
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC662]

 
                      TITLE 15--COMMERCE AND TRADE
 
             CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
 
                    SUBCHAPTER I--GENERAL PROVISIONS
 
Sec. 662. Definitions

    As used in this chapter--
        (1) the term ``Administration'' means the Small Business 
    Administration;
        (2) the term ``Administrator'' means the Administrator of the 
    Small Business Administration;
        (3) the terms ``small business investment company'', 
    ``company'', and ``licensee'' mean a company approved by the 
    Administration to operate under the provisions of this chapter and 
    issued a license as provided in section 681 of this title;
        (4) the term ``State'' includes the several States, the 
    territories and possessions of the United States, the Commonwealth 
    of Puerto Rico, and the District of Columbia;
        (5) the term ``small-business concern'' shall have the same 
    meaning as in the Small Business Act [15 U.S.C. 631 et seq.], except 
    that, for purposes of this chapter--
            (A) an investment by a venture capital firm, investment 
        company (including a small business investment company) employee 
        welfare benefit plan or pension plan, or trust, foundation, or 
        endowment that is exempt from Federal income taxation--
                (i) shall not cause a business concern to be deemed not 
            independently owned and operated regardless of the 
            allocation of control during the investment period under any 
            investment agreement between the business concern and the 
            entity making the investment;
                (ii) shall be disregarded in determining whether a 
            business concern satisfies size standards established 
            pursuant to section 3(a)(2) of the Small Business Act [15 
            U.S.C. 632(a)(2)]; and
                (iii) shall be disregarded in determining whether a 
            small business concern is a smaller enterprise; and

            (B) in determining whether a business concern satisfies net 
        income standards established pursuant to section 3(a)(2) of the 
        Small Business Act [15 U.S.C. 632(a)(2)], if the business 
        concern is not required by law to pay Federal income taxes at 
        the enterprise level, but is required to pass income through to 
        the shareholders, partners, beneficiaries, or other equitable 
        owners of the business concern, the net income of the business 
        concern shall be determined by allowing a deduction in an amount 
        equal to the sum of--
                (i) if the business concern is not required by law to 
            pay State (and local, if any) income taxes at the enterprise 
            level, the net income (determined without regard to this 
            subparagraph), multiplied by the marginal State income tax 
            rate (or by the combined State and local income tax rates, 
            as applicable) that would have applied if the business 
            concern were a corporation; and
                (ii) the net income (so determined) less any deduction 
            for State (and local) income taxes calculated under clause 
            (i), multiplied by the marginal Federal income tax rate that 
            would have applied if the business concern were a 
            corporation;

        (6) the term ``development companies'' means enterprises 
    incorporated under State law with the authority to promote and 
    assist the growth and development of small-business concerns in the 
    areas covered by their operations;
        (7) the term ``license'' means a license issued by the 
    Administration as provided in section 681 of this title;
        (8) the term ``articles'' means articles of incorporation for an 
    incorporated body and means the functional equivalent or other 
    similar documents specified by the Administrator for other business 
    entities;
        (9) the term ``private capital''--
            (A) means the sum of--
                (i) the paid-in capital and paid-in surplus of a 
            corporate licensee, the contributed capital of the partners 
            of a partnership licensee, or the equity investment of the 
            members of a limited liability company licensee; and
                (ii) unfunded binding commitments, from investors that 
            meet criteria established by the Administrator, to 
            contribute capital to the licensee: Provided, That such 
            unfunded commitments may be counted as private capital for 
            purposes of approval by the Administrator of any request for 
            leverage, but leverage shall not be funded based on such 
            commitments; and

            (B) does not include any--
                (i) funds borrowed by a licensee from any source;
                (ii) funds obtained through the issuance of leverage; or
                (iii) funds obtained directly or indirectly from any 
            Federal, State, or local government, or any government 
            agency or instrumentality, except for--
                    (I) funds obtained from the business revenues 
                (excluding any governmental appropriation) of any 
                federally chartered or government-sponsored corporation 
                established prior to October 1, 1987;
                    (II) funds invested by an employee welfare benefit 
                plan or pension plan; and
                    (III) any qualified nonprivate funds (if the 
                investors of the qualified nonprivate funds do not 
                control, directly or indirectly, the management, board 
                of directors, general partners, or members of the 
                licensee);

        (10) the term ``leverage'' includes--
            (A) debentures purchased or guaranteed by the 
        Administration;
            (B) participating securities purchased or guaranteed by the 
        Administration; and
            (C) preferred securities outstanding as of October 1, 1995;

        (11) the term ``third party debt'' means any indebtedness for 
    borrowed money, other than indebtedness owed to the Administration;
        (12) the term ``smaller enterprise'' means any small business 
    concern that, together with its affiliates--
            (A) has--
                (i) a net financial worth of not more than $6,000,000, 
            as of the date on which assistance is provided under this 
            chapter to that business concern; and
                (ii) an average net income for the 2-year period 
            preceding the date on which assistance is provided under 
            this chapter to that business concern, of not more than 
            $2,000,000, after Federal income taxes (excluding any 
            carryover losses) except that, for purposes of this clause, 
            if the business concern is not required by law to pay 
            Federal income taxes at the enterprise level, but is 
            required to pass income through to the shareholders, 
            partners, beneficiaries, or other equitable owners of the 
            business concern, the net income of the business concern 
            shall be determined by allowing a deduction in an amount 
            equal to the sum of--
                    (I) if the business concern is not required by law 
                to pay State (and local, if any) income taxes at the 
                enterprise level, the net income (determined without 
                regard to this clause), multiplied by the marginal State 
                income tax rate (or by the combined State and local 
                income tax rates, as applicable) that would have applied 
                if the business concern were a corporation; and
                    (II) the net income (so determined) less any 
                deduction for State (and local) income taxes calculated 
                under subclause (I), multiplied by the marginal Federal 
                income tax rate that would have applied if the business 
                concern were a corporation; or

            (B) satisfies the standard industrial classification size 
        standards established by the Administration for the industry in 
        which the small business concern is primarily engaged;

        (13) the term ``qualified nonprivate funds'' means any--
            (A) funds directly or indirectly invested in any applicant 
        or licensee on or before August 16, 1982, by any Federal agency, 
        other than the Administration, under a provision of law 
        explicitly mandating the inclusion of those funds in the 
        definition of the term ``private capital'';
            (B) funds directly or indirectly invested in any applicant 
        or licensee by any Federal agency under a provision of law 
        enacted after September 4, 1992, explicitly mandating the 
        inclusion of those funds in the definition of the term ``private 
        capital''; and
            (C) funds invested in any applicant or licensee by one or 
        more State or local government entities (including any guarantee 
        extended by those entities) in an aggregate amount that does not 
        exceed 33 percent of the private capital of the applicant or 
        licensee;

        (14) the terms ``employee welfare benefit plan'' and ``pension 
    plan'' have the same meanings as in section 3 of the Employee 
    Retirement Income Security Act of 1974 [29 U.S.C. 1002], and are 
    intended to include--
            (A) public and private pension or retirement plans subject 
        to such Act [29 U.S.C. 1001 et seq.]; and
            (B) similar plans not covered by such Act that have been 
        established and that are maintained by the Federal Government or 
        any State or political subdivision, or any agency or 
        instrumentality thereof, for the benefit of employees;

        (15) the term ``member'' means, with respect to a licensee that 
    is a limited liability company, a holder of an ownership interest or 
    a person otherwise admitted to membership in the limited liability 
    company;
        (16) the term ``limited liability company'' means a business 
    entity that is organized and operating in accordance with a State 
    limited liability company statute approved by the Administration; 
    and
        (17) the term ``long term'', when used in connection with equity 
    capital or loan funds invested in any small business concern or 
    smaller enterprise, means any period of time not less than 1 year.

(Pub. L. 85-699, title I, Sec. 103, Aug. 21, 1958, 72 Stat. 690; Pub. L. 
86-502, Sec. 3, June 11, 1960, 74 Stat. 196; Pub. L. 87-341, Sec. 2, 
Oct. 3, 1961, 75 Stat. 752; Pub. L. 92-595, Sec. 2(a), Oct. 27, 1972, 86 
Stat. 1314; Pub. L. 94-305, title I, Sec. 106(a), June 4, 1976, 90 Stat. 
666; Pub. L. 102-366, title IV, Sec. 410, Sept. 4, 1992, 106 Stat. 1017; 
Pub. L. 104-208, div. D, title II, Sec. 208(a), Sept. 30, 1996, 110 
Stat. 3009-739; Pub. L. 105-135, title II, Sec. 213, Dec. 2, 1997, 111 
Stat. 2601; Pub. L. 106-9, Sec. 2(c), Apr. 5, 1999, 113 Stat. 17; Pub. 
L. 106-554, Sec. 1(a)(9) [title IV, Sec. 402], Dec. 21, 2000, 114 Stat. 
2763, 2763A-690.)

                       References in Text

    For definition of ``this chapter'', referred to in text, see 
References in Text note set out under section 661 of this title.
    The Small Business Act, referred to in par. (5), is Pub. L. 85-536, 
July 18, 1958, 72 Stat. 384, as amended, which is classified to chapter 
14A (Sec. 631 et seq.) of this title. For complete classification of 
this Act to the Code, see Short Title note set out under section 631 of 
this title and Tables. The term ``small-business concern'' is defined in 
section 632 of this title.
    The Employee Retirement Income Security Act of 1974, referred to in 
par. (14), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829, as amended, 
which is classified principally to chapter 18 (Sec. 1001 et seq.) of 
Title 29, Labor. For complete classification of this Act to the Code, 
see Short Title note set out under section 1001 of Title 29 and Tables.


                               Amendments

    2000--Par. (5)(A)(i). Pub. L. 106-554, Sec. 1(a)(9) [title IV, 
Sec. 402(a)], inserted before semicolon at end ``regardless of the 
allocation of control during the investment period under any investment 
agreement between the business concern and the entity making the 
investment''.
    Par. (17). Pub. L. 106-554, Sec. 1(a)(9) [title IV, Sec. 402(b)], 
added par. (17).
    1999--Par. (5). Pub. L. 106-9, Sec. 2(c)(1), designated existing 
provisions after ``for purposes of this chapter'' as subpar. (A), 
redesignated former subpars. (A) to (C) as cls. (i) to (iii), 
respectively, and added subpar. (B).
    Par. (12)(A)(ii). Pub. L. 106-9, Sec. 2(c)(2), inserted before ``; 
or'': ``except that, for purposes of this clause, if the business 
concern is not required by law to pay Federal income taxes at the 
enterprise level, but is required to pass income through to the 
shareholders, partners, beneficiaries, or other equitable owners of the 
business concern, the net income of the business concern shall be 
determined by allowing a deduction in an amount equal to the sum of--
        ``(I) if the business concern is not required by law to pay 
    State (and local, if any) income taxes at the enterprise level, the 
    net income (determined without regard to this clause), multiplied by 
    the marginal State income tax rate (or by the combined State and 
    local income tax rates, as applicable) that would have applied if 
    the business concern were a corporation; and
        ``(II) the net income (so determined) less any deduction for 
    State (and local) income taxes calculated under subclause (I), 
    multiplied by the marginal Federal income tax rate that would have 
    applied if the business concern were a corporation''.
    1997--Par. (9)(B)(iii). Pub. L. 105-135 added subcl. (I) and 
redesignated former subcls. (I) and (II) as (II) and (III), 
respectively.
    1996--Par. (5). Pub. L. 104-208, Sec. 208(a)(1), inserted before 
semicolon at end ``, except that, for purposes of this chapter, an 
investment by a venture capital firm, investment company (including a 
small business investment company) employee welfare benefit plan or 
pension plan, or trust, foundation, or endowment that is exempt from 
Federal income taxation--
        ``(A) shall not cause a business concern to be deemed not 
    independently owned and operated;
        ``(B) shall be disregarded in determining whether a business 
    concern satisfies size standards established pursuant to section 
    3(a)(2) of the Small Business Act; and
        ``(C) shall be disregarded in determining whether a small 
    business concern is a smaller enterprise''.
    Par. (9). Pub. L. 104-208, Sec. 208(a)(2), amended par. (9) 
generally. Prior to amendment, par. (9) read as follows: 
``notwithstanding any other provision of law, the term `private capital' 
means the private paid-in capital and paid-in surplus of a corporate 
licensee, or the private partnership capital of an unincorporate 
licensee, inclusive of (A) any funds invested in the licensee by a 
public or private pension fund, (B) any funds invested in the licensee 
by State or local government entities, to the extent that such 
investment does not exceed 33 percent of a licensee's total private 
capital and otherwise meets criteria established by the Administration, 
and (C) unfunded commitments from institutional investors that meet 
criteria established by the Administration, but it excludes any funds 
which are borrowed by the licensee from any source or which are obtained 
or derived, directly or indirectly, from any Federal source, including 
the Administration: Provided, That no unfunded commitment from an 
institutional investor may be used for the purpose of meeting the 
minimum amount of private capital required by this chapter or as the 
basis for the Administration to issue obligations to provide financing; 
and''.
    Pars. (10) to (16). Pub. L. 104-208, Sec. 208(a)(3), added pars. 
(10) to (16) and struck out former par. (10) which read as follows: 
``the term `leverage' includes debentures purchased or guaranteed by the 
Administration, participating securities purchased or guaranteed by the 
Administration, or preferred securities issued by companies licensed 
under section 681(d) of this title and which have been purchased by the 
Administration.''
    1992--Pars. (9), (10). Pub. L. 102-366 added pars. (9) and (10).
    1976--Par. (8). Pub. L. 94-305 added par. (8).
    1972--Par. (3). Pub. L. 92-595 substituted ``section 681'' for 
``section 681(c)''.
    Par. (7). Pub. L. 92-595 substituted ``section 681'' for ``section 
681(c)''.
    1961--Par. (3). Pub. L. 87-341, Sec. 2(1), inserted ``licensee'' and 
substituted ``company approved by the Administration to operate under 
the provisions of this chapter and issued a license as provided in 
section 681(c) of this title'' for ``small business investment company 
organized as provided in subchapter III of this chapter, including 
(except for purposes of sections 681 and 687(f) of this title) a State-
chartered investment company which has obtained the approval of the 
Administrator to operate under the provisions of this chapter as 
provided in section 688 of this title and a company converted into a 
small business investment company under section 691 of this title''.
    Par. (7). Pub. L. 87-341, Sec. 2(2), added par. (7).
    1960--Par. (4). Pub. L. 86-502 substituted definition of ``State'' 
for definition of ``United States''.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section 3 
of Pub. L. 105-135, set out as a note under section 631 of this title.


 Effect of Small Business Equity Enhancement Act of 1992 on Securities 
                                  Laws

    Nothing in amendment by Pub. L. 102-366 to be construed to affect 
applicability of securities laws or to otherwise supersede or limit 
jurisdiction of Securities and Exchange Commission, see section 418 of 
Pub. L. 102-366, set out as a note under section 661 of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 683 of this title; title 12 
section 635; title 18 section 20.
