Overview
Title
An Act To amend the Small Business Investment Act of 1958 to exclude from the limit on leverage certain amounts invested in smaller enterprises located in rural or low-income areas and small businesses in critical technology areas, and for other purposes.
ELI5 AI
H.R. 5333 is a plan to make it easier for small businesses in the countryside, poor neighborhoods, or working with special tech, to get money for their projects by changing some borrowing rules. It also makes sure these rules keep up with inflation and checks each year how helpful these changes are.
Summary AI
H.R. 5333, titled the "Investing in All of America Act of 2023," proposes changes to the Small Business Investment Act of 1958. It aims to exclude certain investments in small businesses located in rural or low-income areas and in critical technology fields from the restrictions on borrowing limits. The bill introduces adjustments to these limits and mandates annual inflationary adjustments. Additionally, it requires the Small Business Administration to report annually on the economic impact of these exclusions.
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AnalysisAI
The "Investing in All of America Act of 2023," as outlined in H.R. 5333, aims to modify the Small Business Investment Act of 1958. It primarily seeks to alter the leverage limits for Small Business Investment Companies (SBICs) by excluding certain investments made in smaller enterprises located in rural or low-income areas, and in small businesses within critical technology sectors. These amendments are intended to encourage investment in areas that might benefit from economic stimulation and technological advancement.
General Summary of the Bill
The bill proposes amendments that would redefine the types of funds SBICs can leverage, specifically excluding government-sourced monies, except in certain narrowly defined cases. Additionally, it introduces allowances for funds from colleges or university foundations. Amendments also provide for changes in how leverage qualifications are calculated, particularly benefiting businesses in specific geographic and technological areas. Furthermore, the bill mandates an annual adjustment of leverage limits based on the Consumer Price Index and requires annual reporting to evaluate the economic activities generated by these changes.
Summary of Significant Issues
One pressing issue is the undefined nature of "critical technology areas," leading to potential ambiguity in the bill's application. This lack of clarity could create inconsistencies in how benefits are distributed across various regions and industries.
Additionally, permitting funds from educational institutions may introduce biases favoring certain colleges and universities. This allowance could unintentionally skew investment priorities or benefits toward entities closely tied to these institutions.
Another significant concern is the complexity of the changes in leverage calculation. These adjustments require a sophisticated understanding that might be out of reach for many small businesses. Such complexity could deter some enterprises from applying for or understanding the benefits of these leverage exclusions.
The bill's reliance on the Consumer Price Index for annual adjustments introduces an element of unpredictability, which could complicate long-term budget planning for eligible small businesses. The required annual reports on the legislation's impact have also been flagged for potentially overlooking indirect economic benefits and job creation outside direct investments.
Impact on the Public
The bill broadly aims to stimulate investment in under-resourced areas, potentially driving economic growth and technological advancement in rural and low-income communities. By targeting businesses in critical technology sectors, the Act further aims to bolster national security-related industries. However, the complexity of the bill’s provisions may pose challenges for understanding and accessibility. Small businesses without robust financial departments may struggle to align with the new criteria and thus miss out on potential opportunities.
Impact on Specific Stakeholders
For small businesses and entrepreneurs in rural or low-income areas, the bill could provide significant new opportunities for growth and development through increased investments. These changes might enable them to access more capital than they otherwise would have. However, businesses could also face challenges in interpreting and navigating the new leverage rules.
Educational institutions may benefit from the ability to provide funds for leverage, but this could inadvertently lead to a concentration of advantages around specific colleges and universities that have substantial financial means to invest. Simultaneously, the ambiguity around what constitutes "critical technology areas" could result in uneven application, potentially leaving some deserving sectors without anticipated support.
In conclusion, while the Investing in All of America Act of 2023 holds promise for stimulating investment in crucial areas and supporting small businesses, it faces several challenges that could influence its effectiveness and fairness. Addressing these issues through clearer definitions and simpler processes could optimize its positive impacts.
Financial Assessment
The proposed H.R. 5333, titled the "Investing in All of America Act of 2023," brings forth crucial financial elements designed to amend the Small Business Investment Act of 1958. The bill suggests significant changes in how investments are classified and leveraged, particularly concerning those made in small businesses located in rural or low-income areas, and businesses involved in critical technology sectors.
Financial Allocations and Adjustments
A key financial provision in the bill is the alteration of the maximum leverage exclusion. Specifically, it implements a reduction in the private capital threshold from 300 to 200. This adjustment is intended to ease capital requirements, potentially opening the doors for more small businesses to qualify for investment. However, this change could possibly affect mutual fund access for some businesses, particularly those in specific geographical or technological areas, creating a potential disparity in eligibility.
Moreover, the legislation introduces a cap on the amount excluded from leverage calculation, stating that it should not exceed 50 percent of the private capital or $125,000,000, whichever is less. This clause aims to control the exposure and manage risk by setting a clear financial boundary, but it could complicate leverage calculations for businesses with limited financial acumen.
Inflation and Economic Reporting
In addressing inflation, the bill mandates that the dollar amounts relating to leverage limits are adjusted annually based on the Consumer Price Index (CPI). While this method ensures that financial thresholds remain contemporary with economic conditions, it poses a challenge due to the CPI's inherent volatility, introducing a layer of unpredictability in financial planning for businesses.
Furthermore, the bill requires the Small Business Administration to submit an annual report on the economic activities and job creation resulting from these financial exclusions. This report will be crucial for assessing the real-world impact of the bill's financial provisions. However, the ability of these reports to accurately capture indirect economic impacts remains a concern, as they might overlook the broader influences of market dynamics and external economic conditions.
Concerns and Ethical Considerations
The allowance for funds from university foundations, endowments, or trusts may skew leverage distribution in favor of affiliated institutions, suggesting potential biases. These financial sources, while beneficial for specific sectors, could inadvertently shape investment landscapes unevenly.
Lastly, a point of ambiguity arises around indirect government funding exclusions, which might lead to unforeseen legal or financial complications. The bill tries to clarify eligible funds for leverage purposes but leaves open questions about indirect investment channels that may involve government resources. This lack of clarity could pose compliance challenges and lead to disputes over financial eligibility.
Overall, these financial references and adjustments reflect a conscientious effort to support small businesses in traditionally underserved areas. However, their implementation may require careful monitoring and response to ensure they achieve their intended economic impact without unintended consequences.
Issues
The introduction of the term 'critical technology areas' in Section 2 raises concerns due to the lack of a precise definition, which could lead to ambiguity in interpretation and inconsistent application across different regions and industries.
The allowance of funds from foundations, endowments, or trusts of colleges or universities in Section 2 might create potential biases toward specific educational institutions, potentially skewing the distribution of leverage benefits.
The adjustment of the private capital requirement from 300 to 200 in Section 2 is unclear regarding its impact on small business mutual fund access, potentially affecting eligibility for businesses across critical locations.
The leverage calculation changes in Section 2 involve complex adjustments that may complicate the understanding of eligibility and compliance for small businesses, particularly those lacking sophisticated financial resources.
The reliance on the Consumer Price Index for annual adjustments in Section 2 introduces unpredictability for budget planning due to its fluctuating nature, which could affect financial stability for eligible small businesses.
The report required annually to assess the economic activity and job creation resulting from the leverage exclusion in Section 2 may not adequately capture indirect economic impacts influenced by external factors, potentially misleading stakeholders about the program's effectiveness.
While intending to exclude specific funds from leverage, Section 2 presents ambiguity concerning indirect government funding channels, which might lead to unforeseen legal or financial complications.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section states that the official name of the Act is the “Investing in All of America Act of 2023.”
2. SBIC maximum leverage exclusion Read Opens in new tab
Summary AI
The bill amends the Small Business Investment Act of 1958 to change the rules regarding which funds can be used by Small Business Investment Companies (SBICs) for leverage purposes, excluding government-sourced funds except certain specified types. It also adjusts how leverage calculations are made for businesses in low-income, rural, or critical technology areas, sets limits on leverage exclusions, and mandates annual reports on the economic impact of these changes.
Money References
- (a) Definitions.—Section 103(9) of the Small Business Investment Act of 1958 (15 U.S.C. 662(9)) is amended— (1) in subparagraph (A)(ii), by striking “and” at the end; (2) in subparagraph (B)(iii)— (A) in subclause (I), by striking “established prior to October 1, 1987”; (B) in subclause (II)— (i) by striking “or” and inserting “,”; and (ii) by inserting “, or a foundation, endowment, or trust of a college or university” after “pension plan”; and (C) in subclause (III), by striking the semicolon at the end and inserting “; and”; and (3) by adding at the end the following new subparagraph: “(C) does not include any funds obtained directly or indirectly from any Federal, State or local government or any government agency or instrumentality, except for funds described in subclauses (I) through (III) of subparagraph (B)(iii), for the purpose of approval by the Administrator of any request for leverage.”. (b) In general.—Section 303(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 683(b)(2)) is amended— (1) in subparagraph (A)(i), by striking “300” and inserting “200”; (2) in subparagraph (C)— (A) in the heading— (i) by inserting “or rural” after “low-income”; and (ii) by inserting “or critical technology areas” after “geographic areas”; (B) in clause (i)— (i) by striking “(i) In calculating” and inserting the following: “(i) IN GENERAL.—Except as provided in clause (iii), in calculating”; (ii) by inserting “or companies” after “of a company”; (iii) by striking “subparagraph (A)” and inserting “subparagraphs (A) and (B)”; (iv) by striking “equity”; (v) by striking “the company in a smaller enterprise” and all that follows and inserting the following: “the company or companies in— “(I) a smaller enterprise located in a low-income geographic area (as defined in section 689 of this title) or in a rural area; or”; and (vi) by adding at the end the following new subclause: “(II) a small business concern in an area of critical technology (as defined in section 4801 of title 10, United States Code) vital to maintaining the national security of the United States.”; (C) by amending clause (ii) to read as follows: “(ii) LIMITATION.—While maintaining the limitation of subparagraph (A)(i) and consistent with a leverage determination ratio issued pursuant to section 301(c), the aggregate amount excluded for a company or companies under clause (i) from the calculation of the outstanding leverage of such company or companies for the purposes of subparagraphs (A) and (B) may not exceed the lesser of 50 percent of the private capital of such company or companies or $125,000,000.”; and (D) by amending clause (iii) to read as follows: “(iii) PROSPECTIVE APPLICABILITY.—An investment by a licensee is eligible for exclusion from the calculation of outstanding leverage under clause (i) only if such investment is made by such licensee after the date of enactment of the Investing in All of America Act of 2023.”; and (3) by adding at the end the following new subparagraphs: “(E) ANNUAL ADJUSTMENT.—The Administrator shall adjust the dollar amounts described in subparagraphs (A) and (B)— “(i) on the date of the enactment of this subparagraph, by a percentage equal to the percentage (if any) by which the Consumer Price Index (all items; United States city average), as published by the Bureau of Labor Statistics, increased during the period— “(I) beginning on December 18, 2015, and ending on the date of the enactment of this subparagraph, for subparagraph (B); and “(II) beginning on June 21, 2018, and ending on the date of the enactment of this subparagraph, for subparagraph (A); and “(ii) on the date that is one year after the date of the enactment of this subparagraph, and annually thereafter, by a percentage equal to the percentage (if any) by which the Consumer Price Index (all items; United States city average), as published by the Bureau of Labor Statistics, increased during the one-year period preceding the date of the adjustment under this clause.”. (c) Report.—Not later than June 30 of the first year beginning after the date of the enactment of this Act, and annually thereafter, the Administrator of the Small Business Administration shall submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Representatives a report on the results of the exclusion under subparagraph (C) of section 303(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 683(b)(2)), as amended by subsection (a), including the economic activity generated and jobs directly and indirectly created by the exclusion. ---