3245-AG67 201710 The Regulatory Plan and the Unified Agenda of Federal Regulatory and Deregulatory Actions 3245 Small Business Administration SBA Small Business Investment Companies; Passive Business Expansion & Technical Clarifications

The SBA revised the regulations for the Small Business Investment Company (SBIC) program to further expand the use of Passive Businesses and provide needed protections for SBA with regard to such investments. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958 as amended as well as by regulations. Current program regulations provided for two exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through. The first exception identified in 107.720(b)(2) provides that an SBIC may structure an investment utilizing two pass-through entities to make an investment into an active business. The second exception identified in 107.720(b)(3) allows partnership SBICs with SBA prior approval to invest in a wholly owned passive business that in turn provides financing to an active small business only if a direct financing would cause its investors to incur Unrelated Business Taxable Income (UBTI). The second exception is commonly known as a blocker corporation. The rule clarifies the first exception and further expands the second exception, while providing additional protection to SBA from the risk posed by passive investment structures. As part of the rule, SBA will also make technical corrections and clarifications, including conforming the regulation to the new "family of funds" statutory provision. 

]]> Substantive, Nonsignificant Previously Published in The Unified Agenda Completed Actions No No Not subject to, not significant 13 CFR 107 15 U.S.C. 681 et seq. No NPRM 10/05/2015 80 FR 60077 NPRM Comment Period End 12/04/2015 Final Rule 12/28/2016 81 FR 95419 Final Rule Effective 01/27/2017 Delay of Effective Date Opportunity for Public Comment 01/26/2017 82 FR 8499 Comment Period End 02/19/2017 Final Rule Effective 03/21/2017 Delay of Effective Date 03/21/2017 82 FR 14428 Final Rule Effective 05/20/2017 Delay of Effective Date and Request for Comment 05/02/2017 82 FR 20433 Comment Period End 06/01/2017 Final Rule Effective 08/18/2017 Final Rule and Withdrawal of Final Rule 08/18/2017 82 FR 39335 Final Rule Effective 09/18/2017 Yes Businesses None No Yes No Theresa Jamerson M. Senior Risk and Investment Policy Advisor, Office of Investment and Innovation 3245 Small Business Administration SBA 202 205-7563 theresa.jamerson@sba.gov 409 Third Street SW, Washington DC 20461