American Innovation and Manufacturing Act

II 117TH CONGRESS 1ST SESSION S. 1059 To establish a small business and domestic production recovery investment facility, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 25, 2021 Mr. RUBIO (for himself and Mr. RISCH) introduced the following bill; which was read twice and referred to the Committee on Small Business and En- trepreneurship A BILL To establish a small business and domestic production recovery investment facility, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘American Innovation 4 and Manufacturing Act’’. 5 SEC. 2. SMALL BUSINESS INVESTMENT COMPANY PRO- 6 GRAM. 7 (a) IN GENERAL.—Part A of title III of the Small 8 Business Investment Act of 1958 (15 U.S.C. 681 et seq.) 9 is amended— 10 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 1059 IS (1) in section 302(a) (15 U.S.C. 682(a))— 1 (A) in paragraph (1)— 2 (i) in subparagraph (A), by striking 3 ‘‘or’’ at the end; 4 (ii) in subparagraph (B), by striking 5 the period at the end and inserting ‘‘; or’’; 6 and 7 (iii) by adding at the end the fol- 8 lowing: 9 ‘‘(C) $20,000,000, adjusted every 5 years 10 for inflation, with respect to each licensee au- 11 thorized or seeking authority to sell bonds to 12 Administration as a participating investment 13 company under section 321.’’; and 14 (2) by adding at the end the following: 15 ‘‘SEC. 321. SMALL BUSINESS AND DOMESTIC PRODUCTION 16 RECOVERY INVESTMENT FACILITY. 17 ‘‘(a) DEFINITIONS.—In this section: 18 ‘‘(1) ELIGIBLE SMALL BUSINESS CONCERN.— 19 The term ‘eligible small business concern’— 20 ‘‘(A) means a small business concern that 21 is a manufacturing business that is assigned a 22 North American Industry Classification System 23 code beginning with 31, 32, or 33 at the time 24 at which the small business concern receives an 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 1059 IS investment from a participating investment 1 company under the facility; and 2 ‘‘(B) does not include an entity described 3 in section 7(a)(37)(A)(iv)(III) of the Small 4 Business Act (15 U.S.C. 5 636(a)(37)(A)(iv)(III)). 6 ‘‘(2) FACILITY.—The term ‘facility’ means the 7 facility established under subsection (b). 8 ‘‘(3) FUND.—The term ‘Fund’ means the fund 9 established under subsection (h). 10 ‘‘(4) PARTICIPATING INVESTMENT COMPANY.— 11 The term ‘participating investment company’ means 12 a small business investment company approved 13 under subsection (d) to participate in the facility. 14 ‘‘(5) PROTE´GE´ INVESTMENT COMPANY.—The 15 term ‘prote´ge´ investment company’ means a small 16 business investment company that— 17 ‘‘(A) is majority managed by new, inexperi- 18 enced, or otherwise underrepresented fund man- 19 agers; and 20 ‘‘(B) elects and is selected by the Adminis- 21 tration to participate in the pathway-prote´ge´ 22 program under subsection (g). 23 ‘‘(6) SMALL BUSINESS CONCERN.—The term 24 ‘small business concern’ has the meaning given the 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 1059 IS term in section 3(a) of the Small Business Act (15 1 U.S.C. 632(a)). 2 ‘‘(b) ESTABLISHMENT.— 3 ‘‘(1) FACILITY.—The Administrator shall estab- 4 lish and carry out a facility to increase resiliency in 5 the manufacturing supply chain of eligible small 6 business concerns by providing financial assistance 7 to participating investment companies that facilitate 8 equity financings to eligible small business concerns 9 in accordance with this section. 10 ‘‘(2) ADMINISTRATION OF FACILITY.—The fa- 11 cility shall be administered by the Administrator act- 12 ing through the Associate Administrator described in 13 section 201. 14 ‘‘(c) APPLICATIONS.— 15 ‘‘(1) IN GENERAL.—Any small business invest- 16 ment company may submit to the Administrator an 17 application to participate in the facility. 18 ‘‘(2) REQUIREMENTS FOR APPLICATION.—An 19 application to participate in the facility shall include 20 the following: 21 ‘‘(A) A business plan describing how the 22 applicant intends to make successful equity in- 23 vestments in eligible small business concerns. 24 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 1059 IS ‘‘(B) Information regarding the relevant 1 investment qualifications and backgrounds of 2 the individuals responsible for the management 3 of the applicant. 4 ‘‘(C) A description of the extent to which 5 the applicant meets the selection criteria under 6 subsection (d)(2). 7 ‘‘(3) EXCEPTIONS TO APPLICATION FOR NEW 8 LICENSEES.—Not later than 90 days after the date 9 of enactment of this section, the Administrator shall 10 reduce requirements for applicants applying to oper- 11 ate as a participating investment company under 12 this section in order to encourage the participation 13 of new small business investment companies in the 14 facility under this section, which may include the re- 15 quirements established under part 107 of title 13, 16 Code of Federal Regulations, or any successor regu- 17 lation, relating to— 18 ‘‘(A) the approval of initial management 19 expenses; 20 ‘‘(B) the management ownership diversity 21 requirement; 22 ‘‘(C) the disclosure of general compen- 23 satory practices and fee structures; or 24 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 1059 IS ‘‘(D) any other requirement that the Ad- 1 ministrator determines to be an obstacle to 2 achieving the purposes described in this para- 3 graph. 4 ‘‘(d) SELECTION OF PARTICIPATING INVESTMENT 5 COMPANIES.— 6 ‘‘(1) DETERMINATION.— 7 ‘‘(A) IN GENERAL.—Except as provided in 8 paragraph (3), not later than 60 days after the 9 date on which the Administrator receives an ap- 10 plication under subsection (c), the Adminis- 11 trator shall— 12 ‘‘(i) make a final determination to ap- 13 prove or disapprove such applicant to par- 14 ticipate in the facility; and 15 ‘‘(ii) transmit the determination to the 16 applicant in writing. 17 ‘‘(B) COMMITMENT AMOUNT.—Except as 18 provided in paragraph (3), at the time of ap- 19 proval of an applicant, the Administrator shall 20 make a determination of the amount of the 21 commitment that may be awarded to the appli- 22 cant under this section. 23 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 1059 IS ‘‘(2) SELECTION CRITERIA.—In making a de- 1 termination under paragraph (1), the Administrator 2 shall consider— 3 ‘‘(A) the probability that the investment 4 strategy of the applicant will successfully repay 5 any financial assistance provided by the Admin- 6 istration, including the probability of a return 7 significantly in excess thereof; 8 ‘‘(B) the probability that the investments 9 made by the applicant will— 10 ‘‘(i) provide capital to eligible small 11 business concerns; or 12 ‘‘(ii) create or preserve jobs in the 13 United States; 14 ‘‘(C) the probability that the applicant will 15 meet the objectives in the business plan of the 16 applicant, including the financial goals, and, if 17 applicable, the pathway-prote´ge´ program in ac- 18 cordance with subsection (g); and 19 ‘‘(D) the probability that the applicant will 20 assist eligible small business concerns in achiev- 21 ing profitability. 22 ‘‘(3) APPROVAL OF PARTICIPATING INVEST- 23 MENT COMPANIES.— 24 ‘‘(A) PROVISIONAL APPROVAL.— 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 1059 IS ‘‘(i) IN GENERAL.—Notwithstanding 1 paragraph (1), with respect to an applica- 2 tion submitted by an applicant to operate 3 as a participating investment company 4 under this section, the Administrator may 5 provide provisional approval for the appli- 6 cant in lieu of a final determination of ap- 7 proval and determination of the amount of 8 the commitment under that paragraph. 9 ‘‘(ii) PURPOSE.—The purpose of a 10 provisional approval under clause (i) is 11 to— 12 ‘‘(I) encourage applications from 13 investment companies with an invest- 14 ment mandate from the committed 15 private market capital of the invest- 16 ment company that does not conform 17 to the requirements described in this 18 section at the time of application; 19 ‘‘(II) allow the applicant to more 20 effectively raise capital commitments 21 in the private markets by referencing 22 the intent of the Administrator to 23 award the applicant a commitment; 24 and 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 1059 IS ‘‘(III) allow the applicant to more 1 precisely request the desired amount 2 of commitment pending the securing 3 of capital from private market inves- 4 tors. 5 ‘‘(iii) LIMIT ON PERIOD OF THE 6 TIME.—The period between a provisional 7 approval under clause (i) and the final de- 8 termination of approval under paragraph 9 (1) shall not exceed 12 months. 10 ‘‘(e) COMMITMENTS AND SBIC BONDS.— 11 ‘‘(1) IN GENERAL.—The Administrator may, 12 out of amounts available in the Fund, purchase or 13 commit to purchase from a participating investment 14 company 1 or more accruing bonds that include eq- 15 uity features as described in this subsection. 16 ‘‘(2) BOND TERMS.—A bond purchased by the 17 Administrator from a participating investment com- 18 pany under this subsection shall have the following 19 terms and conditions: 20 ‘‘(A) TERM AND INTEREST.— 21 ‘‘(i) IN GENERAL.—The bond shall be 22 issued for a term of not less than 15 years 23 and shall bear interest at a rate deter- 24 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 1059 IS mined by the Administrator of not more 1 than 2 percent. 2 ‘‘(ii) ACCRUAL OF INTEREST.—Inter- 3 est on the bond shall accrue and shall be 4 payable in accordance with subparagraph 5 (D). 6 ‘‘(iii) PREPAYMENT.—The bond shall 7 be prepayable without penalty after the 8 end of the 1-year period beginning on the 9 date on which the bond was purchased. 10 ‘‘(B) PROFITS.— 11 ‘‘(i) IN GENERAL.—The Administra- 12 tion shall be entitled to receive a share of 13 the profits net of any profit sharing per- 14 formance compensation of the participating 15 investment company equal to the quotient 16 obtained by dividing— 17 ‘‘(I) one-third of the commitment 18 that the participating investment com- 19 pany is approved for under subsection 20 (d); by 21 ‘‘(II) the commitment approved 22 under subsection (d) plus the regu- 23 latory capital of the participating in- 24 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 1059 IS vestment company at the time of ap- 1 proval under that subsection. 2 ‘‘(ii) DETERMINATION OF PERCENT- 3 AGE.—The share to which the Administra- 4 tion is entitled under clause (i)— 5 ‘‘(I) shall be determined at the 6 time of approval under subsection (d); 7 and 8 ‘‘(II) without the approval of the 9 Administration, shall not be revised, 10 including to reflect subsequent dis- 11 tributions of profits, returns of cap- 12 ital, or repayments of bonds, or other- 13 wise. 14 ‘‘(C) PROFIT SHARING PERFORMANCE 15 COMPENSATION.— 16 ‘‘(i) RECEIPT BY ADMINISTRATION.— 17 The Administration shall receive a share of 18 profits of not more than 2 percent, which 19 shall be deposited into the Fund and be 20 available to make commitments under this 21 subsection. 22 ‘‘(ii) RECEIPT BY MANAGERS.—The 23 managers of the participating investment 24 company may receive a maximum profit 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 1059 IS sharing performance compensation of 25 1 percent minus the share of profits paid to 2 the Administration under clause (i). 3 ‘‘(D) PROHIBITION ON DISTRIBUTIONS.— 4 No distributions on capital, including profit dis- 5 tributions, shall be made by the participating 6 investment company to the investors or man- 7 agers of the participating investment company 8 until the Administration has received payment 9 of all accrued interest on the bond committed 10 under this section. 11 ‘‘(E) REPAYMENT OF PRINCIPAL.—Except 12 as described in subparagraph (F), repayments 13 of principal of the bond of a participating in- 14 vestment company shall be— 15 ‘‘(i) made at the same time as returns 16 of private capital; and 17 ‘‘(ii) in amounts equal to the pro rata 18 share of the Administration of the total 19 amount being repaid or returned at such 20 time. 21 ‘‘(F) LIQUIDATION OR DEFAULT.—Upon 22 any liquidation event or default, as defined by 23 the Administration, any unpaid principal or ac- 24 crued interest on the bond shall— 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1059.IS S1059 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 1059 IS ‘‘(i) have a priority over all equity of 1 the participating investment company; and 2 ‘‘(ii) be paid before any return of eq- 3 uity or any other distributions to the inves- 4 tors or managers of the participating in- 5 vestment company. 6 ‘‘(3) AMOUNT OF COMMITMENTS AND PUR- 7 CHASES.— 8 ‘‘(A) MAXIMUM AMOUNT.—The maximum 9 amount of outstanding bonds and commitments 10 to purchase bonds for any participating invest- 11 ment company under the facility shall be the 12 lesser of— 13 ‘‘(i) twice the amount of the regu- 14 latory capital of the participating invest- 15 ment company; or 16 ‘‘(ii) $200,000,000. 17 ‘‘(4) COMMITMENT PROCESS.—Commitments by 18 the Administration to purchase bonds under the fa- 19 cility shall remain available to be sold by a partici- 20 pating investment company until the end of the 21 fourth fiscal year following the year in which the 22 commitment is made, subject to review and approval 23 by the Administration based on regulatory compli- 24 ance, financial status, change in management, devi- 25 VerDate Sep 11 2014 20:56 Apr 23, 2021 Jkt 019200 [Text truncated for display. 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