Small Business Investment Companies: Passive Business Expansion and Technical Clarifications, 20433-20434 [2017-08810]
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20433
Rules and Regulations
Federal Register
Vol. 82, No. 83
Tuesday, May 2, 2017
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
RIN 3245–AG67
Small Business Investment
Companies: Passive Business
Expansion and Technical Clarifications
U.S. Small Business
Administration.
ACTION: Final rule; delay of effective
date and request for comment.
AGENCY:
On December 28, 2016, the
Small Business Administration (SBA)
published a final rule to expand
permitted investments in passive
businesses and provide further
clarification with regard to investments
in such businesses for the Small
Business Investment Company (SBIC)
Program, with an effective date of
January 27, 2017. On January 26, 2017,
SBA published a notification delaying
the effective date until March 21, 2017
and re-opened the rule for additional
public comment. On March 21, 2017,
SBA published another notification to
delay the effective date of this rule until
May 20, 2017, to give the new
administration time to further consider
the rule. After reviewing the final rule,
SBA is considering removing the
provision that would allow SBICs to use
a blocker corporation under its
regulations if an investor of an SBIC has
elected to be taxed as a regulated
investment company (RIC) and a direct
investment into the operating company
would cause the investor to receive or
be deemed to receive income that would
jeopardize its RIC status. SBA is seeking
additional comments regarding the
removal of this provision. In order to
give the public time to provide
comments and for SBA to review those
comments, the effective date of the final
rule is delayed until August 18, 2017.
DATES: The effective date of the SBA
final rule published December 28, 2016
(81 FR 95419), delayed until March 21,
2017 at 82 FR 8499 and then further
jstallworth on DSK7TPTVN1PROD with RULES
SUMMARY:
VerDate Sep<11>2014
14:38 May 01, 2017
Jkt 241001
delayed until May 20, 2017 at 82 FR
14428, is further delayed until August
18, 2017. Comments on this document
must be submitted no later than June 1,
2017.
ADDRESSES: You may submit comments,
identified by RIN 3245–AG67, by any of
the following methods:
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Mail, Hand Delivery/Courier: Theresa
Jamerson, Office of Investment and
Innovation, U.S. Small Business
Administration, 409 Third Street SW.,
Washington, DC 20416.
SBA will post comments on https://
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at https://www.regulations.gov,
please submit the information to
Theresa Jamerson, Office of Investment
and Innovation, 409 Third Street SW.,
Washington, DC 20416. Highlight the
information that you consider to be CBI,
and explain why you believe this
information should be held confidential.
SBA will review the information and
make the final determination of whether
it will publish the information.
FOR FURTHER INFORMATION CONTACT:
Theresa Jamerson, Office of Investment
and Innovation, (202) 205–7563 or sbic@
sba.gov.
SUPPLEMENTARY INFORMATION: The U.S.
Small Business Administration (SBA)
Final Rule entitled Small Business
Investment Companies: Passive
Business Expansion and Technical
Clarifications, 81 FR 95419 (December
28, 2016), had an effective date of
January 27, 2017. The Final Rule would
expand permitted investments in
passive businesses, provide further
clarification with regard to investments
in such businesses, and add certain
requirements to improve SBA’s ability
to monitor such investments. The Final
Rule would also make a conforming
change to the regulations regarding the
amount of leverage available to SBICs
under common control to be consistent
with the Consolidated Appropriations
Act, 2016, which increased the
maximum amount of such leverage from
$225 million to $350 million.
The January effective date was
delayed to March 21, 2017, and the
comment period was reopened until
February 19, 2017. 82 FR 8499 (January
26, 2017). The March effective date was
PO 00000
Frm 00001
Fmt 4700
Sfmt 4700
further delayed to May 20, 2017, for
additional review. 82 FR 14428 (March
21, 2017).
After completing its review, SBA is
considering removing the provision that
would allow SBICs to use a blocker
entity under 13 CFR 107.720(b)(3) if an
investor in an SBIC, typically a business
development company (BDC), has
elected to be taxed as a regulated
investment company (RIC) and a direct
investment into the operating company
would cause the investor to receive or
be deemed to receive income that would
jeopardize its RIC status. This provision
was not included in the proposed rule
published on October 5, 2016 (78 FR
77377), but was added to the final rule
published on December 28, 2016 (81 FR
95419) based on comments SBA
received. After further consideration,
SBA is concerned that, in light of the
increased complexities involved in
monitoring and examining investments
structured through blocker entities
using this provision may increase risk to
the SBIC program unless SBA were to
increase examination resources to
monitor these complex transactions.
SBA notes that the final rule provides,
among other things, two other
exceptions to the passive business
regulation—the blocker corporation
exception for SBICs with tax exempt
investors to avoid unrelated business
taxable income (UBTI) and a similar
exception for SBICs with foreign
investors to avoid effectively connected
income (ECI). SBA continues to believe
the number of SBICs that would
structure investments through passive
entities utilizing these two exceptions is
relatively low. Currently, SBA approves
approximately five blocker corporation
exceptions for UBTI each year and SBA
expects that, after the rule is effective,
only a few SBICs will use the ECI
exception. On the other hand, there are
currently 31 SBICs with BDC investors
(BDC–SBICs) holding over 23% of
SBA’s outstanding guaranteed leverage.
If the final rule were to become effective
in the form published on December 28,
2016, SBA believes that many BDC–
SBICs would structure a number of their
investments through passive entities.
Because BDC–SBICs represent such a
large percentage of SBA’s portfolio,
significant numbers of investments
structured through passive entities
would pose a monitoring and
examination challenge that could
E:\FR\FM\02MYR1.SGM
02MYR1
20434
Federal Register / Vol. 82, No. 83 / Tuesday, May 2, 2017 / Rules and Regulations
expose the program to an unacceptable
level of risk unless SBA increased
significantly its examination and
monitoring resources. Therefore, SBA is
considering revising the final rule to
remove this provision.
SBA is seeking comments from the
public to obtain additional input before
making a final decision. To provide SBA
with sufficient time to seek additional
comments and make this determination,
this notice further delays the effective
date by 90 additional days to August 18,
2017.
Dated: April 25, 2017.
A. Joseph Shepard,
Associate Administrator, Office of Investment
and Innovation.
[FR Doc. 2017–08810 Filed 5–1–17; 8:45 am]
BILLING CODE 8025–01–P
OVERSEAS PRIVATE INVESTMENT
CORPORATION
22 CFR Part 706
[No. FOIA–2016]
RIN 3420–AA02
Freedom of Information
Overseas Private Investment
Corporation.
ACTION: Final rule.
AGENCY:
This final rule implements
revisions to the Overseas Private
Investment Corporation’s (‘‘OPIC’’)
Freedom of Information Act (‘‘FOIA’’)
regulations by making substantive and
administrative changes. These revisions
are intended to supersede OPIC’s
current FOIA regulations, located at this
part. The final rule incorporates the
FOIA revisions contained in the FOIA
Improvement Act of 2016, makes
administrative changes to reflect OPIC’s
costs, and conforms more closely to the
language recommended by the
Department of Justice, Office of
Information Policy.
DATES: This rule is effective on May 1,
2017.
FOR FURTHER INFORMATION CONTACT:
Nichole Skoyles, Administrative
Counsel, (202) 336–8400, or foia@
opic.gov.
SUMMARY:
The
revision of part 706 incorporates
changes to the language and structure of
the regulations and adds new provisions
to implement the FOIA Improvement
Act of 2016. OPIC is already complying
with these changes and this revision
serves as OPIC’s formal codification of
the applicable law and its practice.
jstallworth on DSK7TPTVN1PROD with RULES
SUPPLEMENTARY INFORMATION:
VerDate Sep<11>2014
14:38 May 01, 2017
Jkt 241001
OPIC has also updated its regulations
to incorporate much of the suggested
language provided by the Department of
Justice, Office of Information Policy.
Adopting this language allows OPIC to
adopt many of the recommended best
practices in FOIA administration. This
update also assists requesters as much
of OPIC’s regulations are now similar to
those of other agencies.
OPIC published a proposed rule on
December 22, 2016 at 81 FR 93864 and
invited interested parties to submit
comments. OPIC received three sets of
comments and has made several
changes to its rule based on these
suggestions.
OPIC adopted all of the suggestions
provided. First, OPIC updated its
reference to General Records Schedule
14 to General Records Schedule 4.2 and
changed the description of the services
offered by the Office of Government
Information Services from ‘‘mediation’’
to ‘‘dispute resolution.’’ Second, OPIC
removed references to the voluntary/
involuntary tests applied under
Exemption 4 as these tests are laid out
in case law rather than the FOIA statute
itself. Third, OPIC removed the word
‘‘professional’’ from its example for
requesting expedited processing to make
it clear that a requester need not be paid
to disseminate information in order to
qualify for expedited processing.
Regulatory Flexibility Act (5 U.S.C. 601
et seq.)
Pursuant to the Regulatory Flexibility
Act, 5 U.S.C. 601 et seq., the head of
OPIC has certified that this rule, as
promulgated, will not have a significant
economic impact on a substantial
number of small entities. The rule
implements the FOIA, a statute
concerning the release of Federal
records, and does not economically
impact Federal Government relations
with the private sector. Further, under
the FOIA, agencies may recover only the
direct costs of searching for, reviewing,
and duplicating the records processes
for requesters. Based on OPIC’s
experience, these fees are nominal.
Executive Order 12866
OPIC is exempted from the
requirements of this Executive Order
per the Office of Management and
Budget’s October 12, 1993
memorandum. Accordingly, OMB did
not review this rule. However this rule
was generally composed with the
principles stated in section 1(b) of the
Executive Order in mind.
PO 00000
Frm 00002
Fmt 4700
Sfmt 4700
Unfunded Mandates Reform Act of
1995 (2 U.S.C. 202–05)
This rule will not result in the
expenditure by State, local, and tribal
governments in the aggregate, or by the
private sector, of $100,000,000 or more
in any one year, and it will not
significantly or uniquely affect small
governments. Therefore, no actions were
deemed necessary under the provisions
of the Unfunded Mandates Reform Act
of 1995.
Small Business Regulatory
Enforcement Fairness Act of 1996 (5
U.S.C. 801 et seq.).
This rule is not a major rule as
defined by section 804 of the Small
Business Regulatory Enforcement
Fairness Act of 1996. This regulation
will not result in an annual effect on the
economy of $100,000,000 or more; a
major increase in costs or prices; or
significant adverse effects on
competition, employment, investment,
productivity, innovation, or on the
ability of United State based companies
to compete with foreign-based
companies in domestic and export
markets.
List of Subjects in 22 CFR Part 706
Administrative practice and
procedure, Freedom of information,
Privacy.
■ For the reasons stated in the preamble
the Overseas Private Investment
Corporation revises 22 CFR part 706 to
read as follows:
PART 706—INFORMATION
DISCLOSURE UNDER THE FREEDOM
OF INFORMATION ACT
Subpart A—General
Sec.
706.1 Description.
706.2 Policy.
706.3 Scope.
706.4 Preservation and transfer of records.
706.5 Other rights and services.
Subpart B—Obtaining OPIC Records
706.10 Publicly available records.
706.11 Requesting non-public records.
Subpart C—Fees for Requests for NonPublic Records
706.20 In general.
706.21 Types of fees.
706.22 Requester categories.
706.23 Fees charged.
706.24 Requirements for waiver or
reduction of fees.
Subpart D—Processing of Requests for
Non-Public Records
706.30 Responsibility for responding to
requests.
706.31 Timing of responses to requests.
706.32 Responses to requests.
706.33 Confidential commercial
information.
E:\FR\FM\02MYR1.SGM
02MYR1
Agencies
[Federal Register Volume 82, Number 83 (Tuesday, May 2, 2017)]
[Rules and Regulations]
[Pages 20433-20434]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08810]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 82, No. 83 / Tuesday, May 2, 2017 / Rules and
Regulations
[[Page 20433]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 107
RIN 3245-AG67
Small Business Investment Companies: Passive Business Expansion
and Technical Clarifications
AGENCY: U.S. Small Business Administration.
ACTION: Final rule; delay of effective date and request for comment.
-----------------------------------------------------------------------
SUMMARY: On December 28, 2016, the Small Business Administration (SBA)
published a final rule to expand permitted investments in passive
businesses and provide further clarification with regard to investments
in such businesses for the Small Business Investment Company (SBIC)
Program, with an effective date of January 27, 2017. On January 26,
2017, SBA published a notification delaying the effective date until
March 21, 2017 and re-opened the rule for additional public comment. On
March 21, 2017, SBA published another notification to delay the
effective date of this rule until May 20, 2017, to give the new
administration time to further consider the rule. After reviewing the
final rule, SBA is considering removing the provision that would allow
SBICs to use a blocker corporation under its regulations if an investor
of an SBIC has elected to be taxed as a regulated investment company
(RIC) and a direct investment into the operating company would cause
the investor to receive or be deemed to receive income that would
jeopardize its RIC status. SBA is seeking additional comments regarding
the removal of this provision. In order to give the public time to
provide comments and for SBA to review those comments, the effective
date of the final rule is delayed until August 18, 2017.
DATES: The effective date of the SBA final rule published December 28,
2016 (81 FR 95419), delayed until March 21, 2017 at 82 FR 8499 and then
further delayed until May 20, 2017 at 82 FR 14428, is further delayed
until August 18, 2017. Comments on this document must be submitted no
later than June 1, 2017.
ADDRESSES: You may submit comments, identified by RIN 3245-AG67, by any
of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail, Hand Delivery/Courier: Theresa Jamerson, Office of Investment
and Innovation, U.S. Small Business Administration, 409 Third Street
SW., Washington, DC 20416.
SBA will post comments on https://www.regulations.gov. If you wish
to submit confidential business information (CBI) as defined in the
User Notice at https://www.regulations.gov, please submit the
information to Theresa Jamerson, Office of Investment and Innovation,
409 Third Street SW., Washington, DC 20416. Highlight the information
that you consider to be CBI, and explain why you believe this
information should be held confidential. SBA will review the
information and make the final determination of whether it will publish
the information.
FOR FURTHER INFORMATION CONTACT: Theresa Jamerson, Office of Investment
and Innovation, (202) 205-7563 or sbic@sba.gov.
SUPPLEMENTARY INFORMATION: The U.S. Small Business Administration (SBA)
Final Rule entitled Small Business Investment Companies: Passive
Business Expansion and Technical Clarifications, 81 FR 95419 (December
28, 2016), had an effective date of January 27, 2017. The Final Rule
would expand permitted investments in passive businesses, provide
further clarification with regard to investments in such businesses,
and add certain requirements to improve SBA's ability to monitor such
investments. The Final Rule would also make a conforming change to the
regulations regarding the amount of leverage available to SBICs under
common control to be consistent with the Consolidated Appropriations
Act, 2016, which increased the maximum amount of such leverage from
$225 million to $350 million.
The January effective date was delayed to March 21, 2017, and the
comment period was reopened until February 19, 2017. 82 FR 8499
(January 26, 2017). The March effective date was further delayed to May
20, 2017, for additional review. 82 FR 14428 (March 21, 2017).
After completing its review, SBA is considering removing the
provision that would allow SBICs to use a blocker entity under 13 CFR
107.720(b)(3) if an investor in an SBIC, typically a business
development company (BDC), has elected to be taxed as a regulated
investment company (RIC) and a direct investment into the operating
company would cause the investor to receive or be deemed to receive
income that would jeopardize its RIC status. This provision was not
included in the proposed rule published on October 5, 2016 (78 FR
77377), but was added to the final rule published on December 28, 2016
(81 FR 95419) based on comments SBA received. After further
consideration, SBA is concerned that, in light of the increased
complexities involved in monitoring and examining investments
structured through blocker entities using this provision may increase
risk to the SBIC program unless SBA were to increase examination
resources to monitor these complex transactions. SBA notes that the
final rule provides, among other things, two other exceptions to the
passive business regulation--the blocker corporation exception for
SBICs with tax exempt investors to avoid unrelated business taxable
income (UBTI) and a similar exception for SBICs with foreign investors
to avoid effectively connected income (ECI). SBA continues to believe
the number of SBICs that would structure investments through passive
entities utilizing these two exceptions is relatively low. Currently,
SBA approves approximately five blocker corporation exceptions for UBTI
each year and SBA expects that, after the rule is effective, only a few
SBICs will use the ECI exception. On the other hand, there are
currently 31 SBICs with BDC investors (BDC-SBICs) holding over 23% of
SBA's outstanding guaranteed leverage. If the final rule were to become
effective in the form published on December 28, 2016, SBA believes that
many BDC-SBICs would structure a number of their investments through
passive entities. Because BDC-SBICs represent such a large percentage
of SBA's portfolio, significant numbers of investments structured
through passive entities would pose a monitoring and examination
challenge that could
[[Page 20434]]
expose the program to an unacceptable level of risk unless SBA
increased significantly its examination and monitoring resources.
Therefore, SBA is considering revising the final rule to remove this
provision.
SBA is seeking comments from the public to obtain additional input
before making a final decision. To provide SBA with sufficient time to
seek additional comments and make this determination, this notice
further delays the effective date by 90 additional days to August 18,
2017.
Dated: April 25, 2017.
A. Joseph Shepard,
Associate Administrator, Office of Investment and Innovation.
[FR Doc. 2017-08810 Filed 5-1-17; 8:45 am]
BILLING CODE 8025-01-P