I 118th CONGRESS 1st Session H. R. 1538 IN THE HOUSE OF REPRESENTATIVES March 10, 2023 Mr. Carson (for himself, Mr. Thompson of Mississippi , Mr. Espaillat , Mr. García of Illinois , Ms. Sánchez , Ms. Garcia of Texas , Mr. Case , and Mr. Landsman ) introduced the following bill; which was referred to the Committee on Small Business A BILL To amend the Small Business Act to provide for contracting preferences and other benefits for emerging business enterprises, and for other purposes.

1. Short title This Act may be cited as the Emerging Business Encouragement Act of 2023 . 2. Emerging business enterprises (a) Designation Section 3 of the Small Business Act ( 15 U.S.C. 632 ) is amended by adding at the end the following: (gg) Emerging business enterprise (1) In general In this Act, the term emerging business enterprise means a concern designated by the Administrator in accordance with this section. (2) Criteria for designation Not later than 90 days after the date of enactment of this subsection, the Administrator shall establish criteria for designation of a small business concern as an emerging business enterprise which shall include the following: (A) Number of employees That the highest number of employees of the concern during the year preceding the date of application is less than the larger of— (i) 10 percent of the number of employees that a small business concern within that industry category may employ, if that small business concern is so classified by reason of a size standard under subsection (a) pertaining to the number of employees of the concern; or (ii) 25 employees. (B) Age of business That the small business concern has been in operation for less than 5 years on the date of application. (C) Salary requirements That the small business concern does not, in the Administrator’s determination, pay to an individual who owns any part of the concern or who is in a management position a salary greater than 200 percent of the mean annual salary for an individual in the Managers of Companies and Enterprises sector (as assigned a North American Industry Classification System code beginning with 55) or the equivalent from the most recent employment and wage estimates developed by the Secretary of Labor. (3) Deadline The Administrator shall complete review of an application for designation as an emerging business enterprise and either issue or deny such designation not later than one year of receipt of such application. (4) Termination of designation A designation as an emerging business enterprise shall terminate on the date on which the concern is no longer in compliance with the criteria under paragraph (2), except that— (A) with respect to the requirement in paragraph (2)(A), such designation shall terminate only if the concern employs 50 percent or more employees than the number of employees that a small business concern within that industry category may employ; and (B) with respect to the requirement in paragraph (2)(C), such designation shall terminate only if the concern exceeds such requirement and employs not more than 10 percent of the number of employees that a small business concern within that industry category may employ, if that small business concern is so classified by reason of a size standard under subsection (a) pertaining to the number of employees of the concern. (5) Public notification The Administrator shall take appropriate action to publicize the establishment of the procedures for designations under this paragraph, including by conducting outreach to eligible small business concerns. (6) Contractor training The Administrator shall provide training on Federal procurement specifically for emerging business enterprises on an Internet website of the Administrator, which shall be available to the public at no charge. . (b) Contracting preference Section 15(g)(2) of the Small Business Act ( 15 U.S.C. 644(g)(2) ) is amended by adding at the end the following: (G) Emerging business enterprises (i) In general The head of each Federal agency shall, after consultation with the Administrator, establish goals for participation by emerging business enterprises in not less than 3 percent of all prime contracts and subcontracts of such agency for each fiscal year. (ii) Requirements The head of a Federal agency— (I) shall make consistent efforts to annually expand participation by emerging business enterprises from each industry category in contracts of the agency; and (II) shall, subject to clause (iii), award a contract to an emerging business enterprise if the head of a Federal agency determines the agency will not meet the goals established under this subparagraph for a fiscal year. (iii) Preference The preference described in clause (ii)(II) shall take priority over any preference for procurement from the procurement list established pursuant to section 8503 of title 41, United States Code, or the Federal Prison Industries catalog described under section 4124(d) of title 18, United States Code. (iv) Reports (I) Reports from agencies At the conclusion of each fiscal year, the head of each Federal agency shall report to the Administrator on the extent of participation by emerging business enterprises in procurement contracts of such agency. Such reports shall contain appropriate justifications for failure to meet the goals established under this subparagraph. (II) Reports to congress The Administrator shall annually compile and analyze the reports submitted by agencies pursuant to subclause (I) and shall submit to the President and the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives the compilation and analysis, which shall include the following: (aa) The goals in effect for each agency and the agency’s performance in attaining such goals. (bb) An analysis of any failure to achieve individual agency goals and the actions planned by such agency (that have been approved by the Administrator) to achieve the goals in the succeeding fiscal year. (cc) The total number and dollar value of prime contracts and subcontracts awarded to emerging business enterprises for each agency. (III) Annual presidential report on the state of small business The President shall include the information required by subclause (II) in each annual report to the Congress on the state of small business prepared pursuant to section 303(a) of the Small Business Economic Policy Act of 1980 ( 15 U.S.C. 631b(a) ). . (c) Fee waivers Section 7(a) of the Small Business Act ( 15 U.S.C. 636(a) ) is amended by adding at the end the following: (38) Fee waivers The Administrator may not collect an origination fee or a guarantee fee described in paragraph (18) in connection with a loan made under this subsection to an emerging business enterprise, unless— (A) the President’s budget for the upcoming fiscal year, submitted to Congress pursuant to section 1105(a) of title 31, United States Code, includes a cost for the program established under this paragraph that is above zero; and (B) the Administrator determines carrying out this paragraph will have no adverse effect on the waivers provided under paragraph (31)(G) or (33)(E)(ii) for a fiscal year. (39) Emerging business enterprises (A) Reports On the date that is 1 year after the end of the first fiscal year for which a guaranteed loan is made to an emerging business enterprise under this subsection, and annually thereafter, each lender making such a loan shall submit to the Administrator a report with respect to the preceding fiscal year on the total number and dollar amount of such loans made and the number of waivers issued under paragraph (38). (B) Verification A lender shall verify with the Administrator the status of a concern as an emerging business enterprise before making a loan guaranteed under this subsection to such emerging business enterprise. (C) Penalty If a concern received a loan under this subsection and fraudulently misrepresented the status of the concern as an emerging business enterprise, that concern shall— (i) repay the amount of the loan to the lender (from which amount the lender shall repay the amount of any guarantee paid on the loan to the Administrator); and (ii) pay a fine to the Administrator in an amount determined by the Administrator. . 3. Rulemaking (a) In general Not later 1 year after the date of enactment of this subsection and for each industry category for which the Administrator of the Small Business Administration established a size standard under section 3(a) of the Small Business Act ( 15 U.S.C. 632(a) ), the Administrator shall issue a rule— (1) establishing procedures for designating a small business concern in each such industry category as an emerging business enterprise that include the criteria under subsection (gg)(3) of section 3 of the Small Business Act ( 15 U.S.C. 632 ), as added by this Act, and a process for appealing designation decisions of the Administrator; (2) establishing procedures for certification by the Administrator as an emerging business enterprise; (3) requiring a small business concern to annually submit documentation to the Administrator to establish eligibility for designation as an emerging business enterprise; and (4) establishing compliance requirements for emerging business enterprises. (b) Definitions In this section: (1) Small business concern The term small business concern has the meaning given under section 3 of the Small Business Act ( 15 U.S.C. 632 ). (2) Emerging business enterprise The term emerging business enterprise has the meaning given under subsection (gg) of section 3 of the Small Business Act ( 15 U.S.C. 632 ), as added by this Act.