[Federal Register Volume 82, Number 53 (Tuesday, March 21, 2017)]
[Rules and Regulations]
[Pages 14428-14429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05533]
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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.
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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. On January 26,
2017, SBA published a delay of effective date until March 21, 2017 and
re-opened the rule for additional public comment in response to the
memorandum dated January 20, 2017 from the Assistant to the President
and Chief of Staff, entitled ``Regulatory Freeze Pending Review.'' SBA
requires additional time to consider this final rule and determine
whether any further changes are required; therefore, the effective date
for this final rule is delayed until May 20, 2017. Any changes to the
final rule based on this redetermination will be published in the
Federal Register.
DATES: As of March 21, 2017, the effective date of the SBA final rule
published December 28, 2016 (81 FR 95419), and delayed January 26, 2017
(82 FR 8499), is further delayed until May 20, 2017.
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)
Final Rule: Small Business Investment Companies: Passive Business
Expansion and Technical Clarifications, 81 FR 95419 (December 28,
2016), had an effective date of January 27, 2017. The January effective
date was delayed to March 21, 2017, and the comment period was reopened
until February 19, 2017. 82 FR 8499 (Jan. 26, 2017). This new delay of
effective date will provide 60 additional days for SBA to further
analyze questions of fact, law, and policy related to this rulemaking,
in accordance with OMB Memorandum #M-17-16, Implementation of
Regulatory Freeze (Jan. 24, 2017). SBA will use the supplemental time
to assess the additional comments it received through February 19,
2017, and will further consider the rule's impact on the SBIC program
and program participants. SBA will also use the supplemental time to
make necessary determinations regarding the effects of the final rule
on the examining and liquidation functions of the SBA's Office of
Investment and Innovation.
SBA is considering 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
[[Page 14429]]
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 from $225 million.
Dated: March 10, 2017.
A. Joseph Shepard,
Associate Administrator, Office of Investment and Innovation.
[FR Doc. 2017-05533 Filed 3-20-17; 8:45 am]
BILLING CODE 8025-01-P