§ 662. — Definitions.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 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 sections 20, 1014.
