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Small Business Committee Newsletter Printer Friendly Version
Small Business Committee Notes
Friday, March 03, 2006 Printer Friendly Version
Small Business Committee Notes March 3, 2006 -- Issue 109-36 Phil Eskeland, Policy Director, House Committee on Small Business _______________________________ Chairman Manzullo Offers CFIUS Reforms to Ensure Greater Scrutiny of Foreign Government Deals Chairman’s reforms would have required automatic investigation of Dubai port deal On Wednesday, March 1, U.S. House Small Business Committee Chairman Don Manzullo (R-IL) proposed several reforms that would require the Administration to more closely scrutinize deals when foreign government-owned enterprises try to purchase companies operating in the United States. Chairman Manzullo offered his proposals during Wednesday’s hearing of the Financial Services Subcommittee on Domestic and International Monetary Policy, Trade and Technology, on which he serves. Chairwoman Deborah Pryce called the hearing to consider reforms to the Committee on Foreign Investment in the United States (CFIUS) in light of its rapid and cursory approval of the deal that gave Dubai Ports World -- a state-owned enterprise of the United Arab Emirates -- management control over 27 terminals at six major U.S. ports. “Foreign companies have saved or created more than 5 million jobs in the United States by investing in enterprises and workers on our shores. We must continue to welcome this investment,” Chairman Manzullo said. “However, our government must provide greater scrutiny when the purchaser is a foreign government. The reforms I have proposed will require automatic, extended investigations by CFIUS when foreign governments are the purchasers while opening up the entire process to greater participation by Congress and the American people.” Chairman Manzullo, who has challenged several CFIUS deals over the last few years, offered the following reforms that will be included in a legislative proposal he will introduce at a later date: · Greater transparency - CFIUS would be required to provide a notice and comment period in the Federal Register, hold a public hearing, and inform the relevant Congressional committees when an application is filed. · Automatic extended 45-day review for state-owned enterprises - CFIUS must follow the will of Congress and conduct an extended investigation every time an enterprise owned by a foreign government tries to buy a company operating in the United States. During that additional 45-day review, an analysis of trends and patterns must be undertaken to see if the foreign government buyer will play a passive role in management and live up to free market rules. · Transfer CFIUS to the Commerce Department - The Treasury Department has only pursued eight extended investigations out of the 451 cases it considered between 1997 and 2004, according to the General Accounting Office. A better home for CFIUS is the Bureau of Industry and Security (BIS) at the Commerce Department, which has expertise in balancing commercial interests and national security. BIS already has a team that examines the impact of certain foreign imports on the defense industrial base, which could be expanded to examine the economic impact of a state-owned enterprise purchase of a U.S.-based company. This proposal is a compromise between those who want to retain the status quo and those who believe it should be transferred to the Defense Department. For further information, please contact Rich Beutel, Special Counsel, or Phil Eskeland, Policy Director. _______________________________ WE&GP Subcommittee Hearing on SBA’s Entrepreneurship Programs On Thursday, March 2, the Subcommittee on Workforce, Empowerment, and Government Programs (WE&GP), chaired by Representative Marilyn Musgrave (R-CO), held an oversight hearing on the entrepreneurial programs of the SBA. Below is a copy of the opening statement of Chair Musgrave. “Good morning and thank you all for being here today as we conduct this oversight hearing on the Small Business Administration’s Entrepreneurial Development Programs. Quite often, when one thinks of the types of assistance the SBA provides the first thing that comes to mind is financial assistance. While it is true that through a variety of financing programs, the SBA guarantees small-business loans, fixed asset loans, and microloans, and provides debt and equity capital to small businesses, another critical function of the SBA is technical assistance. The SBA and its partners provide technical assistance programs, including training, counseling, mentoring, and information services to more than four million existing and potential entrepreneurs annually. Overseen by the Office of Entrepreneurial Development, the SBA provides grants to a network of over 950 Small Business Development Centers, or SBDCs; 389 SCORE chapters, which match executives with entrepreneurs for business counseling; and over 80 Women’s Business Centers. SBDCs, the largest entrepreneurial network supported by the SBA, offer one-stop assistance to individuals and small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. The program is a cooperative effort of the private sector, the educational community and federal, state and local governments. It enhances economic development by providing small businesses with management and technical assistance. SBDC assistance is tailored to the local community and the needs of individual clients. Each center develops services in cooperation with local SBA district offices to ensure statewide coordination with other available resources. The SBDC Program is designed to deliver up-to-date counseling, training and technical assistance in all aspects of small business management. SBDC services include, but are not limited to, assisting small businesses with financial, marketing, production, organization, engineering and technical problems and feasibility studies. Special SBDC programs and economic development activities include international trade assistance, technical assistance, procurement assistance, venture capital formation and rural development. The SBDCs also make special efforts to reach minority members of socially and economically disadvantaged groups, veterans, women and the disabled. Moreover, they provide assistance to small businesses applying for Small Business Innovation and Research (SBIR) grants from federal agencies. Another important cog in this wheel is the Service Corps of Retired Executives, or SCORE. A 501 (c) (3) nonprofit organization, SCORE provides a public service to entrepreneurs by offering small business advice and mentoring. Counselors work with entrepreneurs through every phase of their entrepreneurial venture: generating and assessing ideas, preparing a business plan, raising capital and managing the operations and finances of the growing venture. SCORE partners with a wide array of companies and organizations, including Citibank, Ford Motor Company, Vetcorp, and the American Management Association to expand small business outreach, services and resources to communities nationwide. Despite the fact that America’s 10.6 million women-owned businesses employ 19.1 million people and contribute $2.46 trillion to the economy, women continue to face unique obstacles in the world of business. Charged with promoting the growth of women-owned businesses through programs that address business training and technical assistance, and provide access to credit and capital, federal contracts, and international trade opportunities, Women’s Business Centers (WBCs) operate with the mission to level the playing field for women entrepreneurs. I am eager to get started, but before we hear from our panel, I would like to yield to our Ranking Member, the gentleman from Illinois, Mr. Lipinski.” For further information about this hearing, please contact Joe Hartz, Professional Staff _______________________________ Chairman Manzullo: GAO Report Reinforces Need to Enhance Small Business Efforts at Ex-Im Bank On Friday, March 3, House Small Business Committee Chairman Donald Manzullo (R-IL) said a report released today by the U.S. Government Accountability Office (GAO) reinforces the need to enhance small business efforts at the Export-Import Bank (Ex-Im) to ensure America’s small employers are getting the financing they need to compete internationally. The GAO study, which Chairman Manzullo requested as part of a Small Business Committee hearing last year (see SBC Notes 109-6), questions the reliability of the Ex-Im Bank’s small business data in determining whether Ex-Im provides enough support to small exporters. As of 2002, Ex-Im is required to set aside at least 20 percent of its financing for small businesses. However, since then, it has failed to meet this mandate despite the growth in overall exports supported by Ex-Im. The Ex-Im Bank provides loan guarantees and insurance to commercial banks to make trade credits available to U.S. exporters. Of its clients, 86 percent are small employers. While the GAO found that Ex-Im generally classified small business status correctly, there are inherent weaknesses in its data system and data that limits its ability to accurately determine its support for small business. The GAO discovered that for medium- and long-term loans and guarantees, for non bank-held insurance, and for working capital guarantees, the small business status of the exporter is known. However, for bank-held insurance and for credit guarantee facilities, the small business value is based on estimates that are sometimes inaccurate. The GAO report also pointed out that very few small business exporters participate in Ex-Im’s medium- and long-term loan and guarantee programs, which forms Ex-Im’s largest transactions in terms of dollar amount. “The GAO report shows why Ex-Im Bank is not meeting its statutory obligation to help America’s small business owners secure the financing and insurance they need to operate internationally,” Chairman Manzullo said. “While I am pleased to see Ex-Im has committed to act on the GAO’s recommendations, I believe this report reinforces the need to set up a small business office at Ex-Im and to enact programmatic changes to Ex-Im’s medium term loan and guarantee program to make it more attractive to small exporters.” Chairman Manzullo, who is also a member of the House Financial Services Committee, sits on the subcommittee responsible for reauthorizing the Ex-Im Bank. That reauthorization process is underway, and Chairman Manzullo will work with the committee leadership to ensure the interests of America’s small employers -- the job creators of our economy -- are upheld at the Ex-Im Bank. A copy of the GAO can be found by clicking on to this link -- www.gao.gov/cgi-bin/getrpt?GAO-06-351 <http://www.gao.gov/cgi-bin/getrpt?GAO-06-351>. For further information, please contact Rich Beutel, Special Counsel, or Jim Meenan, Senior Trade Advisor. _______________________________ Issues in Brief On Monday, February 27, House Small Business Committee Chairman Donald Manzullo (R-IL) co-signed a letter with 14 other House Members and Senators, including Senate Small Business & Entrepreneurship Committee Chair Olympia Snowe (R-ME), to the conferees on the tax reconciliation bill (H.R. 4297) encouraging them to include in the final version of the conference report Section 302 of the Senate-passed version. Section 302 provides relief from the onerous “sting tax” on excess passive income held by S corporations. Currently, a company’s Subchapter S tax status would terminate if it has excess passive income for three consecutive taxable years. Section 302 would eliminate this rule. In addition, Section 302 increases the threshold for taxing excess passive income from 25 percent to 60 percent. Finally, Section 302 removes gains from the sales or exchanges of stock or securities from the definition of passive investment income. The letter ends with a request for the conferees to support Section 302 of the Senate version of H.R. 4297 throughout the House-Senate tax reconciliation conference and retaining this important provision in the final bill. For further information, please contact John Westmoreland, Chief Tax Counsel. _______________________________ Upcoming Events Thursday, March 8 10:30AM - Tax, Finance & Exports Subcommittee oversight hearing on the Small Business Administration’s (SBA’s) finance programs. For further information, please contact Adam Noah, Counsel. _________________________________ Past hearings/mark-ups/roundtables/meetings in 2006 February 1, 2006 - Tax, Finance & Exports (TF&E) and Rural Enterprises, Agriculture & Technology (REA&T) joint subcommittee hearing on “Transforming the Tax Code: An Examination of the President’s Tax Reform Panel Recommendations.” February 8, 2006 - Regulatory Reform & Oversight (RR&O) Subcommittee hearing on “The Internet Sales Tax: Headaches Ahead for Small Business?” March 2, 2006 - Workforce, Empowerment & Government Programs Subcommittee (WE&GP) hearing on the “Oversight of the Small Business Administration’s Entrepreneurial Development Programs.” _____________________________ Small Business Website Check out the Small Business Committee website at http://www.house.gov/smbiz. The site includes regular updates on small business committee news. The site features special projects, press releases, hearings and scheduling information. _______________________________ Phil Eskeland Deputy Chief of Staff & Policy Director House Committee on Small Business Phil.Eskeland@mail.house.gov (202) 225-5821 To contact any staff member listed in the above newsletter, please use the general number for the House Small Business Committee - (202) 225-5821. Please E-mail me if you want to be removed from the mailing list or if you know of others who might be interested in receiving this publication. Mission Statement of the House Committee on Small Business "We promote the success of America’s small businesses by leveling the global economic playing field and reducing domestic burdens that impede their growth. In this spirit, we work to ensure that every branch of the U.S. government understands the critical role America’s small businesses play - both at home and abroad - including the jobs they create and the spirit of entrepreneurship they embody.”
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