[Federal Register Volume 82, Number 16 (Thursday, January 26, 2017)]
[Rules and Regulations]
[Page 8499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-01809]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 82, No. 16 / Thursday, January 26, 2017 /
Rules and Regulations
[[Page 8499]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
RIN 3245-AG67
Small Business Investment Companies: Passive Business Expansion
and Technical Clarifications
AGENCY: U.S. Small Business Administration.
ACTION: Final rule; delay of effective date and opportunity for public
comment.
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SUMMARY: On December 28, 2016, the Small Business Administration (SBA)
published a final rule to expand permitted investments in passive
businesses and provide further clarification with regard to investments
in such businesses for the Small Business Investment Company (SBIC)
Program, with an effective date of January 27, 2017. In the meantime, a
memorandum dated January 20, 2017 from the Assistant to the President
and Chief of Staff, entitled ``Regulatory Freeze Pending Review'' calls
for agencies to temporarily postpone the effective date of rules not
yet effective and invite new public comment. In view of this
development, SBA is delaying the effective date of this rule until
March 21, 2017, and is inviting additional public comment on the final
rule. Any timely public comments received will be considered and any
changes to the final rule will be published in the Federal Register.
DATES: The effective date of the SBA final rule published December 28,
2016 (81 FR 95419) is delayed until March 21, 2017. Comments must be
received on or before February 19, 2017.
ADDRESSES: You may submit comments, identified by RIN 3245-AG67, by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail, Hand Delivery/Courier: Theresa Jamerson, Office for
Investment and Innovation, U.S. Small Business Administration, 409
Third Street SW., Washington, DC 20416.
SBA will post comments on http://www.regulations.gov. If you wish
to submit confidential business information (CBI) as defined in the
User Notice at http://www.regulations.gov, please submit the
information to Theresa Jamerson, Office of Investment and Innovation,
409 Third Street SW., Washington, DC 20416. Highlight the information
that you consider to be CBI and explain why you believe this
information should be held confidential. SBA will review the
information and make the final determination of whether it will publish
the information or not.
FOR FURTHER INFORMATION CONTACT: Theresa Jamerson, Office of Investment
and Innovation, (202) 205-7563 or [email protected].
SUPPLEMENTARY INFORMATION: The U.S. Small Business Administration (SBA)
is revising the regulations for the Small Business Investment Company
(SBIC) program to expand permitted investments in passive businesses
and provide further clarification with regard to investments in such
businesses. SBICs are generally prohibited from investing in passive
businesses under the Small Business Investment Act of 1958, as amended
(Act). SBIC program regulations provide for two exceptions that allow
an SBIC to structure an investment utilizing a passive small business
as a pass-through. The first exception provides conditions under which
an SBIC may structure an investment through up to two levels of passive
entities to make an investment in a non-passive business that is a
subsidiary of the passive business directly financed by the SBIC. The
second exception, prior to this final rule, enabled a partnership SBIC,
with SBA's prior approval, to provide financing to a small business
through a passive, wholly-owned C corporation (commonly known as a
blocker corporation), but only if a direct financing would cause the
SBIC's investors to incur Unrelated Business Taxable Income (UBTI).
This final rule clarifies several aspects of the first exception and in
the second exception eliminates the prior approval requirement and
expands the purposes for which a blocker corporation may be formed. The
final rule also adds new reporting and other requirements for passive
investments to help protect SBA's financial interests and ensure
adequate oversight and makes minor technical amendments. Finally, this
rule makes a conforming change to the regulations regarding the amount
of leverage available to SBICs under common control. This change is
necessary for consistency with the Consolidated Appropriations Act,
2016, which increased the maximum amount of such leverage to $350
million.
Dated: January 23, 2017.
Michele Schimpp,
Deputy Associate Administrator, Office of Investment and Innovation.
[FR Doc. 2017-01809 Filed 1-25-17; 8:45 am]
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