Small Business Administration 7(a) Loan Guaranty Program

Robert Jay Dilger
Senior Specialist in American National Government

The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses “that might not otherwise obtain financing on reasonable terms and conditions.” The SBA’s 7(a) loan guaranty program is considered the agency’s flagship loan guaranty program. It is named from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorized the SBA to provide business loans and loan guaranties to American small businesses.

In FY2012, the SBA approved 44,377 7(a) loans amounting to more than $15.1 billion. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business.

Congressional interest in the 7(a) program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery. Some, including President Obama, argue that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small business economic growth and job creation.

This report discusses the rationale provided for the 7(a) program; the program’s borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of proceeds, borrower satisfaction, and borrower demographics. It examines issues raised concerning the SBA’s administration of the 7(a) program, including the oversight of 7(a) lenders and the program’s lack of outcome-based performance measures.

It also examines congressional action taken during the 111th Congress to enhance small businesses access to capital. For example, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), provided $375 million to temporarily subsidize the 7(a) and 504/CDC loan guaranty programs’ fees and to temporarily increase the 7(a) program’s maximum loan guaranty percentage to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, provided $505 million to extend the fee subsidies and 90% loan guaranty percentage through December 31, 2010; increased the 7(a) program’s gross loan limit from $2 million to $5 million; and established an alternative size standard for the 7(a) and 504/CDC loan programs. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the fee subsidies and 90% loan guaranty percentage through March 4, 2011, or until available funding was exhausted (which occurred on January 3, 2011).

This report also examines three bills introduced during the 112th Congress that would have changed the 7(a) program. S. 1828, a bill to increase small business lending, would have reinstated for a year following the date of its enactment ARRA’s fee subsidies and 90% loan guaranty percentage for the 7(a) program. H.R. 2936, the Small Business Administration Express Loan Extension Act of 2011, would have extended a one-year increase in the SBAExpress program’s maximum loan amount from $350,000 to $1 million, which expired on September 27, 2011, for an additional year. S. 532, the Patriot Express Authorization Act of 2011, would have provided the Patriot Express Pilot Program statutory authorization and increased its loan guaranty percentages and maximum loan amount from $500,000 to $1 million.

Information concerning the 7(a) program’s SBAExpress, Patriot Express, Small Loan Advantage, and Community Advantage programs is also provided.


Date of Report: January 14, 2013
Number of Pages: 37
Order Number: R41146
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Community and Regional Economic Development: A Compendium

This 300+ page Compendium leads off with a section focusing on community development block grants, covering the Neighborhood Stabilization Program de-signed to assist communities affected by foreclosures, and grants to assist with disaster relief and recovery, as well as background information and funding is-sues.

Other sections cover tax incentives, including information on tax-credit and pri-vate activity bonds; and broadband loan and grant programs and other federal as-sistance programs.

Date of Report: January 18, 2013
Number of Pages: 330
Order Number: C12027
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The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits, Pensions, and Individual Retirement Accounts (IRAs)

John J. Topoleski
Analyst in Income Security

This report provides an overview of how the ban on recognition of same-sex marriage by the federal government potentially affects retirement income security of these couples. The legalization of same-sex marriage in five states and Washington, DC, may affect the eligibility for and payment of federal Social Security benefits, private pensions, and individual retirement accounts (IRAs). Social Security benefits are currently paid to the spouses of disabled, retired, or deceased workers entitled to Social Security. However, under current law, same-sex spouses are not eligible for Social Security benefits because they are unable to meet the gender-based definitions of “wife” and “husband” in the Social Security Act and the gender-based definition of “marriage” established by the Defense of Marriage Act (DOMA; P.L. 104-199). Federal employee pensions and private-sector pensions regulated by the Employee Retirement Income Security Act (ERISA; P.L. 93-406) are required to provide certain benefits to the spouse of a participant in the event of the participant’s death. Under DOMA, both federal pensions and private-sector pensions regulated by ERISA are required to define a spouse only as “a person of the opposite sex who is a husband or a wife.” In addition, IRA benefits available to spouses are not available to same-sex spouses as IRAs are regulated by the Internal Revenue Code. Under DOMA, the IRS does not recognize same-sex marriages.


Date of Report: January 17, 2013
Number of Pages: 12
Order Number: RS21897
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Tax Reform: An Overview of Proposals

Jane G. Gravelle
Senior Specialist in Economic Policy

The President and leading Members of Congress have stated that tax reform is a major policy objective for the 113th Congress. Some Members have said that tax reform is needed in order to raise a large amount of additional revenue, which is necessary to reduce high forecast budget deficits and the sharply rising national debt. Congressional interest has been expressed in both a major overhaul of the U.S. tax system and the feasibility of levying a consumption tax. Some proponents of reform argue that the tax base should be broadened by reducing or eliminating many tax expenditures. An alternative to increasing tax revenues was cutting spending. Thus, Members are faced with considering the best mix of tax increases and spending cuts in order to reduce deficits and slow the growth of the national debt.

Proposals for tax reform have been made in reports by the National Commission on Fiscal Responsibility and Reform and the Debt Reduction Task Force of the Bipartisan Policy Center. In the 112th Congress, fundamental tax reforms were proposed in H.R. 25 and S. 13, Fair Tax Act of 2011; H.R. 99, Fair and Simple Tax Act of 2011; H.R. 8, the Job Protection and Recession Prevention Act of 2012; H.R. 1125, the Debt Free America Act; S. 727, the Bipartisan Tax Fairness and Simplification Act of 2011; H.R. 1040, the Freedom Flat Tax Act; H.R. 6169, the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012; and S. 820, the Simplified, Manageable, and Responsible Tax Act. H.R. 25 has been introduced in the 113th Congress. On April 13, 2011, President Obama presented his Framework for Shared Prosperity and Shared Fiscal Responsibility, which includes fundamental tax reform. On April 14, 2011, Representative Paul Ryan introduced H.Con.Res. 34, the FY2012 budget resolution, which includes fundamental changes in the U.S. tax system. On March 20, 2012, House Budget Committee Chairman Paul Ryan released the committee’s Fiscal Year 2013 Budget Resolution, The Path to Prosperity: A Blueprint for American Renewal. An evaluation of these proposals would consider the effects on equity, efficiency, and simplicity. In February 2012, the President presented his outline for corporate reform, The President’s Framework for Business Tax Reform. 

Tax reforms often include broadening the tax base by eliminating or trimming tax expenditures. While individual tax expenditures are large relative to individual income tax revenues— potentially gaining around $1 trillion per year, or permitting reductions of over 40% in tax rates— many of these provisions may prove difficult to change because they are widely used and popular, are difficult to address administratively, or may be desirable provisions. Corporate tax reform is generally directed at a revenue-neutral change, but tax expenditures are considerably smaller in absolute terms and relative to the base, permitting tax rate reductions of less than 20%. As with individual tax expenditures, many of these provisions would be difficult to eliminate or reduce. There is special interest in revising the tax treatment of foreign source income of corporations.


Date of Report: January 15, 2013
Number of Pages: 20
Order Number: R41591
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Capital Gains Taxes: An Overview

Jane G. Gravelle
Senior Specialist in Economic Policy

Current tax rates on capital gains are imposed at a 0% rate for those whose income places them in the regular 15% bracket, 15% for taxpayers in higher brackets with taxable income below $450,000 for joint returns and $400,000 for single returns, and 20% for those with taxable income above those amounts. There is also an exclusion of $500,000 ($250,000 for single returns) for gains on home sales.

Tax legislation in 1997 reduced capital gains taxes on several types of assets, imposing a 20% maximum tax rate on long-term gains, a rate temporarily reduced to 15% for 2003-2008, which was extended for two additional years in 2006. Legislation enacted in December 2010 extended the lower rates for an additional two years, thorough 2010. The American Taxpayer Relief Act of 2012 (P.L. 112-240) made the lower rates permanent except for very high income taxpayers.

The capital gains tax had been a tax cut target since the 1986 Tax Reform Act treated capital gains as ordinary income. An argument for lower capital gains taxes is reduction of the lock-in effect. Some also believe that lower capital gains taxes will cost little compared to the benefits they bring and that lower taxes induce additional economic growth, although the magnitude of these potential effects is in some dispute. Others criticize lower capital gains taxes as benefitting higher income individuals and express concerns about the budget effects, particularly in future years. Another criticism of lower rates is the possible role of a larger capital gains tax differential in encouraging tax sheltering activities and adding complexity to the tax law.


Date of Report: January 17, 2013
Number of Pages: 9
Order Number: 96-769
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