I
104TH CONGRESS
1ST SESSION
H. R. 1019
To assist in the development of microenterprises and microenterprise lending.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 23, 1995
Mrs. COLLINS of Illinois introduced the following bill; which was referred to
the Committee on Ways and Means and, in addition, to the Committee
on Banking and Financial Services, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To assist in the development of microenterprises and
microenterprise lending.
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 ‘‘Microenterprise Oppor-
tunity Expansion Act’’.
SEC. 2. PUBLIC ASSISTANCE PROVISIONS.
(a) BUSINESS ASSETS EXCLUDED FROM RESOURCES
AND INCOME.—
(1) AFDC.—
(A) EXCLUSION FROM RESOURCES.—Sec-
tion 402(a)(7)(B) of the Social Security Act
(42 U.S.C. 602(a)(8)(A)) is amended—
(i) by striking ‘‘or’’ at the end of
clause (iii); and
(ii) by inserting before the semicolon
the following: ‘‘, or (v) any asset of the
family which is primarily used for business
purposes in a business owned, in whole or
in part, by an individual eligible for aid
under any State plan approved under this
part; and’’.
(B) EXCLUSION
FROM
INCOME.—Section
402(a)(8)(A) 
of 
such 
Act 
(42 
U.S.C.
602(a)(8)(A)) is amended—
(i) by striking ‘‘and’’ at the end of
clause (vii); and
(ii) by inserting after clause (viii) the
following:
‘‘(ix) shall disregard from the income of
any child, relative, or other individual specified
in clause (ii) any asset which is primarily used
for business purposes in a business owned, in
whole or in part, by an individual eligible for
aid under any State plan approved under this
part; and’’.
(2) SSI.—
(A) EXCLUSION
FROM
INCOME.—Section
1612(b) of such Act (42 U.S.C. 1382a(b)) is
amended—
(i) by striking ‘‘and’’ at the end of
paragraph (17);
(ii) in paragraph (18), by striking the
period and inserting ‘‘; and’’; and
(iii) by adding at the end the follow-
ing:
‘‘(19) any asset of such individual (or such
spouse) which is primarily used for business pur-
poses in a business owned, in whole or in part, by
an individual eligible for aid under any State plan
approved under part A of title IV.’’.
(B) EXCLUSION FROM RESOURCES.—Sec-
tion 1613(a) of such Act (42 U.S.C. 1382b(a))
is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (9);
(ii) in paragraph (10), by striking the
period and inserting ‘‘; and’’; and
(iii) by inserting after paragraph (10)
the following:
‘‘(11) any asset of (including any amount re-
ceived as a loan by) such individual (or such spouse)
which is primarily used for business purposes in a
business owned, in whole or in part, by an individual
eligible for aid under any State plan approved under
part A of title IV.’’.
(b) PUBLIC ASSISTANCE BENEFITS EXTENDED FOR
PERSONS WITH INCOME FROM
OR RESOURCES
IN
A
MICROENTERPRISE.—
(1) AFDC AND MEDICAID.—Section 402(a) of
such Act (42 U.S.C. 602(a)) is amended by inserting
after paragraph (28) the following:
‘‘(29) notwithstanding paragraphs (7) and (8),
provide that, during the 2-year period beginning on
the first day any member of a family eligible for
benefits under the State plan sells any good or serv-
ice as part of operating a commercial enterprise with
5 or fewer employees, which is owned in whole or in
part by such family member, all income of such fam-
ily member attributable to the enterprise and all re-
sources in which such family member has a bene-
ficial interest used primarily in the enterprise shall
be disregarded in determining the amount of aid to
which the family is entitled under the State plan;’’.
(2) SSI AND MEDICAID.—
(A) EXCLUSION
FROM
INCOME.—Section
1612(b) of such Act (42 U.S.C. 1382a(b)), as
amended by subsection (a)(2)(A) of this section,
is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (18);
(ii) in paragraph (19), by striking the
period and inserting ‘‘; and’’; and
(iii) by adding at the end the follow-
ing:
‘‘(20) during the 2-year period beginning on the
first day such individual (or such spouse) sells any
good or service as part of operating a commercial
enterprise with 5 or fewer employees, which is owned
in whole or in part by such individual (or such
spouse), all income of such individual (or such
spouse) attributable to the enterprise.’’.
(B) EXCLUSION FROM RESOURCES.—Sec-
tion 1613(a) of such Act (42 U.S.C. 1382b(a)),
as amended by subsection (a)(2)(B) of this sec-
tion, is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (10);
(ii) in paragraph (11), by striking the
period and inserting ‘‘; and’’; and
(iii) by inserting after paragraph (11)
the following:
‘‘(12) during the 2-year period beginning on the
first day such individual (or such spouse) sells any
good or service as part of operating a commercial
enterprise with 5 or fewer employees, which is owned
in whole or in part by such individual (or such
spouse), all resources of such individual (or such
spouse) that are used primarily in the enterprise.’’.
SEC. 3. UNEMPLOYMENT COMPENSATION FOR INDIVID-
UALS STARTING MICROENTERPRISES.
(a) STATE LAW REQUIREMENTS.—Subsection (a) of
section 3304 of the Internal Revenue Code of 1986 (relat-
ing to State law requirements) is amended by striking
‘‘and’’ at the end of paragraph (17), by redesignating
paragraph (18) as paragraph (19), and by inserting after
paragraph (17) the following new paragraph:
‘‘(18) compensation shall be payable to individ-
uals starting microenterprises as provided in section
3(b) of the Act for microenterprises; and’’.
(b) PAYMENT OF COMPENSATION TO INDIVIDUALS
STARTING MICROENTERPRISES.—
(1) IN
GENERAL.—For purposes of section
3304(a)(18) of the Internal Revenue Code of 1986,
a State law shall provide that—
(A) each individual who is an eligible indi-
vidual with respect to any benefit year shall be
entitled to receive regular or extended unem-
ployment compensation, as the case may be,
without regard to any State or Federal require-
ments relating to availability for work, active
search for work, or refusal to accept suitable
work, and
(B) such individual shall be considered to
be unemployed for purposes of the State and
Federal laws applicable to unemployment com-
pensation, as long as the individual is actively
involved in the ownership and operation of a
microenterprise or the preparation of a business
plan for the ownership and operation of a
microenterprise and is receiving guidance or
consultation in starting up or operating a
microenterprise from an experienced entre-
preneur or provider of technical business assist-
ance.
(2) AUTHORIZATION
FOR
USING
UNEMPLOY-
MENT FUNDS TO PROVIDE STARTUP ASSISTANCE.—
Nothing in section 3304(a)(4) or 3306(f) of the In-
ternal Revenue Code of 1986 or section 303(a)(5) of
the Social Security Act shall prevent amounts in a
State unemployment fund from being used to pro-
vide assistance to eligible individuals in starting
microenterprises. The amount of assistance so pro-
vided may be in the form of a lump sum and shall
be in lieu of the periodic payments of compensation
to which the individual would otherwise have been
entitled and shall not exceed the aggregate amount
of compensation to which the individual would other-
wise have been so entitled.
(3) DEFINITIONS.—For purposes of this sec-
tion—
(A) ELIGIBLE INDIVIDUAL.—The term ‘‘el-
igible individual’’ means, with respect to any
benefit year, an individual who—
(i) is eligible to receive regular or ex-
tended compensation under the State law
during such benefit year,
(ii) is starting a microenterprise in
which the individual will have an ownership
interest, and
(iii) submits a request to the State
agency for compensation under this sub-
section.
(B) 
MICROENTERPRISE.—The 
term
‘‘microenterprise’’ means any unincorporated
trade or business with 5 or fewer employees, 1
or more of whom own the enterprise.
(C) OTHER
TERMS.—The terms ‘‘com-
pensation’’, ‘‘extended compensation’’, ‘‘regular
compensation’’, ‘‘benefit year’’, ‘‘State’’, and
‘‘State law’’ have the respective meanings given
to such terms under section 205 of the Federal-
State Extended Unemployment Compensation
Act of 1970.
SEC. 4. TREATMENT OF MICROENTERPRISE LOANS AND
GRANTS BY INSURED DEPOSITORY INSTITU-
TIONS AS COMMUNITY REINVESTMENT.
Section 804 of the Community Reinvestment Act of
1977 (12 U.S.C. 2903) is amended by adding at the end
the following new subsections:
‘‘(c) MICROENTERPRISE LOANS.—
‘‘(1) TREATMENT
OF
LOANS
AND
GRANTS.—
The following amounts shall be treated as an invest-
ment in a regulated financial institution’s commu-
nity for purposes of subsection (a):
‘‘(A) The amount of any loan described in
paragraph (2)(A) made by the regulated finan-
cial institution directly to a microenterprise, if
the loan is made in accordance with the require-
ments of subsection (c).
‘‘(B) The amount of any grant or donation
made by the regulated financial institution to
any microenterprise intermediary to meet oper-
ating costs of the intermediary, including the
costs associated with training, technical assist-
ance, and other support services provided by
the intermediary to microenterprises.
‘‘(C) The amount of any regulated finan-
cial institution’s investment in a revolving fund
established by the institution for loans to
microenterprise intermediaries for lending to
microenterprises if—
‘‘(i) the amount of the investment in
the revolving fund is equal to or greater
than the amount which is equal to 0.05
percent of the assets of the institution;
‘‘(ii) the regulated financial institu-
tion—
‘‘(I) makes grants or donations
described in subparagraph (B) to
microenterprise 
intermediaries 
the
total amount of which equals or ex-
ceeds the amount which is equal to 15
percent of the amount required to be
invested in the revolving fund under
clause (i); or
‘‘(II) provides financial services,
including the establishment and main-
tenance of a transaction account, for
a microenterprise (or any individual
who controls the microenterprise) who
receives a microenterprise loan from a
microenterprise intermediary, at pref-
erential or reduced rates which are
at 
least 
as 
favorable 
to 
the
microenterprise as the rates offered
for such services to the institution’s
most preferred commercial customers;
and
‘‘(iii) loans from the revolving fund
may be made only to microenterprise
intermediaries who agree to use the pro-
ceeds of the loan to make microenterprise
loans in accordance with the requirements
of subsection (d).
‘‘(2) MICROENTERPRISE LOAN.—For purposes
of this subsection and subsection (d), the term
‘microenterprise loan’—
‘‘(A) means a loan—
‘‘(i) to a commercial enterprise with 5
or fewer employees, 1 or more of whom
own the enterprise;
‘‘(ii) in amounts not less than $100
and not more than $10,000;
‘‘(iii) the interest rate on which is
comparable to the interest rate charged on
secured commercial loans offered by the
regulated financial institution to the insti-
tution’s most preferred commercial cus-
tomers;
‘‘(iv) which—
‘‘(I) is not secured by collateral;
or
‘‘(II) is secured by collateral the
value of which, as a percentage of the
amount of the loan, is substantially
less than the percentage generally re-
quired by the institution for commer-
cial loans; and
‘‘(v) the terms of which may permit
the deferral of principal or interest pay-
ments otherwise due under such terms;
and
‘‘(B) includes a loan to a microenterprise
intermediary the proceeds of which will be used
by the intermediary for making loans described
in subparagraph (A).
‘‘(d) CRITERIA FOR MICROENTERPRISE LOANS.—
‘‘(1) IN
GENERAL.—A microenterprise loan
meets the requirements of this subsection if the loan
is made in accordance with the following criteria:
‘‘(A) In considering any loan to a
microenterprise, the lender takes into account—
‘‘(i) the creditworthiness of any per-
son who controls the microenterprise in
lieu of the creditworthiness of the enter-
prise;
‘‘(ii) in the case of a microenterprise
which is a startup business, whether the
microenterprise is soundly conceived; and
‘‘(iii) the need of the microenterprise
for expansion capital.
‘‘(B) The lender accepts as collateral for
the loan a security interest in any personal
property of any person who controls the
microenterprise which consists of consumer or
household goods.
‘‘(C) The lender does not require collateral
or a secured interest for more than 50 percent
of the face amount of the loan.
‘‘(D) The loans are made in amounts not
less than $100 and not more than $10,000 to
persons who would not otherwise qualify for a
commercial loan.
‘‘(E) The lender provides technical assist-
ance, training, and counseling in business prac-
tices, such as accounting, marketing, manage-
ment, sales, financial practices, and general
business practices, and closely monitors the
microenterprise during the period the loan is
outstanding, including the enterprise’s loan re-
payment performance.
‘‘(2) LENDER
DEFINED.—For purposes of
paragraph (1), the term ‘lender’ means—
‘‘(A) in the case of a microenterprise loan
by a regulated financial institution to a
microenterprise, the regulated financial institu-
tion; and
‘‘(B) in the case of a microenterprise loan
by 
a 
microenterprise 
intermediary 
to 
a
microenterprise, 
the 
microenterprise 
inter-
mediary.’’.
SEC. 5. TREATMENT OF MICROENTERPRISE LOANS OF SAV-
INGS ASSOCIATIONS AS QUALIFIED THRIFT
INVESTMENTS.
(a) IN GENERAL.—Section 10(m)(4)(C)(ii) of the
Home Owners’ Loan Act (12 U.S.C. 1467a(m)(4)(C)(ii))
is amended by adding at the end the following new
subclause:
‘‘(VII) The aggregate amount of
microenterprise loans held by the sav-
ings association.’’.
(b) MICROENTERPRISE LOAN DEFINED.—Section
10(m)(4) of the Home Owners’ Loan Act (12 U.S.C.
1467a(m)(4)) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(D) MICROENTERPRISE LOAN.—For pur-
poses 
of 
this 
paragraph, 
the 
term
‘microenterprise loan’—
‘‘(i) means a loan—
‘‘(I) to a commercial enterprise
with 5 or fewer employees, 1 or more
of whom own the enterprise;
‘‘(II) in amounts not less than
$100 and not more than $10,000; and
‘‘(III) the interest rate on which
is comparable to the interest rate
charged on secured commercial loans
offered by the savings association to
the association’s most preferred com-
mercial customers;
‘‘(IV) which is not secured by
collateral or is secured by collateral
the value of which, as a percentage of
the amount of the loan, is substan-
tially less than the percentage gen-
erally required by the institution for
commercial loans; and
‘‘(V) the terms of which may per-
mit the deferral of principal or inter-
est payments otherwise due under
such terms;
‘‘(ii) 
includes 
a 
loan 
to 
a
microenterprise intermediary the proceeds
of which will be used by the intermediary
for making loans described in clause (i);
and
‘‘(iii) does not include—
‘‘(I) 
any 
loan 
to 
a 
micro-
enterprise which does not meet the re-
quirements of paragraph (8); or
‘‘(II) any loan to a micro-
enterprise intermediary which does
not agree to use the proceeds of the
loan to make microenterprise loans in
accordance with the requirements of
paragraph (8).’’.
(c) CRITERIA FOR MICROENTERPRISE LOANS.—Sec-
tion 10(m) of the Home Owners’ Loan Act (12 U.S.C.
1467a(m)) is amended by adding at the end the following
new paragraph:
‘‘(8) 
CRITERIA
FOR
MICROENTERPRISE
LOANS.—
‘‘(A) IN
GENERAL.—A microenterprise
loan meets the requirements of this paragraph
only if the savings association makes the
microenterprise loan, or the microenterprise
intermediary which receives a loan from the as-
sociation, agrees to use the proceeds of the loan
to make microenterprise loans in accordance
with the following criteria: