under section 312 (f) for determining earnings and profits) previously paid in for stock, or as paid-in surplus or as a contribution to capital, reduced by the amount of distributions not out of earnings and profits in the year of distribution and not out of accumulated earnings and profits; and

"(B) the amount of the outstanding indebtedness (not including interest) of the company which is evidenced by a bond, note, bill of exchange, debenture, certificate of indebtedness, mortgage, or deed of trust, except that indebtedness not represented by a bond or debenture shall not be included in excess of an amount equal to the average daily amount of indebtedness not so represented which was outstanding during the taxable year."

(f) The amendments made by this section shall apply only with respect to taxable years ending on or after December 31, 1958.

STATE AND LOCAL TAXATION OF ASSOCIATIONS

SEC. 418. Each association, including its franchise, capital, reserves, and surplus, its income, its real property, its tangible and intangible personal property, and its obligations (both as to principal and income derived therefrom), shall be subject to taxation, in the same manner and to the same extent as a Statechartered institution of similar character, by any State, county, municipality, or local taxing authority; and its real property shall be subject to special assessments for local improvements.

TITLE V-PROVISION OF ASSISTANCE TO SMALL-BUSINESS

CONCERNS

STANDARDS OF ELIGIBILITY FOR ASSISTANCE

SEC. 501. The Board shall promulgate standards to determine the eligibility of small-business concerns for the assistance provided by this Act. In promulgating such standards, which may differ according to the type of assistance involved and any other relevant factors, the Board shall give consideration to

(1) the need to promote the development and growth of small-business concerns so as to enable them to make their maximum contribution to productive investment and employment and to the economic stability and growth of the Nation;

(2) the need to make capital for such concerns more readily available in adequate amounts and on reasonable terms;

(3) the need to facilitate maximum participation of private financial institutions and investors in financing these concerns; and

(4) the need to supplement the existing facilities of banks and other private financial institutions through the program of assistance provided under this Act.

PROVISION OF EQUITY CAPITAL FOR SMALL-BUSINESS CONCERNS

SEC. 502. (a) It shall be the primary function of each small business investment association to provide a source of needed equity capital for incorporated smallbusiness concerns which are located within its district, and which meet the standards of eligibility promulgated by the Board under section 501, by advancing funds to such concerns in the manner and subject to the conditions described in this section.

(b) Funds shall be advanced by an association to a small-business concern only through the purchase of debenture bonds (of such concern) which shall

(1) bear interest at such rate, and contain such other terms, as such association may fix with the approval of the Board;

(2) be callable on any interest payment date, upon three months' notice, at par plus accrued interest; and

(3) be convertible on any interest payment date prior to maturity (unless previously called), at the option of the association, into stock of such concern at the rate of one share of $50 par value common stock and one share of $50 par value 7 per centum preferred stock for each $100 (or fraction thereof) of the face value of the debenture bond or bonds converted; and the right of conversion may be exercised by the association with respect to any one or more debenture bonds without exercising such right with respect to other such bonds of the same concern held by the association.

(c) Before any funds are advanced by an association to a small-business concern under this section

(1) the association may require such concern to refinance any or all of its outstanding indebtedness so that the association is the only holder of any evidence of indebtedness of such concern; and

(2) such concern shall agree that it will not thereafter incur any indebtedness without first securing the approval of the association and giving the association the first opportunity to finance such indebtedness.

(d) Without the approval of the Board, the aggregate amount of obligations and securities of any one small business concern which may be acquired and held by an association at any one time shall not exceed whichever of the following is the larger:

(1) $1,000,000; or

(2) 33% per centum of the combined capital and surplus of the association. (e) Whenever an association advances funds to a small-business concern under this section, such concern shall be required to become a stockholderproprietor of the association by investing in the capital stock of the association in an amount equal to 5 per centum of the amount of the funds so advanced.

LONG-TERM LOANS TO SMALL BUSINESS CONCERNS

SEC. 503. (a) Each bank is authorized to make loans, in the manner and subject to the conditions described in this section, to incorporated and unincorporated small-business concerns which are located in its district, and which meet the standards of eligibility promulgated by the Board under section 501, in order to provide such concerns with funds needed for sound financing, growth, modernization, and expansion.

(b) Loans made under this section may be made directly, or in cooperation with commercial lending institutions through agreements to participate on an immediate or deferred basis.

(c) No financial assistance shall be extended under this subsection unless the financial assistance needed is not otherwise available to the small-business concern on reasonable terms. No immediate participation may be purchased unless it is shown that a deferred participation is not available; and no direct loan may be made unless it is shown that a participation is not available. Any participation by a bank on a deferred basis shall not be in excess of 90 per centum of the balance of the loan outstanding at the time of disbursement by the bank.

(d) The rate of interest for the bank's share of any loan made under this section shall be no more than 5 per centum per annum, and shall not be more than the rate prevailing within the district where the bank is located if such prevailing rate (at the time of disbursement by the bank) is less than 5 per centum per annum.

(e) Loans made under this section shall have a maturity not exceeding thirty years; except that a loan made under this section for the purpose of construction, conversion, or expansion of facilities may have a maturity of thirty years plus such additional period, as is estimated by the bank making the loan to be required to complete such construction, conversion, or expansion.

(f) All loans made under this section shall be of such sound value, or so secured, as reasonably to assure repayment.

(g) Any bank which has made a loan to a small-business concern under this section is authorized to extend the maturity of or renew such loan for additional periods not exceeding ten years if the bank finds that such extension or renewal will aid in the orderly liquidation of such loan.

ASSISTANCE THROUGH PRIVATE INVESTMENT COMPANIES AND STATE AND LOCAL

DEVELOPMENT CORPORATIONS

SEC. 504. (a) In addition to providing financial assistance for small-business concerns by advancing funds to associations and making long-term loans to such concerns as otherwise provided in this Act, each bank, subject to regulations of the Board, is authorized to advance funds to investment companies (both openend and closed-end) in its district which are in existence on the date of the enactinent of this Act, and to State and local development corporations in its district whether in existence on such date or formed after such date, on condition that such funds he used only to supply equity capital to small-business concerns

in such district in a manner which will assist in carrying out the purpose of this Act. Any funds advanced to a financial institution under this subsection shall be in exchange for convertible debenture bonds of such institution having the same terms and conditions as the debenture bonds of associations described in section 408 (b), and funds may be so advanced without regard to the use and investment by such institution of funds secured by it from other sources.

(b) Whenever a bank advances funds to a financial institution under subsection (a), such institution shall be required to become a stockholder-proprietor of such bank by investing in the capital stock of such bank in an amount equal to 5 per centum of the amount of the funds so advanced.

(c) A bank may acquire and hold stock in one or more financial institutions through conversion of the debenture bonds of such institutions under subsection (a), and a financial institution may acquire and hold stock of a bank under subsection (b), without regard to any limitation (in section of the Investment Company Act of 1940 or in any other law of the United States) upon the right of such bank or institution to acquire and hold such stock or the amount of such stock which may be so acquired and held.

(d) As used in subsection (a).

(1) the term "investment companies" means investment companies as defined in section 3 of the Investment Company Act of 1940 which are subject to the provisions of that Act; and

(2) the term "State and local development corporations" means enterprises incorporated under State law for the primary purpose of promoting and assisting the growth and development of small business concerns in the areas covered by their operations.

TITLE VI-MISCELLANEOUS

CRIMINAL PENALTIES

SEC. 601. (a) The first paragraph of section 217 of title 18, United States Code, is amended by inserting after "farm credit examiner," the following: "or of any small business capital bank or small business investment association,".

(b) Section 218 of such title is amended by inserting after "National Agricultural Credit Corporations," the following: "or an examiner of small business capital banks or small business investment associations,".

(c) (1) The first paragraph of section 221 of such title is amended by inserting after "United States," the following: "or a small business investment association or small business capital bank,".

(2) The second paragraph of such section 221 is amended by inserting after "Congress," the following: "or any small business capital bank or small business investment association,".

(3) The heading of such section 221 is amended by striking out "farm loan or land bank" and inserting in lieu thereof "farm loan, land bank, or small business".

(4) The table of sections for chapter 11 of such title 18 is amended by striking out "farm loan or land bank" in the reference to section 221 and inserting in lieu thereof "farm loan, land bank, or small business".

(d) Section 657 of such title is amended by inserting after "Federal Savings and Loan Insurance Corporation," the following: "or any small business capital bank or small business investment association,".

(e) Section 1006 of such title is amended by inserting after "Federal Savings and Loan Insurance Corporation," the following: "or any small business capital bank or small business investment association,".

(f) Section 1014 of such title is amended by inserting after "a Federal Reserve bank," the following: "or of a small business capital bank or a small business investment association,”.

INJUNCTIVE RELIEF

SEC. 602. Whenever in the judgment of the Board any person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of any provision of this Act or of any regulation prescribed by the Board under this Act, the Board may make application to the proper district court of the United States, or the United States court of any Territory or other place subject to the jurisdiction of the United States, for an order enjoining such acts or practices, or for an order enforcing compliance with such provision,

and such courts shall have jurisdiction of such actions and upon a showing by the Board that such person has engaged or is about to engage in any such acts or practices a permanent or temporary injunction, restraining order, or other order shall be granted without bond.

[S. 3643, 85th Cong., 2d sess.]

A BILL To provide financial assistance to small-business concerns through private (local) or State development credit corporations, to establish small-business investment associations, to make equity-type capital available through funds provided by the Small Business Administration, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

TITLE I-TITLE, POLICY, PURPOSE, AND DEFINITIONS

TITLE

SEC. 101. This Act may be cited as the "Small Business Capital Act of 1958".

DECLARATION OF POLICY

SEC. 102. It is the policy of the Congress to foster the growth, independence, and stability of small business in this country in order to preserve a sound national economy.

To effectuate such policy in a changing economy requires the enactment by Congress from time to time of legislation to meet the changing needs of small business.

It is hereby declared to be the policy of the Congress to provide the smallbusiness concerns of the United States with an additional source of equity capital and thereby to promote their growth and development in the interest of a sound national economy: Provided, however, That this policy shall be carried out in such manner as to insure the maximum participation of private financing

sources.

STATEMENT OF PURPOSE

SEC. 103. The Congress finds that the small-business concerns of the United States are in need of additional equity capital to finance their growth and development.

The Congress further finds that private (local) and State development credit corporations should be encouraged and are in need of supplemental financial assistance.

The purpose of this Act is to provide promptly such capital and assistance.

DEFINITIONS

SEC. 104. As used in this Act-

(1) "State" shall have reference to and include the several States, the Territories of Alaska and Hawaii, the District of Columbia, and the Commonwealth of Puerto Rico.

(2) "Small Business Act" shall mean the Small Business Act of 1953, as amended.

(3) "Administrator" means the Administrator of the Small Business Administration, referred to in the Small Business Act.

(4) "Administration" means the Small Business Administration, created by the Small Business Act.

TITLE II-AUTHORIZATION FOR FUNDS

SEC. 201. Subsection (b) of section 204 of the Small Business Act is hereby amended as follows:

(1) The figure "$530,000,000" shall be deleted wherever it appears in such subsection and in lieu thereof there shall be substituted the figure “$750,000,000”. (2) The word and reference "and (b) (3)" at the end of the fourth sentence In such subsection shall be deleted and in lieu thereof there shall be substituted following the references, word and punctuation: “(b) (3), (c), (d), and (e)”. (3) The figure "$305,000,000" appearing in the fifth sentence in such subsection shall be deleted and in lieu thereof there shall be substituted the figure

"525,000,000". Further, the period at the end of such sentence shall be deleted and there shall be inserted the following additional references: “, (c), (d), and (e)".

TITLE III-SECURED LOANS TO PRIVATE (LOCAL) OR STATE DEVELOPMENT CREDIT CORPORATIONS

SEC. 301. Section 207 of the Small Business Act is hereby amended by adding the following new subsection:

"(c) The Administration is empowered to make loans for plant construction, conversion or expansion, including the acquisition of land, to private (local) or State development credit corporations formed to assist, develop, and expand the economy of an area, and such loans may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate on an immediate or deferred basis: Provided, however, That the foregoing powers shall be subject to the following restrictions and limitations:

"(1) No financial assistance shall be extended by the Administration pursuant to this subsection unless the financial assistance applied for is not otherwise available on reasonable terms and all loans made shall be so secured as reasonably to assure repayment; no immediate participation may be purchased unless it is shown that a deferred participation is not available; and no loan may be made unless it is shown that a participation is not available. In agreements to participate in loans on a deferred basis under this subsection, such participation by the Administration shall not be in excess of 90 per centum of the balance of the loan outstanding at the time of disbursement.

"(2) No financial assistance shall be extended by the Administration pursuant to this subsection if it will cause a relocation of all or a part of a small-business concern so as to effect a significant reduction in employment in the general area of original location or will provide facilities to be made available to a smallbusiness concern at a subsidy to induce any relocation or will aid any relocation for other than a sound business purpose approved by the Administrator.

"(3) The proceeds of any such loan must be used solely by such borrower to assist an identifiable small-business concern and for a sound business purpose approved by the Administration.

"(4) Loans made by the Administration under this authority shall be limited to $250,000 for each such identifiable small-business concern.

"(5) Such corporations must meet criteria established by the Administration, including the extent of participation or amount of paid-in capital to be used in each instance as is determined to be reasonable by the Administration.

"(6) No loans including extensions or renewals thereof may be made by the Administration for a period or periods exceeding ten years plus such additional period as is estimated may be required to complete construction, conversion, or expansion: Provided, That the Administration may extend the maturity of or rerew any loan made pursuant to this subsection beyond the period stated for additional periods not to exceed ten years, if such extension or renewal will aid in the orderly liquidation of such loan. Any such loan shall bear interest at a rate not to exceed 6 per centum per annum."

TITLE IV-LOANS TO STATE DEVELOPMENT CREDIT CORPORATIONS EVIDENCED BY DEBENTURES

SEC. 401. Section 207 of the Small Business Act is hereby amended by adding the following new subsection:

"(d) The Administration is also empowered to make loans to State development credit corporations, which shall be evidenced by debentures, promissory notes, or other obligations upon such conditions and in such form as may be approved by the Administration, subject to the following limitations:

*(1) Any funds loaned to a development credit corporation under this subsection must be used solely for the purpose of assisting small-business concerns and in accordance with regulations promulgated by the Administration.

"(2) No financial assistance shall be extended by the Administration pursuant to this subsection if it will cause a relocation of all or a part of a small business concern so as to effect a significant reduction in employment in the general area of original location or will provide facilities to be made available to a small-business concern at a subsidy to induce any relocation or will aid any relocation for other than a sound business purpose approved by the Administrator.