109th CONGRESS
1st Session
H. R. 4565
To amend the Small Business Investment Act of 1958 to establish
the Angel Investment Program.
IN THE HOUSE OF REPRESENTATIVES
December 15, 2005
Ms. VELAZQUEZ (for herself, Mr. BARROW, Ms. BEAN, Ms. BORDALLO, Mr. CASE,
Mrs. CHRISTENSEN, Mr. DAVIS of Illinois, Mr. GRIJALVA, Mr. MICHAUD, Ms.
MILLENDER-MCDONALD, Ms. MOORE of Wisconsin, and Ms. LINDA T. SANCHEZ of
California) introduced the following bill; which was referred to the Committee
on Small Business, and in addition to the Committee on Ways and Means, for
a period to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend the Small Business Investment Act of 1958 to establish
the Angel Investment Program.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Angels Nurture Growing Entrepreneurs into
Long-term Successes (ANGELS) Act'.
SEC. 2. ESTABLISHMENT OF ANGEL INVESTMENT PROGRAM.
(a) Establishment- Title III of the Small Business Investment Act of 1958
(15 U.S.C. 681 et seq.) is amended by adding at the end the following new
part:
`PART C--ANGEL INVESTMENT PROGRAM
`SEC. 380. OFFICE OF ANGEL INVESTMENT.
`(a) Establishment- There is established, in the Investment Division of
the Small Business Administration, the Office of Angel Investment.
`(b) Director- The head of the Office of Angel Investment is the Director
of Angel Investment.
`(c) Duties- Subject to the direction of the Secretary, the Director shall
perform the following functions:
`(1) Provide support for the development of angel investment opportunities
for small business concerns.
`(2) Administer the Angel Finance Program under section 381 of this Act.
`(3) Administer the Federal Angel Network under section 382 of this Act.
`(4) Administer the grant program for the development of angel groups
under section 383 of this Act.
`(5) Perform such other duties consistent with this section as the Administrator
shall prescribe.
`SEC. 381. ANGEL FINANCE PROGRAM.
`(a) In General- The Director of Angel Investment shall establish and carry
out a program, to be known as the Angel Finance Program, to provide financing
to approved angel groups.
`(b) Eligibility- To be eligible to receive financing under this section,
an angel group shall--
`(1) have demonstrated experience making investments in local or regional
small business concerns;
`(2) have established protocols and a due diligence process for determining
its investment strategy;
`(3) have an established code of ethics; and
`(4) submit an application to the Director of Angel Investment at such
time and containing such information and assurances as the Director may
require.
`(c) Use of Funds- An angel group that receives financing under this section
shall use the amounts received to make investments in small business concerns--
`(1) that have been in existence for less than 5 years as of the date
on which the investment is made;
`(2) that have fewer than 75 employees as of the date on which the investment
is made; and
`(3) more than 50 percent of the employees of which perform substantially
all of their services in the United States as of the date on which the
investment is made.
`(d) Limitation on Amount- No angel group receiving financing under this
section shall receive more than $2,000,000.
`(e) Priority in Providing Financing- In providing financing under this
section, the Director shall give priority to angel groups that invest in
small business concerns owned and controlled by veterans, small business
concerns owned and controlled by women, and socially and economically disadvantaged
small business concerns.
`(f) Geographic Distribution of Financing- In providing financing under
this section, the Director shall, to the extent practicable, provide financing
to angel groups that are located in a variety of geographic areas.
`(g) Matching Requirement- As a condition of receiving financing under this
section, the Director shall require that for each small business concern
in which the angel group receiving such financing invests, the angel group
shall invest an amount that is equal to or greater than the amount of financing
received under this section from a source other than the Federal Government
that is equal to the amount of the financing provided under this section
that the angel group invests in that small business concern.
`(h) Repayment of Financing- As a condition of receiving financing under
this section, the Director shall require an angel group to repay the Director
for any investment on which the angel group makes a profit an amount equal
to the percentage of the profit that is equal to the percentage of the total
amount invested by the angel group that consisted of financing received
under this section.
`(i) Angel Investment Fund-
`(1) ESTABLISHMENT- There is in the Treasury a fund to be known as the
Angel Investment Fund.
`(2) DEPOSIT OF CERTAIN AMOUNTS- Amounts collected under subsection (h)
shall be deposited in the fund.
`(3) USE OF DEPOSITS- Deposits in the fund shall be available for the
purpose of providing financing under this section in the amounts specified
in annual appropriation laws without regard to fiscal year limitations.
`(j) Definitions- In this section:
`(1) The term `small business concern owned and controlled by veterans'
has the meaning given that term under section 3(q)(3) of the Small Business
Act (15 U.S.C. 632(q)(3)).
`(2) The term `small business concern owned and controlled by women' has
the meaning given that term under section 8(d)(3)(D) of such Act (15 U.S.C.
637(d)(3)(D)).
`(3) The term `socially and economically disadvantaged small business
concern' has the meaning given that term under section 8(a)(4)(A) of such
Act (15 U.S.C. 637(a)(4)(A)).
`(k) Authorization of Appropriations- There is authorized to be appropriated
to carry out this section--
`(1) $25,000,000 for fiscal year 2007;
`(2) $50,000,000 for fiscal year 2008; and
`(3) $75,000,000 for fiscal year 2009.
`SEC. 382. FEDERAL ANGEL NETWORK.
`(a) In General- Subject to the succeeding provisions of this subsection,
the Director of the Office of Angel Investment shall establish and maintain
a searchable database, to be known as the Federal Angel Network, to assist
small business concerns in identifying angel investors.
`(b) Network Contents- The Federal Angel Network shall include--
`(1) a list of the names and addresses of angel groups and angel investors;
`(2) information about the types of investments each angel group or angel
investor has made; and
`(3) information about other public and private resources and registries
that provide information about angel groups or angel investors.
`(c) Collection of Information-
`(1) IN GENERAL- The Director shall collect the information to be contained
in the Federal Angel Network and shall ensure that such information is
updated regularly.
`(2) REQUEST FOR EXCLUSION OF INFORMATION- The Director shall not include
such information concerning an angel investor if that investor contacts
the Director to request that such information be excluded from the Network.
`(d) Availability- The Director shall make the Federal Angel Network available
on the Internet website of the Administration.
`(e) Authorization of Appropriations- There is authorized to be appropriated
to carry out this section $1,000,000, to remain available until expended.
`SEC. 383. GRANT PROGRAM FOR DEVELOPMENT OF ANGEL GROUPS.
`(a) In General- The Director of the Office of Angel Investment shall establish
and carry out a grant program to make grants to eligible entities for the
development of new or existing angel groups and to increase awareness and
education about angel investing.
`(b) Eligible Entities- In this section, the term `eligible entity' means--
`(1) a State or unit of local government;
`(2) a nonprofit organization;
`(3) a state mutual benefit corporation;
`(4) a Small Business Development Center established pursuant to section
21 of the Small Business Act (15 U.S.C. 648); or
`(5) a women's business center established pursuant to section 29 of the
Small Business Act (15 U.S.C. 656).
`(c) Application- To receive a grant under this section, an eligible entity
shall submit an application that contains--
`(1) a proposal describing how the grant would be used; and
`(2) any other information or assurances as the Director may require.
`(d) Report- Not later than 3 years after the date on which an eligible
entity receives a grant under this section, such eligible entity shall submit
a report to the Administrator describing the use of grant funds and evaluating
the success of the angel group developed using the grant funds.
`(e) Authorization of Appropriations- There is authorized to be appropriated
to carry out this section $1,500,000, for each of fiscal years 2007 through
2009.
`SEC. 384. DEFINITIONS.
`(a) The term `angel group' means two or more angel investors organized
for the purpose of making investments in local or regional small business
concerns that--
`(1) consists primarily of angel investors;
`(2) requires angel investors to be accredited investors; and
`(3) actively involves the angel investors in evaluating and making decisions
about making investments.
`(b) The term `angel investor' means an individual who--
`(1) on the basis of such factors as financial sophistication, income,
net worth, knowledge, and experience in financial matters, or amount of
assets under management, qualifies as an accredited investor under rules
and regulations prescribed by the Commissioner of the Securities and Exchange
Commission; and
`(2) provides capital to or makes investments in a small business concern.'.
SEC. 3. TAX CREDIT FOR SMALL BUSINESS INVESTMENT.
(a) In General- Subpart A of part IV of subchapter A of chapter 1 of the
Internal Revenue Code of 1986 (relating to nonrefundable personal credits)
is amended by inserting after section 25D the following new section:
`SEC. 25E. SMALL BUSINESS INVESTMENT.
`(a) In General- In the case of an individual, there shall be allowed as
a credit against the tax imposed by this chapter an amount equal to 20 percent
of the amount paid or incurred for qualified small business investments
during the taxable year.
`(b) Limitation- With respect to any qualified small business investment
in any corporation or partnership, the amount paid or incurred by any taxpayer
which is taken into account under subsection (a) shall not exceed $250,000
($500,000 in the case of a joint return), reduced by the amount taken into
account under such subsection with respect to investments by the taxpayer
in such corporation or partnership for all prior taxable years.
`(c) Qualified Small Business Investment- For purposes of this section--
`(1) IN GENERAL- The term `qualified small business investment' means
any small business stock and any small business partnership interest.
`(2) SMALL BUSINESS STOCK- The term `small business stock' means any stock
in a domestic corporation acquired by the taxpayer at its original issue
(directly or through an underwriter) solely in exchange for cash, if--
`(A) such corporation is an eligible small business (as defined in section
41(b)(3)(D)(ii)),
`(B) such corporation is engaged primarily in the trade or business
of manufacturing, processing, assembling, or researching and developing
products or in the trade or business of agriculture, technology, or
life science,
`(C) such corporation has been in existence for less than 5 years as
of such acquisition,
`(D) such corporation has fewer than 75 employees as of such acquisition,
`(E) more than 50 percent of the corporation's employees perform substantially
all of their services in the United States as of such acquisition, and
`(F) such stock is designated by the corporation for purposes of this
paragraph.
For purposes of subparagraph (E), stock shall not be treated as designated
if such designation would result in the aggregate amount which may be
taken into account under this section with respect to stock issued by
such corporation to exceed $750,000, taking into account all taxpayers
for all taxable years.
`(3) SMALL BUSINESS PARTNERSHIP INTEREST- The term `small business partnership
interest' means any capital or profits interest in a domestic partnership
acquired by the taxpayer from the partnership solely in exchange for cash,
if--
`(A) such partnership is an eligible small business (as defined in section
41(b)(3)(D)(ii)),
`(B) such partnership is engaged primarily in the trade or business
of manufacturing, processing, assembling, or researching and developing
products or in the trade or business of agriculture, technology, or
life science,
`(C) such partnership has been in existence for less than 5 years as
of such acquisition,
`(D) such partnership has fewer than 75 employees as of such acquisition,
`(E) more than 50 percent of the partnership's employees perform substantially
all of their services in the United States as of such acquisition, and
`(F) such capital or profits interest is designated by partnership for
purposes of this paragraph.
For purposes of subparagraph (E), a capital or profits interest shall
not be treated as designated if such designation would result in the aggregate
amount which may be taken into account under this section with respect
to interests in such partnership to exceed $750,000, taking into account
all taxpayers for all taxable years.
`(d) Carryforward of Unused Credit- If the credit allowable under subsection
(a) exceeds the limitation imposed by section 26(a) for such taxable year
reduced by the sum of the credits allowable under this subpart (other than
this section), such excess shall be carried to the succeeding taxable year
and added to the credit allowable under this section. Such excess shall
not be taken into account under this subsection for such succeeding taxable
year or any taxable year succeeding such year.'.
(b) Clerical Amendment- The table of sections of such subpart is amended
by inserting after the item relating to section 25D the following new item:
`Sec. 25E. Small business investment.'.
(c) Report to Congress- The Secretary of the Treasury shall conduct a study
and report to Congress on the effectiveness of the credit allowed under
section 25E of the Internal Revenue Code of 1986 (as added by this section),
and similar State tax credits, in providing incentives for investment in
qualified small businesses. There are authorized to be appropriated $500,000
to carry out the purposes of this subsection.
(d) Effective Date- The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
END
