SBA revised the regulations for SBA's Small Business Investment Company (SBIC) program concerning investments in passive businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, as amended, as well as by regulations. The current program regulations provide for an exception that allows an SBIC to structure an investment utilizing a passive small business as a pass-through under certain limited circumstances, such as an investment that would otherwise cause a tax-exempt investor in the SBIC to incur unrelated business taxable income. Under the exception contained in the current program regulations, the SBIC makes an investment in a passive small business that immediately passes through all of the investment proceeds to one or more subsidiaries, each of which must be a non-passive small business. The rule modifies this exception to allow an SBIC to structure an investment utilizing two passive small businesses as pass-through to place them on equal footing with their non-SBIC counterparts in the venture capital and private equity sectors. The SBIC makes an investment in a passive small business that would immediately pass through all of the investment proceeds to another passive small business that would, in turn, immediately pass through all of the investment proceeds to one or more subsidiaries, each of which must be a non-passive small business.