,i #aacth ,,congress #ast ,session ,h4 ,r4 #cj ,,in ,,the ,,house ,,of ,,representatives ,january #c1 #bjac ,ms4 ,velzquez introduced the following bill2 which was referred to the ,committee on ,small ,business1 and in addition to the ,committee on ,ways and ,means1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to amend the ,small ,business ,investment ,act of #aieh1 to provide for a small business early-stage investment program1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,small ,business ,investment ,enhancement and ,tax ,relief ,act4 ,i ,small business early-stage investment program #aja4 ,small business early-stage investment program ,title ,,iii of the ,small ,business ,investment ,act of #aieh 7#ae ,u4,s4,c4 #fha et seq47 is amended by adding at the end the following3 ,d ,small business early-stage investment program #cii;,a4 ,establishment of program ,the ,administrator shall establish and carry out an early-stage investment program 7hereinafter referred to in this part as the program7 to provide equity investment financing to support early-stage small businesses in accordance with this part4 #cii;,b4 ,administration of program ,the program shall be administered by the ,administrator acting through the ,associate ,administrator described under section #bja4 #cii;,c4 ,applications 7a7 ,in general ,any existing or newly formed incorporated body1 limited liability company1 or limited partnership organized and chartered or otherwise existing under ,federal or ,state law for the purpose of performing the functions and conducting the activities contemplated under the program and any manager of any small business investment company may submit to the ,administrator an application to participate in the program4 7b7 ,requirements for application ,an application to participate in the program shall include the following3 7#a7 ,a business plan describing how the applicant intends to make successful venture capital investments in early-stage small businesses and direct capital to small business concerns in targeted industries or other business sectors4 7#b7 ,information regarding the relevant venture capital investment qualifications and backgrounds of the individuals responsible for the management of the applicant4 7#c7 ,a description of the extent to which the applicant meets the selection criteria under section #cii;,d4 7c7 ,applications from managers of small business investment companies ,the ,administrator shall establish an abbreviated application process for applicants that are managers of small business investment companies that are licensed under section #cja and that are applying to participate in the program4 ,such abbreviated process shall incorporate a presumption that such managers satisfactorily meet the selection criteria under paragraphs 7#c7 and 7#e7 of section #cii;,d7b74 #cii;,d4 ,selection of participating investment companies 7a7 ,in general ,not later than #ij days after the date on which the ,administrator receives an application from an applicant under section #cii;,c1 the ,administrator shall make a determination to conditionally approve or disapprove such applicant to participate in the program and shall transmit such determination to the applicant in writing4 ,a determination to conditionally approve an applicant shall identify all conditions necessary for a final approval and shall provide a period of not less than one year for satisfying such conditions4 7b7 ,selection criteria ,in making a determination under subsection 7a71 the ,administrator shall consider each of the following3 7#a7 ,the likelihood that the applicant will meet the goals specified in the business plan of the applicant4 7#b7 ,the likelihood that the investments of the applicant will create or preserve jobs1 both directly and indirectly4 7#c7 ,the character and fitness of the management of the applicant4 7#d7 ,the experience and background of the management of the applicant4 7#e7 ,the extent to which the applicant will concentrate investment activities on early-stage small businesses4 7#f7 ,the likelihood that the applicant will achieve profitability4 7#g7 ,the experience of the management of the applicant with respect to establishing a profitable investment track record4 7#h7 ,the extent to which the applicant will concentrate investment activities on small business concerns in targeted industries4 7c7 ,final approval ,for each applicant provided a conditional approval under subsection 7a71 the ,administrator shall provide final approval to participate in the program not later than #ij days after the date the applicant satisfies the conditions specified by the ,administrator under such subsection or1 in the case of applicants whose partnership or management agreements conform to models approved by the ,administrator1 the ,administrator shall provide final approval to participate in the program not later than #cj days after the date the applicant satisfies the conditions specified under such subsection4 ,if an applicant provided conditional approval under subsection 7a7 fails to satisfy the conditions specified by the ,administrator in the time period designated under such subsection1 the ,administrator shall revoke the conditional approval4 #cii;,e4 ,equity financings 7a7 ,in general ,the ,administrator may make one or more equity financings to a participating investment company4 7b7 ,equity financing amounts 7#a7 ,non-,federal capital ,an equity financing made to a participating investment company under the program may not be in an amount that exceeds the amount of the capital of such company that is not from a ,federal source and that is available for investment on or before the date on which an equity financing is drawn upon4 ,such capital may include legally binding commitments with respect to capital for investment4 7#b7 ,limitation on aggregate amount ,the aggregate amount of all equity financings made to a participating investment company under the program may not exceed #ajj1jjj1jjj4 7c7 ,equity financing process ,in making an equity financing under the program1 the ,administrator shall commit an equity financing amount to a participating investment company and the amount of each such commitment shall remain available to be drawn upon by such company-- 7#a7 for new-named investments during the #e-year period beginning on the date on which each such commitment is first drawn upon2 and 7#b7 for follow-on investments and management fees during the #aj-year period beginning on the date on which each such commitment is first drawn upon1 with not more than #b additional #a-year periods available at the discretion of the ,administrator4 7d7 ,commitment of funds ,the ,administrator shall make commitments for equity financings not later than #b years after the date funds are appropriated for the program4 #cii;,f4 ,investments in early-stage small businesses 7a7 ,in general ,as a condition of receiving an equity financing under the program1 a participating investment company shall make all of the investments of such company in small business concerns1 of which at least #ej percent shall be early-stage small businesses4 7b7 ,evaluation of compliance ,with respect to an equity financing amount committed to a participating investment company under section #cii;,e1 the ,administrator shall evaluate the compliance of such company with the requirements under this section if such company has drawn upon #ej percent of such commitment4 #cii;,g4 ,pro rata investment shares ,each investment made by a participating investment company under the program shall be treated as comprised 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 investment4 #cii;,h4 ,equity financing interest 7a7 ,equity financing ,interest 7#a7 ,in general ,as a condition of receiving an equity financing under the program1 a participating investment company shall convey an equity financing interest to the ,administrator in accordance with paragraph 7#b74 7#b7 ,effect of conveyance ,the equity financing interest conveyed under paragraph 7#a7 shall have all the rights and attributes of other investors attributable to their interests in the participating investment company1 but shall not denote control or voting rights to the ,administrator4 ,the equity financing interest shall entitle the ,administrator to a pro rata portion of any distributions made by the participating investment company equal to the percentage of capital in the participating investment company that the equity financing comprises4 ,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 interest4 ,the investment company shall make allocations of income1 gain1 loss1 deduction1 and credit to the ,administrator with respect to the equity financing interest as if the ,administrator were an investor4 7b7 ,manager profits ,as a condition of receiving an equity financing under the program1 the manager profits interest payable to the managers of a participating investment company under the program shall not exceed #bj percent of profits1 exclusive of any profits that may accrue as a result of the capital contributions of any such managers with respect to such company4 ,any excess of this amount1 less taxes payable thereon1 shall be returned by the managers and paid to the investors and the ,administrator in proportion to the capital contributions and equity financings paid in4 ,no manager profits interest 7other than a tax distribution7 shall be paid prior to the repayment to the investors and the ,administrator of all contributed capital and equity financings made4 7c7 ,distribution requirements ,as a condition of receiving an equity financing under the program1 a participating investment company shall make all distributions to all investors in cash and shall make distributions within a reasonable time after exiting investments1 including following a public offering or market sale of underlying investments4 #cii;,i4 ,fund ,there is hereby created within the ,treasury a separate 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 program4 ,all amounts received by the ,administrator1 including any moneys1 property1 or assets derived by the ,administrator from operations in connection with the program1 shall be deposited in the fund4 ,all expenses and payments1 excluding administrative expenses1 pursuant to the operations of the ,administrator under the program shall be paid from the fund4 #cii;,j4 ,application of other sections ,to the extent not inconsistent with requirements under this part1 the ,administrator may apply sections #cji1 #caa1 #cab1 #cac1 and #cad to activities under this part and an officer1 director1 employee1 agent1 or other participant in a participating investment company shall be subject to the requirements under such sections4 #cii,k4 ,annual reporting ,the ,administrator shall report on the performance of the program in the annual performance report of the ,administration4 #cii,l4 ,definitions ,in this part1 the following definitions apply3 7#a7 ,early-stage small business ,the term early-stage small business means a small business concern that-- 7,a7 is domiciled in a ,state2 and 7,b7 has not generated gross annual sales revenues exceeding #ae1jjj1jjj in any of the previous #c years4 7#b7 ,participating investment company ,the term participating investment company means an applicant approved under section #cii;,d to participate in the program4 7#c7 ,targeted industries ,the term targeted industries means any of the following business sectors3 7,a7 ,agricultural technology4 7,b7 ,energy technology4 7,c7 ,environmental technology4 7,d7 ,life science4 7,e7 ,information technology4 7,f7 ,digital media4 7,g7 ,clean technology4 7,h7 ,defense technology4 4 ,,ii ,small business investment #bja4 ,tax credit for small business investment 7a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf 7relating to nonrefundable personal credits7 is amended by inserting after section #be;,d the following new section3 #be;,e4 ,small business investment 7a7 ,in general ,in the case of an individual1 there shall be allowed as a credit against the tax imposed by this chapter an amount equal to #bj percent of the amount paid or incurred for qualified small business investments during the taxable year4 7b7 ,limitation ,with respect to any qualified small business investment in any corporation or partnership1 the amount paid or incurred by any taxpayer which is taken into account under subsection 7a7 shall not exceed #bej1jjj 7#ejj1jjj in the case of a joint return71 reduced by the amount taken into account under such subsection with respect to investments by the taxpayer in such corporation or partnership for all prior taxable years4 7c7 ,qualified small business investment ,for purposes of this section-- 7#a7 ,in general ,the term qualified small business investment means any small business stock and any small business partnership interest4 7#b7 ,small business stock ,the term small business stock means any stock in a domestic corporation acquired by the taxpayer at its original issue 7directly or through an underwriter7 solely in exchange for cash1 if-- 7,a7 such corporation is an eligible small business 7as defined in section #da7;b77#c77;,d77ii772 7,b7 such corporation is engaged primarily in the trade or business of manufacturing1 processing1 assembling1 or researching and developing products or in the trade or business of agriculture1 technology1 or life science2 7,c7 such corporation has been in existence for less than #e years as of such acquisition2 7,d7 such corporation has fewer than #ge employees as of such acquisition2 7,e7 more than #ej percent of the corporation's employees perform substantially all of their services in the ,united ,states as of such acquisition2 and 7,f7 such stock is designated by the corporation for purposes of this paragraph4 ,for purposes of subparagraph 7,e71 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 #gej1jjj1 taking into account all taxpayers for all taxable years4 7#c7 ,small business partnership interest ,the term small business partnership interest means any capital or profits interest in a domestic partnership acquired by the taxpayer from the partnership solely in exchange for cash1 if-- 7,a7 such partnership is an eligible small business 7as defined in section #da7;b77#c77;,d77ii772 7,b7 such partnership is engaged primarily in the trade or business of manufacturing1 processing1 assembling1 or researching and developing products or in the trade or business of agriculture1 technology1 or life science2 7,c7 such partnership has been in existence for less than #e years as of such acquisition2 7,d7 such partnership has fewer than #ge employees as of such acquisition2 7,e7 more than #ej percent of the partnership's employees perform substantially all of their services in the ,united ,states as of such acquisition2 and 7,f7 such capital or profits interest is designated by partnership for purposes of this paragraph4 ,for purposes of subparagraph 7,e71 a capital or profits 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 exceed #gej1jjj1 taking into account all taxpayers for all taxable years4 7d7 ,carryforward of unused credit ,if the credit allowable under subsection 7a7 exceeds the limitation imposed by section #bf7;a7 for such taxable year reduced by the sum of the credits allowable under this subpart 7other than this section71 such excess shall be carried to the succeeding taxable year and added to the credit allowable under this section4 ,such excess shall not be taken into account under this subsection for such succeeding taxable year or any taxable year succeeding such year4 4 7b7 ,clerical amendment ,the table of sections of such subpart is amended by inserting after the item relating to section #be;,d the following new item3 ,sec4 #be;,e4 ,small business investment4 4 7c7 ,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 #be;,e of the ,internal ,revenue ,code of #aihf 7as added by this section71 and similar ,state tax credits1 in providing incentives for investment in qualified small businesses4 ,there are authorized to be appropriated #ejj1jjj to carry out the purposes of this subsection4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4