II Calendar No. 167 118TH CONGRESS 1ST SESSION S. 1345 To amend the Small Business Act to enhance the Office of Credit Risk Management, to require the Administrator of the Small Business Admin- istration to issue rules relating to environmental obligations of certified development companies, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 27, 2023 Mr. YOUNG (for himself, Ms. KLOBUCHAR, and Mr. BOOKER) introduced the following bill; which was read twice and referred to the Committee on Small Business and Entrepreneurship JULY 25, 2023 Reported by Mr. CARDIN, with an amendment [Strike out all after the enacting clause and insert the part printed in italic] A BILL To amend the Small Business Act to enhance the Office of Credit Risk Management, to require the Administrator of the Small Business Administration to issue rules relat- ing to environmental obligations of certified development companies, 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 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1345 RS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘504 Credit Risk Man- 2 agement Improvement Act of 2023’’. 3 SEC. 2. ENHANCEMENTS TO THE OFFICE OF CREDIT RISK 4 MANAGEMENT. 5 Section 47 of the Small Business Act (15 U.S.C. 6 657t) is amended— 7 (1) by striking subsection (b) and inserting the 8 following: 9 ‘‘(b) DUTIES.—The Office— 10 ‘‘(1) shall be responsible for— 11 ‘‘(A) supervising— 12 ‘‘(i) any lender making loans under 13 section 7(a) (in this section referred to as 14 a ‘7(a) lender’); 15 ‘‘(ii) any Lending Partner or Inter- 16 mediary participant of the Administration 17 in a lending program of the Office of Cap- 18 ital Access of the Administration; 19 ‘‘(iii) any small business lending com- 20 pany or a non-Federally regulated lender 21 without regard to the requirements of sec- 22 tion 23; and 23 ‘‘(iv) any certified development com- 24 pany described under the program estab- 25 lished under title V of the Small Business 26 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1345 RS Investment Act of 1958 (15 U.S.C. 695 et 1 seq.) (referred to in this section as a ‘cer- 2 tified development company’), as provided 3 in subsection (k); and 4 ‘‘(B) conducting file reviews with respect 5 to loan closings under the program established 6 under title V of the Small Business Investment 7 Act of 1958 (15 U.S.C. 695 et seq.), as pro- 8 vided in subsection (j); and 9 ‘‘(2) may— 10 ‘‘(A) take formal and informal enforcement 11 actions against a certified development com- 12 pany, as provided in subsection (l); and 13 ‘‘(B) charge a certified development com- 14 pany a fee, as provided in subsection (m).’’; and 15 (2) by adding at the end the following: 16 ‘‘(j) LOAN CLOSING FILE REVIEWS.—With respect 17 to a loan closing under the program established under title 18 V of the Small Business Investment Act of 1958 (15 19 U.S.C. 695 et seq.), the Office shall be responsible for the 20 following: 21 ‘‘(1) Conducting a complete file review of a ran- 22 dom selection of all loan closings, the number, fre- 23 quency, and conduct of which shall be at the discre- 24 tion of the Office, to ensure program integrity, in- 25 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1345 RS cluding a review of the items listed on the Checklist 1 for Complete File Review contained in the appro- 2 priate form of the Administration. 3 ‘‘(2) Not later than 60 days after the date on 4 which each complete file review conducted under 5 paragraph (1) is completed, preparing a written re- 6 port documenting the results of that review, which 7 the Office shall send to— 8 ‘‘(A) the applicable certified development 9 company; 10 ‘‘(B) the designated attorney that closed 11 the loan for the certified development company; 12 and 13 ‘‘(C) the Commercial Loan Service Center. 14 ‘‘(3) If a complete file review conducted under 15 paragraph (1) reveals a deficiency that could result 16 in a loss to the Administration, requiring the appli- 17 cable certified development company or the des- 18 ignated attorney to promptly correct the deficiency. 19 ‘‘(k) SUPERVISION OF CERTIFIED DEVELOPMENT 20 COMPANIES.—With respect to the supervision of certified 21 development companies— 22 ‘‘(1) an employee of the Office shall— 23 ‘‘(A) be present for, and supervise, the re- 24 view of any such company that is conducted by 25 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1345 RS a contractor of the Office on the premises of 1 the company; and 2 ‘‘(B) supervise the review of any such com- 3 pany that is conducted by a contractor of the 4 Office that is not conducted on the premises of 5 the company; and 6 ‘‘(2) the Administrator shall— 7 ‘‘(A) develop a timeline for the review by 8 the Office of certified development companies 9 and the submission of reports regarding those 10 reviews, under which the Administrator shall— 11 ‘‘(i) submit to a certified development 12 company a written report of any review of 13 the company not later than 90 days after 14 the date on which the review is concluded; 15 or 16 ‘‘(ii) if the Administrator expects to 17 submit the report after the end of the 90- 18 day period described in clause (i), notify 19 the company of the expected date of sub- 20 mission of the report and the reason for 21 the delay; and 22 ‘‘(B) if a response by a certified develop- 23 ment company is requested in a report sub- 24 mitted under subparagraph (A)(i), require the 25 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1345 RS company to submit responses to the Adminis- 1 trator not later than 45 business days after the 2 date on which the company receives the report. 3 ‘‘(l) ENFORCEMENT AUTHORITY AGAINST CER- 4 TIFIED DEVELOPMENT COMPANIES.— 5 ‘‘(1) INFORMAL ENFORCEMENT AUTHORITY.— 6 The Director may take an informal enforcement ac- 7 tion against a certified development company if the 8 Director finds that the company has violated a stat- 9 utory or regulatory requirement or any requirement 10 in a Standard Operating Procedures Manual or Pol- 11 icy Notice relating to a program or function of the 12 Office of Capital Access. 13 ‘‘(2) FORMAL ENFORCEMENT AUTHORITY.— 14 ‘‘(A) IN GENERAL.—With the approval of 15 the Lender Oversight Committee established 16 under section 48, the Director may take a for- 17 mal enforcement action against any certified de- 18 velopment company if the Director finds that 19 the company has violated— 20 ‘‘(i) a statutory or regulatory require- 21 ment, including a requirement relating to 22 the necessary funds for making loans when 23 those funds are not made available to the 24 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1345 RS company from private sources on reason- 1 able terms; or 2 ‘‘(ii) any requirement described in a 3 Standard Operating Procedures Manual or 4 Policy Notice relating to a program or 5 function of the Office of Capital Access. 6 ‘‘(B) ENFORCEMENT ACTIONS.—The deci- 7 sion to take an enforcement action against a 8 certified development company under subpara- 9 graph (A) shall be based on the severity or fre- 10 quency of the violation and may include assess- 11 ing a civil monetary penalty against the com- 12 pany in an amount that is not greater than 13 $250,000. 14 ‘‘(3) FAILURE TO SUBMIT ANNUAL REPORT.— 15 With respect to a certified development company 16 that, as of the date that is 30 days after the date 17 on which the company is required to submit any re- 18 port, fails to submit that report, the Director may— 19 ‘‘(A) suspend the company from partici- 20 pating in the program established under title V 21 of the Small Business Investment Act of 1958 22 (15 U.S.C. 695 et seq.) for a period that is not 23 longer than 30 days; or 24 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1345 RS ‘‘(B) impose a penalty on the company in 1 an amount to be determined by the Director, 2 except that the amount of the penalty shall be 3 not more than $10,000. 4 ‘‘(m) FEE AUTHORITY REGARDING CERTIFIED DE- 5 VELOPMENT COMPANIES.— 6 ‘‘(1) IN GENERAL.—On and after the date that 7 is 1 year after the date of enactment of this sub- 8 section, the Office may collect from each certified 9 development company a fee, the amount of which— 10 ‘‘(A) shall be determined on a graduated 11 scale according to the size of the portfolio of 12 the certified development company with respect 13 to the program carried out under title V of the 14 Small Business Investment Act of 1958 (15 15 U.S.C. 695 et seq.); and 16 ‘‘(B) shall not exceed the amount that is 1 17 basis point with respect to the value of the 18 portfolio described in subparagraph (A). 19 ‘‘(2) PAYMENT.—A certified development com- 20 pany on which a fee is imposed under paragraph (1) 21 shall pay the fee from the servicing fees collected by 22 the development company pursuant to regulation.’’. 23 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6401 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1345 RS SEC. 3. RULES RELATING TO OBLIGATIONS OF CERTIFIED 1 DEVELOPMENT COMPANIES UNDER THE NA- 2 TIONAL ENVIRONMENTAL POLICY ACT. 3 (a) ELIGIBLE CERTIFIED DEVELOPMENT COMPANY 4 DEFINED.—In this section, the term ‘‘eligible certified de- 5 velopment company’’ means a certified development com- 6 pany defined under title V of the Small Business Invest- 7 ment Act of 1958 (15 U.S.C. 695 et seq.) that receives 8 assistance pursuant to that title. 9 (b) REQUIREMENT TO ISSUE RULES.—Not later 10 than 180 days after the date of enactment of this Act, 11 the Administrator of the Small Business Administration 12 shall issue rules to clarify the procedures necessary for an 13 eligible certified development company to comply with the 14 applicable requirements under National Environmental 15 Policy Act of 1969 (42 U.S.C. 4321 et seq.). 16 (c) RULE OF CONSTRUCTION.—Nothing in this sec- 17 tion shall be construed to modify the requirements of the 18 National Environmental Policy Act of 1969 (42 U.S.C. 19 4321 et seq.). 20 SECTION 1. SHORT TITLE. 21 This Act may be cited as the ‘‘504 Credit Risk Manage- 22 ment Improvement Act of 2023’’. 23 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1345 RS SEC. 2. ENHANCEMENTS TO THE OFFICE OF CREDIT RISK 1 MANAGEMENT. 2 Title V of the Small Business Investment Act of 1958 3 (15 U.S.C. 695 et seq.) is amended by adding at the end 4 the following: 5 ‘‘SEC. 511. OFFICE OF CREDIT RISK MANAGEMENT OVER- 6 SIGHT. 7 ‘‘(a) DEFINITIONS.—In this section— 8 ‘‘(1) the term ‘Director’ means the Director of the 9 Office; and 10 ‘‘(2) the term ‘Office’ means the Office of Credit 11 Risk Management established under section 47 of the 12 Small Business Act (15 U.S.C. 657t). 13 ‘‘(b) DUTIES RELATING TO 504 PROGRAM.—The Of- 14 fice— 15 ‘‘(1) shall be responsible for— 16 ‘‘(A) supervising any certified development 17 company, as provided in subsection (d); and 18 ‘‘(B) conducting file reviews with respect to 19 loan closings under the program established 20 under this title, as provided in subsection (c); 21 and 22 ‘‘(2) may— 23 ‘‘(A) take formal and informal enforcement 24 actions against a certified development company, 25 as provided in subsection (e); and 26 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 11 •S 1345 RS ‘‘(B) charge a certified development com- 1 pany a fee, as provided in subsection (f). 2 ‘‘(c) LOAN CLOSING FILE REVIEWS.—With respect to 3 a loan closing under the program established under this 4 title, the Office shall be responsible for the following: 5 ‘‘(1) Conducting a complete file review of a ran- 6 dom selection of all loan closings, the number, fre- 7 quency, and conduct of which shall be at the discre- 8 tion of the Office, to ensure program integrity, includ- 9 ing a review of the items listed on the Checklist for 10 Complete File Review contained in the appropriate 11 form of the Administration. 12 ‘‘(2) Not later than 60 days after the date on 13 which each complete file review conducted under 14 paragraph (1) is completed, preparing a written re- 15 port documenting the results of that review, which the 16 Office shall send to— 17 ‘‘(A) the applicable certified development 18 company; 19 ‘‘(B) the designated attorney that closed the 20 loan for the certified development company; and 21 ‘‘(C) the Commercial Loan Service Center. 22 ‘‘(3) If a complete file review conducted under 23 paragraph (1) reveals a deficiency that could result 24 in a loss to the Administration, requiring the appli- 25 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\S1345.RS S1345 kjohnson on DSK79L0C42PROD with BILLS 12 •S 1345 RS cable certified development company or the designated 1 attorney to promptly correct the deficiency. 2 ‘‘(d) SUPERVISION OF CERTIFIED DEVELOPMENT COM- 3 PANIES.—With respect to the supervision of certified devel- 4 opment companies— 5 ‘‘(1) an employee of the Office shall— 6 ‘‘(A) be present for, and supervise, the re- 7 view of any such company that is conducted by 8 a contractor of the Office on the premises of the 9 company; and 10 ‘‘(B) supervise the review of any such com- 11 pany that is conducted by a contractor of the Of- 12 fice that is not conducted on the premises of the 13 company; and 14 ‘‘(2) the Administrator shall— 15 ‘‘(A) develop a timeline for the review by 16 the Office of certified development companies and 17 the submission of reports regarding those re- 18 views, under which the Administrator shall— 19 ‘‘(i) submit to a certified development 20 company a written report of any review of 21 the company not later than 90 days after 22 the date on which the review is concluded; 23 or 24 VerDate Sep 11 2014 05:21 Jul 26, 2023 Jkt [Text truncated for display. 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