IB
Union Calendar No. 464
106TH CONGRESS
2D SESSION
H. R. 2848
[Report No. 106–706, Part I]
To amend the Small Business Investment Act of 1958 and the Small Business
Act to establish a New Markets Venture Capital Program, to establish
an America’s Private Investment Company Program, to amend the Inter-
nal Revenue Code of 1986 to establish a New Markets Tax Credit,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 13, 1999
Mr. WATTS of Oklahoma (for himself, Mr. TALENT, Mr. LEACH, and Mr.
BAKER) (all by request) introduced the following bill; which was referred
to the Committee on Banking and Financial Services, and in addition to
the Committees on Ways and Means, and Small Business, for a period
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
JUNE 28, 2000
Reported from the Committee on Banking and Financial Services with an
amendment
[Omit the part struck through and insert the part printed in italic]
JUNE 28, 2000
Referral to the Committees on Ways and Means and Small Business extended
for a period ending not later than July 28, 2000
JULY 28, 2000
The Committees on Ways and Means and Small Business discharged; com-
mitted to the Committee of the Whole House on the State of the Union
and ordered to be printed
A BILL
To amend the Small Business Investment Act of 1958 and
the Small Business Act to establish a New Markets
Venture Capital Program, to establish an America’s Pri-
vate Investment Company Program, to amend the Inter-
nal Revenue Code of 1986 to establish a New Markets
Tax Credit, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘New Markets Initiative
Act of 1999’’.
SEC. 2. TABLE OF CONTENTS.
The table of contents for this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I—NEW MARKETS VENTURE CAPITAL PROGRAM
Sec. 101. New Markets Venture Capital Program.
Sec. 102. Conforming amendments.
Sec. 103. Bankruptcy exemption for New Markets Venture Capital companies.
Sec. 104. Federal Savings Associations.
TITLE II—SMALL BUSINESS LOANS
Sec. 201. Participation rate.
Sec. 202. Guarantee fee.
Sec. 203. Guarantee reduction.
TITLE III—AMERICA’S PRIVATE INVESTMENT COMPANIES
Sec. 301. Congressional findings and purposes.
Sec. 302. Definitions.
Sec. 303. Authorization.
Sec. 304. Selection of APICs.
Sec. 305. Operations of APICs.
Sec. 306. Credit enhancement by the Federal Government.
Sec. 307. APIC requests for guarantee actions.
Sec. 308. Examination and monitoring of APICs.
Sec. 309. Incentives and penalties.
TITLE III—AMERICA’S PRIVATE INVESTMENT COMPANIES
Sec. 301. Short Title.
Sec. 302. Findings and purposes.
Sec. 303. Definitions.
Sec. 304. Authorization.
Sec. 305. Selection of APICs.
Sec. 306. Operations of APICs.
Sec. 307. Credit enhancement by the Federal Government.
Sec. 308. APIC requests for guarantee actions.
Sec. 309. Examination and monitoring of APICs.
Sec. 310. Penalties.
Sec. 311. Effective date.
Sec. 312. Sunset.
TITLE IV—NEW MARKETS CREDIT
Sec. 401. New markets tax credit.
TITLE I—NEW MARKETS
VENTURE CAPITAL PROGRAM
SEC. 101. NEW MARKETS VENTURE CAPITAL PROGRAM.
Title III of the Small Business Investment Act of
1958 is amended—
(1) in the heading, by striking ‘‘SMALL BUSI-
NESS INVESTMENT COMPANIES’’ and insert-
ing ‘‘INVESTMENT DIVISION PROGRAMS’’;
(2) by inserting before the heading for section
301 the following:
‘‘PART A—SMALL BUSINESS INVESTMENT COMPANIES’’;
and
(3) by adding at the end the following:
‘‘PART B—NEW MARKETS VENTURE CAPITAL PROGRAM
‘‘SEC. 350. DEFINITIONS.
‘‘In this part—
‘‘(1) the term ‘New Markets Venture Capital
company’ means a company that—
‘‘(A) has been approved by the Administra-
tion under section 353(e) to operate under the
New Markets Venture Capital Program; and
‘‘(B) has entered into a participation
agreement with the Administration; and
‘‘(2) the term ‘low- or moderate-income geo-
graphic area’ means—
‘‘(A) a census tract, or the equivalent
county division as defined by the Bureau of the
Census for purposes of defining poverty areas,
in which—
‘‘(i) the poverty rate is not less than
20 percent; or
‘‘(ii) in the case of a census tract or
division located within a metropolitan area,
the median family income for such tract or
division does not exceed the greater of 80
percent of the statewide median family in-
come or 80 percent of the metropolitan-
area median family income: or
‘‘(iii) in the case of a census tract or
division not located within a metropolitan
area, the median family income for such
‘‘SEC. 351. PURPOSES.
‘‘The purposes of the New Markets Venture Capital
Program are—
‘‘(1) to encourage venture capital investment in
smaller enterprises located in urban and rural areas;
and
‘‘(2) to establish a venture capital program to
be 
administered 
by 
the 
Small 
Business
Administration—
‘‘(A) to enter into a participation agree-
ment with New Markets Venture Capital com-
panies;
‘‘(B) to guarantee debentures of New Mar-
kets Venture Capital companies to enable each
such company to make venture capital invest-
ments in smaller enterprises in urban and rural
areas; and
‘‘(C) to make grants to New Markets Ven-
ture Capital companies for the purpose of pro-
viding marketing, management, and technical
assistance to smaller enterprises financed, or
expected to be financed, by such company.
‘‘SEC. 352. ESTABLISHMENT OF PROGRAM.
‘‘The Administration shall establish a New Markets
Venture Capital Program, under which the Administration
may—
‘‘(1) enter into a participation agreement with
each New Markets Venture Capital company for the
purposes set forth in section 351;
‘‘(2) guarantee debentures issued by each New
Markets Venture Capital company as provided in
section 354; and
‘‘(3) make grants to each New Markets Venture
Capital company as provided in section 355.
‘‘SEC. 353. SELECTION OF NEW MARKETS VENTURE CAP-
ITAL COMPANIES.
‘‘(a) ELIGIBILITY.—A company shall be eligible for
participation in the New Markets Venture Capital Pro-
gram if—
‘‘(1) it is a newly formed for-profit entity or a
newly formed for-profit subsidiary of an existing en-
tity; and
‘‘(2) it has a management team with experience
in community development financing or venture cap-
ital financing.
‘‘(b) APPLICATION.—To participate in the New Mar-
kets Venture Capital Program, an eligible company shall
submit an application to the Administration that
includes—
‘‘(1) a business plan describing how the com-
pany intends to make successful venture capital in-
vestments in low- or moderate-income geographic
areas;
‘‘(2) information regarding the qualifications of
the company’s management;
‘‘(3) a description of how the company intends
to work with community organizations;
‘‘(4) a description of how the company will use
the grant funds provided under this part to provide
marketing, management, and technical assistance to
smaller enterprises;
‘‘(5) a description of the criteria the company
will use to evaluate whether and to what extent it
meets the objectives of the program established
under this part;
‘‘(6) information regarding the management
and financial strength of any parent firm, affiliated
firm, or any other firm essential to the success of
the company’s business plan; and
‘‘(7) such other information as the Administra-
tion may require.
‘‘(c) CONDITIONAL APPROVAL.—
‘‘(1) IN
GENERAL.—From among companies
submitting applications under subsection (b), the
Administration shall in accordance with this sub-
section conditionally approve companies to partici-
pate in the New Markets Venture Capital Program.
‘‘(2) SELECTION CRITERIA.—In selecting com-
panies under paragraph (1), the Administration
shall consider the following:
‘‘(A) The likelihood that the applicant will
meet the goals of its business plan.
‘‘(B) The experience and background of
the company’s management team.
‘‘(C) The need for equity investments in
the areas in which the company intends to in-
vest.
‘‘(D) The extent to which the company will
concentrate its activities on serving the areas in
which it intends to invest.
‘‘(E) The likelihood that the company will
be able to satisfy the conditions under sub-
section (d).
‘‘(F) The extent to which the activities
proposed by the company will expand economic
opportunities in the areas in which the company
intends to invest.
‘‘(G) Any other factors deemed appropriate
by the Administration.
‘‘(3) NATIONWIDE DISTRIBUTION.—In selecting
companies under paragraph (1), the Administration
shall ensure that companies are chosen in such a
way that investments under the New Markets Ven-
ture Capital Program will be made nationwide.
‘‘(d) CONDITIONS TO BE MET
FOR FINAL AP-
PROVAL.—The Administration shall give each condi-
tionally approved company a period of time, not to exceed
24 months, to satisfy the following conditions:
‘‘(1) CAPITAL
REQUIREMENT.—Each condi-
tionally approved company must raise not less than
$5,000,000 of contributed capital or binding capital
commitments from 1 or more investors (other than
an agency of the Federal Government) who meet cri-
teria established by the Administration; and
‘‘(2) NON-ADMINISTRATION
RESOURCES
FOR
TECHNICAL ASSISTANCE.—
‘‘(A) IN
GENERAL.—In order to provide
marketing, management, and technical assist-
ance, each conditionally approved company
must—
‘‘(i) have binding commitments (in
cash or in-kind)—
‘‘(I) from any sources other than
the Administration that meet criteria
established by the Administration:
‘‘(II) payable or available over a
multiyear period acceptable to the Ad-
ministration (not to exceed 10 years):
and
‘‘(III) in an amount equal to 30
percent of the capital and commit-
ments raised under subsection (d)(1);
or
‘‘(ii) 
must 
have 
purchased 
an
annuity—
‘‘(I) from an insurance company
acceptable to the Administration;
‘‘(II) using funds (other than the
funds raised to satisfy subsection
(d)(1)) from any source other than
the Administration; and
‘‘(III) that yields cash payments
over a multiyear period acceptable to
the Administration (not to exceed 10
years) in an amount equal to 30 per-
cent of the capital and commitments
raised under subsection (d)(1); or
‘‘(iii) must have binding commitments
(in cash or in-kind) of the type described
in subsection (d)(2)(A)(i) and must have
purchased an annuity of the type described
in subsection (d)(2)(A)(ii), which in the
aggregate make available, over a multiyear
period acceptable to the Administration
(not to exceed 10 years), an amount equal
to 30 percent of the capital and commit-
ments raised under subsection (d)(1).
‘‘(B) SPECIAL RULE.— On a showing of
special circumstances and good cause, the Ad-
ministrator may with respect to a particular
company waive the requirements of subsection
(d)(2) if the Administrator considers the com-
pany to have a viable business plan that reason-
ably projects the company’s capacity to raise
the amount (in cash or in-kind) required under
subsection (d)(2)(A).
‘‘(e) FINAL APPROVAL.—The Administration shall
grant to a conditionally approved company final approval
to participate in the New Markets Venture Capital Pro-
gram as a New Markets Venture Capital company after
the company—
‘‘(1) has satisfied the conditions under sub-
section (d); and
‘‘(2) has entered into a participation agreement
with the Administration.
‘‘SEC. 354. DEBENTURES.
‘‘(a) IN GENERAL.—The Administration may, to the
extent authorized in advance in appropriations Acts, guar-
antee the timely payment of principal and interest as
scheduled on debentures issued by New Markets Venture
Capital companies.
‘‘(b) TERMS AND CONDITIONS.—The Administration
may make guarantees under this section on such terms
and conditions as it deems appropriate, except that the
term of any debenture guaranteed under this section shall
not exceed 15 years.
‘‘(c) FULL FAITH AND CREDIT OF THE UNITED
STATES.—The full faith and credit of the United States
shall be pledged to the payment of all amounts which may
be required to be paid under any guarantee under this
part.
‘‘(d) MAXIMUM GUARANTEE.—The Administration
may provide guarantees under this section for the deben-
tures issued by any New Markets Venture Capital com-
pany only to the extent that such guarantees do not exceed
150 percent of the contributed capital of the company, as
determined by the Administration. Contributed capital
shall include capital that is deemed to be Federal funds
contributed by an investor other than an agency of the
Federal Government.
‘‘SEC. 355. TECHNICAL ASSISTANCE GRANTS.
‘‘(a) IN GENERAL.—
‘‘(1) AUTHORITY.—In accordance with this sec-
tion, the Administration may make grants to each
New Markets Venture Capital company to provide
marketing, management, and technical assistance for
the benefit of smaller enterprises financed, or ex-
pected to be financed, by the company.
‘‘(2) TERMS.—Grants made under this sub-
section shall be made over a multiyear period not to
exceed 10 years, under such other terms as the Ad-
ministration may require.
‘‘(2) GRANT AMOUNT.—
‘‘(A) IN
GENERAL.—The amount of a
grant made under this subsection to each New
Markets Venture Capital company shall be
equal to the amount resources raised by the
company (in cash or in-kind) under section
353(d)(2).
‘‘(B) 
SPECIAL
RULE.—Notwithstanding
subparagraph (A), the Administration may
make a grant under this section in an amount
other than that set forth in subparagraph (A),
if the Administration considers the grant to be
in the best interests of the New Markets Ven-
ture Capital Program.
‘‘(3) PRO RATA REDUCTIONS.—If the amount
made available to carry out this section is insuffi-
cient for the Administration to provide grants in the
amounts provided for in subsection (a)(2), the Ad-
ministration shall make pro rata reductions in the
amounts otherwise payable to each New Markets
Venture Capital company under such subsection.
‘‘(b) SUPPLEMENTAL GRANTS.—
‘‘(1) IN
GENERAL.—The Administration may
make supplemental grants to any New Markets Ven-
ture Capital company, containing such terms as the
Administration may require, to provide additional
marketing, management, and technical assistance for
the benefit of smaller enterprises financed, or ex-
pected to be financed, by the New Markets Venture
Capital company.
‘‘(2) MATCHING REQUIREMENT.—The Adminis-
tration may require, as a condition of any supple-
mental grant made under this subsection, that the
New Markets Venture Capital company provide from
resources (in cash or in-kind) other than those pro-
vided by the Administration an amount equal to the
amount of the supplemental grant.
‘‘SEC. 356. ISSUANCE AND GUARANTEE OF TRUST CERTIFI-
CATES.
‘‘(a) ISSUANCE.—The Administration may issue trust
certificates representing ownership of all or a fractional
part of debentures issued by New Markets Venture Cap-
ital companies and guaranteed by the Administration
under this Act, if such certificates are based on and
backed by a trust or pool approved by the Administration
and composed solely of guaranteed debentures.
‘‘(b) GUARANTEE.—
‘‘(1) IN GENERAL.—The Administration may,
under such terms and conditions as the Administra-
tion deems appropriate, guarantee the timely pay-
ment of the principal of and interest on trust certifi-
cates issued by the Administration or its agent for
purposes of this section.
‘‘(2) LIMITATION.—Guarantees under this sub-
section shall be limited to the extent of principal and
interest on the guaranteed debentures which com-
pose the trust or pool.
‘‘(3) PREPAYMENT OR DEFAULT.—In the event
that a debenture in a trust or pool is prepaid, or in
the event of default of such a debenture, the guar-
antee of timely payment of principal and interest on
the trust certificates shall be reduced in proportion
to the amount of principal and interest such prepaid
debenture represents in the trust or pool. Interest on
prepaid or defaulted debentures shall accrue and be
guaranteed by the Administration only through the
date of payment of the guarantee. At any time dur-
ing its term, a trust certificate may be called for re-
demption due to prepayment or default of all deben-
tures.
‘‘(c) FULL FAITH AND CREDIT OF THE UNITED
STATES.—The full faith and credit of the United States
shall be pledged to the payment of all amounts which may
be required to be paid under any guarantee of such trust
certificates issued by the Administration or its agent
under this section.
‘‘(d) FEES.—The Administration shall not collect a
fee for any guarantee under this section, but any agent
of the Administration may collect a fee approved by the
Administration for the functions described in subsection
(f)(2) of this section.
‘‘(e) SUBROGATION AND OWNERSHIP RIGHTS.—
‘‘(1) SUBROGATION.—In the event the Adminis-
tration pays a claim under a guarantee issued under
this section, it shall be subrogated fully to the rights
satisfied by such payment.
‘‘(2) OWNERSHIP RIGHTS.—No Federal, State,
or local law shall preclude or limit the exercise by
the Administration of its ownership rights in the de-
bentures residing in a trust or pool against which
trust certificates are issued under this section.
‘‘(f) MANAGEMENT AND ADMINISTRATION.—
‘‘(1) REGISTRATION.—
‘‘(A) IN
GENERAL.—The Administration
may provide for a central registration of all
trust certificates issued under this section.
‘‘(B) FORMS OF REGISTRATION.—Nothing
in this subsection shall prohibit the use of a
book entry or other electronic form of registra-
tion for trust certificates.
‘‘(2) CONTRACTING OF FUNCTIONS.—
‘‘(A) IN
GENERAL.—The Administrator
may contract with an agent or agents to carry
out on behalf of the Administration the pooling
and the central registration functions provided
for in this section including, notwithstanding
any other provision of law—
‘‘(i) maintenance on behalf of and
under the direction of the Administration,
such commercial bank accounts or invest-
ments in obligations of the United States
as may be necessary to facilitate the cre-
ation of trusts or pools backed by deben-
tures guaranteed under this Act; and
‘‘(ii) the issuance of trust certificates
to facilitate the creation of such trusts or
pools.
‘‘(B) PROTECTION OF THE INTERESTS OF
THE UNITED STATES.—Any agent performing
functions on behalf of the Administration under
this paragraph shall provide a fidelity bond or
insurance in such amounts as the Administra-
tion determines to be necessary to fully protect
the interests of the United States.
‘‘(3) REGULATION
OF
BROKERS
AND
DEAL-
ERS.—The Administrator may regulate brokers and
dealers in trust certificates sold under this section.
‘‘SEC. 357. FEES.
‘‘Except as provided in section 356(d), the Adminis-
tration may charge such fees as it deems appropriate with
respect to any guarantee or grant issued under this part.
‘‘SEC. 358. BANK PARTICIPATION.
‘‘(a) IN GENERAL.—To the extent provided for in
subsection (b), any national bank, any member bank of
the Federal Reserve System, and any bank that is not a
member of such system but which is insured to the extent
permitted under applicable State law, may invest in any
New Markets Venture Capital company, or in any entity
established to invest solely in New Markets Venture Cap-
ital companies.
‘‘(b) LIMITATION.—No bank described in subsection
(a) may make investments described in such subsection
that are greater than 5 percent of the capital and surplus
of the bank.
‘‘SEC. 359. FEDERAL FINANCING BANK.
‘‘Section 318 shall not apply to any debenture issued
by a New Markets Venture Capital company under this
part.
‘‘SEC. 360. REPORTING REQUIREMENTS.
‘‘Each New Markets Venture Capital company shall
provide to the Administration such information as the Ad-
ministration may require, including information on the
measurement criteria that the New Markets Venture Cap-
ital company proposed in its program application.
‘‘SEC. 361. EXAMINATIONS.
‘‘(a) IN GENERAL.—Each New Markets Venture
Capital company shall be subject to examinations made
at the direction of the Investment Division of the Adminis-
tration in accordance with this section.
‘‘(b) ASSISTANCE OF PRIVATE SECTOR ENTITIES.—
Examinations under this section may be conducted with
the assistance of a private sector entity that has both the
qualifications to conduct and expertise in conducting such
examinations.
‘‘(c) COSTS.—
‘‘(A) IN
GENERAL.—The Administrator
may assess the cost of examinations under this
section, including compensation of the exam-
iners, against the company examined.
‘‘(B) DEPOSIT
OF
FUNDS.—Funds col-
lected under this section shall be deposited in
the account for salaries and expenses of the Ad-
ministration.
‘‘(C) 
AUTHORIZATION
OF
APPROPRIA-
TIONS.—Funds deposited under subparagraph
(B) are authorized to be appropriated solely to
cover the costs of examinations and other pro-
gram oversight activities.
‘‘SEC. 362. INJUNCTIONS AND OTHER ORDERS.
‘‘(a) IN GENERAL.— Whenever, in the Administrator
considers that a New Markets Venture Capital company,
or any other person, has engaged or is about to engage
in any acts or practices which constitute, or will constitute,
a violation of any provision of this Act, of any rule or regu-
lation under this Act, or of any order issued under this
Act, the Administration may make application to the prop-
er district court of the United States or to a United States
court of any place subject to the jurisdiction of the United
States for an order enjoining such acts or practices, or
for an order enforcing compliance with such provision,
rule, regulation, or order, and such courts shall have juris-
diction of such actions and, upon a showing by the Admin-
istration that such New Markets Venture Capital company
or other person has engaged or is about to engage in any
such acts or practices, a permanent or temporary injunc-
tion, restraining order, or other order, shall be granted
without bond.
‘‘(b) SEIZING OF ASSETS.—In any such proceeding
the court, as a court of equity may, to the extent it deems
necessary, take exclusive jurisdiction of the New Markets
Venture Capital company and the assets thereof, wherever
located. The court shall have jurisdiction in any such pro-
ceeding to appoint a trustee or receiver to hold or admin-
ister under the direction of the court the assets so pos-
sessed.
‘‘(c) ADMINISTRATION AS TRUSTEE OR RECEIVER.—
‘‘(1) IN
GENERAL.—The Administration may
act as trustee or receiver under subsection (b) of a
New Markets Venture Capital company.
‘‘(2) APPOINTMENT.—At the request by the Ad-
ministration, the court may appoint the Administra-
tion to act as a trustee or receiver of a New Markets
Venture Capital company unless the court deems
such appointment inequitable or otherwise inappro-
priate.
‘‘SEC. 363. UNLAWFUL ACTS AND OMISSIONS BY OFFICERS,
DIRECTORS, 
EMPLOYEES, 
OR 
AGENTS;
BREACH OF FIDUCIARY DUTY.
‘‘(a) PARTIES DEEMED TO COMMIT A VIOLATION.—
Whenever an New Markets Venture Capital company vio-
lates any provision of this Act, or any regulation issued
thereunder, by reason of its failure to comply with its
terms or by reason of its engaging in any act or practice
which constitutes or will constitute a violation thereof,
such violation shall also be deemed to be a violation and
an unlawful act committed by any person who, directly
or indirectly, authorizes, orders, participates in, causes,
brings about, counsels, aids, or abets in the commission
of any acts, practices, or transactions which constitute or
will constitute, in whole or in part, such violation.
‘‘(b) FIDUCIARY DUTIES.—It shall be unlawful for
any officer, director, employee, agent, or other participant
in the management or conduct or the affairs of an New
Markets Venture Capital company to engage in any act
or practice, or to omit any act, in breach of his fiduciary
duty as such officer, director, employee, agent, or partici-
pant if, as a result thereof, the New Markets Venture Cap-
ital company has suffered or is in imminent danger or suf-
fering financial loss or other damage.
‘‘(c) UNLAWFUL ACTS.—Except with the written con-
sent of the Administration, it shall be unlawful—
‘‘(1) for any person to take office as an officer,
director, or employee of an New Markets Venture
Capital company, or to become an agent or partici-
pant in the conduct of the affairs or management of
an New Markets Venture Capital company, if the
person—
‘‘(A) has been convicted of a felony, or any
other criminal offense involving dishonesty or
breach of trust, or
‘‘(B) the person has been found civilly lia-
ble in damages, or has been permanently or
temporarily enjoined by order, judgment, or de-
cree of a court of competent jurisdiction, by
reason of any act or practice involving fraud, or
breach of trust; and
‘‘(2) for any person continue to serve in any of
the capacities described in paragraph (1), if—
‘‘(A) the person is convicted of a felony, or
any other criminal offense involving dishonesty
or breach of trust, or
‘‘(B) the person found civilly liable in dam-
ages, or is permanently or temporarily enjoined
by an order, judgment, or decree of a court of
competent jurisdiction, by reason of any act or
practice involving fraud or breach of trust.
‘‘(d) REMOVAL OR SUSPENSION.—
‘‘(1) IN GENERAL.—As provided in section 313,
the Administration may remove or suspend any per-
son upon whom the Administration has served a no-
tice under this subsection.
‘‘(2) NOTICE.—The Administration may serve
upon any person who is an officer, director, or em-
ployee of a New Markets Venture Capital company,
or an agent or participant in the conduct of the af-
fairs or management of the company, a written no-
tice of the Administration’s intention to remove or
suspend such person from the person’s office or po-
sition, if in the opinion of the Administration, such
person—
‘‘(A) has willfully and knowingly com-
mitted any substantial violation of—
‘‘(i) this Act,
‘‘(ii) any regulation issued under this
Act, or
‘‘(iii) a cease-and-desist order which
has become final, or
‘‘(B) has willfully and knowingly com-
mitted or engaged in any act, omission, or prac-
tice which constitutes a substantial breach of
his fiduciary duty, and that such violation or
such breach of fiduciary duty is one involving
personal dishonesty on the part of such person.
‘‘SEC. 364. REGULATIONS.
‘‘The Administration is authorized to issue such regu-
lations as it deems necessary to carry out the provisions
of this part in accordance with its purposes.
‘‘SEC. 365. AUTHORIZATION OF APPROPRIATIONS.
‘‘For fiscal years 2000 through 2005, the Adminis-
tration is authorized to be appointed such subsidy budget
authority as may be necessary to guarantee up to
$100,000,000 of debentures, and up to $30,000,000 to
make technical assistance grants, for the purposes of this
part, to remain available until expended. This authority
shall be in effect for the period commencing with fiscal
year 2000 through fiscal year 2005.’’.
SEC. 102. CONFORMING AMENDMENTS.
The table of contents in section 101 of the Small
Business Investment Act of 1958 (15 U.S.C. 661 note)
is amended—
(1) by striking ‘‘TITLE III—SMALL BUSI-
NESS INVESTMENT COMPANIES’’ and insert-
ing the following:
‘‘TITLE III—INVESTMENT DIVISION PROGRAMS
‘‘PART A—SMALL BUSINESS INVESTMENT COMPANIES’’;
and
(2) by inserting after the item relating to sec-
tion 322 the following:
‘‘PART B—NEW MARKETS VENTURE CAPITAL PROGRAM
‘‘Sec. 350. Definitions.
‘‘Sec. 351. Purposes.
‘‘Sec. 352. Program establishment.
‘‘Sec. 353. Selection of new markets venture capital companies.
‘‘Sec. 354. Debentures.
‘‘Sec. 355. Technical assistance.
‘‘Sec. 356. Issuance and guarantee of trust certificates.
‘‘Sec. 357. Fees.
‘‘Sec. 358. Bank participation.
‘‘Sec. 359. Federal financing bank.
‘‘Sec. 360. Reporting requirements.
‘‘Sec. 361. Examinations.
‘‘Sec. 362. Injunctions and other orders.
‘‘Sec. 363. Unlawful acts and omissions by officers, directors, employees, or
agents; breach of fiduciary duty.
‘‘Sec. 364. Regulations.
‘‘Sec. 365. Authorization of appropriations.’’.
SEC. 103. BANKRUPTCY EXEMPTION FOR NEW MARKETS
VENTURE CAPITAL COMPANIES.
Section 109(b)(2) of title 11, United States Code, is
amended by inserting ‘‘a New Markets Venture Capital
company as defined in section 350 of the Small Business
Investment Act of 1958,’’ after ‘‘homestead association,’’.
SEC. 104. FEDERAL SAVINGS ASSOCIATIONS.
Section 5(c)(4) of the Home Owners’ Loan Act (12
U.S.C. 1464(c)(4)) is amended by adding at the end the
following:
‘‘(F) NEW
MARKETS
VENTURE
CAPITAL
COMPANIES.—A Federal savings association
may invest in stock, obligations, or other securi-
ties of any New Markets Venture Capital com-
pany as defined in section 350 of the Small
Business investment Act of 1958, except that a
Federal savings association may not make any
investment under this subparagraph if its ag-
gregate outstanding investment under this sub-
paragraph would exceed 5 percent of the capital
and surplus of such savings association.’’.
TITLE II—SMALL BUSINESS
LOANS
SEC. 201. PARTICIPATION RATE.
Section 7(a)(2)(A) of the Small Business Act (15
U.S.C. 636(a)(2)(A)) is amended by striking ‘‘$100,000’’
each place it appears and inserting ‘‘$150,000’’.
SEC. 202. GUARANTEE FEE.
Section 7(a)(18)(B) of the Small Business Act (15
U.S.C. 636(a)(18)(B)) is amended by striking ‘‘$80,000’’
and inserting ‘‘$120,000’’.
SEC. 203. GUARANTEE REDUCTION.
Section 7(a)(23)(A) of the Small Business Act (15
U.S.C. 636(a)(23)(A)) is amended by striking the period
at the end and adding the following: ‘‘, except that with
respect to each loan of less than $150,000 guaranteed
under this subsection, the Administration shall assess and
collect an annual fee in an amount equal to 0.3 percent
of the outstanding balance of the deferred participation
share of the loan.’’
TITLE III—AMERICA’S PRIVATE
INVESTMENT COMPANIES
SEC. 301. CONGRESSIONAL FINDINGS AND PURPOSES.
(a) CONGRESSIONAL FINDINGS.—
(1) People living in distressed areas, both urban
and rural, characterized by high levels of joblessness,
poverty, and low incomes continue to miss out on
the economic expansion experienced by the Nation as
a whole.
(2) Unequal access to economic opportunities
continues to make the social costs of joblessness and
poverty to our Nation very high.
(3) There are significant untapped markets in
our Nation, and many of these are in areas that are
underserved by institutions that can make equity
and credit investments.
(b) PURPOSES.—The purposes of this Act are to—
(1) license private for profit community devel-
opment entities that will focus on making equity and
credit investments for large-scale business develop-
ments that benefit low-income communities;
(2) provide credit enhancement for those enti-
ties for use in low-income communities; and
(3) provide a vehicle under which the economic
and social returns on financial investments made
pursuant to this Act may be available both to the in-
vestors in these entities and to the residents of the
low-income communities.
SEC. 302. DEFINITIONS.
As used in this Act:
(1) The term ‘‘Agency’’ has the meaning given
such term in section 551(1) of title 5, United States
Code.
(2) The term ‘‘APIC’’ means a business entity
that has been licensed under the terms of this Act
as an America’s Private Investment Company, and
the license of which has not been revoked.
(3) The term ‘‘Administrator’’ means the Ad-
ministrator of the Small Business Administration.
(4) The term ‘‘community development entity’’
means an entity whose primary mission must be
serving or providing investment capital for low-in-
come communities or low-income persons, which
maintains accountability to residents of low-income
communities, and which has 60 percent of its aggre-
gate gross assets invested in low-income community
investments or residential property located in low-in-
come communities.
(5) The term ‘‘cost’’ has the meaning set forth
in section 502(5) of the Federal Credit Reform Act
of 1990.
(6) The term ‘‘debentures’’ means debt instru-
ments the terms of any of which may be specified
by the Secretary.
(7) The term ‘‘HUD’’ means the Secretary of
Housing and Urban Development or the Department
of Housing and Urban Development, as the context
requires.
(8) The term ‘‘low-income communities’’ means
census tracts with (A) poverty rates of at least 20
percent, based on the most recent census data; or
(B) median family income that does not exceed 80
percent of the greater of (i) metropolitan area me-
dian family income, or (ii) statewide median family
income.
(9) The term ‘‘qualified low-income community
investments’’ means equity investments in, or loans
to, qualified active businesses located in low-income
communities.
(10)
The
term
‘‘qualified
active
business’’
means a business or trade—
(A) at least 50 percent of the gross income
of which is derived from conduct of trade or
business activities in low-income communities;
(B) a substantial portion of the use of the
tangible property of which is used within low-
income communities;
(C) a substantial portion of the services
that the employees of which perform are per-
formed in low-income communities; and
(D) less than 5 percent of the aggregate
unadjusted bases of the property of which is at-
tributable to certain financial property, as the
Secretary shall set forth in regulations, or in
collectibles, other than collectibles held pri-
marily for sale to customers.
(11) The term ‘‘Secretary’’ means the Secretary
of Housing and Urban Development, unless other-
wise specified in this Act.
SEC. 303. AUTHORIZATION.
(a) LICENSES.—The Secretary is authorized to li-
cense America’s Private Investment Companies, in accord-
ance with the terms of this Act.
(b) REGULATIONS.—The Secretary is authorized to
regulate APICs for compliance with sound financial man-
agement practices, and the program and procedural goals
of this and other related Acts, and other purposes as re-
quired or authorized by this Act, or determined by the
Secretary. The Secretary may issue regulations, Federal
Register notices, and other guidance or directives to carry
out licensing and regulatory and other duties under this
Act.
(c) USE OF CREDIT SUBSIDY FOR LICENSES.—
(1) NUMBER OF LICENSES.—The Secretary is
authorized to have outstanding at any one time the
number of licenses for APICs that may be supported
by the amount of the budget authority appropriated
in accordance with the Federal Credit Reform Act of
1990 for the subsidy cost and the investment strate-
gies of such APICs.
(2) USE OF CREDIT SUBSIDY AFTER INITIAL
APPROPRIATION TO HUD.—With respect to any ap-
propriation of budget authority for the credit costs
after the initial appropriation, the Secretary may li-
cense additional APICs, or as hereinafter provided,
increase the credit subsidy allocated to an APIC as
an award for high performance under this Act.
(d) COOPERATION AND COORDINATION.—
(1) PROGRAM POLICIES.—The Secretary is au-
thorized to coordinate and cooperate, through memo-
randa of understanding, an APIC liaison committee,
or otherwise, with the Administrator, the Secretary
of the Treasury, and other agencies in the discretion
of the Secretary, on implementation of this Act, in-
cluding regulation, examination, and monitoring of
APICs under this Act.
(2) OPERATIONS.—The Secretary may carry
out this Act—
(A)
directly,
through
agreements
with
other Federal entities under section 1535 of
title 31, United States Code, or otherwise, or
(B) indirectly, under contracts or agree-
ments, as the Secretary shall determine.
(e)
FEES
AND
CHARGES
FOR
ADMINISTRATIVE
COSTS.—To the extent provided in appropriations Acts,
the Secretary is authorized to impose fees and charges for
application, review, licensing, and regulation, or other ac-
tions under this Act, and to pay for the costs of such ac-
tivities from the fees and charges collected.
(f) GUARANTEE FEES.—The Secretary is authorized
to set and collect fees for loan guarantee commitments and
loan guarantees that the Secretary makes under this Act.
(g) FUNDING.—
(1) AUTHORIZATION
FOR
APPROPRIATION
OF
COST
OF
ANNUAL
LOAN
GUARANTEE
COMMIT-
MENT.—For each of fiscal years 2000, 2001, 2002,
and 2003, there is authorized to be appropriated up
to $36,000,000 for the cost of annual loan guar-
antee commitments under this Act. The Secretary
may make commitments to guarantee loans only to
the extent that the total loan principal, any part of
which is guaranteed, will not exceed $1,000,000,000,
or the amount specified in appropriations Acts in
each such fiscal year. Amounts appropriated under
this paragraph shall remain available for 5 years.
(2) AUTHORIZATION
FOR
APPROPRIATION
OF
ADMINISTRATIVE EXPENSES.—For each of the fiscal
years 2000, 2001, 2002, and 2003, there is author-
ized to be appropriated $1,000,000 for administra-
tive expenses for carrying out this Act. The Sec-
retary may transfer amounts appropriated under
this paragraph to any appropriation account of
HUD or another agency, to carry out the program
under this Act. Any agency to which the Secretary
may transfer amounts under this Act is authorized
to accept such transferred amounts in any appro-
priation account of such agency.
SEC. 304. SELECTION OF APICS.
(a) NOTICE OF COMPETITIONS.—The Secretary shall
select APICs for licensing on the basis of competitions.
Such competitions shall be announced by a Federal Reg-
ister notice that invites applications for APIC licenses.
Each such notice shall set forth application requirements,
and such other terms of the competition not otherwise pro-
vided for, as determined by the Secretary.
(b) LICENSEE SELECTION CRITERIA.—The Secretary
shall select among applicants for licenses on the basis of
the extent to which an applicant may be expected to
achieve the goals of the Act by satisfying the requirements
set forth in this subsection.
(1) The applicant shall be a private for profit
entity that qualifies as a community development en-
tity for the purposes of the New Markets Tax Cred-
its, to the extent such credits are established under
Federal law.
(2) The entity must, as of the time that the li-
cense is approved, have reasonably available to it, as
determined
by
the
Secretary,
a
minimum
of
$25,000,000 in equity capital, as determined by the
Secretary.
(3) The entity must demonstrate that its man-
agers are qualified, and have the knowledge, experi-
ence, and capability necessary to raise large amounts
of capital and make investments for community eco-
nomic development in distressed areas.
(4) The entity must demonstrate that, as a
matter of sound financial management practices, it
is structured to preclude financial conflict of interest
between the APIC and a manager or investor.
(5) The entity must prepare and submit an in-
vestment strategy that includes benchmarks for eval-
uation of its progress.
(6) The entity must prepare and submit a
statement of public purpose goals. The statement
shall include elements specified by the Secretary, in-
cluding proposed measurements and strategies for
meeting the goals. The goals shall promote commu-
nity and economic development, and include at
least—
(A) making investments that are qualified
investments in low-income communities;
(B) creation of jobs that pay decent wages
in low-income communities and for residents of
such areas; and
(C) involvement of community-based orga-
nizations and residents in community develop-
ment activities.
(7) The entity must demonstrate a capacity to
cooperate with States or units of general local gov-
ernment and with community-based organizations
and residents of low-income communities.
(8) The entity must agree to comply with appli-
cable laws, including Federal executive orders, Office
of Management and Budget circulars, and Treasury
requirements, and such operating and regulatory re-
quirements as the Secretary may impose from time
to time.
(9) The entity must satisfy other application re-
quirements that the Secretary may impose by regu-
lation or Federal Register notice.
(c) COMMUNICATIONS BETWEEN HUD AND APPLI-
CANTS DURING SELECTION PROCESS.—
(1) The Secretary shall set forth in regulations
the procedures under which HUD, on the one hand,
and applicants for APIC licenses, and others, on the
other hand, may communicate. Such regulations
shall—
(A) specify by position the HUD officers
and employees who may communicate with such
applicants and others;
(B) permit such officers and employees to
request and discuss with the applicant and oth-
ers (such as banks or other credit or business
references, or potential investors, that the appli-
cant specifies in writing) any more detailed in-
formation that may be desirable to facilitate
HUD’s review of the applicant’s application;
(C) restrict such officers and employees
from revealing to any applicant—
(i) the fact or chances of award of a
license to such applicant, unless there has
been a public announcement of the results
of the competition; and
(ii) any information with respect to
any other applicant; and
(D) set forth requirements for making and
keeping records of any communications con-
ducted under this subsection, including require-
ments for making such records available to the
public after the award of licenses under an ini-
tial or subsequent notice, as appropriate, under
subsection (a).
(2) Regulations under this subsection may be
issued as interim rules for effect on or before the
date of publication of the first notice under sub-
section (a), and shall apply only with respect to ap-
plications under such notice. Regulations to imple-
ment this subsection with respect to any notice after
the first such notice shall be subject to notice and
comment rulemaking.
(3) Section 12(e)(2) of the Department of
Housing and Urban Development Act (42 U.S.C.
3537a(e)(2)) is amended by inserting before the pe-
riod at the end the following: ‘‘, or any license pro-
vided under the America’s Private Investment Com-
panies Act’’.
SEC. 305. OPERATIONS OF APICS.
(a) IN GENERAL.—
(1)
An
APIC
shall
have
any
powers
or
authorities—
(A) that the APIC derives from the juris-
diction in which it is organized, or that the
APIC otherwise has;
(B) as may be conferred by a license under
this Act; and
(C) as the Secretary may prescribe by reg-
ulation.
(2) Nothing in this Act shall preclude an APIC
or its investors from receiving an allocation of New
Market Tax Credits (to the extent such credits are
established under Federal law) if the APIC satisfies
any applicable terms and conditions under the Inter-
nal Revenue Code of 1986.
(b) INVESTMENT LIMITATIONS.—
(1) QUALIFIED
LOW-INCOME
COMMUNITY
IN-
VESTMENTS.—Substantially all investments that an
APIC makes must be qualified low-income commu-
nity investments if the investments are financed
with—
(A) amounts available from the proceeds of
the issuance of an APICs debenture guaranteed
under this Act;
(B) proceeds of the sale of obligations de-
scribed under subsection (c)(3)(C)(iii); or
(C) the use of equity capital, as deter-
mined by the Secretary, in an amount specified
in the APICs license.
(2) INVESTMENT LIMIT.—An APIC shall not,
as a matter of sound financial practice, invest in any
one business, an amount that exceeds an amount
equal to 35 percent of the sum of—
(A) the APICs equity capital; plus
(B) an amount equal to the percentage
limit that the Secretary determines that APIC
may have outstanding at any one time, under
subsection (c)(2)(A).
(c) BORROWING POWERS; DEBENTURES.—
(1) ISSUING.—An APIC may issue debentures
that the Secretary may guarantee under the terms
of this Act.
(2) LEVERAGE LIMITS.—In general, as a mat-
ter of sound financial management practices—
(A) the total amount of debentures that an
APIC issues under this Act that an APIC may
have outstanding at any one time shall not ex-
ceed an amount equal to 200 percent of the eq-
uity capital of the APIC, as determined by the
Secretary: Provided, That the Secretary may by
regulation increase the foregoing percentage to
up to 300 percent for all APICs, or any reason-
able class of APICs; and
(B) an APIC must not have more than
$300,000,000 in face value of debentures issued
under this Act outstanding at any one time.
(3) REPAYMENT.—
(A) An APIC must have repaid, or have
otherwise been relieved of indebtedness, with re-
spect to any interest or principal amounts of
borrowings under this subsection no less than 2
years before the APIC may dissolve or other-
wise complete the wind-up of its business.
(B) An APIC may repay any interest or
principal amounts of borrowings under this sub-
section at any time: Provided, That the repay-
ment of such amounts shall not relieve an APIC
of any duty otherwise applicable to the APIC
under this Act, unless the Secretary orders such
relief.
(C) Until an APIC has repaid all interest
and principal amounts on APIC borrowings
under this subsection, an APIC may use the
proceeds of investments in accordance with reg-
ulations issued by the Secretary only to—
(i) pay for proper costs and expenses
the APIC incurs in connection with such
investments;
(ii) pay for the reasonable administra-
tive expenses of the APIC;
(iii) purchase Treasury securities;
(iv)
repay
interest
and
principal
amounts on APIC borrowings under this
subsection;
(v) make interest, dividend, or other
distributions to or on behalf of an investor;
or
(vi) undertake such other purposes as
the Secretary may approve.
(D) After an APIC has repaid all interest
and principal amounts on APIC borrowings
under this subsection, and subject to continuing
compliance with subsection (a), the APIC may
use the proceeds from investments to make in-
terest, dividend, or other distributions to or on
behalf of investors in the nature of returns on
capital, or the withdrawal of equity capital,
without regard to subparagraph (C) but in con-
formity with the APICs investment strategy
and statement of public purpose goals.
(d) REUSE OF DEBENTURE PROCEEDS.—An APIC
may use the proceeds of sale of Treasury securities pur-
chased under subsection (c)(3)(C)(iii) to make qualified
low-income community investments, subject to the Sec-
retary’s approval. In making the request for the Sec-
retary’s approval, the APIC shall follow the procedures ap-
plicable to an APICs request for HUD guarantee action,
as the Secretary may modify such procedures for imple-
mentation of this subsection. Such procedures shall never-
theless include the description and certifications that an
APIC must include in all requests for guarantee action,
and the environmental certification applicable to initial ex-
penditures for a project or activity.
(e) ANTIPIRATING.—Notwithstanding any other pro-
vision of law, an APIC may not use any equity capital
required to be contributed under this Act, or the proceeds
from the sale of any debenture under this Act, to make
an investment, as determined by the Secretary, to assist
directly in the relocation of any industrial or commercial
plant, facility, or operation, from 1 area to another area,
if the relocation is likely to result in a significant loss of
employment in the labor market area from which the relo-
cation occurs.
(f) EXCLUSION
OF APIC FROM DEFINITION
OF
DEBTOR
UNDER
BANKRUPTCY
PROVISIONS.—Section
109(b)(2) of title 11 of the United States Code is amended
by inserting before ‘‘credit union’’ the following: ‘‘Amer-
ica’s Private Investment Companies licensed by the De-
partment of Housing and Urban Development under the
America’s Private Investment Companies Act,’’.
SEC. 306. CREDIT ENHANCEMENT BY THE FEDERAL GOV-
ERNMENT.
(a) ISSUANCE AND GUARANTEE OF DEBENTURES.—
Consistent with the Federal Credit Reform Act of 1990,
the Secretary is authorized to make commitments to guar-
antee and guarantee the timely payment of all principal
and interest as scheduled on, debentures issued by APICs.
Such commitments or guarantees may be made by the
Secretary on such terms and conditions, including but not
limited to amounts, expirations, number, priorities of re-
payment, security, collateral, amortization, payment of in-
terest (including the timing thereof), and fees and charges,
as the Secretary determines to be appropriate, in docu-
ments that the Secretary approves for any commitment
or guarantee, or pursuant to regulations issued by the Sec-
retary. Debentures guaranteed by the Secretary under this
subsection shall be senior to any debt obligation, equity
contribution or earnings, or the distribution of dividends,
interest, or other amounts of an APIC, notwithstanding
any Federal or other law. Debentures may be issued for
a term of not to exceed 21 years and shall bear interest
during all or any part of that time period at a rate or
rates approved by the Secretary. The debentures shall also
contain such other terms as the Secretary may fix.
(b) ISSUANCE OF TRUST CERTIFICATES.—The Sec-
retary, or an agent or entity selected by the Secretary,
is authorized to issue trust certificates representing own-
ership of all or a fractional part of guaranteed debentures
issued by APICs and held in trust.
(c) GUARANTEE OF TRUST CERTIFICATES.—
(1) IN GENERAL.—The Secretary is authorized,
upon such terms and conditions as the Secretary de-
termines to be appropriate, to guarantee the timely
payment of the principal of and interest on trust
certificates issued by the Secretary, or an agent or
other entity, for purposes of this section. Such guar-
antee shall be limited to the extent of principal and
interest on the guaranteed debentures which com-
pose the trust.
(2)
SUBSTITUTION
OPTION.—The
Secretary
shall have the option to replace in the corpus of the
trust any prepaid or defaulted debenture with a de-
benture, another full faith and credit instrument, or
any obligations of the United States, that may rea-
sonably substitute for such prepaid or defaulted de-
benture.
(3) PROPORTIONATE REDUCTION OPTION.—In
the event that the Secretary elects not to exercise
the option under paragraph (2), and a debenture in
such trust is prepaid, or in the event of default of
a debenture, the guarantee of timely payment of
principal and interest on the trust certificate shall be
reduced in proportion to the amount of principal and
interest that such prepaid debenture represents in
the trust. Interest on prepaid or defaulted deben-
tures shall accrue and be guaranteed by the Sec-
retary only through the date of payment of the guar-
antee. During the term of a trust certificate, it may
be called for redemption due to prepayment or de-
fault of all debentures that are in the corpus of the
trust.
(d) FULL FAITH AND CREDIT BACKING OF GUARAN-
TEES.—The full faith and credit of the United States is
pledged to the timely payment of all amounts which may
be required to be paid under any guarantee by the Sec-
retary pursuant to this section.
(e) SUBROGATION AND LIENS.—
(1) In the event the Secretary pays a claim
under a guarantee issued under this section, the
Secretary shall be subrogated fully to the rights sat-
isfied by such payment.
(2) No State or local law, and no Federal law,
shall preclude or limit the exercise by the Secretary
of its ownership rights in the debentures in the cor-
pus of a trust under this section.
(f) REGISTRATION.—
(1) The Secretary shall provide for a central
registration of all trust certificates issued pursuant
to this section.
(2) The Secretary may contract with an agent
or agents to carry out on behalf of the Secretary the
pooling and the central registration functions of this
section notwithstanding any other provision of law,
including maintenance on behalf of and under the
direction of the Secretary, such commercial bank ac-
counts or investments in obligations of the United
States as may be necessary to facilitate trusts
backed by debentures guaranteed under this Act and
the issuance of trust certificates to facilitate forma-
tion of the corpus of the trusts. The Secretary may
require such agent or agents to provide a fidelity
bond or insurance in such amounts as the Secretary
determines to be necessary to protect the interests of
the Government.
(3) Book-entry or other electronic forms of reg-
istration for trust certificates under this Act are au-
thorized.
(g) TIMING OF ISSUANCE OF GUARANTEES OF DE-
BENTURES AND TRUST CERTIFICATES.—The Secretary
may, from time to time in the Secretary’s discretion, exer-
cise the authority to issue guarantees of debentures under
this Act or trust certificates under this Act.
SEC. 307. APIC REQUESTS FOR GUARANTEE ACTIONS.
(a) ALL APIC REQUESTS FOR HUD GUARANTEE
ACTION.—An APIC may request that the Secretary guar-
antee a debenture that the APIC intends to issue, in ac-
cordance with the Secretary’s regulations. All such re-
quests shall include a description of the manner in which
the APIC intends to use the proceeds from such deben-
ture. All such requests shall also include certification by
the APIC that the APIC is in substantial compliance
with—
(1) this Act and other applicable laws;
(2) all terms and conditions of its license, and
of any penalty or condition that may have arisen
from examination or monitoring by the Secretary or
otherwise, including the satisfaction of any financial
audit exception that may have been outstanding;
(3) all requirements relating to the allocation
and use of New Markets Tax Credits, to the extent
such credits are established under Federal law; and
(4) any other requirements that the Secretary
may specify under regulations.
(b) REQUESTS FOR GUARANTEE OF DEBENTURES
THAT WOULD INCLUDE FUNDING FOR INITIAL EXPENDI-
TURE FOR A PROJECT OR ACTIVITY.—In addition to the
description and certification that an APIC is required to
supply in all requests for guarantee action under sub-
section (a), in the case of an APIC’s request for a guar-
antee that includes a debenture, the proceeds of which the
APIC expects to be used as its initial expenditure for a
project or activity in which the APIC intends to invest,
and the expenditure for which would require an environ-
mental assessment under the National Environmental Pol-
icy Act of 1969 and other related laws that further the
purposes of such Act, such request for guarantee action
must include evidence satisfactory to the Secretary of the
certification of the completion of environmental review of
the project or activity required of the cognizant State or
local government under subsection (c). If the environ-
mental review responsibility for the project or activity has
not been assumed by a State or local government under
subsection (c), then the Secretary is responsible for car-
rying out the applicable responsibilities under the National
Environmental Policy Act of 1969 and other provisions
of law that further the purposes of such Act that relate
to the project or activity, and the Secretary must execute
such responsibilities before acting on the APIC’s request
for the guarantee that is covered by this subsection.
(c)
RESPONSIBILITY
FOR
ENVIRONMENTAL
RE-
VIEWS.—
(1) EXECUTION
OF
RESPONSIBILITY
BY
THE
SECRETARY.—This subsection shall apply to guaran-
tees by the Secretary of debentures under this Act,
the proceeds of which would be used in connection
with qualified low-income community investments of
APICs under this Act.
(2) ASSUMPTION OF RESPONSIBILITY BY COG-
NIZANT UNIT OF GENERAL GOVERNMENT.—
(A)
GUARANTEE
OF
DEBENTURES.—In
order to assure that the policies of the National
Environmental Policy Act of 1969 and other
provisions of law that further the purposes of
such Act (as specified in regulations issued by
the Secretary) are most effectively implemented
in connection with the expenditure of funds
under this Act, and to assure to the public
undiminished protection of the environment, the
Secretary may, under such regulations, in lieu
of the environmental protection procedures oth-
erwise applicable, provide for the guarantee of
debentures, any part of the proceeds of which
are to fund particular qualified low-income com-
munity investments of APICs under this Act, if
a State or unit of general local government, as
designated by the Secretary in accordance with
regulations issued by the Secretary, assumes all
of the responsibilities for environmental review,
decisionmaking, and action pursuant to the Na-
tional Environmental Policy Act of 1969 and
such other provisions of law that further such
Act as the regulations of the Secretary specify,
that would otherwise apply to the Secretary
were the Secretary to undertake the funding of
such investments as a Federal action.
(B)
IMPLEMENTATION.—The
Secretary
shall issue regulations to carry out this sub-
section only after consultation with the Council
on Environmental Quality. Such regulations
shall—
(i) specify any other provisions of law
which further the purposes of the National
Environmental Policy Act of 1969 and to
which the assumption of responsibility as
provided in this subsection applies;
(ii) provide eligibility criteria and pro-
cedures for the designation of a State or
unit of general local government to assume
all of the responsibilities in this subsection;
(iii) specify the purposes for which
funds may be committed without regard to
the procedure established under paragraph
(3);
(iv) provide for monitoring of the per-
formance of environmental reviews under
this subsection;
(v) in the discretion of the Secretary,
provide for the provision or facilitation of
training for such performance; and
(vi) subject to the discretion of the
Secretary, provide for suspension or termi-
nation by the Secretary of the assumption
under subparagraph (A).
(C) RESPONSIBILITIES
OF
STATES
AND
UNITS OF GENERAL LOCAL GOVERNMENT.—The
Secretary’s duty under subparagraph (B) shall
not be construed to limit any responsibility as-
sumed by a State or unit of general local gov-
ernment with respect to any particular request
for guarantee under subparagraph (A), or the
use of funds for a qualified investment.
(3) PROCEDURE.—The Secretary shall approve
the request for guarantee of a debenture, any part
of the proceeds of which is to fund particular quali-
fied low-income community investments of APICs
under this Act, that is subject to the procedures au-
thorized by this subsection only if, not less than 15
days prior to such approval and prior to any com-
mitment of funds to such investment (except for
such purposes specified in the regulations issued
under paragraph (2)(B)), the APIC submits to the
Secretary a request for guarantee of a debenture
that is accompanied by evidence of a certification of
the State or unit of general local government which
meets the requirements of paragraph (4). The ap-
proval by the Secretary of any such certification
shall be deemed to satisfy the Secretary’s respon-
sibilities pursuant to paragraph (1) under the Na-
tional Environmental Policy Act of 1969 and such
other provisions of law as the regulations of the Sec-
retary specify insofar as those responsibilities relate
to the guarantees of debentures, any parts of the
proceeds of which are to fund such investments,
which are covered by such certification.
(4) CERTIFICATION.—A certification under the
procedures authorized by this subsection shall—
(A) be in a form acceptable to the Sec-
retary;
(B) be executed by the chief executive offi-
cer or other officer of the State or unit of gen-
eral local government who qualifies under regu-
lations of the Secretary;
(C) specify that the State or unit of gen-
eral local government under this subsection has
fully carried out its responsibilities as described
under paragraph (2); and
(D) specify that the certifying officer—
(i) consents to assume the status of a
responsible Federal official under the Na-
tional Environmental Policy Act of 1969
and each provision of law specified in regu-
lations issued by the Secretary insofar as
the provisions of such Act or other such
provision of law apply pursuant to para-
graph (2); and
(ii) is authorized and consents on be-
half of the State or unit of general local
government and himself or herself to ac-
cept the jurisdiction of the Federal courts
for the purpose of enforcement of the re-
sponsibilities as such an official.
SEC. 308. EXAMINATION AND MONITORING OF APICS.
(a) IN GENERAL.—The Secretary shall, under regula-
tions, through audits, performance agreements, license
conditions, or otherwise, examine and monitor the oper-
ations and activities of APICs for compliance with sound
financial management practices, and for satisfaction of the
program and procedural goals of this Act and other re-
lated Acts. The Secretary may undertake any responsi-
bility under this section in cooperation with an APIC liai-
son committee, or any agency that is a member of such
a committee, or other agency.
(b) MONITORING, UPDATING,
AND PROGRAM RE-
VIEW.—
(1)
REPORTING
AND
UPDATING.—The
Sec-
retary may establish such annual or more frequent
reporting requirements for APICs, and such require-
ments for independent audits, and the updating of
the statement of public purpose goals, investment
strategy (including the benchmarks in such strat-
egy), and other documents that may have been used
in the license application process under this Act, as
the Secretary determines necessary to assist the Sec-
retary in monitoring the compliance and perform-
ance of APICs.
(2) EXAMINATIONS.—The Secretary shall, no
less often than once every 2 years, examine the oper-
ations and portfolio of each APIC licensed under
this Act for compliance with sound financial man-
agement practices, and for compliance with this Act.
(3) EXAMINATION STANDARDS.—
(A)
SOUND
FINANCIAL
MANAGEMENT
PRACTICES.—The Secretary shall examine each
APIC to ensure, as a matter of sound financial
management practices, substantial compliance
with this and other applicable laws, including
Federal executive orders, Department of Treas-
ury and Office of Management and Budget
guidance, circulars, and application and licens-
ing requirements on a continuing basis. The
Secretary may set any additional sound finan-
cial management practices standards by regula-
tion, including standards that address solvency
and financial exposure.
(B) PERFORMANCE AND OTHER EXAMINA-
TIONS.—The
Secretary
shall
monitor
each
APICs progress in meeting the goals in the
APICs statement of public purpose goals, exe-
cuting the APICs investment strategy, and
other matters.
SEC. 309. INCENTIVES AND PENALTIES.
(a) INCENTIVES.—From amounts of budget authority
appropriated after the initial appropriation for the cost of
annual loan guarantee commitments under this Act, the
Secretary may increase the credit subsidy allocated to an
APIC, in the Secretary’s discretion, as an award for high
performance of the APIC in carrying out its investment
strategy and statement of public purpose goals.
(b) PENALTIES.—
(1) IN GENERAL.—The Secretary may penalize
any APIC, or any manager of an APIC, in the event
such APIC or a manager of the APIC commits an
act of fraud, mismanagement, or noncompliance with
this Act or regulations thereunder or a condition of
the APICs license under this Act. The Secretary in
regulations shall identify, by generic description of a
role or responsibilities, any manager of an APIC
that is subject to this subsection.
(2) PENALTIES REQUIRING NOTICE AND HEAR-
ING.—With respect to an act of commission or omis-
sion under paragraph (1) for which the Secretary
may penalize an APIC or a manager, the Secretary
may, following notice in writing to the APIC or the
manager,
and
opportunity
for
administrative
hearing—
(A) assess a civil money penalty against an
APIC, or a manager of an APIC, the amount
of which may exceed $10,000;
(B) require an APIC to divest any interest
in an investment, on such terms and conditions
as the Secretary imposes; or
(C) revoke the APICs license.
(3) PENALTIES REQUIRING NOTICE AND AN OP-
PORTUNITY TO RESPOND.—With respect to any act
of commission or omission under paragraph (1) for
which the Secretary may penalize an APIC or a
manager, following notice in writing and an oppor-
tunity for the APIC or manager to respond, impose
any reasonable penalty. Such a penalty may, in addi-
tion to any others, be—
(A) a civil money penalty of $10,000 or
less;
(B) the suspension of an APICs license, or
the conditioning of the use of an APICs license,
for up to 90 days, including the deferral for the
period of the suspension of a commitment to
guarantee any new debenture of the APIC; or
(C) any other penalty that the Secretary
determines to be less burdensome to the APIC
than a penalty that requires notice and an ad-
ministrative hearing under this Act.
(c) PROCEDURES.—
(1) No award under this section shall be made
until notice thereof is published in the Federal Reg-
ister.
(2) No civil money penalty, or other penalty
under subsection (b), except suspension or condi-
tioning
of
an
APICs
license
under
subsection
(b)(3)(B), shall be due and payable, or otherwise
take effect, or be subject to enforcement by an order
of a court, until notice thereof is published in the
Federal Register.
(3)(A) The Secretary may suspend or condition
an APICs license for up to 45 days without prior no-
tice in the Federal Register, but such suspension or
conditioning shall take effect only after the Sec-
retary has issued a written notice (including a writ-
ing in electronic form) of such action to the APIC.
Such written notice shall be effective without regard
to whether the APIC has been accorded the oppor-
tunity to respond. Such suspension or conditioning
shall be subject to enforcement by an order of a
court when the Secretary has issued such written
notice.
(B) After such suspension or conditioning takes
effect, the Secretary shall promptly cause a notice of
suspension or conditioning of such license for a pe-
riod of up to 90 days to be published in the Federal
Register. The APIC shall be entitled to respond to
such notice. In counting the time period of the sus-
pension or conditioning, the first day shall be the
day that written notice under this paragraph is
issued.
(C) During the time period of such suspension
or conditioning, the Secretary may proceed under
subsection (b)(2), and in accordance with the proce-
dures applicable to such subsection, to revoke the
APICs license. Only if the Secretary so proceeds,
notwithstanding any other provision of this section,
the Secretary may extend the suspension or condi-
tioning of the APICs license by publishing a notice
of such action in the Federal Register—
(i) for the first such extension, before the
period under subparagraph (B) expires; and
(ii) for any subsequent extensions of up to
90 days, before the preceding period of up to
90 days expires.
(D)
The
suspension
or
conditioning
of
an
APICs license by the Secretary under this paragraph
shall remain in effect in accordance with its terms
until final adjudication in any litigation undertaken
to challenge such suspension or conditioning, or rev-
ocation, of an APICs license.
TITLE III—AMERICA’S PRIVATE
INVESTMENT COMPANIES
SEC. 301. SHORT TITLE.
This title may be cited as the ‘‘America’s Private In-
vestment Companies Act’’.
SEC. 302. FINDINGS AND PURPOSES.
(a) FINDINGS.—The Congress finds that—
(1) people living in distressed areas, both urban
and rural, that are characterized by high levels of job-
lessness, poverty, and low incomes have not benefited
adequately from the economic expansion experienced
by the Nation as a whole;
(2) unequal access to economic opportunities
continues to make the social costs of joblessness and
poverty to our Nation very high; and
(3) there are significant untapped markets in
our Nation, and many of these are in areas that are
underserved by institutions that can make equity and
credit investments.
(b) PURPOSES.—The purposes of this title are to—
(1) license private for profit community develop-
ment entities that will focus on making equity and
credit investments for large-scale business develop-
ments that benefit low-income communities;
(2) provide credit enhancement for those entities
for use in low-income communities; and
(3) provide a vehicle under which the economic
and social returns on financial investments made
pursuant to this title may be available both to the in-
vestors in these entities and to the residents of the
low-income communities.
SEC. 303. DEFINITIONS.
As used in this title:
(1) 
ADMINISTRATOR.—The 
term 
‘‘Adminis-
trator’’ means the Administrator of the Small Busi-
ness Administration.
(2) AGENCY.—The term ‘‘agency’’ has the mean-
ing given such term in section 551(1) of title 5,
United States Code.
(3) APIC.—The term ‘‘APIC’’ means a business
entity that has been licensed under the terms of this
title as an America’s Private Investment Company,
and the license of which has not been revoked.
(4) COMMUNITY
DEVELOPMENT
ENTITY.—The
term ‘‘community development entity’’ means an en-
tity the primary mission of which is serving or pro-
viding investment capital for low-income commu-
nities or low-income persons and which maintains ac-
countability to residents of low-income communities.
(5) HUD.—The term ‘‘HUD’’ means the Sec-
retary of Housing and Urban Development or the De-
partment of Housing and Urban Development, as the
context requires.
(6) LICENSE.—The term ‘‘license’’ means a li-
cense issued by HUD as provided in section 304.
(7) LOW-INCOME COMMUNITY.—The term ‘‘low-
income community’’ means—
(A) a census tract or tracts that have—
(i) a poverty rate of 20 percent or
greater, based on the most recent census
data; or
(ii) a median family income that does
not exceed 80 percent of the greater of (I)
the median family income for the metropoli-
tan area in which such census tract or
tracts are located, or (II) the median family
income for the State in which such census
tract or tracts are located; or
(B) a property that was located on a mili-
tary installation that was closed or realigned
pursuant to title II of the Defense Authorization
Amendments and Base Closure and Realignment
Act (Public Law 100–526; 10 U.S.C. 2687 note),
the Defense Base Closure and Realignment Act of
1990 (part A of title XXIX of Public Law 101–
510; 10 U.S.C. 2687 note), section 2687 of title
10, United States Code, or any other similar law
enacted after the date of the enactment of this
Act that provides for closure or realignment of
military installations.
(8) LOW-INCOME
PERSON.—The term ‘‘low-in-
come person’’ means a person who is a member of a
low-income family, as such term is defined in section
104 of the Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12704).
(9) PRIVATE EQUITY CAPITAL.—
(A) IN GENERAL.—The term ‘‘private eq-
uity capital’’—
(i) in the case of a corporate entity, the
paid-in capital and paid-in surplus of the
corporate entity;
(ii) in the case of a partnership entity,
the contributed capital of the partners of the
partnership entity;
(iii) in the case of a limited liability
company entity, the equity investment of
the members of the limited liability com-
pany entity; and
(iv) earnings from investments of the
entity that are not distributed to investors
and are available for reinvestment by the
entity.
(B) EXCLUSIONS.—Such term does not in-
clude any—
(i) funds borrowed by an entity from
any source or obtained through the issuance
of leverage; except that this clause may not
be construed to exclude amounts evidenced
by a legally binding and irrevocable invest-
ment commitment in the entity, or the use
by an entity of a pledge of such investment
commitment to obtain bridge financing
from a private lender to fund the entity’s
activities on an interim basis; or
(ii) funds obtained directly or indi-
rectly from any Federal, State, or local gov-
ernment or any government agency, except
for—
(I) funds invested by an employee
welfare benefit plan or pension plan;
and
(II) credits against any Federal,
State, or local taxes.
(10) QUALIFIED
ACTIVE
BUSINESS.—The term
‘‘qualified active business’’ means a business or
trade—
(A) that, at the time that an investment is
made in the business or trade, is deriving at
least 50 percent of its gross income from the con-
duct of trade or business activities in low-income
communities;
(B) a substantial portion of the use of the
tangible property of which is used within low-in-
come communities;
(C) a substantial portion of the services that
the employees of which perform are performed in
low-income communities; and
(D) less than 5 percent of the aggregate
unadjusted bases of the property of which is at-
tributable to certain financial property, as the
Secretary shall set forth in regulations, or in col-
lectibles, other than collectibles held primarily
for sale to customers.
(11) QUALIFIED DEBENTURE.—The term ‘‘quali-
fied debenture’’ means a debt instrument having
terms that meet the requirements established pursuant
to section 306(c)(1).
(12) QUALIFIED
LOW-INCOME
COMMUNITY
IN-
VESTMENT.—The term ‘‘qualified low-income commu-
nity investment’’ mean an equity investment in, or a
loan to, a qualified active business.
(13) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Housing and Urban Development,
unless otherwise specified in this title.
SEC. 304. AUTHORIZATION.
(a) LICENSES.—The Secretary is authorized to license
community development entities as America’s Private In-
vestment Companies, in accordance with the terms of this
title.
(b) REGULATIONS.—The Secretary shall regulate
APICs for compliance with sound financial management
practices, and the program and procedural goals of this title
and other related Acts, and other purposes as required or
authorized by this title, or determined by the Secretary. The
Secretary shall issue such regulations as are necessary to
carry out the licensing and regulatory and other duties
under this title, and may issue notices and other guidance
or directives as the Secretary determines are appropriate
to carry out such duties.
(c) USE OF CREDIT SUBSIDY FOR LICENSES.—
(1) NUMBER
OF
LICENSES.—The number of
APICs licensed at any one time may not exceed—
(A) the number that may be supported by
the amount of budget authority appropriated in
accordance with section 504(b) of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661c) for
the cost (as such term is defined in section 502
of such Act) of the subsidy and the investment
strategies of such APICs; or
(B) to the extent the limitation under sec-
tion 305(e)(1) applies, the number authorized
under such section.
(2) USE OF ADDITIONAL CREDIT SUBSIDY.—Sub-
ject to the limitation under paragraph (1), the Sec-
retary may use any budget authority available after
credit subsidy has been allocated for the APICs ini-
tially licensed pursuant to section 305 as follows:
(A) ADDITIONAL LICENSES.—To license ad-
ditional APICs.
(B) CREDIT SUBSIDY INCREASES.—To in-
crease the credit subsidy allocated to an APIC as
an award for high performance under this title,
except that such increases may be made only in
accordance with the following requirements and
limitations:
(i) TIMING.—An increase may only be
provided for an APIC that has been licensed
for a period of not less than 2 years.
(ii) COMPETITION.—An increase may
only be provided for a fiscal year pursuant
to a competition for such fiscal year among
APICs eligible for, and requesting, such an
increase. The competition shall be based
upon criteria that the Secretary shall estab-
lish, which shall include the financial
soundness and performance of the APICs, as
measured by achievement of the public per-
formance goals included in the APICs state-
ments required under section 305(a)(6) and
audits conducted under section 309(b)(2).
Among the criteria established by the Sec-
retary to determine priority for selection
under this section, the Secretary shall in-
clude making investments in and loans to
qualified active businesses in urban or rural
areas that have been designated under sub-
chapter U of Chapter 1 of the Internal Rev-
enue Code of 1986 as empowerment zones or
enterprise communities.
(d) COOPERATION AND COORDINATION.—
(1) PROGRAM POLICIES.—The Secretary is au-
thorized to coordinate and cooperate, through memo-
randa of understanding, an APIC liaison committee,
or otherwise, with the Administrator, the Secretary of
the Treasury, and other agencies in the discretion of
the Secretary, on implementation of this title, includ-
ing regulation, examination, and monitoring of
APICs under this title.
(2) FINANCIAL
SOUNDNESS
REQUIREMENTS.—
The Secretary shall consult with the Administrator
and the Secretary of the Treasury, and may consult
with such other heads of agencies as the Secretary
may consider appropriate, in establishing any regula-
tions, requirements, guidelines, or standards for fi-
nancial soundness or management practices of APICs
or entities applying for licensing as APICs. In imple-
menting and monitoring compliance with any such
regulations, requirements, guidelines, and standards,
the Secretary shall enter into such agreements and
memoranda of understanding with the Administrator
and the Secretary of the Treasury as may be appro-
priate to provide for such officials to provide any as-
sistance that may be agreed to.
(3) OPERATIONS.—The Secretary may carry out
this title—
(A) directly, through agreements with other
Federal entities under section 1535 of title 31,
United States Code, or otherwise, or
(B) indirectly, under contracts or agree-
ments, as the Secretary shall determine.
(e) FEES
AND
CHARGES
FOR
ADMINISTRATIVE
COSTS.—To the extent provided in appropriations Acts, the
Secretary is authorized to impose fees and charges for ap-
plication, review, licensing, and regulation, or other actions
under this title, and to pay for the costs of such activities
from the fees and charges collected.
(f) GUARANTEE FEES.—The Secretary is authorized to
set and collect fees for loan guarantee commitments and
loan guarantees that the Secretary makes under this title.
(g) FUNDING.—
(1) AUTHORIZATION
OF
APPROPRIATIONS
FOR
LOAN GUARANTEE COMMITMENTS.—For each of fiscal
years 2000, 2001, 2002, 2003, and 2004, there is au-
thorized to be appropriated up to $36,000,000 for the
cost (as such term is defined in section 502(5) of the
Federal Credit Reform Act of 1990) of annual loan
guarantee commitments under this title. Amounts ap-
propriated under this paragraph shall remain avail-
able until expended.
(2) AGGREGATE LOAN GUARANTEE COMMITMENT
LIMITATION.—The Secretary may make commitments
to guarantee loans only to the extent that the total
loan principal, any part of which is guaranteed, will
not exceed $1,000,000,000, unless another such
amount is specified in appropriation Acts for any fis-
cal year.
(3) AUTHORIZATION
OF
APPROPRIATIONS
FOR
ADMINISTRATIVE EXPENSES.—For each of the fiscal
years 2000, 2001, 2002, 2003, and 2004, there is au-
thorized to be appropriated $1,000,000 for adminis-
trative expenses for carrying out this title. The Sec-
retary may transfer amounts appropriated under this
paragraph to any appropriation account of HUD or
another agency, to carry out the program under this
title. Any agency to which the Secretary may transfer
amounts under this title is authorized to accept such
transferred amounts in any appropriation account of
such agency.
SEC. 305. SELECTION OF APICS.
(a) ELIGIBLE APPLICANTS.—An entity shall be eligible
to be selected for licensing under section 304 as an APIC
only if the entity submits an application in compliance
with the requirements established pursuant to subsection (b)
and the entity meets or complies with the following require-
ments:
(1) ORGANIZATION.—The entity shall be a pri-
vate, for-profit entity that qualifies as a community
development entity for the purposes of the New Mar-
kets Tax Credits, to the extent such credits are estab-
lished under Federal law.
(2) MINIMUM
PRIVATE
EQUITY
CAPITAL.—The
amount of private equity capital reasonably available
to the entity, as determined by the Secretary, at the
time that a license is approved may not be less than
$25,000,000.
(3) QUALIFIED MANAGEMENT.—The management
of the entity shall, in the determination of the Sec-
retary, meet such standards as the Secretary shall es-
tablish to ensure that the management of the APIC is
qualified, and has the financial expertise, knowledge,
experience, and capability necessary, to make invest-
ments for community and economic development in
low-income communities.
(4) CONFLICT OF INTEREST.—The entity shall
demonstrate that, in accordance with sound financial
management practices, the entity is structured to pre-
clude financial conflict of interest between the APIC
and a manager or investor.
(5) INVESTMENT
STRATEGY.—The entity shall
prepare and submit to the Secretary an investment
strategy that includes benchmarks for evaluation of
its progress, that includes an analysis of existing lo-
cally owned businesses in the communities in which
the investments under the strategy will be made, that
prioritizes such businesses for investment opportuni-
ties, and that fulfills the specific public purpose goals
of the entity.
(6) STATEMENT OF PUBLIC PURPOSE GOALS.—
The entity shall prepare and submit to the Secretary
a statement of the public purpose goals of the entity,
which shall—
(A) set forth goals that shall promote com-
munity and economic development, which shall
include—
(i) making investments in low-income
communities that further economic develop-
ment objectives by targeting such invest-
ments in businesses or trades that comply
with the requirements under subparagraphs
(A) through (C) of section 303(10) relating
to low-income communities in a manner
that benefits low-income persons;
(ii) creating jobs in low-income com-
munities for residents of such communities;
(iii) involving community-based orga-
nizations and residents in community de-
velopment activities;
(iv) such other goals as the Secretary
shall specify; and
(v) such elements as the entity may set
forth to achieve specific public purpose
goals;
(B) include such other elements as the Sec-
retary shall specify; and
(C) include proposed measurements and
strategies for meeting the goals.
(7) COMPLIANCE WITH LAWS.—The entity shall
agree to comply with applicable laws, including Fed-
eral executive orders, Office of Management and
Budget circulars, and requirements of the Department
of the Treasury, and such operating and regulatory
requirements as the Secretary may impose from time
to time.
(8) OTHER.—The entity shall satisfy any other
application requirements that the Secretary may im-
pose by regulation or Federal Register notice.
(b) COMPETITIONS.—The Secretary shall select eligible
entities under subsection (a) to be licensed under section
304 as APICs on the basis of competitions. The Secretary
shall announce each such competition by causing a notice
to be published in the Federal Register that invites applica-
tions for licenses and sets forth the requirements for appli-
cation and such other terms of the competition not otherwise
provided for, as determined by the Secretary.
(c) SELECTION.—In competitions under subsection (b),
the Secretary shall select eligible entities under subsection
(a) for licensing as APICs on the basis of—
(1) the extent to which the entity is expected to
achieve the goals of this title by meeting or exceeding
criteria established under subsection (d); and
(2) to the extent practicable and subject to the
existence of approvable applications, ensuring geo-
graphical diversity among the applicants selected and
diversity of APICs investment strategies, so that
urban and rural communities are both served, in the
determination of the Secretary, by the program under
this title.
(d) SELECTION CRITERIA.—The Secretary shall estab-
lish selection criteria for competitions under subsection (b),
which shall include the following criteria:
(1) CAPACITY.—
(A) MANAGEMENT.—The extent to which the
entity’s management has the quality, experience,
and expertise to make and manage successful in-
vestments for community and economic develop-
ment in low-income communities.
(B) STATE AND LOCAL COOPERATION.—The
extent to which the entity demonstrates a capac-
ity to cooperate with States or units of general
local government and with community-based or-
ganizations and residents of low-income commu-
nities.
(2) INVESTMENT STRATEGY.—The quality of the
entity’s investment strategy submitted in accordance
with subsection (a)(5) and the extent to which the in-
vestment strategy furthers the goals of this title pursu-
ant to paragraph (3) of this subsection.
(3) PUBLIC PURPOSE GOALS.—With respect to
the statement of public purpose goals of the entity
submitted in accordance with subsection (a)(6), and
the strategy and measurements included therein—
(A) the extent to which such goals promote
community and economic development;
(B) the extent to which such goals provide
for making qualified investments in low-income
communities that further economic development
objectives, such as—
(i) creating, within 2 years of the com-
pletion of the initial such investment, job
opportunities, opportunities for ownership,
and other economic opportunities within a
low-income community, both short-term and
of a longer duration;
(ii) improving the economic vitality of
a low-income community, including stimu-
lating other business development;
(iii) bringing new income into a low-
income community and assisting in the re-
vitalization of such community;
(iv) converting real property for the
purpose of creating a site for business incu-
bation and location, or business district re-
vitalization;
(v) enhancing economic competition,
including the advancement of technology;
(vi) rural development;
(vii) mitigating, rehabilitating, and
reusing real property considered subject to
the Solid Waste Disposal Act (42 U.S.C.
6901 et seq.; commonly referred to as the
Resource Conservation and Recovery Act) or
restoring coal mine-scarred land;
(viii) creation of local wealth through
investments in employee stock ownership
companies or resident-owned ventures; and
(ix) any other objective that the Sec-
retary may establish to further the purposes
of this title;
(C) the quality of jobs to be created for resi-
dents of low-income communities, taking into
consideration such factors as the payment of
higher wages, job security, employment benefits,
opportunity for advancement, and personal asset
building;
(D) the extent to which achievement of such
goals will involve community-based organiza-
tions and residents in community development
activities; and
(E) the extent to which the investments re-
ferred to in subparagraph (B) are likely to ben-
efit existing small business in low-income com-
munities or will encourage the growth of small
business in such communities.
(4) OTHER.—Any other criteria that the Sec-
retary may establish to carry out the purposes of this
title.
(e) FIRST YEAR REQUIREMENTS.—
(1) NUMERICAL
LIMITATION.—The number of
APICs may not, at any time during the 1-year period
that begins upon the Secretary awarding the first li-
cense for an APIC under this title, exceed 15.
(2) LIMITATION ON ALLOCATION OF AVAILABLE
CREDIT SUBSIDY.—Of the amount of budget authority
initially made available for allocation under this title
for APICs, the amount allocated for any single APIC
may not exceed 20 percent.
(3) NATIVE
AMERICAN
PRIVATE
INVESTMENT
COMPANY.—Subject only to the absence of an approv-
able application from an entity, during the 1-year pe-
riod referred to in paragraph (1), of the entities se-
lected and licensed by the Secretary as APICs, at
least one shall be an entity that has as its primary
purpose the making of qualified low-income commu-
nity investments in areas that are within Indian
country (as such term is defined in section 1151 of
title 18, United States Code) or within lands that
have status as Hawaiian home land under section
204 of the Hawaiian Homes Commission Act, 1920
(42 Stat. 108) or are acquired pursuant to such Act.
The Secretary may establish specific selection criteria
for applicants under this paragraph.
(f) COMMUNICATIONS BETWEEN HUD AND APPLI-
CANTS.—
(1) IN GENERAL.—The Secretary shall set forth
in regulations the procedures under which HUD and
applicants for APIC licenses, and others, may com-
municate. Such regulations shall—
(A) specify by position the HUD officers
and employees who may communicate with such
applicants and others;
(B) permit HUD officers and employees to
request and discuss with the applicant and oth-
ers (such as banks or other credit or business ref-
erences, or potential investors, that the applicant
specifies in writing) any more detailed informa-
tion that may be desirable to facilitate HUD’s
review of the applicant’s application;
(C) restrict HUD officers and employees
from revealing to any applicant—
(i) the fact or chances of award of a li-
cense to such applicant, unless there has
been a public announcement of the results of
the competition; and
(ii) any information with respect to
any other applicant; and
(D) set forth requirements for making and
keeping records of any communications con-
ducted under this subsection, including require-
ments for making such records available to the
public after the award of licenses under an ini-
tial or subsequent notice, as appropriate, under
subsection (a).
(2) TIMING.—Regulations under this subsection
may be issued as interim rules for effect on or before
the date of publication of the first notice under sub-
section (a), and shall apply only with respect to ap-
plications under such notice. Regulations to imple-
ment this subsection with respect to any notice after
the first such notice shall be subject to notice and
comment rulemaking.
(3) INAPPLICABILITY OF DEPARTMENT OF HUD
ACT PROVISION.—Section 12(e)(2) of the Department
of Housing and Urban Development Act (42 U.S.C.
3537a(e)(2)) is amended by inserting before the pe-
riod at the end the following: ‘‘or any license provided
under the America’s Private Investment Companies
Act’’.
SEC. 306. OPERATIONS OF APICS.
(a) POWERS AND AUTHORITIES.—
(1) IN GENERAL.—An APIC shall have any pow-
ers or authorities that—
(A) the APIC derives from the jurisdiction
in which it is organized, or that the APIC other-
wise has;
(B) may be conferred by a license under
this title; and
(C) the Secretary may prescribe by regula-
tion.
(2) NEW MARKET ASSISTANCE.—Nothing in this
title shall preclude an APIC or its investors from re-
ceiving an allocation of New Market Tax Credits (to
the extent such credits are established under Federal
law) if the APIC satisfies any applicable terms and
conditions under the Internal Revenue Code of 1986.
(b) INVESTMENT LIMITATIONS.—
(1) QUALIFIED LOW-INCOME COMMUNITY INVEST-
MENTS.—Substantially all investments that an APIC
makes shall be qualified low-income community in-
vestments if the investments are financed with—
(A) amounts available from the proceeds of
the issuance of an APIC’s qualified debenture
guaranteed under this title;
(B) proceeds of the sale of obligations de-
scribed under subsection (c)(3)(C)(iii); or
(C) the use of private equity capital, as de-
termined by the Secretary, in an amount speci-
fied in the APIC’s license.
(2) SINGLE BUSINESS INVESTMENTS.—An APIC
shall not, as a matter of sound financial practice, in-
vest in any one business an amount that exceeds an
amount equal to 35 percent of the sum of—
(A) the APIC’s private equity capital; plus
(B) an amount equal to the percentage limit
that the Secretary determines that an APIC may
have outstanding at any one time, under sub-
section (c)(2)(A).
(c) BORROWING POWERS; QUALIFIED DEBENTURES.—
(1) ISSUANCE.—An APIC may issue qualified
debentures. The Secretary shall, by regulation, specify
the terms and requirements for debentures to be con-
sidered qualified debentures for purposes of this title,
except that the term to maturity of any qualified de-
benture may not exceed 21 years and each qualified
debenture shall bear interest during all or any part
of that time period at a rate or rates approved by the
Secretary.
(2) LEVERAGE LIMITS.—In general, as a matter
of sound financial management practices—
(A) the total amount of qualified debentures
that an APIC issues under this title that an
APIC may have outstanding at any one time
shall not exceed an amount equal to 200 percent
of the private equity capital of the APIC, as de-
termined by the Secretary; and
(B) an APIC shall not have more than
$300,000,000 in face value of qualified deben-
tures issued under this title outstanding at any
one time.
(3) REPAYMENT.—
(A) CONDITION OF BUSINESS WIND-UP.—An
APIC shall have repaid, or have otherwise been
relieved of indebtedness, with respect to any in-
terest or principal amounts of borrowings under
this subsection no less than 2 years before the
APIC may dissolve or otherwise complete the
wind-up of its business.
(B) TIMING.—An APIC may repay any in-
terest or principal amounts of borrowings under
this subsection at any time: Provided, That the
repayment of such amounts shall not relieve an
APIC of any duty otherwise applicable to the
APIC under this title, unless the Secretary or-
ders such relief.
(C) USE
OF
INVESTMENT
PROCEEDS
BE-
FORE REPAYMENT.—Until an APIC has repaid
all interest and principal amounts on APIC bor-
rowings under this subsection, an APIC may use
the proceeds of investments, in accordance with
regulations issued by the Secretary, only to—
(i) pay for proper costs and expenses
the APIC incurs in connection with such
investments;
(ii) pay for the reasonable administra-
tive expenses of the APIC;
(iii) purchase Treasury securities;
(iv) repay interest and principal
amounts on APIC borrowings under this
subsection;
(v) make interest, dividend, or other
distributions to or on behalf of an investor;
or
(vi) undertake such other purposes as
the Secretary may approve.
(D) USE OF INVESTMENT PROCEEDS AFTER
REPAYMENT.—After an APIC has repaid all in-
terest and principal amounts on APIC bor-
rowings under this subsection, and subject to
continuing compliance with subsection (a), the
APIC may use the proceeds from investments to
make interest, dividend, or other distributions to
or on behalf of investors in the nature of returns
on capital, or the withdrawal of private equity
capital, without regard to subparagraph (C) but
in conformity with the APIC’s investment strat-
egy and statement of public purpose goals.
(d) REUSE OF QUALIFIED DEBENTURE PROCEEDS.—
An APIC may use the proceeds of sale of Treasury securities
purchased under subsection (c)(3)(C)(iii) to make qualified
low-income community investments, subject to the Sec-
retary’s approval. In making the request for the Secretary’s
approval, the APIC shall follow the procedures applicable
to an APIC’s request for HUD guarantee action, as the Sec-
retary may modify such procedures for implementation of
this subsection. Such procedures shall include the descrip-
tion and certifications that an APIC must include in all
requests for guarantee action, and the environmental certifi-
cation applicable to initial expenditures for a project or ac-
tivity.
(e) ANTIPIRATING.—Notwithstanding any other provi-
sion of law, an APIC may not use any private equity cap-
ital required to be contributed under this title, or the pro-
ceeds from the sale of any qualified debenture under this
title, to make an investment, as determined by the Sec-
retary, to assist directly in the relocation of any industrial
or commercial plant, facility, or operation, from 1 area to
another area, if the relocation is likely to result in a signifi-
cant loss of employment in the labor market area from
which the relocation occurs.
(f) EXCLUSION OF APIC FROM DEFINITION OF DEBT-
OR UNDER BANKRUPTCY PROVISIONS.—Section 109(b)(2)
of title 11, United States Code, is amended by inserting
before ‘‘credit union’’ the following: ‘‘America’s Private In-
vestment Company licensed under the America’s Private
Investment Companies Act,’’.
SEC. 307. CREDIT ENHANCEMENT BY THE FEDERAL GOV-
ERNMENT.
(a) ISSUANCE AND GUARANTEE OF QUALIFIED DE-
BENTURES.—
(1) AUTHORITY.—To the extent consistent with
the Federal Credit Reform Act of 1990, the Secretary
is authorized to make commitments to guarantee and
guarantee the timely payment of all principal and
interest as scheduled on qualified debentures issued by
APICs. Such commitments and guarantees may only
be made in accordance with the terms and conditions
established under paragraph (2).
(2) TERMS
AND
CONDITIONS.—The Secretary
shall establish such terms and conditions as the Sec-
retary determines to be appropriate for commitments
and guarantees under this subsection, including terms
and conditions relating to amounts, expiration, num-
ber, priorities of repayment, security, collateral, am-
ortization, payment of interest (including the timing
thereof), and fees and charges. The terms and condi-
tions applicable to any particular commitment or
guarantee may be established in documents that the
Secretary approves for such commitment or guar-
antee.
(3) SENIORITY.—Notwithstanding any other pro-
vision of Federal law or any law or the constitution
of any State, qualified debentures guaranteed under
this subsection by the Secretary shall be senior to any
other debt obligation, equity contribution or earnings,
or the distribution of dividends, interest, or other
amounts, of an APIC.
(b) ISSUANCE OF TRUST CERTIFICATES.—The Sec-
retary, or an agent or entity selected by the Secretary, is
authorized to issue trust certificates representing ownership
of all or a fractional part of guaranteed qualified debentures
issued by APICs and held in trust.
(c) GUARANTEE OF TRUST CERTIFICATES.—
(1) IN GENERAL.—The Secretary is authorized,
upon such terms and conditions as the Secretary de-
termines to be appropriate, to guarantee the timely
payment of the principal of and interest on trust cer-
tificates issued by the Secretary, or an agent or other
entity, for purposes of this section. Such guarantee
shall be limited to the extent of principal and interest
on the guaranteed qualified debentures which compose
the trust.
(2) SUBSTITUTION OPTION.—The Secretary shall
have the option to replace in the corpus of the trust
any prepaid or defaulted qualified debenture with a
debenture, another full faith and credit instrument, or
any obligations of the United States, that may rea-
sonably substitute for such prepaid or defaulted quali-
fied debenture.
(3) PROPORTIONATE
REDUCTION
OPTION.—In
the event that the Secretary elects not to exercise the
option under paragraph (2), and a qualified deben-
ture in such trust is prepaid, or in the event of de-
fault of a qualified debenture, the guarantee of timely
payment of principal and interest on the trust certifi-
cate shall be reduced in proportion to the amount of
principal and interest that such prepaid qualified de-
benture represents in the trust. Interest on prepaid or
defaulted qualified debentures shall accrue and be
guaranteed by the Secretary only through the date of
payment of the guarantee. During the term of a trust
certificate, it may be called for redemption due to
prepayment or default of all qualified debentures that
are in the corpus of the trust.
(d) FULL FAITH AND CREDIT BACKING OF GUARAN-
TEES.—The full faith and credit of the United States is
pledged to the timely payment of all amounts which may
be required to be paid under any guarantee by the Secretary
pursuant to this section.
(e) SUBROGATION AND LIENS.—
(1) SUBROGATION.—In the event the Secretary
pays a claim under a guarantee issued under this sec-
tion, the Secretary shall be subrogated fully to the
rights satisfied by such payment.
(2) PRIORITY OF LIENS.—No State or local law,
and no Federal law, shall preclude or limit the exer-
cise by the Secretary of its ownership rights in the de-
bentures in the corpus of a trust under this section.
(f) REGISTRATION.—
(1) IN GENERAL.—The Secretary shall provide
for a central registration of all trust certificates
issued pursuant to this section.
(2) AGENTS.—The Secretary may contract with
an agent or agents to carry out on behalf of the Sec-
retary the pooling and the central registration func-
tions of this section notwithstanding any other provi-
sion of law, including maintenance on behalf of and
under the direction of the Secretary, such commercial
bank accounts or investments in obligations of the
United States as may be necessary to facilitate trusts
backed by qualified debentures guaranteed under this
title and the issuance of trust certificates to facilitate
formation of the corpus of the trusts. The Secretary
may require such agent or agents to provide a fidelity
bond or insurance in such amounts as the Secretary
determines to be necessary to protect the interests of
the Government.
(3) FORM.—Book-entry or other electronic forms
of registration for trust certificates under this title are
authorized.
(g) TIMING OF ISSUANCE OF GUARANTEES OF QUALI-
FIED DEBENTURES AND TRUST CERTIFICATES.—The Sec-
retary may, from time to time in the Secretary’s discretion,
exercise the authority to issue guarantees of qualified deben-
tures under this title or trust certificates under this title.
SEC. 308. APIC REQUESTS FOR GUARANTEE ACTIONS.
(a) IN GENERAL.—The Secretary may issue a guar-
antee under this title for a qualified debenture that an
APIC intends to issue only pursuant to a request to the
Secretary by the APIC for such guarantee that is made in
accordance with regulations governing the content and pro-
cedures for such requests, that the Secretary shall prescribe.
Such regulations shall provide that each such request shall
include—
(1) a description of the manner in which the
APIC intends to use the proceeds from the qualified
debenture;
(2) a certification by the APIC that the APIC is
in substantial compliance with—
(A) this title and other applicable laws, in-
cluding any requirements established under this
title by the Secretary;
(B) all terms and conditions of its license,
any cease-and-desist order issued under section
310, and of any penalty or condition that may
have arisen from examination or monitoring by
the Secretary or otherwise, including the satis-
faction of any financial audit exception that
may have been outstanding; and
(C) all requirements relating to the alloca-
tion and use of New Markets Tax Credits, to the
extent such credits are established under Federal
law; and
(3) any other information or certification that
the Secretary considers appropriate.
(b) REQUESTS FOR GUARANTEE OF QUALIFIED DE-
BENTURES THAT INCLUDE FUNDING FOR INITIAL EXPEND-
ITURE FOR A PROJECT OR ACTIVITY.—In addition to the
description and certification that an APIC is required to
supply in all requests for guarantee action under subsection
(a), in the case of an APIC’s request for a guarantee that
includes a qualified debenture, the proceeds of which the
APIC expects to be used as its initial expenditure for a
project or activity in which the APIC intends to invest, and
the expenditure for which would require an environmental
assessment under the National Environmental Policy Act
of 1969 and other related laws that further the purposes
of such Act, such request for guarantee action shall include
evidence satisfactory to the Secretary of the certification of
the completion of environmental review of the project or ac-
tivity required of the cognizant State or local government
under subsection (c). If the environmental review responsi-
bility for the project or activity has not been assumed by
a State or local government under subsection (c), then the
Secretary shall be responsible for carrying out the applica-
ble responsibilities under the National Environmental Pol-
icy Act of 1969 and other provisions of law that further
the purposes of such Act that relate to the project or activity,
and the Secretary shall execute such responsibilities before
acting on the APIC’s request for the guarantee that is cov-
ered by this subsection.
(c) 
RESPONSIBILITY
FOR
ENVIRONMENTAL
RE-
VIEWS.—
(1) EXECUTION OF RESPONSIBILITY BY THE SEC-
RETARY.—This subsection shall apply to guarantees
by the Secretary of qualified debentures under this
title, the proceeds of which would be used in connec-
tion with qualified low-income community invest-
ments of APICs under this title.
(2) ASSUMPTION
OF
RESPONSIBILITY
BY
COG-
NIZANT UNIT OF GENERAL GOVERNMENT.—
(A) GUARANTEE
OF
QUALIFIED
DEBEN-
TURES.—In order to assure that the policies of
the National Environmental Policy Act of 1969
and other provisions of law that further the pur-
poses of such Act (as specified in regulations
issued by the Secretary) are most effectively im-
plemented in connection with the expenditure of
funds under this title, and to assure to the public
undiminished protection of the environment, the
Secretary may, under such regulations, in lieu of
the environmental protection procedures other-
wise applicable, provide for the guarantee of
qualified debentures, any part of the proceeds of
which are to fund particular qualified low-in-
come community investments of APICs under
this title, if a State or unit of general local gov-
ernment, as designated by the Secretary in ac-
cordance with regulations issued by the Sec-
retary, assumes all of the responsibilities for en-
vironmental review, decisionmaking, and action
pursuant to the National Environmental Policy
Act of 1969 and such other provisions of law
that further such Act as the regulations of the
Secretary specify, that would otherwise apply to
the Secretary were the Secretary to undertake the
funding of such investments as a Federal action.
(B) IMPLEMENTATION.—The Secretary shall
issue regulations to carry out this subsection
only after consultation with the Council on En-
vironmental Quality. Such regulations shall—
(i) specify any other provisions of law
which further the purposes of the National
Environmental Policy Act of 1969 and to
which the assumption of responsibility as
provided in this subsection applies;
(ii) provide eligibility criteria and
procedures for the designation of a State or
unit of general local government to assume
all of the responsibilities in this subsection;
(iii) specify the purposes for which
funds may be committed without regard to
the procedure established under paragraph
(3);
(iv) provide for monitoring of the per-
formance of environmental reviews under
this subsection;
(v) in the discretion of the Secretary,
provide for the provision or facilitation of
training for such performance; and
(vi) subject to the discretion of the Sec-
retary, provide for suspension or termi-
nation by the Secretary of the assumption
under subparagraph (A).
(C) RESPONSIBILITIES
OF
STATES
AND
UNITS OF GENERAL LOCAL GOVERNMENT.—The
100
Secretary’s duty under subparagraph (B) shall
not be construed to limit any responsibility as-
sumed by a State or unit of general local govern-
ment with respect to any particular request for
guarantee under subparagraph (A), or the use of
funds for a qualified investment.
(3) PROCEDURE.—Subject to compliance by the
APIC with the requirements of this title, the Sec-
retary shall approve the request for guarantee of a
qualified debenture, any part of the proceeds of which
is to fund particular qualified low-income community
investments of an APIC under this title, that is sub-
ject to the procedures authorized by this subsection
only if, not less than 15 days prior to such approval
and prior to any commitment of funds to such invest-
ment (except for such purposes specified in the regula-
tions issued under paragraph (2)(B)), the APIC sub-
mits to the Secretary a request for guarantee of a
qualified debenture that is accompanied by evidence
of a certification of the State or unit of general local
government which meets the requirements of para-
graph (4). The approval by the Secretary of any such
certification shall be deemed to satisfy the Secretary’s
responsibilities pursuant to paragraph (1) under the
National Environmental Policy Act of 1969 and such
101
other provisions of law as the regulations of the Sec-
retary specify insofar as those responsibilities relate
to the guarantees of qualified debentures, any parts of
the proceeds of which are to fund such investments,
which are covered by such certification.
(4) CERTIFICATION.—A certification under the
procedures authorized by this subsection shall—
(A) be in a form acceptable to the Secretary;
(B) be executed by the chief executive officer
or other officer of the State or unit of general
local government who qualifies under regulations
of the Secretary;
(C) specify that the State or unit of general
local government under this subsection has fully
carried out its responsibilities as described under
paragraph (2); and
(D) specify that the certifying officer—
(i) consents to assume the status of a
responsible Federal official under the Na-
tional Environmental Policy Act of 1969
and each provision of law specified in regu-
lations issued by the Secretary insofar as
the provisions of such Act or other such pro-
vision of law apply pursuant to paragraph
(2); and
102
(ii) is authorized and consents on be-
half of the State or unit of general local
government and himself or herself to accept
the jurisdiction of the Federal courts for the
purpose of enforcement of the responsibil-
ities as such an official.
SEC. 309. EXAMINATION AND MONITORING OF APICS.
(a) IN GENERAL.—The Secretary shall, under regula-
tions, through audits, performance agreements, license con-
ditions, or otherwise, examine and monitor the operations
and activities of APICs for compliance with sound finan-
cial management practices, and for satisfaction of the pro-
gram and procedural goals of this title and other related
Acts. The Secretary may undertake any responsibility
under this section in cooperation with an APIC liaison
committee, or any agency that is a member of such a com-
mittee, or other agency.
(b) MONITORING, UPDATING, AND PROGRAM RE-
VIEW.—
(1) REPORTING AND UPDATING.—The Secretary
shall establish such annual or more frequent reporting
requirements for APICs, and such requirements for
the updating of the statement of public purpose goals,
investment strategy (including the benchmarks in
such strategy), and other documents that may have
103
been used in the license application process under this
title, as the Secretary determines necessary to assist
the Secretary in monitoring the compliance and per-
formance of APICs.
(2) ANNUAL
AUDITS.—The Secretary shall re-
quire each APIC to have an independent audit con-
ducted annually of the operations of the APIC. The
Secretary, in consultation with the Administrator
and the Secretary of the Treasury, shall establish re-
quirements and standards for such audits, including
requirements that such audits be conducted in accord-
ance with generally accepted accounting principles,
that the APIC submit the results of the audit to Sec-
retary, and that specify the information to be sub-
mitted.
(3) EXAMINATIONS.—The Secretary shall, no less
often than once every 2 years, examine the operations
and portfolio of each APIC licensed under this title
for compliance with sound financial management
practices, and for compliance with this title.
(4) EXAMINATION STANDARDS.—
(A) SOUND FINANCIAL MANAGEMENT PRAC-
TICES.—The Secretary shall examine each APIC
to ensure, as a matter of sound financial man-
agement practices, substantial compliance with
104
this and other applicable laws, including Federal
executive orders, Department of Treasury and
Office of Management and Budget guidance, cir-
culars, and application and licensing require-
ments on a continuing basis. The Secretary may,
by regulation, establish any additional standards
for sound financial management practices, in-
cluding standards that address solvency and fi-
nancial exposure.
(B) PERFORMANCE AND OTHER EXAMINA-
TIONS.—The 
Secretary 
shall 
monitor 
each
APIC’s progress in meeting the goals in the
APIC’s statement of public purpose goals, exe-
cuting the APIC’s investment strategy, and other
matters.
(c) INSPECTOR GENERAL RESPONSIBILITY.—In car-
rying out monitoring of HUD’s responsibilities under this
title and for purposes of ensuring that the program under
this title is operated in accordance with sound financial
management practices, the Inspector General of the Depart-
ment of Housing and Urban Development shall consult with
the Inspector General of the Department of the Treasury
and the Inspector General of the Small Business Adminis-
tration, as appropriate, and may enter into such agree-
ments and memoranda of understanding as may be nec-
105
essary to obtain the cooperation of the Inspectors General
of the Department of the Treasury and the Small Business
Administration in carrying out such function.
(d) ANNUAL REPORT BY SECRETARY.—The Secretary
shall submit a report to the Congress annually regarding
the operations, activities, financial health, and achieve-
ments of the APIC program under this title. The report
shall list each investment made by an APIC and include
a summary of the examinations conducted under subsection
(b)(3), the guarantee actions of HUD, and any regulatory
or policy actions taken by HUD. The report shall distin-
guish recently licensed APICs from APICs that have held
licenses for a longer period for purposes of indicating pro-
gram activities and performance.
(e) GAO REPORT.—
(1) REQUIREMENT.—Not later than 2 years after
the date of the enactment of this Act, the Comptroller
General of the United States shall submit a report to
the Congress regarding the operation of the program
under this title for licensing and guarantees for
APICs.
(2) CONTENTS.—The report shall include—
(A) an analysis of the operations and moni-
toring by HUD of the APIC program under this
title;
106
(B) the administrative and capacity needs
of HUD required to ensure the integrity of the
program;
(C) the extent and adequacy of any credit
subsidy appropriated for the program; and
(D) the management of financial risk and
liability of the Federal Government under the
program.
SEC. 310. PENALTIES.
(a) VIOLATIONS SUBJECT
TO PENALTY.—The Sec-
retary may impose a penalty under this subsection on any
APIC or manager of an APIC that, by any act, practice,
or failure to act, engages in fraud, mismanagement, or non-
compliance with this title, the regulations under this title,
or a condition of the APIC’s license under this title. The
Secretary shall, by regulation, identify, by generic descrip-
tion of a role or responsibilities, any manager of an APIC
that is subject to a penalty under this section.
(b) PENALTIES REQUIRING NOTICE AND AN OPPOR-
TUNITY TO RESPOND.—If, after notice in writing to an
APIC or the manager of an APIC that the APIC or man-
ager has engaged in any action, practice, or failure to act
that, under subsection (a), is subject to a penalty, and after
an opportunity for the APIC or manager to respond to the
notice, the Secretary determines that the APIC or manager
108
(1) assess a civil money penalty against the
APIC or a manager in any amount;
(2) require the APIC to divest any interest in an
investment, on such terms and conditions as the Sec-
retary may impose; or
(3) revoke the APIC’s license.
(d) EFFECTIVE DATE OF PENALTIES.—
(1) PRIOR
NOTICE
REQUIREMENT.—Except as
provided in paragraph (2) of this subsection, a pen-
alty under subsection (b) or (c) shall not be due and
payable and shall not otherwise take effect or be sub-
ject to enforcement by an order of a court, before no-
tice of the penalty is published in the Federal Reg-
ister.
(2) CEASE-AND-DESIST
ORDERS
AND
SUSPEN-
SION OR CONDITIONING OF LICENSE.—In the case of
a cease-and-desist order under subsection (b)(2) or the
suspension or conditioning of an APIC’s license under
subsection (b)(3), the following procedures shall apply:
(A) ACTION
WITHOUT
PUBLISHED
NO-
TICE.—The Secretary may order an APIC or
manager to cease and desist from an action,
practice, or failure to act or may suspend or
condition an APIC’s license, for not more than
45 days without prior publication of notice in
109
the Federal Register, but such cease-and-desist
order or suspension or conditioning shall take ef-
fect only after the Secretary has issued a written
notice (which may include a writing in elec-
tronic form) of such action to the APIC. Not-
withstanding subsection (b), such written notice
shall be effective without regard to whether the
APIC has been accorded an opportunity to re-
spond. Upon such notice, such cease-and-desist
order or suspension or conditioning shall be sub-
ject to enforcement by an order of a court.
(B) PUBLICATION OF NOTICE OF SUSPEN-
SION OR CONDITIONING OF LICENSE.—Upon a
suspension or conditioning of a license taking ef-
fect pursuant to subparagraph (A), the Secretary
shall promptly cause a notice of suspension or
conditioning of such license for a period of not
more than 90 days to be published in the Federal
Register. The Secretary shall provide the APIC
an opportunity to respond to such notice. For
purposes of the determining the duration of the
period of any suspension or conditioning under
this subparagraph, the first day of such period
shall be the day of issuance of the written notice
110
under this paragraph of the suspension or condi-
tioning.
(C) REVOCATION OF LICENSE.—During the
period of the suspension or conditioning of an
APIC’s license, the Secretary may take action
under subsection (c)(3) to revoke the license of
the APIC, in accordance with the procedures ap-
plicable to such subsection. Notwithstanding any
other provision of this section, if the Secretary
takes such action, the Secretary may extend the
suspension or conditioning of the APIC’s license,
for one or more periods of not more than 90 days
each, by causing notice of such action to be pub-
lished in the Federal Register—
(i) for the first such extension, before
the expiration of the period under subpara-
graph (B); and
(ii) for any subsequent extension, be-
fore the expiration of the preceding exten-
sion period under this subparagraph.
(D) TERM OF EFFECTIVENESS.—A cease-and-de-
sist order or the suspension or conditioning of an
APIC’s license by the Secretary under this paragraph
shall remain in effect in accordance with the terms of
the order, suspension, or conditioning until final ad-
111
judication in any action undertaken to challenge the
order, or the suspension or conditioning, or the rev-
ocation, of an APIC’s license.
SEC. 311. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in subsection
(b), this title shall take effect upon the expiration of the
6-month period beginning on the date of the enactment of
this Act.
(b) ISSUANCE OF REGULATIONS AND GUIDELINES.—
Any authority under this title of the Secretary, the Admin-
istrator, and the Secretary of the Treasury to issue regula-
tions, standards, guidelines, or licensing requirements, and
any authority of such officials to consult or enter into agree-
ments or memoranda of understanding regarding such
issuance, shall take effect on the date of the enactment of
this Act.
SEC. 312. SUNSET.
After the expiration of the 5-year period beginning
upon the date that the Secretary awards the first license
for an APIC under this title—
(1) the Secretary may not license any APIC; and
(2) no amount may be appropriated for the costs
(as such term is defined in section 502 of the Federal
Credit Reform Act of 1990 (2 U.S.C. 661c)) of any
112
guarantee under this title for any debenture issued by
an APIC.
This section may not be construed to prohibit, limit, or af-
fect the award, allocation, or use of any budget authority
for the costs of such guarantees that is appropriated before
the expiration of such period.
TITLE IV—NEW MARKETS
CREDIT
SEC. 401. NEW MARKETS TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business-related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45D. NEW MARKETS TAX CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—
‘‘(1) IN GENERAL.—For purposes of section 38,
in the case of a taxpayer who holds a qualified eq-
uity investment on a credit allowance date of such
investment which occurs during the taxable year, the
new markets tax credit determined under this sec-
tion for such taxable year is an amount equal to 6
percent of the amount paid to the qualified commu-
nity development entity for such investment at its
original issue.
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‘‘(2) CREDIT
ALLOWANCE
DATE.—The term
‘credit allowance date’ means, with respect to any
qualified equity investment—
‘‘(A) the date on which such investment is
initially made, and
‘‘(B) each of the 4 anniversary dates of
such date thereafter.
‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified equity
investment’ means any equity investment in a quali-
fied community development entity if—
‘‘(A) such investment is acquired by the
taxpayer at its original issue (directly or
through an underwriter) solely in exchange for
cash,
‘‘(B) substantially all of such cash is used
by the qualified community development entity
to make qualified low-income community invest-
ments, and
‘‘(C) such investment is designated for
purposes of this section by the qualified com-
munity development entity.
Such term shall not include any equity investment
issued by a qualified community development entity
115
‘‘(5) REDEMPTIONS.—A rule similar to the rule
of section 1202(c)(3) shall apply for purposes of this
subsection.
‘‘(6) EQUITY INVESTMENT.—The term ‘equity
investment’ means—
‘‘(A) any stock in a qualified community
development entity which is a corporation, and
‘‘(B) any capital interest in a qualified
community development entity which is a part-
nership.
‘‘(c) QUALIFIED COMMUNITY DEVELOPMENT ENTI-
TY.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified com-
munity development entity’ means any domestic cor-
poration or partnership if—
‘‘(A) the primary mission of the entity is
serving, or providing investment capital for,
low-income communities or low-income persons,
‘‘(B) the entity maintains accountability to
residents of low-income communities through
representation on governing or advisory boards
or otherwise, and
‘‘(C) the entity is certified by the Secretary
for purposes of this section as being a qualified
community development entity.
116
‘‘(2) SPECIAL RULES FOR CERTAIN ORGANIZA-
TIONS.—The requirements of paragraph (1) shall be
treated as met by—
‘‘(A) any specialized small business invest-
ment 
company 
(as 
defined 
in 
section
1044(c)(3)), and
‘‘(B) any community development financial
institution (as defined in section 103 of the
Community Development Banking and Finan-
cial Institutions Act of 1994 (12 U.S.C. 4702)).
‘‘(d) QUALIFIED LOW-INCOME COMMUNITY INVEST-
MENTS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified low-in-
come community investment’ means—
‘‘(A) any equity investment in, or loan to,
any qualified active low-income community busi-
ness,
‘‘(B) the purchase from another commu-
nity development entity of any loan made by
such entity which is a qualified low-income com-
munity investment if the amount received by
such other entity from such purchase is used by
such other entity to make qualified low-income
community investments,
117
‘‘(C) financial counseling and other serv-
ices specified in regulations prescribed by the
Secretary to businesses located in, and resi-
dents of, low-income communities, and
‘‘(D) any equity investment in, or loan to,
any qualified community development entity if
substantially all of the investment or loan is
used by such entity to make qualified low-in-
come community investments described in sub-
paragraphs (A), (B), and (C).
‘‘(2) QUALIFIED ACTIVE LOW-INCOME COMMU-
NITY BUSINESS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘qualified active low-income
community business’ means, with respect to any
taxable year, any corporation or partnership if
for such year—
‘‘(i) at least 50 percent of the total
gross income of such entity is derived from
the active conduct of a qualified business
within any low-income community,
‘‘(ii) a substantial portion of the use
of the tangible property of such entity
(whether owned or leased) is within any
low-income community,
118
‘‘(iii) a substantial portion of the serv-
ices performed for such entity by its em-
ployees are performed in any low-income
community,
‘‘(iv) less than 5 percent of the aver-
age of the aggregate unadjusted bases of
the property of such entity is attributable
to collectibles (as defined in section
408(m)(2)) other than collectibles that are
held primarily for sale to customers in the
ordinary course of such business, and
‘‘(v) less than 5 percent of the aver-
age of the aggregate unadjusted bases of
the property of such entity is attributable
to nonqualified financial property (as de-
fined in section 1397B(e)).
‘‘(B) PROPRIETORSHIP.—Such term shall
include any business carried on by an individual
as a proprietor if such business would meet the
requirements of subparagraph (A) were it incor-
porated.
‘‘(C) PORTIONS
OF
BUSINESS
MAY
BE
QUALIFIED
ACTIVE
LOW-INCOME
COMMUNITY
BUSINESS.—The term ‘qualified active low-in-
come community business’ includes any trades
119
or businesses which would qualify as a qualified
active low-income community business if such
trades or businesses were separately incor-
porated.
‘‘(3) QUALIFIED BUSINESS.—For purposes of
this subsection, the term ‘qualified business’ has the
meaning given to such term by section 1397B(d);
except that—
‘‘(A) in lieu of applying paragraph (2)(B)
thereof, the rental to others of real property lo-
cated in any low-income community shall be
treated as a qualified business if there are sub-
stantial improvements located on such property,
‘‘(B) paragraph (3) thereof shall not apply,
and
‘‘(C) such term shall not include any busi-
ness if a significant portion of the equity inter-
ests in such business are held by any person
who holds a significant portion of the equity in-
vestments in the community development entity.
‘‘(e) LOW-INCOME COMMUNITY.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘low-income com-
munity’ means any population census tract if—
120
‘‘(A) the poverty rate for such tract is at
least 20 percent, or
‘‘(B)(i) in the case of a tract not located
within a metropolitan area, the median family
income for such tract does not exceed 80 per-
cent of statewide median family income, or
‘‘(ii) in the case of a tract located within
a metropolitan area, the median family income
for such tract does not exceed 80 percent of the
greater of statewide median family income or
the metropolitan area median family income.
‘‘(2) AREAS NOT WITHIN CENSUS TRACTS.—In
the case of an area which is not tracted for popu-
lation census tracts, the equivalent county divisions
(as defined by the Bureau of the Census for pur-
poses of defining poverty areas) shall be used for
purposes of determining poverty rates and median
family income.
‘‘(f) NATIONAL LIMITATION ON AMOUNT OF INVEST-
MENTS DESIGNATED.—
‘‘(1) IN GENERAL.—There is a new markets tax
credit limitation of $1,200,000,000 for each of cal-
endar years 2000 through 2004.
‘‘(2) ALLOCATION OF LIMITATION.—The limita-
tion under paragraph (1) shall be allocated by the