SBA Small Business Investment Company 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 to enhance small business access to capital; programs to increase small business opportunities in federal contracting; direct loans for businesses, homeowners, and renters to assist their recovery from natural disasters; and access to entrepreneurial education to assist with business formation and expansion. It also administers the Small Business Investment Company (SBIC) Program. Authorized by P.L. 85-699, the Small Business Investment Act of 1958, as amended, the SBIC program is designed to enhance small business access to venture capital by stimulating and supplementing “the flow of private equity capital and long term loan funds which small business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply.” Facilitating the flow of capital to small businesses to stimulate the national economy was, and remains, the SBIC program’s primary objective.

The SBA does not make direct investments in small businesses. It works with 296 privately owned and managed SBICs licensed by the SBA to provide financing to small businesses with private capital the SBIC has raised and with funds the SBIC borrows at favorable rates because the SBA guarantees the debenture (loan obligation).

SBICs pursue investments in a broad range of industries, geographies, and stages of investment. Some SBICs specialize in a particular field or industry in which their management has expertise, while others invest more generally. Most SBICs concentrate on a particular stage of investment (i.e., start-up, expansion, or turnaround) and identify a geographic area in which to focus.

The SBIC program currently has invested or committed about $17.1 billion in small businesses, with the SBA’s share of capital at risk about $8.3 billion. In FY2011, the SBA guaranteed $1.8 billion in SBIC small business investments, and SBICs provided another $1.0 billion in investments from private capital, for a total of more than $2.8 billion in financing for 1,339 small businesses.

Congressional interest in the SBIC program has increased in recent years primarily because it is viewed as a means to stimulate economic activity, create jobs, and assist in the national economic recovery. However, there are disagreements concerning whether the program should target additional assistance to startup and early-stage small businesses, which are generally viewed as relatively risky investments but also as having a relatively high potential for job creation.

This report examines the SBIC program’s structure and operation, focusing on SBIC eligibility requirements, investment activity, and program statistics. It also examines legislation and Obama Administration proposals considered during the 111th and 112th Congresses, including H.R. 3854, the Small Business Financing and Investment Act of 2009; H.R. 5554, the Small Business Assistance and Relief Act of 2010; P.L. 111-240, the Small Business Jobs Act of 2010; H.R. 3219, the Small Business Investment Company Modernization Act of 2011; and the Obama Administration’s Startup America Initiative, which addresses the following SBIC-related issues: (1) the targeting of additional assistance to startup and early-stage small businesses, (2) the SBA’s management of the program’s financial risk and its processing of SBIC applications, and (3) whether the program’s financing levels are appropriate given the nation’s current economic circumstances.


Date of Report: February 2, 2012
Number of Pages: 35
Order Number: R41456
Price: $29.95

Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Social Security: The Government Pension Offset (GPO)

Alison M. Shelton
Analyst in Income Security

The Government Pension Offset (GPO) may reduce Social Security spousal and survivor benefits, which are generally payable to the spouses and survivors of retired, disabled, or deceased workers covered by Social Security. The Social Security spousal benefit is equal to 50% of the retired or disabled worker’s benefit and the survivor benefit is 100% of the deceased worker’s benefit.

Social Security spousal benefits were established in the 1930s to help support wives who are financially dependent on their husbands. It has since become more common for both spouses in a couple to work, with the result that, in more cases, both members of a couple are entitled to Social Security or other government pensions based on their own work records. Social Security generally does not provide both a full retired-worker and a full spousal benefit to the same individual.

Two provisions are designed to reduce the Social Security spousal benefits of individuals who are not financially dependent on their spouses because they receive benefits based on their own work records. These are 

•         the “dual entitlement” rule, which applies to spouses who qualify for both (1) a Social Security spousal benefit based on a spouse’s work history in Social Security-covered employment and (2) a Social Security retired or disabled worker benefit based on their own work histories in Social Security-covered employment; and 

•         the GPO, which applies to spouses who qualify for both (1) a Social Security spousal benefit based on a spouse’s work history in Social Security-covered employment and (2) a government pension based on their own non-Social Security-covered government employment. 

The GPO reduces Social Security spousal benefits by two-thirds of the pension from non-covered government employment. The GPO does not reduce the benefits of the spouse who was covered by Social Security.

Opponents contend that the GPO provision is basically imprecise and can be unfair. Defenders argue it is the best method currently available for preserving the spousal benefit’s original intent of supporting financially dependent spouses, and also for eliminating an unfair advantage for spouses working in non-Social Security-covered employment compared with spouses working in Social Security-covered jobs (who are subject to the dual entitlement rule).


Date of Report: January 30, 2012
Number of Pages: 18
Order Number: RL32453
Price: $29.95

Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

The Debt Limit: History and Recent Increases

D. Andrew Austin
Analyst in Economic Policy

Mindy R. Levit
Analyst in Public Finance

Total federal debt can increase in two ways. First, debt increases when the government sells debt to the public to finance budget deficits and acquire the financial resources needed to meet its obligations. This increases debt held by the public. Second, debt increases when the federal government issues debt to certain government accounts, such as the Social Security, Medicare, and Transportation trust funds, in exchange for their reported surpluses. This increases debt held by government accounts. The sum of debt held by the public and debt held by government accounts is the total federal debt. Surpluses reduce debt held by the public, while deficits raise it.

On August 2, 2011, President Obama signed the Budget Control Act of 2011 (BCA; S. 365; P.L. 112-25), after an extended debt limit episode. The federal debt had reached its legal limit on May 16, 2011, prompting Treasury Secretary Timothy Geithner to declare a debt issuance suspension period, allowing certain extraordinary measures to extend Treasury’s borrowing capacity. The BCA included provisions aimed at deficit reduction and allowing the debt limit to rise between $2,100 billion and $2,400 billion in three stages, the latter two subject to congressional disapproval. Once the BCA was enacted, a presidential certification triggered a $400 billion increase, raising the debt limit to $14,694 billion, and a second $500 billion increase on September 22, 2011, as a disapproval measure (H.J.Res. 77) only passed the House. A January 12, 2012, presidential certification triggered a third, $1.2 trillion increase on January 28, 2012. On January 18, 2012, the House passed a disapproval measure (H.J.Res. 98) on a 239-176 vote. The Senate declined to take up a similar measure (S.J.Res. 34), on a 44-52 vote on January 26, 2012.

Congress has always placed restrictions on federal debt. The form of debt restrictions, structured as amendments to the Second Liberty Bond Act of 1917, evolved into a general debt limit in 1939. Congress has voted to raise the debt limit 11 times since 2001, due to persistent deficits and additions to federal trust funds. Congress raised the limit in June 2002, and by December 2002 the U.S. Treasury asked Congress for another increase, which passed in May 2003. In June 2004, the U.S. Treasury asked for another debt limit increase and again in October 2004. A debt limit increase was enacted on November 19, 2004. In 2005, reconciliation instructions in the FY2006 budget resolution (H.Con.Res. 95) included a debt limit increase. After warnings from the U.S. Treasury, Congress passed an increase that the President signed on March 20. In 2007, Congress approved legislation (H.J.Res. 43) to raise the debt limit by $850 billion to $9,815 billion that the President signed September 29, 2007.

The recent economic slowdown led to sharply higher deficits in recent years, which led to a series of debt limit increases. The Housing and Economic Recovery Act of 2008 (H.R. 3221), signed into law (P.L. 110-289) on July 30, 2008, included a debt limit increase. The Emergency Economic Stabilization Act of 2008 (H.R. 1424), signed into law on October 3 (P.L. 110-343), raised the debt limit again. The debt limit rose a third time in less than a year to $12,104 billion with the passage of the American Recovery and Reinvestment Act of 2009 on February 13, 2009 (ARRA; H.R. 1), which was signed into law on February 17, 2009 (P.L. 111-5).

Following this measure, the debt limit was subsequently increased by $290 billion to $12,394 billion (P.L. 111-123) in a stand-alone debt limit bill on December 28, 2009, and by $1.9 trillion to $14,294 billion on February 12, 2010 (P.L. 111-139), as part of a package that also contained the Statutory Pay-As-You-Go Act of 2010.


Date of Report: February 2, 2012
Number of Pages: 36
Order Number: RL31967
Price: $29.95

Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Section 179 and Bonus Depreciation Expensing Allowances: Current Law, Legislative Proposals in the 112th Congress, and Economic Effects

Gary Guenther
Analyst in Public Finance

Expensing is the most accelerated form of depreciation for tax purposes. Section 179 of the Internal Revenue Code (IRC) allows a taxpayer to expense (or deduct as a current expense rather than a capital expense) up to $125,00 of the total cost of new and used qualified depreciable assets it buys and places in service in 2012, within certain limits. Firms unable to take advantage of the Section 179 expensing allowance may recover the cost of qualified assets over a longer periods, using the appropriate depreciation schedules. While the Section 179 expensing allowance is not targeted at firms that are relatively small in employment, asset, or receipt size, the rules governing its use limit its benefits to such firms, for the most part.

In addition, Section 168(k), which provides a so-called bonus depreciation allowance, generally allows taxpayers to expense half the cost of qualified assets bought and place in service in 2012. Taxpayers that can claim the allowance have the option of monetizing any unused alternative minimum tax credits they have accumulated from tax years before 2006, within certain limits, and writing off the cost of the assets that qualify for the allowance over a longer period.

This report examines the current status, legislative history, and economic effects of the two expensing allowances. It also discusses initiatives in the 112th Congress to modify them. The report will be updated as legislative activity warrants.

The two expensing allowances have enjoyed broad bipartisan support in recent years. There is no evidence that this backing has lessened in the 112th Congress. A number of bills have been introduced in the House and Senate to permanently extend a more generous allowance than current law would allow, such as H.R. 1773 and S. 12. Some other bills, including most notably H.R. 3630, would extend the 100% bonus depreciation allowance through 2012. H.R. 3630 would also extend the current two percentage point reduction in the employee’s share of the federal payroll tax through 2012.

Since 2002, the allowances have served as one of several tax incentives for stimulating growth in the U.S. economy. This raises the question of their effectiveness. Though there are no studies that address the economic effects of the enhanced Section 179 allowances that were enacted in the previous eight years, several studies have examined the economic effects of the 30% and 50% bonus depreciation allowances that were available from 2002 to 2004. The two allowances applied to nearly the same property. Basically, the studies concluded that accelerated depreciation in general is a relatively ineffective tool for stimulating the economy. Take-up rates for those allowances were lower than expected, and only 10% of the firms taking them said that the allowances played a decisive role in their investment decisions.

Available evidence, as incomplete as it is, indicates that the expensing allowances probably have no more than a minor effect on the level, composition, and allocation among industries of business investment; the distribution of the federal tax burden among income groups; and the cost of tax compliance for smaller firms. On the one hand, an expensing allowance has the potential to spur increased small business investment in favored assets in the short run by reducing the user cost of capital and increasing the cash flow of investing firms. It also has the advantage of simplifying tax accounting for depreciation for firms that take the expensing allowance. On the other hand, an expensing allowance could interfere with the allocation of economic resources by diverting capital flows away from investments with more productive outcomes.


Date of Report: January 30, 2012
Number of Pages: 20
Order Number: RL31852
Price: $29.95

Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Fair Credit Reporting Act: Rights and Responsibilities

Margaret Mikyung Lee
Legislative Attorney

The purpose of the Fair Credit Reporting Act (FCRA) is “to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.” The FCRA establishes consumers’ rights in relation to their credit reports, as well as permissible uses of credit reports. It also imposes certain responsibilities on those who collect, furnish, and use the information contained in consumers’ credit reports.

The FCRA has been amended several times over the last decade. The Fair and Accurate Credit Transactions Act of 2003 (FACT Act, P.L. 108-159) amended the FCRA to include a number of provisions aimed at preventing identity theft and assisting victims. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act, P.L. 111-24) strengthened protections for young consumers and advertising disclosures regarding free credit reports from consumer reporting agencies. More recently, the Consumer Financial Protection Act of 2010, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), established the Consumer Financial Protection Bureau and transferred administrative functions, including most rulemaking and reporting, as well as certain enforcement functions, from other federal agencies, such as the Federal Trade Commission and the Federal Reserve Board, to the Bureau. For more information on the functions of the new Bureau, see CRS Report R41338, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Title X, The Consumer Financial Protection Bureau, by David H. Carpenter.

This report discusses consumers’ rights under the FCRA, as well as the type of information included in credit reports, permissible uses of credit reports, disclosure requirements, and requirements for users of consumer credit reports and furnishers of information. It also addresses FCRA provisions aimed at preventing identity theft and assisting victims of identity theft. For further information on laws and issues related to identity theft, see CRS Report R40599, Identity Theft: Trends and Issues, by Kristin M. Finklea, and CRS Report RL31919, Federal Laws Related to Identity Theft, by Gina Stevens. For information on data security and the legislative efforts regarding such, see CRS Report RL34120, Federal Information Security and Data Breach Notification Laws, by Gina Stevens, and CRS Report RL33273, Data Security: Federal Legislative Approaches, by Gina Stevens.


Date of Report: February 2, 2012
Number of Pages: 16
Order Number: RL31666
Price: $29.95

Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.