American Innovation and Manufacturing Act

I 118TH CONGRESS 1ST SESSION H. R. 580 To establish a small business and domestic production recovery investment facility, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JANUARY 26, 2023 Ms. TENNEY introduced the following bill; which was referred to the Committee on Small Business 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 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 580 IH (1) in section 302(a)(1) (15 U.S.C. 1 682(a)(1))— 2 (A) in subparagraph (A), by striking ‘‘or’’ 3 at the end; 4 (B) in subparagraph (B), by striking the 5 period at the end and inserting ‘‘; or’’; and 6 (C) by adding at the end the following: 7 ‘‘(C) $20,000,000, adjusted every 5 years 8 for inflation, with respect to each licensee au- 9 thorized or seeking authority to sell bonds to 10 Administration as a participating investment 11 company under section 321.’’; and 12 (2) by adding at the end the following: 13 ‘‘SEC. 321. SMALL BUSINESS AND DOMESTIC PRODUCTION 14 RECOVERY INVESTMENT FACILITY. 15 ‘‘(a) DEFINITIONS.—In this section: 16 ‘‘(1) ELIGIBLE SMALL BUSINESS CONCERN.— 17 The term ‘eligible small business concern’— 18 ‘‘(A) means a small business concern that 19 is a manufacturing business that is assigned a 20 North American Industry Classification System 21 code beginning with 31, 32, or 33 at the time 22 at which the small business concern receives an 23 investment from a participating investment 24 company under the facility; and 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 580 IH ‘‘(B) does not include an entity described 1 in section 7(a)(37)(A)(iv)(III) of the Small 2 Business Act (15 U.S.C. 3 636(a)(37)(A)(iv)(III)). 4 ‘‘(2) FACILITY.—The term ‘facility’ means the 5 facility established under subsection (b). 6 ‘‘(3) FUND.—The term ‘Fund’ means the fund 7 established under subsection (h). 8 ‘‘(4) PARTICIPATING INVESTMENT COMPANY.— 9 The term ‘participating investment company’ means 10 a small business investment company approved 11 under subsection (d) to participate in the facility. 12 ‘‘(5) PROTE´GE´ INVESTMENT COMPANY.—The 13 term ‘prote´ge´ investment company’ means a small 14 business investment company that— 15 ‘‘(A) is majority managed by new, inexperi- 16 enced, or otherwise underrepresented fund man- 17 agers; and 18 ‘‘(B) elects and is selected by the Adminis- 19 tration to participate in the pathway-prote´ge´ 20 program under subsection (g). 21 ‘‘(6) SMALL BUSINESS CONCERN.—The term 22 ‘small business concern’ has the meaning given the 23 term in section 3(a) of the Small Business Act (15 24 U.S.C. 632(a)). 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 580 IH ‘‘(b) ESTABLISHMENT.— 1 ‘‘(1) FACILITY.—The Administrator shall estab- 2 lish and carry out a facility to increase resiliency in 3 the manufacturing supply chain of eligible small 4 business concerns by providing financial assistance 5 to participating investment companies that facilitate 6 equity financings to eligible small business concerns 7 in accordance with this section. 8 ‘‘(2) ADMINISTRATION OF FACILITY.—The fa- 9 cility shall be administered by the Administrator act- 10 ing through the Associate Administrator described in 11 section 201. 12 ‘‘(c) APPLICATIONS.— 13 ‘‘(1) IN GENERAL.—Any small business invest- 14 ment company may submit to the Administrator an 15 application to participate in the facility. 16 ‘‘(2) REQUIREMENTS FOR APPLICATION.—An 17 application to participate in the facility shall include 18 the following: 19 ‘‘(A) A business plan describing how the 20 applicant intends to make successful equity in- 21 vestments in eligible small business concerns. 22 ‘‘(B) Information regarding the relevant 23 investment qualifications and backgrounds of 24 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 580 IH the individuals responsible for the management 1 of the applicant. 2 ‘‘(C) A description of the extent to which 3 the applicant meets the selection criteria under 4 subsection (d)(2). 5 ‘‘(3) EXCEPTIONS TO APPLICATION FOR NEW 6 LICENSEES.—Not later than 90 days after the date 7 of enactment of this section, the Administrator shall 8 reduce requirements for applicants applying to oper- 9 ate as a participating investment company under 10 this section in order to encourage the participation 11 of new small business investment companies in the 12 facility under this section, which may include the re- 13 quirements established under part 107 of title 13, 14 Code of Federal Regulations, or any successor regu- 15 lation, relating to— 16 ‘‘(A) the approval of initial management 17 expenses; 18 ‘‘(B) the management ownership diversity 19 requirement; 20 ‘‘(C) the disclosure of general compen- 21 satory practices and fee structures; or 22 ‘‘(D) any other requirement that the Ad- 23 ministrator determines to be an obstacle to 24 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 580 IH achieving the purposes described in this para- 1 graph. 2 ‘‘(d) SELECTION OF PARTICIPATING INVESTMENT 3 COMPANIES.— 4 ‘‘(1) DETERMINATION.— 5 ‘‘(A) IN GENERAL.—Except as provided in 6 paragraph (3), not later than 60 days after the 7 date on which the Administrator receives an ap- 8 plication under subsection (c), the Adminis- 9 trator shall— 10 ‘‘(i) make a final determination to ap- 11 prove or disapprove such applicant to par- 12 ticipate in the facility; and 13 ‘‘(ii) transmit the determination to the 14 applicant in writing. 15 ‘‘(B) COMMITMENT AMOUNT.—Except as 16 provided in paragraph (3), at the time of ap- 17 proval of an applicant, the Administrator shall 18 make a determination of the amount of the 19 commitment that may be awarded to the appli- 20 cant under this section. 21 ‘‘(2) SELECTION CRITERIA.—In making a de- 22 termination under paragraph (1), the Administrator 23 shall consider— 24 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 580 IH ‘‘(A) the probability that the investment 1 strategy of the applicant will successfully repay 2 any financial assistance provided by the Admin- 3 istration, including the probability of a return 4 significantly in excess thereof; 5 ‘‘(B) the probability that the investments 6 made by the applicant will— 7 ‘‘(i) provide capital to eligible small 8 business concerns; or 9 ‘‘(ii) create or preserve jobs in the 10 United States; 11 ‘‘(C) the probability that the applicant will 12 meet the objectives in the business plan of the 13 applicant, including the financial goals, and, if 14 applicable, the pathway-prote´ge´ program in ac- 15 cordance with subsection (g); and 16 ‘‘(D) the probability that the applicant will 17 assist eligible small business concerns in achiev- 18 ing profitability. 19 ‘‘(3) APPROVAL OF PARTICIPATING INVEST- 20 MENT COMPANIES.— 21 ‘‘(A) PROVISIONAL APPROVAL.— 22 ‘‘(i) IN GENERAL.—Notwithstanding 23 paragraph (1), with respect to an applica- 24 tion submitted by an applicant to operate 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 580 IH as a participating investment company 1 under this section, the Administrator may 2 provide provisional approval for the appli- 3 cant in lieu of a final determination of ap- 4 proval and determination of the amount of 5 the commitment under that paragraph. 6 ‘‘(ii) PURPOSE.—The purpose of a 7 provisional approval under clause (i) is 8 to— 9 ‘‘(I) encourage applications from 10 investment companies with an invest- 11 ment mandate from the committed 12 private market capital of the invest- 13 ment company that does not conform 14 to the requirements described in this 15 section at the time of application; 16 ‘‘(II) allow the applicant to more 17 effectively raise capital commitments 18 in the private markets by referencing 19 the intent of the Administrator to 20 award the applicant a commitment; 21 and 22 ‘‘(III) allow the applicant to more 23 precisely request the desired amount 24 of commitment pending the securing 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 580 IH of capital from private market inves- 1 tors. 2 ‘‘(iii) LIMIT ON PERIOD OF THE 3 TIME.—The period between a provisional 4 approval under clause (i) and the final de- 5 termination of approval under paragraph 6 (1) shall not exceed 12 months. 7 ‘‘(e) COMMITMENTS AND SBIC BONDS.— 8 ‘‘(1) IN GENERAL.—The Administrator may, 9 out of amounts available in the Fund, purchase or 10 commit to purchase from a participating investment 11 company 1 or more accruing bonds that include eq- 12 uity features as described in this subsection. 13 ‘‘(2) BOND TERMS.—A bond purchased by the 14 Administrator from a participating investment com- 15 pany under this subsection shall have the following 16 terms and conditions: 17 ‘‘(A) TERM AND INTEREST.— 18 ‘‘(i) IN GENERAL.—The bond shall be 19 issued for a term of not less than 15 years 20 and shall bear interest at a rate deter- 21 mined by the Administrator of not more 22 than 2 percent. 23 ‘‘(ii) ACCRUAL OF INTEREST.—Inter- 24 est on the bond shall accrue and shall be 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 580 IH payable in accordance with subparagraph 1 (D). 2 ‘‘(iii) PREPAYMENT.—The bond shall 3 be prepayable without penalty after the 4 end of the 1-year period beginning on the 5 date on which the bond was purchased. 6 ‘‘(B) PROFITS.— 7 ‘‘(i) IN GENERAL.—The Administra- 8 tion shall be entitled to receive a share of 9 the profits net of any profit sharing per- 10 formance compensation of the participating 11 investment company equal to the quotient 12 obtained by dividing— 13 ‘‘(I) one-third of the commitment 14 that the participating investment com- 15 pany is approved for under subsection 16 (d); by 17 ‘‘(II) the commitment approved 18 under subsection (d) plus the regu- 19 latory capital of the participating in- 20 vestment company at the time of ap- 21 proval under that subsection. 22 ‘‘(ii) DETERMINATION OF PERCENT- 23 AGE.—The share to which the Administra- 24 tion is entitled under clause (i)— 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 580 IH ‘‘(I) shall be determined at the 1 time of approval under subsection (d); 2 and 3 ‘‘(II) without the approval of the 4 Administration, shall not be revised, 5 including to reflect subsequent dis- 6 tributions of profits, returns of cap- 7 ital, or repayments of bonds, or other- 8 wise. 9 ‘‘(C) PROFIT SHARING PERFORMANCE 10 COMPENSATION.— 11 ‘‘(i) RECEIPT BY ADMINISTRATION.— 12 The Administration shall receive a share of 13 profits of not more than 2 percent, which 14 shall be deposited into the Fund and be 15 available to make commitments under this 16 subsection. 17 ‘‘(ii) RECEIPT BY MANAGERS.—The 18 managers of the participating investment 19 company may receive a maximum profit 20 sharing performance compensation of 25 21 percent minus the share of profits paid to 22 the Administration under clause (i). 23 ‘‘(D) PROHIBITION ON DISTRIBUTIONS.— 24 No distributions on capital, including profit dis- 25 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 580 IH tributions, shall be made by the participating 1 investment company to the investors or man- 2 agers of the participating investment company 3 until the Administration has received payment 4 of all accrued interest on the bond committed 5 under this section. 6 ‘‘(E) REPAYMENT OF PRINCIPAL.—Except 7 as described in subparagraph (F), repayments 8 of principal of the bond of a participating in- 9 vestment company shall be— 10 ‘‘(i) made at the same time as returns 11 of private capital; and 12 ‘‘(ii) in amounts equal to the pro rata 13 share of the Administration of the total 14 amount being repaid or returned at such 15 time. 16 ‘‘(F) LIQUIDATION OR DEFAULT.—Upon 17 any liquidation event or default, as defined by 18 the Administration, any unpaid principal or ac- 19 crued interest on the bond shall— 20 ‘‘(i) have a priority over all equity of 21 the participating investment company; and 22 ‘‘(ii) be paid before any return of eq- 23 uity or any other distributions to the inves- 24 VerDate Sep 11 2014 00:48 Feb 10, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H580.IH H580 pbinns on DSKJLVW7X2PROD with $$_JOB 13 •HR 580 IH tors or managers of the participating in- 1 vestment company. 2 ‘‘(3) AMOUNT OF COMMITMENTS AND PUR- 3 CHASES.— 4 ‘‘(A) MAXIMUM AMOUNT.—The maximum 5 amount of outstanding bonds and commitments 6 to purchase bonds for any participating invest- 7 ment company under the facility shall be the 8 lesser of— 9 ‘‘(i) twice the amount of the regu- 10 latory capital of the participating invest- 11 ment company; or 12 ‘‘(ii) $200,000,000. 13 ‘‘(4) COMMITMENT PROCESS.—Commitments by 14 the Administration to purchase bonds under the fa- 15 cility shall remain available to be sold by a partici- 16 pating investment company until the end of the 17 fourth fiscal year following the year in which the 18 commitment is made, subject to review and approval 19 by the Administration based on regulatory compli- 20 ance, financial status, change in management, devi- 21 ation from business plan, and such other limitations 22 as may be determined by the Administration by reg- 23 ulation or otherwise. 24 ‘‘(5) COMMITMENT CONDITIONS.— 25 VerD [Text truncated for display. 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