‘‘(c) EQUITY FINANCING PROCESS.—In making an 
equity financing under the program, the Administrator 
shall commit an equity financing amount to a partici-
pating investment company and the amount of each such 
commitment shall remain available to be drawn upon by 
such company— 
‘‘(1) for new-named investments during the 5- 
year period beginning on the date on which each 
such commitment is first drawn upon; and 
‘‘(2) for follow-on investments and management 
fees during the 10-year period beginning on the date 
on which each such commitment is first drawn upon, 
with not more than 2 additional 1-year periods avail-
able at the discretion of the Administrator. 
‘‘(d) COMMITMENT OF FUNDS.—The Administrator 
shall make commitments for equity financings not later 
than 2 years after the date funds are appropriated for the 
program. 
‘‘SEC. 399F. INVESTMENTS IN EARLY-STAGE SMALL BUSI-
NESSES. 
‘‘(a) IN GENERAL.—As a condition of receiving an 
equity financing under the program, a participating in-
vestment company shall make all of the investments of 
such company in small business concerns, of which at least 
50 percent shall be early-stage small businesses. 
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‘‘(b) EVALUATION OF COMPLIANCE.—With respect to 
an equity financing amount committed to a participating 
investment company under section 399E, the Adminis-
trator shall evaluate the compliance of such company with 
the requirements under this section if such company has 
drawn upon 50 percent of such commitment. 
‘‘SEC. 399G. PRO RATA INVESTMENT SHARES. 
‘‘Each investment made by a participating invest-
ment company under the program shall be treated as com-
prised of capital from equity financings under the program 
according to the ratio that capital from equity financings 
under the program bears to all capital available to such 
company for investment. 
‘‘SEC. 399H. EQUITY FINANCING INTEREST. 
‘‘(a) EQUITY FINANCING INTEREST.— 
‘‘(1) IN GENERAL.—As a condition of receiving 
an equity financing under the program, a partici-
pating investment company shall convey an equity fi-
nancing interest to the Administrator in accordance 
with paragraph (2). 
‘‘(2) EFFECT OF CONVEYANCE.—The equity fi-
nancing interest conveyed under paragraph (1) shall 
have all the rights and attributes of other investors 
attributable to their interests in the participating in-
vestment company, but shall not denote control or 
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voting rights to the Administrator. The equity fi-
nancing interest shall entitle the Administrator to a 
pro rata portion of any distributions made by the 
participating investment company equal to the per-
centage of capital in the participating investment 
company that the equity financing comprises. The 
Administrator shall receive distributions from the 
participating investment company at the same times 
and in the same amounts as any other investor in 
the company with a similar interest. The investment 
company shall make allocations of income, gain, loss, 
deduction, and credit to the Administrator with re-
spect to the equity financing interest as if the Ad-
ministrator were an investor. 
‘‘(b) MANAGER PROFITS.—As a condition of receiv-
ing an equity financing under the program, the manager 
profits interest payable to the managers of a participating 
investment company under the program shall not exceed 
20 percent of profits, exclusive of any profits that may 
accrue as a result of the capital contributions of any such 
managers with respect to such company. Any excess of 
this amount, less taxes payable thereon, shall be returned 
by the managers and paid to the investors and the Admin-
istrator in proportion to the capital contributions and eq-
uity financings paid in. No manager profits interest (other 
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than a tax distribution) shall be paid prior to the repay-
ment to the investors and the Administrator of all contrib-
uted capital and equity financings made. 
‘‘(c) DISTRIBUTION REQUIREMENTS.—As a condition 
of receiving an equity financing under the program, a par-
ticipating investment company shall make all distributions 
to all investors in cash and shall make distributions within 
a reasonable time after exiting investments, including fol-
lowing a public offering or market sale of underlying in-
vestments. 
‘‘SEC. 399I. FUND. 
‘‘There is hereby created within the Treasury a sepa-
rate fund for equity financings which shall be available 
to the Administrator subject to annual appropriations as 
a revolving fund to be used for the purposes of the pro-
gram. All amounts received by the Administrator, includ-
ing any moneys, property, or assets derived by the Admin-
istrator from operations in connection with the program, 
shall be deposited in the fund. All expenses and payments, 
excluding administrative expenses, pursuant to the oper-
ations of the Administrator under the program shall be 
paid from the fund. 
‘‘SEC. 399J. APPLICATION OF OTHER SECTIONS. 
‘‘To the extent not inconsistent with requirements 
under this part, the Administrator may apply sections 
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309, 311, 312, 313, and 314 to activities under this part 
and an officer, director, employee, agent, or other partici-
pant in a participating investment company shall be sub-
ject to the requirements under such sections. 
‘‘SEC. 399K. ANNUAL REPORTING. 
‘‘The Administrator shall report on the performance 
of the program in the annual performance report of the 
Administration. 
‘‘SEC. 399L. DEFINITIONS. 
‘‘In this part, the following definitions apply: 
‘‘(1) EARLY-STAGE
SMALL
BUSINESS.—The 
term ‘early-stage small business’ means a small busi-
ness concern that— 
‘‘(A) is domiciled in a State; and 
‘‘(B) has not generated gross annual sales 
revenues exceeding $15,000,000 in any of the 
previous 3 years. 
‘‘(2) PARTICIPATING INVESTMENT COMPANY.— 
The term ‘participating investment company’ means 
an applicant approved under section 399D to par-
ticipate in the program. 
‘‘(3) TARGETED INDUSTRIES.—The term ‘tar-
geted industries’ means any of the following business 
sectors: 
‘‘(A) Agricultural technology. 
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‘‘(B) Energy technology. 
‘‘(C) Environmental technology. 
‘‘(D) Life science. 
‘‘(E) Information technology. 
‘‘(F) Digital media. 
‘‘(G) Clean technology. 
‘‘(H) Defense technology.’’. 
TITLE II—SMALL BUSINESS 
INVESTMENT 
SEC. 201. TAX CREDIT FOR SMALL BUSINESS INVESTMENT. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to nonrefundable personal credits) is 
amended by inserting after section 25D the following new 
section: 
‘‘SEC. 25E. SMALL BUSINESS INVESTMENT. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this chapter an amount equal to 20 percent of the 
amount paid or incurred for qualified small business in-
vestments during the taxable year. 
‘‘(b) LIMITATION.—With respect to any qualified 
small business investment in any corporation or partner-
ship, the amount paid or incurred by any taxpayer which 
is taken into account under subsection (a) shall not exceed 
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$250,000 ($500,000 in the case of a joint return), reduced 
by the amount taken into account under such subsection 
with respect to investments by the taxpayer in such cor-
poration or partnership for all prior taxable years. 
‘‘(c) QUALIFIED SMALL BUSINESS INVESTMENT.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified small 
business investment’ means any small business stock 
and any small business partnership interest. 
‘‘(2) SMALL
BUSINESS
STOCK.—The term 
‘small business stock’ means any stock in a domestic 
corporation acquired by the taxpayer at its original 
issue (directly or through an underwriter) solely in 
exchange for cash, if— 
‘‘(A) such corporation is an eligible small 
business (as defined in section 41(b)(3)(D)(ii)); 
‘‘(B) such corporation is engaged primarily 
in the trade or business of manufacturing, proc-
essing, assembling, or researching and devel-
oping products or in the trade or business of 
agriculture, technology, or life science; 
‘‘(C) such corporation has been in exist-
ence for less than 5 years as of such acquisi-
tion; 
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‘‘(D) such corporation has fewer than 75 
employees as of such acquisition; 
‘‘(E) more than 50 percent of the corpora-
tion’s employees perform substantially all of 
their services in the United States as of such 
acquisition; and 
‘‘(F) such stock is designated by the cor-
poration for purposes of this paragraph. 
For purposes of subparagraph (E), stock shall not 
be treated as designated if such designation would 
result in the aggregate amount which may be taken 
into account under this section with respect to stock 
issued by such corporation to exceed $750,000, tak-
ing into account all taxpayers for all taxable years. 
‘‘(3) SMALL
BUSINESS
PARTNERSHIP
INTER-
EST.—The term ‘small business partnership interest’ 
means any capital or profits interest in a domestic 
partnership acquired by the taxpayer from the part-
nership solely in exchange for cash, if— 
‘‘(A) such partnership is an eligible small 
business (as defined in section 41(b)(3)(D)(ii)); 
‘‘(B) such partnership is engaged primarily 
in the trade or business of manufacturing, proc-
essing, assembling, or researching and devel-
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oping products or in the trade or business of 
agriculture, technology, or life science; 
‘‘(C) such partnership has been in exist-
ence for less than 5 years as of such acquisi-
tion; 
‘‘(D) such partnership has fewer than 75 
employees as of such acquisition; 
‘‘(E) more than 50 percent of the partner-
ship’s employees perform substantially all of 
their services in the United States as of such 
acquisition; and 
‘‘(F) such capital or profits interest is des-
ignated by partnership for purposes of this 
paragraph. 
For purposes of subparagraph (E), a capital or prof-
its interest shall not be treated as designated if such 
designation would result in the aggregate amount 
which may be taken into account under this section 
with respect to interests in such partnership to ex-
ceed $750,000, taking into account all taxpayers for 
all taxable years. 
‘‘(d) CARRYFORWARD OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) exceeds the limita-
tion imposed by section 26(a) for such taxable year re-
duced by the sum of the credits allowable under this sub-
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part (other than this section), such excess shall be carried 
to the succeeding taxable year and added to the credit al-
lowable under this section. Such excess shall not be taken 
into account under this subsection for such succeeding 
taxable year or any taxable year succeeding such year.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
of such subpart is amended by inserting after the item 
relating to section 25D the following new item: 
‘‘Sec. 25E. Small business investment.’’. 
(c) REPORT TO CONGRESS.—The Secretary of the 
Treasury shall conduct a study and report to Congress on 
the effectiveness of the credit allowed under section 25E 
of the Internal Revenue Code of 1986 (as added by this 
section), and similar State tax credits, in providing incen-
tives for investment in qualified small businesses. There 
are authorized to be appropriated $500,000 to carry out 
the purposes of this subsection. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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