,,ii #aafth ,,congress #b;d ,session ,s4 #ceae ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,march #ah1 #bjbj,ms4 ,klobuchar 7for herself1 ,mr4 ,coons1 ,mr4 ,king1 and ,mr4 ,kaine7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to establish the ,innovation and ,startups ,equity ,investment ,program in the ,department of the ,treasury1 through which the ,secretary of the ,treasury shall allocate money to certain ,states to assist high-potential scalable startups access venture capital to commercialize innovations1 create jobs1 and accelerate economic growth1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,new ,business ,preservation ,act4 #b4 ,definitions ,in this ,act3 7#a7 ,approved ,state program ,the term approved ,state program means a ,state program that is approved by the ,secretary in accordance with the standards established under section #c7;b77#a74 7#b7 ,covered investment ,the term covered investment means an equity investment in a startup using amounts made available to carry out the covered programs4 7#c7 ,covered programs ,the term covered programs means the ,program and the program carried out under section #d4 7#d7 ,equity investment ,the term equity investment-- 7,a7 means an investment for an ownership interest in an entity1 the financial return with respect to which is principally aligned with the financial return of the plurality of ownership interests in the entity2 and 7,b7 includes a debt instrument that can be converted to an equity ownership interest in an entity based on future events4 7#e7 ,exit ,the term exit1 with respect to a startup in which there is a covered investment1 means-- 7,a7 the acquisition of the startup2 7,b7 after an initial public offering with respect to the startup1 the sale of a share of the startup that was obtained through the covered investment2 or 7,c7 the voluntary purchase of ownership interests by the startup1 investors1 or existing shareholders4 7#f7 ,federal contribution ,the term ,federal contribution means a contribution made-- 7,a7 by a participating ,state to1 or for the account of1 an approved ,state program2 and 7,b7 with ,federal funds allocated to the participating ,state by the ,secretary4 7#g7 ,follow-on investment ,the term follow-on investment means a subsequent equity investment in a startup in which there was originally a separate and distinct equity investment under-- 7,a7 a program carried out under the ,state ,small ,business ,credit ,initiative ,act of #bjaj 7#ab ,u4,s4,c4 #egja et seq472 or 7,b7 the ,program4 7#h7 ,market rate management fee and profit interest ,the term market rate management fee and profit interest means the usual and customary compensation structure paid to fund managers for fund investment management services under agreements with private sector limited partners4 7#i7 ,participating ,state ,the term participating ,state means a ,state that participates in the ,program after having satisfied the approval criteria under section #c7;c74 7#aj7 ,program ,the term ,program means the ,innovation and ,startups ,equity ,investment ,program established under section #c7;a74 7#aa7 ,qualifying area ,the term qualifying area means an area of the ,united ,states outside of the major venture capital centers1 as determined in the rule making conducted by the ,secretary under section #c7;e74 7#ab7 ,rule2 rule making ,the terms rule and rule making have the meanings given those terms in section #eea of title #e1 ,united ,states ,code4 7#ac7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury4 7#ad7 ,startup ,the term startup means a business entity that-- 7,a7 has been in existence for less than #aj years2 7,b7 has the intention or potential to-- 7i7 significantly scale with respect to revenue and job creation2 7ii7 develop innovative products or services2 and 7iii7 deliver high returns on investment2 and 7,c7 is headquartered in a qualifying area4 7#ae7 ,state 7,a7 ,in general ,the term ,state means-- 7i7 a ,state of the ,united ,states2 and 7ii7 the ,district of ,columbia4 7,b7 ,rule of construction ,the ,commonwealth of ,puerto ,rico1 the ,united ,states ,virgin ,islands1 ,guam1 ,american ,samoa1 and the ,commonwealth of the ,northern ,mariana ,islands shall collectively be considered to be #a ,state for the purposes of this ,act4 7#af7 ,state program ,the term ,state program means a program established by a ,state to provide equity investment in startups or venture capital funds that are headquartered in qualifying areas1 without regard to whether those qualifying areas are located in the ,state4 7#ag7 ,venture capital fund ,the term venture capital fund has the meaning given the term in section #bge4bjc7l7-#a of title #ag1 ,code of ,federal ,regulations1 or any successor regulation4 #c4 ,,isei ,program 7a7 ,establishment ,there is established in the ,department of the ,treasury the ,innovation and ,startups ,equity ,investment ,program-- 7#a7 which shall be administered by the ,secretary2 and 7#b7 under which-- 7,a7 the ,secretary shall1 in accordance with the provisions of this section1 allocate to participating ,states-- 7i7 the amount appropriated under section #h7;a77#a72 and 7ii7 any future amounts appropriated to carry out the ,program under the authorization provided under section #h7;b72 7,b7 participating ,states to which funds are allocated under subparagraph 7,a7 shall1 through approved ,state programs1 provide equity investment in startups2 and 7,c7 money 7including securities7 returned to ,states after exits with respect to the investments described in subparagraph 7,b7 shall be reinvested through follow-on investments1 as further provided in section #e4 7b7 ,duties of the ,secretary ,in administering the ,program1 the ,secretary shall-- 7#a7 establish minimum standards for a ,state program to be considered an approved ,state program2 7#b7 provide technical assistance to ,states for designing ,state programs and implementing approved ,state programs2 7#c7 disseminate information relating to best practices with respect to the design and implementation described in paragraph 7#b72 7#d7 perform any managerial or administrative function that is necessary to maintain the integrity of the ,program2 and 7#e7 provide oversight of the ,program1 including by reviewing whether each approved ,state program is in compliance with the requirements of the ,program4 7c7 ,approval criteria 7#a7 ,participating ,states ,a ,state may become a participating ,state if-- 7,a7 the ,state-- 7i7 designates a specific department or agency of the ,state1 or an entity supported by the ,state1 to implement and administer a ,state program of the ,state2 or 7ii7 has a contractual arrangement-- 7,i7 with a participating ,state that has an approved ,state program2 and 7,,ii7 through which the participating ,state described in subclause 7,i7 will implement and administer the ,state program of the ,state2 7,b7 the ,state takes all legal actions necessary to enable the entity that1 under subparagraph 7,a71 will implement the ,state program of the ,state to carry out that implementation2 7,c7 the ,state submits to the ,secretary an application described in paragraph 7#b77;,b7 during a time period to be established by the ,secretary2 and 7,d7 the ,state and the ,secretary enter into an allocation agreement that-- 7i7 satisfies the requirements of this ,act1 including the requirement under section #e7;a77#b77;,a72 7ii7 provides that the ,state program established by the ,state will comply with any standards established by the ,secretary in carrying out this ,act2 7iii7 establishes internal control1 compliance1 and reporting requirements established by the ,secretary and any other terms and conditions that are necessary to carry out the ,program1 including an agreement by the ,state to permit the ,secretary to audit the ,state program established by the ,state2 7iv7 requires that1 not later than #ahj days after the date on which the ,state and the ,secretary enter into the agreement 7or a later date if the ,secretary determines that later date to be appropriate71 the ,state program of the ,state is able to make the type of equity investments contemplated by this ,act2 and 7v7 includes an agreement by the ,state to submit to the ,secretary any reports required under the ,program1 including those required under section #g4 7#b7 ,approved ,state programs 7,a7 ,models ,the ,secretary may certify a ,state program that uses either of the following structures as an approved ,state program3 7i7 ,a program in which a ,state-supported entity or a private investment firm 7referred to in this clause as the manager7 directly invests in startups in accordance with the following requirements3 7,i7 ,a ,state agency may not serve as the manager of the program4 7,,ii7 ,any investment made under the program shall have not less than #ej percent of the investment funded using nongovernment sources4 7,,iii7 ,a ,state-sponsored entity or nonprofit organization serving as the manager under the program may charge a market rate annual management fee4 7,,iv7 ,the ,state may allow the manager under the program to receive a market-rate profit share4 7,v7 ,the manager under the program shall actively-- 7aa7 educate minority-owned and women-owned startups regarding the process through which the manager makes equity investments2 and 7bb7 pursue equity investments in startups described in item 7aa74 7ii7 ,a program in which a ,state-supported entity or a private investment firm establishes a fund to invest in other investment funds in accordance with the following requirements3 7,i7 ,the fund established under the program may charge a market rate management fee paid by the administrator of the program with program funds and receive a market rate management fee and profit interest4 7,,ii7 ,if the ,state has an above average per capita venture capital market share1 the ,state shall prioritize allocations by the fund established under the program to funds managed by first-time managers1 women1 and minorities4 7,,iii7 ,the allocations made by the fund established under the program shall be in an amount that is not more than #bj percent of the capital raised by that fund1 except that1 with respect to a recipient fund described in subclause 7,,ii71 that amount shall be #ej percent4 7,b7 ,application ,a ,state that wishes to have a ,state program of the ,state certified by the ,secretary as an approved ,state program shall submit to the ,secretary an application that contains-- 7i7 a venture capital supply and accessibility study listing1 which shall include-- 7,i7 a list of active1 as of the date on which the application is submitted1 venture capital funds in the ,state with capital under management1 segregated by funds that actively invest in startups and funds that no longer actively invest in startups2 7,,ii7 sources of equity investments in startups2 and 7,,iii7 a summary of investment activity in the ,state from accredited investors that are not venture capital funds2 7ii7 for the #aj-year period preceding the date on which the ,state submits the application1 a list of each ,state-sponsored program1 the intent of which is to stimulate equity investment in startups1 including the policies implemented under each such program and the reported results of each such program2 7iii7 a list of active1 as of the date on which the application is submitted1 ,state pension fund investments in venture capital funds and similar types of investments2 7iv7 a final report on outcomes in the ,state under each program established under the ,state ,small ,business ,credit ,initiative ,act of #bjaj 7#ab ,u4,s4,c4 #egja et seq47 7referred to in this subparagraph as the ,initiative71 including-- 7,i7 the total amount expended in direct support of small businesses under the ,initiative in the ,state2 7,,ii7 the total amount of private capital leverage generated by each approved program under the ,initiative in the ,state2 7,,iii7 the amount of funds made available under the ,initiative in the ,state that were not ultimately expended1 if any2 7,,iv7 the amount of capital returned to the ,state in the form of investment returns or loan repayments under the ,initiative2 and 7,v7 the actual uses of residual funds generated from the ,initiative in the ,state2 7v7 a policy regarding the resolution of conflicts of interest with respect to the ,state program1 including a comparison with that policy for the ,department of the ,treasury with respect to the ,initiative2 and 7vi7 an identification of which model described in subparagraph 7,a7 the ,state intends to use for the ,state program of the ,state4 7,c7 ,review of application ,not later than #ij days after the date on which the ,secretary receives an application submitted by a ,state under subparagraph 7,b71 the ,secretary shall approve the application if the application satisfies all applicable requirements4 7#c7 ,duration of approval 7,a7 ,in general ,except as provided in subparagraph 7,c71 a ,state program that the ,secretary certifies as an approved ,state program under this subsection shall-- 7i7 remain so certified for the #e-year period beginning on the date on which the ,secretary certifies the program2 and 7ii7 during the #e-year period described in clause 7i71 remain eligible to receive allocations under the ,program1 except as otherwise expressly provided in this section4 7,b7 ,re-certification ,after the end of the #e-year period described in subparagraph 7,a77i7 with respect to an approved ,state program1 the ,secretary may re-certify the approved ,state program after obtaining from the applicable participating ,state any materials that the ,secretary may require4 7,c7 ,exception for material changes ,if1 during the #e-year period described in subparagraph 7,a77i7 with respect to an approved ,state program1 there are material changes made to the structure or administration of the approved ,state program1 the applicable participating ,state1 in order to maintain the certification for the approved ,state program1 shall submit to the ,secretary an updated application that contains any materials that the ,secretary may require4 7d7 ,allocations 7#a7 ,formula 7,a7 ,in general ,subject to subparagraphs 7,b7 and 7,c71 the amount of an allocation to a participating ,state under the ,program shall be calculated as follows3 7i7 ,with respect to an allocation made from the amount appropriated under section #h7;a77#a71 the allocation shall be calculated as follows3 7,i7 ,divide the total population of the ,state by the total population of the ,united ,states4 7,,ii7 ,multiply the total amount appropriated under section #h7;a77#a7 by the quotient obtained under subclause 7,i7 with respect to the ,state4 7ii7 ,with respect to an allocation made from any amounts appropriated to carry out the ,program under the authorization provided under section #h7;b71 the allocation shall be calculated as follows3 7,i7 ,divide the total population of the ,state by the total population of the ,united ,states4 7,,ii7 ,multiply the quotient obtained under subclause 7,i7 with respect to the ,state by the total amount made available to carry out the ,program for the fiscal year in which the allocation is made4 7,b7 ,states with a high level of venture capital activity 7i7 ,purpose ,the purpose of this subparagraph is to1 for the purposes of the calculation under subparagraph 7,a7 with respect to certain ,states1 exclude areas with high levels of venture capital activity from the populations of those ,states4 7ii7 ,calculation ,subject to any rules issued under clause 7iii71 with respect to the calculation under subparagraph 7,a7 for the ,states of ,california1 ,massachusetts1 and ,new ,york1 the total populations of those ,states shall be adjusted as follows3 7,i7 ,with respect to ,california1 the populations of the following counties shall be subtracted from the total population of that ,state3 7aa7 ,marin ,county4 7bb7 ,sonoma ,county4 7cc7 ,napa ,county4 7dd7 ,contra ,costa ,county4 7ee7 ,santa ,clara ,county4 7ff7 ,san ,mateo ,county4 7gg7 ,san ,francisco ,county4 7hh7 ,los ,angeles ,county4 7ii7 ,orange ,county4 7jj7 ,ventura ,county4 7,,ii7 ,with respect to ,massachusetts1 the populations of the following counties shall be subtracted from the total population of that ,state3 7aa7 ,essex ,county4 7bb7 ,middlesex ,county4 7cc7 ,suffolk ,county4 7dd7 ,norfolk ,county4 7,,iii7 ,with respect to ,new ,york1 the populations of the following counties shall be subtracted from the total population of that ,state3 7aa7 ,kings ,county4 7bb7 ,queens ,county4 7cc7 ,new ,york ,county4 7dd7 ,bronx ,county4 7ee7 ,richmond ,county4 7iii7 ,rule making ,as the ,secretary determines to be appropriate1 the ,secretary may issue rules to amend the list of counties under subclause 7,i71 7,,ii71 or 7,,iii7 of clause 7ii7 in order to fulfill the purpose described in clause 7i74 7,c7 ,minimum allocation ,the allocation to a participating ,state under the ,program shall be in an amount that is not less than-- 7i7 with respect to an allocation made from the amount appropriated under section #h7;a77#a71 #a percent of that amount2 and 7ii7 with respect to an allocation made from amounts appropriated in a fiscal year to carry out the ,program under the authorization provided under section #h7;b71 #a percent of the total amount made available to carry out the ,program for that fiscal year4 7#b7 ,delivery 7,a7 ,in general ,subject to the other provisions of this paragraph1 the ,secretary shall-- 7i7 apportion the amount allocated to a participating ,state under this subsection into thirds2 7ii7 transfer the first #a_/c described in clause 7i7 to a participating ,state not later than #cj days after the date on which the ,secretary approves the ,state program of the ,state2 and 7iii7 transfer each successive #a_/c described in clause 7i7 to a participating ,state when the ,state has certified to the ,secretary that the ,state has expended1 transferred1 or obligated #hj percent of the most recently allocated #a_/c for ,federal contributions4 7,b7 ,use of amounts ,each amount allocated to a participating ,state under this subsection shall remain available to the ,state-- 7i7 for making ,federal contributions2 and 7ii7 in the case of each #a_/c transferred under subparagraph 7,a71 for paying administrative costs incurred by the ,state in implementing an approved ,state program of the ,state in an amount that is not more than #e percent of that #a_/c amount4 7,c7 ,withholding ,the ,secretary may withhold a #a_/c transfer under subparagraph 7,a7 pending the results of a financial audit by the ,secretary of the applicable approved ,state program4 7,d7 ,exception ,the ,secretary may1 in the discretion of the ,secretary1 transfer the full amount allocated to a participating ,state under this subsection in a single transfer if the ,state submits to the ,secretary an application that demonstrates the need for such a method of transfer4 7#c7 ,remaining funds ,if1 after allocating funds to participating ,states under this subsection1 there are amounts remaining from the amounts made available to carry out the ,program 7without regard to whether those amounts were made available under section #h7;a77#a7 or pursuant to the authorization provided under section #h7;b771 the ,secretary shall allocate the remaining amounts in accordance with paragraphs 7#a7 and 7#b74 7e7 ,rules ,not later than #ij days after the date of enactment of this ,act1 the ,secretary shall initiate a rule making to issue rules regarding the administration of the ,program1 which shall include the establishment of the minimum standards described in subsection 7b77#a74 #d4 ,follow-on investments 7a7 ,in general ,the ,secretary shall allocate the amount appropriated under section #h7;a77#b71 and any future amounts appropriated to carry out this section under the authorization provided under section #h7;b71 to approved ,state programs to facilitate follow-on investments4 7b7 ,process ,to carry out the allocations under this section1 the ,secretary shall manage a competitive process1 facilitated by an expert consultant from the private sector1 to award funding to approved ,state programs to provide follow-on investments4 7c7 ,amount ,a follow-on investment under subsection 7b7 shall be in an amount that is not less than #e1jjj1jjj and not more than #ej1jjj1jjj4 7d7 ,fees ,with respect to the expert consultant described in subsection 7b7-- 7#a7 the ,secretary may pay management fees to the consultant in an amount that is not more than #j4e percent of the co-investment funds managed by the consultant over the term of the program under this section2 and 7#b7 the consultant may receive not more than #aj percent of the profit interest earned by the ,states participating in the program under this section from the proceeds of successful follow-on investments4 7e7 ,rules ,not later than #ahj days after the date of enactment of this ,act1 the ,secretary shall issue rules-- 7#a7 to determine the eligibility of ,states that wish to participate in the program established under this section1 which shall include the exclusion under section #c7;d77#a77;,b77ii72 7#b7 to provide the manner in which ,states may make the follow-on investments described in this section2 7#c7 that shall permit multiple ,states to work together to invest in startups2 and 7#d7 to determine an appropriate time to make the allocations required under this section with respect to follow-on investments in startups for which the original equity investments were made under the ,program4 #e4 ,exits and repayment 7a7 ,exits 7#a7 ,in general ,if a ,state to which an allocation is made under a covered program receives funds from an exit with respect to a covered investment1 the ,state shall use those funds to further invest in startups in the manner contemplated by the applicable covered program4 7#b7 ,enforcement ,the ,secretary shall-- 7,a7 require that each allocation agreement described in section #c7;c77#a77;,d7 include the requirement under paragraph 7#a72 and 7,b7 in any audit conducted of the ,state by the ,secretary under a covered program1 confirm that there is compliance with respect to the requirement under paragraph 7#a74 7b7 ,failure ,to reinvest ,if a ,state to which an allocation is made under a covered program receives funds from an exit with respect to a covered investment and fails to comply with any requirement under this ,act1 that ,state shall repay to the ,secretary the amount of that allocation1 including any realized gains4 #f4 ,expedited contracting ,for the purposes of carrying out this ,act1 during the #a-year period beginning on the date of enactment of this ,act1 the ,secretary may enter into contracts without regard to any other provision of law regarding public contracts4 #g4 ,reporting 7a7 ,quarterly reports from ,states to the ,secretary 7#a7 ,in general ,not later than #cj days after the first day of each calendar quarter that begins after the date on which the ,secretary issues final rules in the rule making initiated under section #c7;e71 each participating ,state that has received an allocation under the ,program and each ,state to which funding is awarded under section #d7;b7 shall submit to the ,secretary a report regarding the use1 during the quarter preceding the quarter in which the ,state submits the report1 of funds received under the applicable covered program4 7#b7 ,contents ,in each report that a ,state is required to submit under paragraph 7#a71 the ,state shall1 with respect to the quarter covered by the report-- 7,a7 indicate the total amount of funds during the quarter that the ,state received under the covered programs and expended2 and 7,b7 contain a certification by the ,state that-- 7i7 all of the information contained in the report is accurate2 7ii7 funds allocated to the ,state under the covered programs continue to be available and legally committed to an approved ,state program of the ,state1 except for funds already expended by the ,state in carrying out the approved ,state program2 and 7iii7 the ,state is carrying out the approved ,state program of the ,state in accordance with this ,act and rules issued under this ,act4 7b7 ,annual reports from ,states to the ,secretary ,not later than ,march #ca of each year in which the covered programs are in effect1 each participating ,state that has received an allocation under the ,program and each ,state to which funding is awarded under section #d7;b7 shall submit to the ,secretary an annual report with respect to the year preceding the year in which the report is submitted1 which shall include1 for the year covered by the report-- 7#a7 the number of startups supported by an investment made through an approved ,state program of the ,state2 7#b7 the total number of investments made through an approved ,state program of the ,state2 7#c7 the amount of private capital leverage for each covered investment made through an approved ,state program of the ,state and collectively by the ,state under the covered programs and the source of any private capital match2 7#d7 a breakdown of investments made through an approved ,state program of the ,state by1 with respect to the startups in which the investments were made1 industry type1 investment size1 age of entity1 annual sales1 geographic location 7which shall be indicated by zip code71 and number of employees2 and 7#e7 any other information that the ,secretary1 in the sole discretion of the ,secretary1 may require to carry out the purposes of the covered programs4 7c7 ,annual reports from the ,secretary to ,congress 7#a7 ,reporting requirement 7,a7 ,in general ,the ,secretary shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives an annual report that summarizes information reported to the ,secretary by ,states that details1 for the year covered by the report1 outcomes from investments made pursuant to funds allocated under the covered programs4 7,b7 ,length of requirement ,the ,secretary shall submit the annual report required under subparagraph 7,a7 until the later of-- 7i7 the year that is #ab years after the date of enactment of this ,act2 or 7ii7 the year in which no investment is made through either of the covered programs4 7#b7 ,reserve of amounts ,of amounts appropriated to carry out the covered programs under section #h7;a77#a71 and amounts that may be appropriated under the authorization provided under section #h7;b71 the ,secretary may reserve a percentage of the amounts in order to carry out paragraph 7#a74 #h4 ,appropriations2 deposits 7a7 ,direct appropriation ,there are appropriated1 out of monies in the ,treasury not otherwise appropriated1 #b1jjj1jjj1jjj as follows3 7#a7 #a1ejj1jjj1jjj to carry out the ,program1 including any administrative costs incurred in carrying out the ,program4 7#b7 #ejj1jjj1jjj to carry out the follow-on investments program established under section #d1 including any administrative costs incurred in carrying out that program4 7b7 ,authorization of future appropriations ,in addition to the appropriation under subsection 7a71 there is authorized to be appropriated to the ,secretary such sums as may be necessary to carry out this ,act4 7c7 ,deposits ,in addition to the amount appropriated under subsection 7a71 and any amounts that may be appropriated under the authorization provided under subsection 7b71 the ,secretary may1 in accordance with the requirements of this ,act1 expend any funds repaid to the ,secretary under section #e7;b74 7d7 ,availability of funds 7#a7 ,in general ,the amount appropriated under subsection 7a71 and any amounts that may be appropriated under the authorization provided under subsection 7b71 shall remain available1 without fiscal year limitation1 until expended4 7#b7 ,availability of certain deposits ,any amounts repaid to the ,secretary as described in subsection 7c7 shall remain available1 without fiscal year limitation1 until expended4