SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Encouraging Small 
Business Innovation Act’’. 
SEC. 2. INCLUSION OF TESTING AND EVALUATION IN THE 
DEFINITION OF RESEARCH AND DEVELOP-
MENT. 
Section 9(e)(5) of the Small Business Act (15 U.S.C. 
638(e)(5)) is amended— 
(1) by redesignating subparagraphs (A), (B), 
and (C) as clauses (i), (ii), and (iii), respectively 
(and conforming the margins accordingly); 
(2) by striking ‘‘means any activity which is’’ 
and inserting the following: ‘‘means— 
‘‘(A) any activity which is—’’; and 
(3) in clause (iii), as so redesignated, by adding 
‘‘and’’ after the semicolon at the end; and 
(4) by adding at the end the following new sub-
paragraph: 
‘‘(B) any testing or evaluation in connec-
tion with such an activity;’’. 
SEC. 3. INCLUSION OF SMALL BUSINESS INVESTMENT COM-
PANIES IN SBIR AND STTR. 
Section 9 of the Small Business Act (15 U.S.C. 638) 
is amended—
(1) by striking ‘‘or private equity firm invest-
ment’’ each place such term appears and inserting 
‘‘private equity firm, or SBIC investment’’; 
(2) by striking ‘‘or private equity firms’’ and in-
serting ‘‘private equity firms, or SBICs’’; 
(3) in subsection (e)— 
(A) in paragraph (12)(B), by striking 
‘‘and’’ at the end; 
(B) in paragraph (13)(B), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
paragraph: 
‘‘(14) the term ‘SBIC’ means a small business 
investment company as defined in section 103 of the 
Small Business Investment Act of 1958.’’; and 
(4) in the heading for subsection (dd), by strik-
ing ‘‘OR PRIVATE EQUITY FIRMS’’ and inserting 
‘‘PRIVATE EQUITY FIRMS, OR SBICS’’. 
SEC. 4. CALCULATION OF LEVERAGE OF SMALL BUSINESS 
INVESTMENT COMPANIES THAT INVEST IN 
SBIR OR STTR PARTICIPANTS. 
Section 303(b)(2) of the Small Business Investment 
Act of 1958 (15 U.S.C. 683(b)(2)) is amended by adding 
at the end the following new subparagraph:
‘‘(E) INVESTMENTS
IN
SBIR
AND
STTR 
PARTICIPANTS.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), in calculating the outstanding leverage 
of a company for purposes of subpara-
graph (A), the Administrator shall exclude 
the amount of any investment made in a 
SBIR or STTR participant, if such invest-
ment is made in the first fiscal year after 
the date of enactment of this subparagraph 
or any fiscal year thereafter by a company 
licensed during the applicable fiscal year. 
‘‘(ii) LIMITATIONS.— 
‘‘(I) AMOUNT OF EXCLUSION.— 
The amount excluded under clause (i) 
for a company shall not exceed 33 
percent of the private capital of that 
company. 
‘‘(II) MAXIMUM
INVESTMENT.— 
A company shall not make an invest-
ment in any one SBIR or STTR par-
ticipant in an amount equal to more 
than 20 percent of the private capital 
of that company.
‘‘(III) OTHER TERMS.—The ex-
clusion of amounts under clause (i) 
shall be subject to such terms as the 
Administrator may impose to ensure 
that there is no cost (as that term is 
defined in section 502 of the Federal 
Credit Reform Act of 1990 (2 U.S.C. 
661a)) with respect to purchasing or 
guaranteeing any debenture involved. 
‘‘(iii) DEFINITIONS.—In this subpara-
graph, the term ‘SBIR or STTR partici-
pant’ means a small business concern that 
receives contracts or grants pursuant to 
section 9 of the Small Business Act.’’. 
SEC. 5. ENCOURAGING PARTICIPATION IN THE MENTOR- 
PROTEGE PROGRAM. 
Section 9 of the Small Business Act (15 U.S.C. 638) 
is amended by adding at the end the following: 
‘‘(tt) ENCOURAGING PARTICIPATION IN THE MEN-
TOR-PROTEGE PROGRAM.—The Administrator shall pro-
vide an increase to the past performance rating of any 
small business concern that has participated in the SBIR 
or STTR program that serves as a mentor under section 
45 to a small business concern that seeks to participate 
in the SBIR or STTR program.’’.
SEC. 6. ANNUAL MEETING FOR FEDERAL AGENCIES WITH A 
SBIR OR STTR PROGRAM. 
(a) IN GENERAL.—Section 9 of the Small Business 
Act (15 U.S.C. 638), as amended by section 3, is further 
amended by adding at the end the following new sub-
section: 
‘‘(uu) ANNUAL MEETING.— 
‘‘(1) IN GENERAL.—The head of each Federal 
agency required to have a program under this sec-
tion (or a designee) and the Administrator (or a des-
ignee) shall meet annually to discuss methods— 
‘‘(A) to improve the collection of data 
under this section; 
‘‘(B) to improve the reporting of data to 
the Administrator under this section; 
‘‘(C) to make the application processes for 
programs under this section more efficient; and 
‘‘(D) to increase participation in the pro-
grams under this section. 
‘‘(2) REPORTING.—Not later than 60 days after 
the date on which an annual meeting required under 
paragraph (1) is held, the Administrator shall sub-
mit to the Committee on Small Business and Entre-
preneurship of the Senate, and the Committee on 
Small Business and the Committee on Science, 
Space, and Technology of the House of Representa-