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
The bill wants to help small businesses, especially those in the countryside, poorer areas, or making cool technology, by letting them have more money to grow without worrying about too many loans. It also wants to check each year how this money helps make jobs and improve these areas.
Summary AI
H.R. 5333, titled the “Investing in All of America Act of 2023,” aims to change the rules under the Small Business Investment Act of 1958. Specifically, it allows certain investments in smaller businesses located in rural or low-income areas, as well as in critical technology sectors, to be exempt from limits on financial leverage. This means that more financial resources could be directed towards these businesses without affecting the overall borrowing cap. Additionally, the bill provides for annual adjustments based on inflation and requires regular reporting on the economic impact and jobs created as a result of these changes.
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AnalysisAI
Summary of the Bill
The proposed legislation, titled the "Investing in All of America Act of 2023," seeks to amend the Small Business Investment Act of 1958. The primary aim is to modify the current rules regarding how Small Business Investment Companies (SBICs) can leverage funds. Specifically, the bill intends to exclude from leverage limits investments made in smaller enterprises situated in rural or low-income areas, and businesses operating in critical technology sectors. Additionally, the bill outlines procedures for annual adjustments based on economic indicators and mandates reports on the economic impact of the exclusions.
Significant Issues
One notable issue with the bill is the introduction of the term "critical technology areas" without a clear definition, leading to possible confusion and inconsistent implementation. This lack of clarity could hinder the equitable distribution of investments. Furthermore, the inclusion of funds from foundations, endowments, or trusts of colleges or universities may introduce concerns about favoritism or bias, allowing certain educational institutions to receive preferential access to the benefits intended by the leverage changes.
The bill also proposes a reduction in the private capital required for SBIC leverage, from 300 to 200, but lacks detailed explanation on how this change will affect access to mutual funds for small businesses. The requirement for annual adjustments based on the Consumer Price Index introduces variability, potentially complicating financial planning for businesses. Finally, the requirement for annual reports may not sufficiently account for all economic impacts due to other external factors.
Impact on the Public
Broadly, the bill could potentially enhance investment in rural, low-income, and critical technology areas by offering more favorable leverage conditions to businesses and investors operating in these zones. This might stimulate economic growth and technological innovation in underserved regions, ultimately benefiting local communities through job creation and enhanced business opportunities.
On the other hand, the uncertainty surrounding the definition of "critical technology areas" could result in uneven allocation of investment funds, possibly disadvantaging certain sectors or regions. Businesses may also face challenges in adapting to the complex financial changes, potentially limiting their ability to make full use of the intended benefits.
Impact on Stakeholders
Small Businesses: Small enterprises in specified areas are poised to gain from increased investment potential, potentially translating into business expansion and job creation. However, they might struggle with the complexity of new leverage calculations, which require careful compliance to fully benefit from the changes.
Educational Institutions: Universities and colleges with associated foundations, endowments, or trusts could benefit by gaining access to leverage opportunities. This might lead to improved educational infrastructures or resources but could also provoke criticism if perceptions of favoritism arise.
Investors and SBICs: these groups stand to benefit from relaxed leverage restrictions, allowing them to increase investments in qualified businesses. Nevertheless, they might face unpredictability due to the adjustments based on the Consumer Price Index.
In summary, while the bill has the potential to drive investment in key areas across the U.S., careful consideration and refinement are necessary to ensure broad and equitable access to its benefits, while mitigating risks associated with ambiguity and unpredictability.
Financial Assessment
The "Investing in All of America Act of 2023" (H.R. 5333) brings attention to the financial allocations within the Small Business Investment Act of 1958, specifically in relation to how funds are managed and leveraged for small business support. The bill makes significant amendments concerning leverage limits, particularly benefiting businesses in rural or low-income areas and critical technology sectors.
Financial Allocation and Leverage Exemption
The bill allows for certain amounts invested in smaller enterprises located in rural or low-income areas, as well as small businesses in critical technology areas, to be excluded from the overall limit on financial leverage. This exemption means that these businesses can receive more financial resources without impacting their borrowing limits. The intention is to encourage investments in these strategically significant sectors.
Defined Terms and Compliance Complexity
One of the issues surrounding this bill is the undefined term "critical technology areas." This introduces ambiguity, as there is no clear guidance on which sectors qualify. The financial references in the bill rely heavily on this definition, affecting how funds will be directed. The potential for uneven application could lead to some businesses being unintentionally excluded from leverage benefits, directly impacting their access to needed capital.
Additionally, the bill reduces the private capital requirement for businesses from 300 to 200. Such a change might complicate investment strategies for small enterprises as it modifies the threshold for accessing mutual funds. This adjustment necessitates a transparent understanding of its financial implications, yet the lack of clarity around its anticipated outcomes presents challenges.
Annual Adjustments Based on Consumer Price Index
The bill mandates that the dollar amounts described will be adjusted annually based on the Consumer Price Index. These adjustments ensure that the financial allocations remain relevant in changing economic conditions. However, this introduces unpredictability, as the Consumer Price Index can fluctuate due to various factors, impacting financial planning for businesses expecting consistent leverage terms.
Influence of Educational Institutions
Another significant change is the amendment allowing investments from foundations, endowments, or trusts of colleges or universities. While this provision aims to expand investment avenues, there is a concern about potential biases. Educational institutions with substantial financial resources could gain a disproportionate advantage in receiving leverage benefits, raising ethical questions about fairness and equitable distribution of resources.
Economic Impact Reporting
A critical aspect of the bill is its requirement for the Small Business Administration to produce annual reports on the economic impact of the leverage exclusion. These reports must account for the economic activity and jobs generated. However, there remains a concern that these reports might not fully consider external economic variables that influence these outcomes, potentially leading to incomplete assessments of the program's success.
In summary, while H.R. 5333 aims to enhance financial support for targeted small businesses, it introduces several complexities in its financial references. The provisions within the bill address key areas of investment but also raise questions about definitions, equity, and comprehensive economic assessments.
Issues
The undefined term 'critical technology areas' in Section 2 introduces ambiguity, which could lead to challenges in consistent application and interpretation of the law, potentially affecting the distribution of funds and investments.
The amendment in Section 2 allowing funds from foundations, endowments, or trusts of colleges or universities raises ethical concerns about potential biases toward specific educational institutions, as certain institutions might have a disproportionate advantage in accessing leverage benefits.
The proposed changes in Section 2 to leverage calculation involve complex financial adjustments, which could present difficulties for small businesses attempting to understand their eligibility and compliance, possibly limiting their ability to access intended benefits effectively.
The reliance on the Consumer Price Index for the 'annual adjustment' as outlined in Section 2 introduces unpredictability due to fluctuating economic conditions, which could pose financial planning challenges for businesses expecting consistent leverage terms.
The amendment process, reducing the private capital requirement from 300 to 200 in Section 2, lacks transparency in terms of its anticipated impact on small business access to mutual funds, potentially complicating investment strategies for those enterprises.
The report required under Section 2 may not fully account for the broader economic impacts and job creation influenced by external variables, which could lead to incomplete assessments of the initiative's outcomes.
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. ---