Summary: H.R.2848 — 106th Congress (1999-2000)All Information (Except Text)

Bill summaries are authored by CRS.

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Reported to House amended, Part I (06/28/2000)

New Markets Initiative Act of 1999 - Title I: New Markets Venture Capital Program - Amends the Small Business Investment Act of 1958 to direct the Small Business Administration (SBA) to establish a New Markets Venture Capital Program, under which the SBA may: (1) enter into a participation agreement with each new market venture capital company (company) for encouraging venture capital investment in smaller enterprises located in urban and rural areas; (2) guarantee debentures issued by each company; and (3) make technical assistance grants to each company. Makes eligible as a participating company in the Program one which: (1) is a newly formed for-profit entity or newly formed for-profit subsidiary of an existing company; and (2) has a management team with experience in community development financing or venture capital financing. Outlines application requirements and SBA selection criteria, requiring the SBA to ensure that companies are chosen so that investments under the Program will be made nationwide. Outlines conditions to be met by each company before final approval, including: (1) a capital investment requirement of at least $5 million from investors who meet SBA-established criteria; and (2) binding commitments with non-SBA sources for Program marketing, management, and technical assistance.

Authorizes the SBA to: (1) guarantee the timely payment of principal and interest on debentures issued by companies, not to exceed 150 percent of the contributed capital; (2) make grants to each company to provide marketing, management, and technical assistance for the benefit of smaller enterprises financed by such company; (3) issue trust certificates representing ownership of all or a fractional part of SBA-guaranteed debentures under this Act; and (4) charge fees with respect to any guarantee or certificate issued.

Authorizes any national bank, member bank of the Federal Reserve System, and any other bank which is insured to the extent permitted under applicable State law to invest in any company or in any entity established to invest solely in such companies. Limits such investment to five percent of such bank's capital and surplus.

Requires each company to provide the SBA with any required information.

Subjects each company to examinations made at the direction of the Investment Division of the SBA.

Authorizes the SBA to obtain injunctions and other relief against companies violating requirements of this Act, which shall include a breach of fiduciary duty in unlawful acts and omissions by company officers, directors, employees, or agents.

Authorizes appropriations for FY 2000 through 2005 to carry out this title.

(Sec. 103) Exempts a company from debtor status under Federal bankruptcy law.

(Sec. 104) Amends the Home Owners' Loan Act to authorize a Federal savings association to invest in company securities, with an investment limit of five percent of the association's capital and surplus.

Title II: Small Business Loans - Amends the Small Business Act to: (1) increase to $150,000 (formerly $100,000) the authorized outstanding loan balance for small businesses receiving start-up loans from the SBA; (2) increase from $80,000 to $120,000 the total deferred participation share threshold of an SBA-guaranteed loan for which the loan fee cannot exceed two percent; and (3) reduce the annual loan fee with respect to guaranteed loans of less than $150,000.

Title III: America's Private Investment Companies - America's Private Investment Companies Act - Authorizes the Secretary of Housing and Urban Development (HUD) to license and regulate America's Private Investment Companies (APICs). Provides related administrative authority over APICs. Allows credit subsidies allocated to APICs to be increased as an award for high performance, but only: (1) for APICs that have been licensed for at least two years; and (2) pursuant to a competition among eligible APICs. Authorizes the Secretary to set and collect fees for loan guarantees and commitments made under this title. Authorizes appropriations for FY 2000 through 2004 for the cost of such loan guarantees and for administrative expenses.

(Sec. 305) Outlines APIC selection criteria, requiring such APICs to: (1) be a private, for-profit entity that qualifies as a community development entity (an entity that provides investment capital for low-income communities or persons); (2) have available a minimum of $25 million in private equity capital; (3) be clearly qualified and have the necessary knowledge and experience to make investments for community development in distressed areas; and (4) prepare and submit an investment strategy and a statement of public purpose goals in connection with such investments. Requires the Secretary to select eligible entities as APICs on the basis of competitions. Outlines: (1) administrative procedures concerning the selection of qualified APICs by the Secretary; and (2) APIC powers, authorities, and investment and leverage limits. Limits: (1) to 15 the number of APICs selected in the first year; and (2) the amount of credit subsidy allocated to any single APIC to 20 percent of the entire budget authority. Requires the Secretary, during the first year, to select at least one entity which has as its primary purpose the making of qualified low-income community investments within Indian country or Hawaiian home lands (unless no such entity is eligible). Directs the Secretary to set forth procedures under which HUD and APIC applicants may communicate.

(Sec. 307) Authorizes the Secretary to make commitments to guarantee the timely payment of principal and interest on qualified debentures issued by APICs, to issue trust certificates representing ownership of all or a fractional part of such guaranteed debentures, and to guarantee such certificates. Requires such qualified debentures to be senior to any other debt obligation, equity contribution or earnings, dividends, interest, or other amounts of an APIC. Outlines guarantee and certificate limits, terms and conditions.

(Sec. 308) Authorizes the Secretary to issue a guarantee for a qualified debenture that an APIC intends to issue only pursuant to a request by an APIC for such guarantee, under procedures to be prescribed by the Secretary. Provides additional APIC requirements for such requests when: (1) the proceeds of the debenture are to be used as an APIC initial expenditure for a project or activity to fund qualified low-income community investments; and (2) such expenditure would require an environmental assessment under the National Environmental Policy Act of 1969 and related laws. Authorizes the Secretary, in the latter case, to guarantee such debenture if the appropriate State or local governmental unit assumes such environmental review responsibilities. Directs the Secretary to issue regulations to carry out such a debenture guarantee only after consultation with the Council on Environmental Quality. Outlines procedures for the approval of a request for the guarantee of a debenture to be used for low-income community investment.

(Sec. 309) Directs the Secretary to: (1) examine and monitor APIC operations and activities for compliance with sound management practices and satisfaction of program and procedural goals of this Act and related Acts; (2) establish annual or more frequent reporting requirements for APICs for the updating of public purpose goals, investment strategies, and other documents required in the license application process; and (3) require each APIC to undergo an annual independent audit of its operations. Outlines consultation requirements of HUD's Inspector General in monitoring HUD's responsibilities under this title. Requires an annual report from the Secretary to Congress regarding the operations, activities, financial health, and achievements of the APIC program. Requires a report from the Comptroller General to Congress regarding the operation of the program for APIC licensing and guarantees.

(Sec. 310) Authorize the Secretary to provide penalties, including civil penalties, suspending or conditioning the use of an APIC license, cease and desist orders, and withdrawal of investment funds, for an APIC's failure to conform to such strategies and statements or noncompliance with requirements of this Act. Outlines specific procedures with respect to cease and desist orders and the suspension or conditioning of an APIC license.

(Sec. 311) Makes this title effective six months after the enactment of this Act.

(Sec. 312) Prohibits, after five years after the Secretary awards the first license for an APIC: (1) the Secretary from licensing any additional APICs; or (2) amounts being appropriated for the costs of any guarantees for qualified debentures issued by an APIC.

Title IV: New Markets Credit - Amends the Internal Revenue Code to provide a new markets tax credit for taxpayers holding a qualified equitable investment, in the amount of six percent of the amount paid to the qualified community development entity for authorized investments under this Act. Provides a tax credit limit of $1.2 billion for each of calendar years 2000 through 2004, to be allocated among selected qualified community development entities. Provides for tax credit recapture in appropriate cases. Makes such credit part of the general business tax credit.