Project Vote Smart

Legislation - Signed (Executive) - Sept. 27, 2010

Legislation - Concurrence Vote Passed (House) - Sept. 23, 2010 (Key vote)

Title: Small Business Lending Fund and Tax Law Amendments

Vote Smart's Synopsis:

Vote concur with Senate amendments pass a bill that establishes the Small Business Lending Fund to fund capital investments to financial institutions to provide loans to small businesses, establishes the Small Business Credit Initiative to fund state capital access programs for small businesses, and expands various tax deductions.

Highlight: -Establishes the Small Business Lending Fund (SBLF) within the Department of Treasury in which the Secretary of the Treasury is authorized to appropriate up to $30 billion for capital investments to the following (Sec. 4103):

-Financial institutions with assets of $1 billion or less, provided that such investment does not exceed 5 percent of risk-weighted assets; and -Financial institutions with assets of more than $1 billion but no more than $10 billion, provided that such investment does not exceed 3 percent of risk-weighted assets.

-Requires the Department of Treasury to purchase preferred stock and other financial instruments from financial institutions to finance capital investments from the the SBLF, and specifies that such preferred stock and other financial instruments shall be repaid within 10 years, or be subject to additional terms as determined by the Secretary, including, but not limited to, that the stock carry the highest dividend or interest rate payable (Sec. 4103). -Requires the funds received in connection with the investments made from the SBLF shall be paid into the General Fund of the Department of Treasury for reduction of the public debt (Sec. 4103). -Requires a financial institution to submit with an application for a capital investment from the SBLF a "small business lending plan" that describes the strategy and operating goals to "address the needs of small businesses in the areas it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate" (Sec. 4103). -Authorizes financial institutions that are community development loan funds to apply to receive capital investments from the SBLF, provided such investment does not exceed 5 percent of total assets (Sec. 4103). -Prohibits financial institutions from receiving capital investments from the SBLF if they are on the Federal Deposit Insurance Corporation's (FDIC) "problem bank list" (current rating of 4 or 5 under the Uniform Financial Institutions Rating System, or other designation as determined by the FDIC), or have been removed from such list in the last 90 days (Sec. 4103). -Requires the Secretary of the Treasury to consider the following when considering applications for capital investments from the SBLF (Sec. 4105):

-Increasing the availability of credit for small businesses; -Providing funding to minority-owned eligible institutions and other institutions that serve small businesses that are owned by minorities, veterans, and women, and that serve low to moderate-income, minority, and other "underserved" or rural communities; -Protecting and increasing American jobs; -Increasing the opportunity for small business development in areas with unemployment rates that exceed the national average; -Ensuring that financial institutions may apply for capital investments without discrimination based on geography; -Providing transparency with respect to the use of funds; -Minimizing the costs to taxpayers; -Promoting and engaging in financial education to would-be borrowers; and -Providing funding to financial institutions that serve small businesses directly affected by the Deepwater Horizon oil spill, particularly states along the Gulf of Mexico.

-Establishes the Small Business Credit Initiative (SBCI) within the Department of Treasury through which the Secretary of the Treasury is required to allocate $1.5 billion to states for capital access programs for small businesses, and specifies that the amount of SBCI funds allocated to states is contingent on the state's employment declines in 2008 and 2009 (Secs. 3003 & 3009). -Requires state capital access programs to meet the following criteria to receive funding from the SBCI (Sec. 3005):

-Provides portfolio insurance for business loans based on a separate loan-loss reserve fund for each financial institution; -Requires insurance premiums to be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund; -Provides for contributions to be made by the state to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and -Provides its portfolio insurance solely for loans that do not exceed $5 million for borrowers that have 500 employees or less at the time the loan is enrolled in the program.

-Requires states to submit with an application for SBCI funding for a capital access program, a report stating how the state plans to use the funds to provide access to capital for small businesses in low to moderate-income, minority, and other "underserved communities," including women and minority owned small businesses (Sec. 3005). -Limits insurance premium charges for loans approved by state capital access programs and funded by the SBCI to a range of 2 percent to 7 percent of the amount of the loan (Sec. 3005). -Expands the income tax exemption for small business stock from 50 percent of any sale or gain such stock to 100 percent for stock acquired after the date of enactment through January 1, 2011 (Sec. 2011). -Authorizes self-employed individuals to deduct their health insurance costs from their tax liability for the 2010 taxable year (Sec. 2042). -Authorizes the Administrator of the SBA to provide open-end extension of credit under the Floor Plan Financing Program to small businesses for the purchase of automobiles, recreational vehicles, boats, and manufactured homes for another 5 years, provided an extension of credit is between $500,000 and $5 million (Sec. 1133). -Expands the participation of the SBA in small business loans (15 USC 636) as follows (Sec. 1111):

-For loans in which the balance of the financing outstanding at the time of disbursement exceeds $150,000, the rate is increased from 75 percent to 90 percent of the balance; and -For loans in which the balance of the financing outstanding at the time of disbursement is less than $150,000, the rate is increased from 85 percent to 90 percent of the balance.

-Increases the maximum amount of loans the SBA is authorized to issue for plant acquisition, construction, conversion, or expansion (15 USC 696) as follows (Sec. 1112):

-For small businesses, the limit is increased from $1.5 million or $2 million, depending on the purpose of the loan, to $5 million; -For small manufacturers, the limit is increased from $4 million to $5.5 million; -For projects that reduce a borrower's energy consumption by at least 10 percent, the limit is increased from $4 million to $5.5 million; and -For projects that generate renewable energy or renewable fuels, the limit is increased from $4 million to $5.5 million.

-Increases the maximum amount of business property ("Section 179 property" - 26 USC 179) that may be deducted from income tax liability from $125,000 (set to go back to $25,000 in 2011) to the following (Sec. 2021):

-$250,000 for 2008-2009; -$500,000 for 2010-2011; and -$25,000 for 2012 and subsequent taxable years.

-Increases the threshold to reduce the aforementioned income tax deduction for business property from the amount by which the property exceeds $500,000 (set to go down to $200,000 in 2011) to the amount which the property exceeds the following (Sec. 2021):

-$800,000 for 2008-2009; -$2 million for 2010-2011; and -$200,000 for 2012 and subsequent taxable years.

-Increases the maximum amount of business startup expenditures that may be deducted from income tax liability from $5,000 to $10,000, and increases the threshold to reduce the deduction from the amount by which the expenditures exceed $50,000 to the amount by which expenditures exceed $60,000 (Sec. 2031).

Legislation - Bill Passed (Senate) - Sept. 16, 2010 (Key vote)

Title: Small Business Lending Fund and Tax Law Amendments

Vote Smart's Synopsis:

Vote to pass a bill that establishes the Small Business Lending Fund to fund capital investments to financial institutions to provide loans to small businesses, establishes the Small Business Credit Initiative to fund state capital access programs for small businesses, and expands various tax deductions.

Highlight: -Establishes the Small Business Lending Fund (SBLF) within the Department of Treasury in which the Secretary of the Treasury is authorized to appropriate up to $30 billion for capital investments to the following (Sec. 4103):

-Financial institutions with assets of $1 billion or less, provided that such investment does not exceed 5 percent of risk-weighted assets; and -Financial institutions with assets of more than $1 billion but no more than $10 billion, provided that such investment does not exceed 3 percent of risk-weighted assets.

-Requires the Department of Treasury to purchase preferred stock and other financial instruments from financial institutions to finance capital investments from the the SBLF, and specifies that such preferred stock and other financial instruments shall be repaid within 10 years, or be subject to additional terms as determined by the Secretary, including, but not limited to, that the stock carry the highest dividend or interest rate payable (Sec. 4103). -Requires the funds received in connection with the investments made from the SBLF shall be paid into the General Fund of the Department of Treasury for reduction of the public debt (Sec. 4103). -Requires a financial institution to submit with an application for a capital investment from the SBLF a "small business lending plan" that describes the strategy and operating goals to "address the needs of small businesses in the areas it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate" (Sec. 4103). -Authorizes financial institutions that are community development loan funds to apply to receive capital investments from the SBLF, provided such investment does not exceed 5 percent of total assets (Sec. 4103). -Prohibits financial institutions from receiving capital investments from the SBLF if they are on the Federal Deposit Insurance Corporation's (FDIC) "problem bank list" (current rating of 4 or 5 under the Uniform Financial Institutions Rating System, or other designation as determined by the FDIC), or have been removed from such list in the last 90 days (Sec. 4103). -Requires the Secretary of the Treasury to consider the following when considering applications for capital investments from the SBLF (Sec. 4105):

-Increasing the availability of credit for small businesses; -Providing funding to minority-owned eligible institutions and other institutions that serve small businesses that are owned by minorities, veterans, and women, and that serve low to moderate-income, minority, and other "underserved" or rural communities; -Protecting and increasing American jobs; -Increasing the opportunity for small business development in areas with unemployment rates that exceed the national average; -Ensuring that financial institutions may apply for capital investments without discrimination based on geography; -Providing transparency with respect to the use of funds; -Minimizing the costs to taxpayers; -Promoting and engaging in financial education to would-be borrowers; and -Providing funding to financial institutions that serve small businesses directly affected by the Deepwater Horizon oil spill, particularly states along the Gulf of Mexico.

-Establishes the Small Business Credit Initiative (SBCI) within the Department of Treasury through which the Secretary of the Treasury is required to allocate $1.5 billion to states for capital access programs for small businesses, and specifies that the amount of SBCI funds allocated to states is contingent on the state's employment declines in 2008 and 2009 (Secs. 3003 & 3009). -Requires state capital access programs to meet the following criteria to receive funding from the SBCI (Sec. 3005):

-Provides portfolio insurance for business loans based on a separate loan-loss reserve fund for each financial institution; -Requires insurance premiums to be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund; -Provides for contributions to be made by the state to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and -Provides its portfolio insurance solely for loans that do not exceed $5 million for borrowers that have 500 employees or less at the time the loan is enrolled in the program.

-Requires states to submit with an application for SBCI funding for a capital access program, a report stating how the state plans to use the funds to provide access to capital for small businesses in low to moderate-income, minority, and other "underserved communities," including women and minority owned small businesses (Sec. 3005). -Limits insurance premium charges for loans approved by state capital access programs and funded by the SBCI to a range of 2 percent to 7 percent of the amount of the loan (Sec. 3005). -Expands the income tax exemption for small business stock from 50 percent of any sale or gain such stock to 100 percent for stock acquired after the date of enactment through January 1, 2011 (Sec. 2011). -Authorizes self-employed individuals to deduct their health insurance costs from their tax liability for the 2010 taxable year (Sec. 2042). -Authorizes the Administrator of the SBA to provide open-end extension of credit under the Floor Plan Financing Program to small businesses for the purchase of automobiles, recreational vehicles, boats, and manufactured homes for another 5 years, provided an extension of credit is between $500,000 and $5 million (Sec. 1133). -Expands the participation of the SBA in small business loans (15 USC 636) as follows (Sec. 1111):

-For loans in which the balance of the financing outstanding at the time of disbursement exceeds $150,000, the rate is increased from 75 percent to 90 percent of the balance; and -For loans in which the balance of the financing outstanding at the time of disbursement is less than $150,000, the rate is increased from 85 percent to 90 percent of the balance.

-Increases the maximum amount of loans the SBA is authorized to issue for plant acquisition, construction, conversion, or expansion (15 USC 696) as follows (Sec. 1112):

-For small businesses, the limit is increased from $1.5 million or $2 million, depending on the purpose of the loan, to $5 million; -For small manufacturers, the limit is increased from $4 million to $5.5 million; -For projects that reduce a borrower's energy consumption by at least 10 percent, the limit is increased from $4 million to $5.5 million; and -For projects that generate renewable energy or renewable fuels, the limit is increased from $4 million to $5.5 million.

-Increases the maximum amount of business property ("Section 179 property" - 26 USC 179) that may be deducted from income tax liability from $125,000 (set to go back to $25,000 in 2011) to the following (Sec. 2021):

-$250,000 for 2008-2009; -$500,000 for 2010-2011; and -$25,000 for 2012 and subsequent taxable years.

-Increases the threshold to reduce the aforementioned income tax deduction for business property from the amount by which the property exceeds $500,000 (set to go down to $200,000 in 2011) to the amount which the property exceeds the following (Sec. 2021):

-$800,000 for 2008-2009; -$2 million for 2010-2011; and -$200,000 for 2012 and subsequent taxable years.

-Increases the maximum amount of business startup expenditures that may be deducted from income tax liability from $5,000 to $10,000, and increases the threshold to reduce the deduction from the amount by which the expenditures exceed $50,000 to the amount by which expenditures exceed $60,000 (Sec. 2031).

Legislation - Bill Passed (House) - June 17, 2010 (Key vote)

Title: Small Business Lending Fund and Tax Law Amendments

Vote Smart's Synopsis:

Vote to pass a bill that establishes the Small Business Lending Fund to fund capital investments to financial institutions to provide loans to small businesses, establishes the Small Business Credit Initiative to fund state credit support programs for small businesses, and establishes the Early Stage Investment Program to fund equity investment financing to support early-stage businesses.

Highlight: -Establishes the Small Business Lending Fund (SBLF) within the Department of Treasury in which the Secretary of the Treasury is authorized to appropriate up to $30 billion in capital investments to the following (Sec. 103):

-Financial institutions with assets of $1 billion or less, provided that such investment does not exceed 5 percent of risk-weighted assets; and -Financial institutions with assets of more than $1 billion but less than $10 billion, provided that such investment does not exceed 3 percent of risk-weighted assets.

-Requires the Department of Treasury to purchase preferred stock and other financial instruments from financial institutions to finance capital investments from the the SBLF, and specifies that such preferred stock and other financial instruments shall be repaid within 10 years, or be subject to additional terms as determined by the Secretary, including, but not limited to, that the stock carry the highest dividend or interest rate payable (Sec. 103). -Specifies that the funds received in connection with the investments made from the SBLF shall be paid into the General Fund of the Department of Treasury for reduction of the public debt (Sec. 103). -Requires financial institutions to submit with an application for a capital investment from the SBLF a "small business lending plan" that describes the strategy and operating goals to "address the needs of small businesses in the areas it serves, as well as a plan to provide linguistically and culturally appropriate outreach, where appropriate" (Sec. 103). -Authorizes financial institutions that are community development loan funds to apply to receive capital investments from the SBLF, provided such investment does not exceed 10 percent of total assets (Sec. 103). -Prohibits financial institutions from applying to receive capital investments from the SBLF if they are on the Federal Deposit Insurance Corporation's (FDIC) "problem bank list" (current rating of 4 or 5 under the Uniform Financial Institutions Rating System, or other designation as determined by the FDIC), or have been removed from such list in the last 90 days (Sec. 103). -Requires the Secretary of the Treasury to consider the following when considering applications for capital investments from the SBLF (Sec. 105):

-Increasing the availability of credit for small businesses; -Providing funding to minority-owned eligible institutions and other institutions that serve small businesses that are owned by minorities, veterans, and women, and that serve low to moderate-income, minority, and other "undeserved" or rural communities; -Protecting and increasing American jobs; -Increasing the opportunity for small business development in areas with unemployment rates that exceed the national average; -Ensuring that financial institutions may apply for capital investments without discrimination based on geography; -Providing transparency with respect to the use of funds; -Minimizing the costs to taxpayers; -Promoting and engaging in financial education to would-be borrowers; and -Providing funding to financial institutions that serve small businesses directly affected by the Deepwater Horizon oil spill, particularly states along the Gulf of Mexico.

-Establishes the Small Business Credit Initiative (SBCI) within the Department of Treasury in which the Secretary of the Treasury is required to allocated $2 billion to States for credit support programs for small businesses, and specifies that the amount of SBCI funds allocated to states is contingent on the state's employment declines in 2008 and 2009 (Secs. 203 & 209). -Requires state capital access programs to meet the following criteria to receive funding from the SBCI (Sec. 205):

-Provides portfolio insurance for business loans based on a separate loan-loss reserve fund for each financial; -Requires insurance premiums be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund; -Provides for contributions to be made by the state to the reserve fund in amounts at least equal to the sum of the amount of the insurance premium charges paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and -Provides its portfolio insurance solely for loans that do not exceed $5 million for borrowers that have 500 employees or less at the time the loan is enrolled in the program.

-Requires states to submit with an application for SBCI funding for a capital access program, a report stating how the state plans to use the funds to provide access to capital for small businesses in low to moderate-income, minority, and other "underserved communities," including women and minority owned small business (Sec. 205). -Limits insurance premium charges for loans approved by state capital access programs and funded by the SBCI to a range of 2 percent to 7 percent of the amount of the loan (Sec. 205). -Requires the Administrator of the SBA to establish an Early Stage Investment Program (ESIP) to provide up to $1 billion in equity investment financing to support early-stage businesses that have not generated annual sales revenues exceeding $15 million in any of the previous 3 years (Sec. 302). -Requires the Administrator of the Small Business Administration (SBA) to consider the following when considering applications for equity investment financing under the ESIP (Sec. 302):

-The likelihood that the applicant will meet the goals of the business plan; -The likelihood that the investments will create or preserve jobs, both directly and indirectly; -The character, fitness, experience, and background of the management of the applicant; -The extent to which the applicant will concentrate investment activities on early-stage small businesses; -The likelihood that the applicant will achieve profitability; -The experience of the management of the applicant with respect to establishing a profitable investment track record; and -The extent to which the applicant will concentrate investment activities on small business concerns in targeted industries.

-Defines "targeted industries" as any of the following business sectors (Sec. 302):

-Agricultural technology; -Energy technology; -Environmental technology; -Life science; -Information technology; -Digital media; -Clean technology; -Defense technology; and -Photonics technology.

-Authorizes the Administrator of the SBA to approve equity financing for an investment company, provided that such financing does not exceed $100 million and the investment company makes all of the investments in small business concerns, of which 50 percent shall be early-stage small businesses (Sec. 302). -Expands the income tax exemption for small business stock from 50 percent of any sale or gain such stock to 100 percent for stock acquired after March 15, 2010 through January 1, 2012 (Sec. 501).

Legislation - Introduced (House) - May 13, 2010

Title: Small Business Lending Fund and Tax Law Amendments