Rural Business Investment Company (RBIC) Program, 16519-16523 [2020-05746]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service
• Rural Utilities Service

[Federal Register Volume 85, Number 57 (Tuesday, March 24, 2020)]
[Rules and Regulations]
[Pages 16519-16523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05746]



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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. 

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Federal Register / Vol. 85, No. 57 / Tuesday, March 24, 2020 / Rules 
and Regulations

[[Page 16519]]



DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4290

[Docket No. RBS-12-NONE-0002]
RIN 0570-AB01


Rural Business Investment Company (RBIC) Program

AGENCY: Rural Business-Cooperative Service, Rural Utilities Service, 
USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Business-Cooperative Service (RBS) published an 
interim rule on December 23, 2011, which made several revisions to the 
Rural Business Investment program. Through this action, RBS finalizes 
the rule based on public comments, amends its regulations, and 
incorporates new program requirements established in the Agriculture 
Improvement Act of 2018 Bill for the Rural Business Investment Program. 
This action, which affects some of the substantive aspects of the Rural 
Business Investment Program, is expected to decrease the time and 
workload necessary in carrying out the Rural Business Investment 
Program.

DATES: This rule is effective March 24, 2020.

FOR FURTHER INFORMATION CONTACT: Sami Zarour, Director, Specialty 
Programs Division, Rural Business-Cooperative Service, U.S. Department 
of Agriculture, STOP 3225, 1400 Independence Avenue SW, Washington, DC 
20250-3225; email: [email protected]; telephone (202) 720-9549.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    This final rule has been determined to be non-significant for 
purposes of Executive Order (E.O.) 12866 and therefore has not been 
reviewed by the Office of Management and Budget (OMB).

Congressional Rulemaking Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule, as defined by 5 U.S.C. 804(2).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The Agency has determined that this rule meets the 
applicable standards provided in section 3 of the Executive order. In 
addition, all state and local laws and regulations that conflict with 
this rule will be preempted. No retroactive effect will be given to 
this rule.

Executive Order 12372

    These loans are subject to the provisions of Executive Order 12372 
that requires intergovernmental consultation with State and local 
officials. The Rural Business-Cooperative Service (RBS) conducts 
intergovernmental consultation for each RBIC loan in accordance with 2 
CFR part 415, subpart C.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.) the undersigned has determined and certified by signature of this 
document that this rule, while affecting small entities, will not have 
an adverse economic impact on small entities. This rule does not impose 
any significant new requirements on program recipients, nor does it 
adversely impact proposed real estate transactions involving program 
recipients as the buyers.

National Environmental Policy Act/Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1970, 
subpart A, ``Environmental Policies.'' It is the determination of the 
Agency that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment, and, in 
accordance with the National Environmental Policy Act of 1969, Public 
Law 91-190, neither an Environmental Assessment nor an Environmental 
Impact Statement is required.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the program 
impacted by this action is 10.860, Rural Business Investment Program. 
The Catalog is available on the internet at https://beta.sam.gov. The 
Government Publishing Office (GPO) prints and sells the CFDA to 
interested buyers. For information about purchasing the Catalog of 
Federal Domestic Assistance from GPO, call the Superintendent of 
Documents at 202-512-1800 or toll free at 866-512-1800, or access GPO's 
online bookstore at https://bookstore.gpo.gov.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public 
Law 104-4 establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 
Rural Development generally must prepare a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 of UMRA generally requires Rural Development to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

E-Government Act Compliance

    Rural Development is committed to complying with the E-Government 
Act, to provide increased opportunities for citizens to access 
Government information and services electronically to the maximum 
extent possible.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on

[[Page 16520]]

states, on the relationship between the National Government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Nor does this final rule impose 
substantial direct compliance costs on state and local governments. 
Therefore, consultation with states is not required.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes. Rural Development has 
assessed the impact of this rule on Indian tribes and determined that 
this rule does not, to our knowledge, have tribal implications that 
require tribal consultation under E.O. 13175. If a tribe would like to 
engage in consultation with Rural Development on this rule, please 
contact Rural Development's Native American Coordinator at (720) 544-
2911 or [email protected].

Civil Rights Impact Analysis

    Rural Development has reviewed this rule in accordance with USDA 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any 
major civil rights impacts the rule might have on program participants 
on the basis of age, race, color, national origin, sex or disability. 
Based on the review and analysis of the rule and available data, it has 
been determined that the program purpose, application submission and 
eligibility criteria, issuance of this final rule will neither 
adversely nor disproportionately impact low and moderate-income 
populations, minority populations, women, Indian tribes or persons with 
disability, by virtue of their race, color, national origin, sex, age, 
disability, or marital or familial status.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.), the information collection activities associated with 
this rule are covered under OMB Number: 0570-0051. This final rule 
contains no new reporting or recordkeeping requirements that would 
require approval under the Paperwork Reduction Act of 1995.

Background

I. Rural Business Investment Program

    The Rural Business Investment Program (RBIP) promotes economic 
development and the creation of wealth and job opportunities among 
individuals living in rural areas and to help meet the equity capital 
investment needs primarily of smaller enterprises located in such 
areas. Under the RBIP, for-profit Rural Business Investment Companies 
(RBICs) make venture capital investments in rural areas with the 
objectives of fostering economic development in such areas and 
returning maximum profits to the RBIC's investors. The regulations set 
forth the criteria RBS uses to select and license RBICs, guarantee its 
debentures, and to make grants to RBICs.
    The Food, Conservation, and Energy Program of 2008 (the 2008 Farm 
Bill) was enacted and affected several provisions of the RBIP 
regulation. Section 6027 of the 2008 Farm Bill resulted in the need for 
several regulatory modifications. The agency published an interim rule 
on December 23, 2011 at 76 FR 80217, with an effective date of January 
23, 2012.
    In addition, the Agency amended the program to allow RBICs to 
participate without financial leverage from the Agency. In response to 
the Interim rule, the agency received three comments from stakeholders. 
On December 21, 2018, the Agriculture Improvement Act of 2018 (the 2018 
Farm Bill) was enacted and contained several statutory amendments 
affecting the RBIP. Section 6426 of the 2018 Farm Bill resulted in 
necessary amendments to 7 CFR part 4290, subpart F.
    Lastly, the Agency is taking this opportunity to clarify several of 
the provisions of the regulation.

II. Summary of Changes

7 CFR Part 4290

Section 4290.50--Definitions
    Rural Business Concern: The current rule defines a Rural Business 
Concern as an ``enterprise whose Principal Office is located in a Rural 
Area.'' By requiring the Rural Business Concern's principal office to 
be located in a rural area, the Agency has determined that this 
restriction is hampering the full implementation of the program. The 
statute authorizing the program defines a rural business concern, in 
part, as one that ``primarily operates in a rural area.'' By focusing 
on the location of the principal office, the Agency is unnecessarily 
limiting the effectiveness of the program. In addition, per the 
authorizing statute, the key aspect, as noted above, is that the rural 
business concern ``primarily operates in a rural area. The current 
definition misses this key feature. For these reasons, the Agency is 
revising the definition of ``rural business concern'' to align with the 
statutory definition.
    Rural Business Concern Investment: The current rule defines a Rural 
Business Concern Investment as being ``located in a Rural Area at the 
time of the initial Financing.'' If the initial investment is made in a 
concern located in an area not considered Rural with the stipulation 
that the Concern will relocate to a Rural Area after initial financing, 
the current rules require the RBIC to carry the investment as a non-
rural Investment. By requiring the RBIC to carry an investment as a 
non-rural Investment when the concern has relocated to Rural Area puts 
an undue burden on the RBIC. The intent of the program is to bring 
businesses and job opportunities to Rural Areas. So, if the investment 
was implemented to help facilitate the relocation of the business to a 
Rural Area, the RBIC should be able to reclassify the initial 
investment as a ``Rural Business Concern Investment.''
     In addition, the definitions are being revised to be 
consistent with the 2018 Farm Bill and to remove various other 
definitions that are no longer needed. These include: Revising Urban 
Area Investment, Developmental Venture Capital, Rural Business Concern, 
and Rural Business Concern Investment; adding Agency; and deleting 
Principal Office, Secretary, Small Business Concern, Small Business 
Concern Investment.
Section 4290.210--Minimum Capital Requirements for RBICs
    The current regulation requires an RBIC to raise the amount of 
funds it has identified in its application by the end of the second 
year from when it receives its ``green light'' letter. However, the 
current regulation does not adequately address situations in which the 
RBIC may raise and close on capital in increments before the end of 
second year. Such multiple closing is not uncommon when for competing 
private equity funds. To better align the program with the realities of 
raising private equity funds, the Agency is adding a new paragraph to 
this section (see Sec.  4290.210(d)) that specifically allows for 
multiple closings.

[[Page 16521]]

Section 4290.330--Grant Issuance Fee
    In order to implement language from the 2018 Farm Bill, the Agency 
is removing the $500 cap on guarantee fees the Secretary may charge and 
revising the paragraph. Any fee charged will be published in the 
Federal Register and published on the Rural Development website.
Section 4280.700--Requirements Concerning Types of Enterprises To 
Receive Financing
    The Agency is revising the requirements found in this section in 
three ways, as described below.
    1. The current regulation identifies minimum levels of financing 
that must be received by rural business concerns, smaller enterprises, 
and small business concerns and a maximum level of financing that can 
go to urban area investments. The authorizing statute contains 
requirements for the minimum percentage of financings that must be 
received by rural business concerns and that maximum percentage that 
can be received in urban areas; it does not specifically identify 
similar requirements for either smaller enterprises or small business 
concern investments.
    The Agency is keeping the financial requirements for smaller 
enterprise investments because of the emphasis in the statue. The 
Agency is, however, dropping the financing percentage requirements for 
small business concern investments (i.e., removing Sec.  4290.700(c) 
from the regulation). This simplifies the implementation of the program 
and helps reduce potential overlap with programs administered by the 
Small Business Administration.
    2. The current regulation requires the percentage requirements to 
be met on both the percentage of the number of concerns receiving 
Financing within the RBIC's portfolio and the percentage of dollars the 
RBIC provides to the concerns in its portfolio. Requiring both 
percentages to be met unnecessarily complicates the program. Therefore, 
the Agency is revising the percentage requirements to be applied to the 
amount of dollars the RBIC spends on concerns in the three remaining 
areas (i.e., rural business concerns, smaller businesses, and urban 
areas).
    3. The current regulation requires RBICs to comply with the 
Financing percentages starting the first year after issuance of the 
certificate. This is unnecessarily restrictive and does not allow an 
RBIC sufficient time to implement the program. Therefore, the Agency is 
revising the regulation to require that the Financing percentages be 
met by the third year after the RBIC receives its certificate, and each 
subsequent year thereafter.
     Removing reference to Small Business Concern/Small 
Business Concern Investment in Sec. Sec.  4290.370(h), 4290.610(b), and 
4290.760(a). The authorizing statute for RBIC does not require Small 
Business Concerns and the agency is removing this reference to allow 
for more flexibility for RBICs.
Section 4290.720(g)--Foreign Investment Exceptions
    In general, the current regulation prohibits Financings to an 
enterprise if the funds will be used substantially for a foreign 
operation or more than 49 percent of the employees or tangible assets 
of the enterprise are located outside the United States. The current 
regulation has one exception--allowing a financing used to acquire 
foreign materials and equipment or foreign property rights for use or 
sale in the United States.
    The Agency has determined that the restriction on financing of 
foreign investments is unnecessarily restrictive--it is prohibiting 
investments in rural America that will provide more opportunities for 
job creation and general economic stimulus. Therefore, the Agency is 
adding a second exception that will allow the financing of a subsidiary 
of foreign owned entities when that subsidiary is based in the United 
States with a minimum of 51 percent U.S. ownership (see Sec.  
4290.720(g)(2)(ii)).
Section 4290.720(i)--Entities Ineligible for Farm Credit System 
Assistance
    This rule will increase the limitation on rural business investment 
companies controlled by Farm Credit System institutions from 25% to 50% 
before the rural investment company is prohibited from providing equity 
investments to companies that are not otherwise eligible to receive 
financing from the Farm Credit System.
Section 4290.720(k)--Changes in Ownership of an Enterprise
    The current regulation requires an RBIC to obtain Agency approval 
whenever there has been a change in ownership. This provision is an 
unnecessary burden to RBICs because every financing involving equity 
capital triggers a change in ownership. Furthermore, the appropriate 
change should be in the change of control (not ownership) in the rural 
business concern. Change of control occurs when more than 50 percent of 
the concern exchanges hands. The Agency, therefore, is revising this 
provision to require Agency approval when there is change of more than 
50 percent of control.
Remove the Word ``Secretary'' and Replace With ``Agency.''
    The current RBIP rule refers throughout to the ``Secretary'' (that 
is, the Secretary of Agriculture) in a number of contexts. A 
substantial number of these references involve an action by the 
Secretary, such as approvals, delegations, and determinations. The 
Administrator, Rural Business-Cooperative Service is delegated 
authority through 7 CFR 2.48(a)(2)(xiii) to administer the Rural 
Business Investment Program. Therefore, all references to ``Secretary'' 
are being revised to reflect the delegation to the Rural Business-
Cooperative Service throughout 7 CFR part 4290.

III. Summary of Comments and Responses From Prior Rulemaking

    On December 23, 2011, the Rural Business Cooperatives Service (RBS) 
published an interim rule in the Federal Register (76 FR 80217) to 
conform the Rural Business Investment Program (RBIP) to the 2008 Farm 
Bill, to add provisions for Rural Business Investment Companies (RBIC) 
that wish to participate in a non-leveraged capacity, and to make 
several clarifications to the existing rule for leveraged RBICs. In 
addition, this rule amended the categorical exclusions from the 
National Environmental Policy Act by adding categorical exclusions for 
the RBIP for both leveraged and non-leveraged RBICs.
    Three commenters--1 from a sponsoring organization and 2 from 
industry associations, provided a total of 29 comments in response to 
the interim rule. One comment was supportive of the changes to the 
rule. Commenter indicated that the change to the program in general 
would help support rural communities and economic development. There 
were 4 comments that were neither supportive nor adverse. There were 24 
comments that were averse to certain changes in the interim rule, below 
are listed the substantive comments.
    Comments on rural area: One comment supported the direction that 
UDSA set forth in the interim rule and believes that the USDA has 
identified an appropriate balance between a regulatory framework that 
can improve the long-term viability of a non-leverage RBIC while still 
allowing sufficient flexibility, either expressly or by providing the 
Secretary with the

[[Page 16522]]

opportunity to exercise discretion to accommodate unique circumstances.
    The four indifferent comments included one wanting some 
confirmation that Community Reinvestment Act (CRA) Credits will be 
available for community banks. One commenter wanted to work with the 
program to make it workable with their clients. Two comments wanted the 
Agency to provide participation requirements for non-leveraged RBICs 
and work with the associations to survey its members.
    Response: The Agency acknowledges the supportive and indifferent 
comments, and no action is needed for those comments. RBS disagrees 
with the following adverse comments.
    Non-Supportive Comments: Five comments suggested that the rule 
should have been issued as a proposed rule or final rule instead of an 
interim rule.
    Response: The Administrative Procedures Act (APA) (5 U.S.C. 
553(a)(2)) provides that notice and comment is not required with 
respect to rules involving listed subject matters areas including 
``loans, grants, benefits and contracts.'' At the time the interim rule 
was issued, it was the policy of USDA to issue a proposed rule even 
though this exemption applied unless the agency found for good cause 
that an interim rule instead of a final rule was in the public 
interest. On October 28, 2013 (78 FR 64194), USDA published a notice in 
the Federal Register revoking this policy of seeking notice and comment 
when the provisions of 5 U.S.C. 553(a)(3) were otherwise applicable. As 
stated in the preamble of the interim rule, RBS determined that good 
cause existed for the issuance of an interim rule; notably, the degree 
of similarity between this program and Small Business Administration's 
(SBA) Small Business Investment Company (SBIC) and New Market Venture 
Capital (NMVC) programs. RBS determined at that time that little was to 
be gained from a delay in implementing the program for public comment. 
USDA minimized administrative burdens by adopting as much of the SBA's 
SBIC and NMVC programs as possible. Accordingly, the interim rule 
imposed a minimum number of unfamiliar requirements from the SBIC and 
NMVC programs and the rule should be very familiar to applicants 
currently participating in either of those programs.
    Non-Supportive Comments: One comment suggested that SBA should 
administer the program.
    Response: The comment is not attributable to the interim rule as it 
does not address how the Agency will implement the non-leverage 
program. The RBIP program will be administered by the Administrator of 
the Rural Business and Cooperative Service.
    Non-Supportive Comments: One comment suggested that the rule will 
have significant impact on a substantial number of small entities.
    Response: The Agency disagrees with the concern that the rule will 
have a significant impact on a substantial number of small entities. 
The comment is attributed to the preamble section ``Regulatory 
Flexibility Act Certification,'' which is intended to address the 
regulatory burden a rule imposed on small entities.
    Non-Supportive Comments: One comment was concerned about the 
definition of rural being subjective and open-ended.
    Response: The Agency disagrees that the definition of rural is 
subjective and open-ended. The definition of ``Rural in character'' is 
statutorily required and will be determined by USDA for this and its 
other regulations.
    Non-Supportive Comments: Ten comments were concerned about Federal 
Credit Administration (FCA) administering the RBIP.
    Response: The RBIP program will be administered by the 
Administrator of the Rural Business and Cooperative Service.
    Non-Supportive Comments: Six comments requested including local and 
community banks in the RBIP.
    Response: The Agency and the program makes every effort to work 
with community and local banks.

IV. Rural Business Investment Program Applications

    As provided in 7 CFR 4290.300, a Notice of Solicitation for 
Applications (NOSA) will be published separately for each fiscal year, 
as necessary, to announce any special limitations and the opening and 
closing dates for the application window.

List of Subjects in 7 CFR Part 4290

    Community development, Government securities, Grant programs--
business, Securities, Small businesses.

    Therefore, chapter XLII, title 7 of the Code of Federal Regulations 
is amended as follows:

PART 4290--RURAL BUSINESS INVESTMENT COMPANY (``RBIC'') PROGRAM

0
1. The authority citation for part 4290 continues to read as follows:

    Authority: 7 U.S.C. 1989 and 2009cc et seq.


0
2. In part 4290, wherever they may occur:
0
a. Remove the word ``Secretary'' and add in its place ``Agency'';
0
b. Remove the word ``Secretary's'' and add in its place ``Agency's'';
0
c. Remove the words ``his or her'' and add in their place ``its'';
0
d. Remove the words ``he or she'' and add in their place ``it'';
0
e. Remove the words ``him or her'' and add in their place ``it'';
0
f. Remove the words ``him or herself'' and add in their place 
``itself'';
0
g. Remove the words ``himself or herself'' and add in their place 
``itself''; and
0
h. Remove the word ``Venture''.

Subpart B--Definition of Terms Used in Part 4290

0
3. Amend Sec.  4290.50 by:
0
a. Adding the definition for ``Agency'' in alphabetical order;
0
b. Removing the definition of ``Principal Office;''
0
c. Revising the definitions ``Rural Business Concern'' and ``Rural 
Business Concern Investment;''
0
d. Removing the definition of ``Agency'' following the definition of 
``Secondary Relative'' and the definitions of ``Small Business 
Concern'' and ``Small Business Concern Investment;''
0
e. In the definition for ``Urban Area Investment,'' removing the words 
``whose Principle Office was located'' and adding in their place ``that 
primarily operates.''
    The addition and revisions read as follows:


Sec.  4279.50  Definition of terms.

* * * * *
    Agency means the Rural Business-Cooperative Service (RBS) an agency 
of the U.S. Department of Agriculture.
* * * * *
    Rural Business Concern means an Enterprise that primarily operates 
in a Rural Area.
    Rural Business Concern Investment means a Financing in a Rural 
Business Concern at the time of the initial Financing or if the initial 
Financing is to facilitate a relocation from a Non-rural Area to a 
Rural Area after that initial Financing.
* * * * *

Subpart C--Qualifications for the RBIC Program

0
4. Amend Sec.  4290.210 by adding paragraph (d) to read as follows:


Sec.  4290.210  Minimum capital requirements for RBICs.

* * * * *

[[Page 16523]]

    (d) Closing. Each RBIC may conduct more than one closing to raise 
the specific amount of Regulatory Capital that the Applicant had 
projected in its application that it would raise (see Sec.  
4290.310(b)). One or more closings may take place subsequent to 
licensing as an RBIC to raise the difference between the required 
Regulatory Capital as provided under paragraphs (a) and (b) of this 
section and the specific amount of Regulatory Capital that the 
Applicant had projected to raise in its application.


Sec.  4290.230  [Amended]

0
5. Amend Sec.  4290.230(c)(5) by removing the word ``collectibility'' 
and adding in its place ``collectability''.

Subpart D--Application and Approval Process for RBIC Licensing

0
6. Revise Sec.  4290.330 to read as follows:


Sec.  4290.330  Guarantee fee.

    In cases of Leveraged Applications, the Applicant must pay to the 
Agency an issuance fee for each grant or debenture guarantee. The 
Agency may charge such fees as the Agency considers appropriate, so 
long as those fees are proportionally equal for each rural business 
investment company, with respect to any guarantee or grant issued under 
this subchapter.

Subpart E--Evaluation and Selection of RBICs


Sec.  4290.340  [Amended]

0
7. Amend Sec.  4290.340 introductory text by removing ``Agency on 
behalf of USDA'' and adding in its place ``Administrator of RBS''.


0
8. Amend Sec.  4290.370 by revising the introductory text and paragraph 
(h) to read as follows:


Sec.  4290.370  Evaluation criteria.

    Of those Applicants whose management team is considered qualified 
for venture capital investing and who have submitted an eligible and 
complete application, the Administrator of RBS and the Administrator on 
behalf of SBA, in their sole discretion, will evaluate and select an 
Applicant for participation in the RBIC program by considering the 
following criteria:
* * * * *
    (h) The extent to which the Applicant will concentrate its 
activities on serving Smaller Enterprises located in the Rural Area in 
which it intends to invest, including the ratio of resources that it 
proposes to invest in such Enterprises as compared to other 
Enterprises;
* * * * *

0
9. Amend Sec.  4290.380 by revising the first sentence to read as 
follows:


Sec.  4290.380  Selection.

    From among the Applicants that have submitted eligible and complete 
applications, the Administrator of RBS and the Administrator on behalf 
of SBA, in their sole discretion, will select some, all, or none of 
such Applicants to participate in the RBIC program. * * *


0
10. Amend Sec.  4290.390 by revising paragraph (b) to read as follows:


Sec.  4290.390  Licensing as a RBIC.

* * * * *
    (b) Licensing as a RBIC. If the selected Applicant has 
satisfactorily met all the conditions specified in paragraph (a) of 
this section, as determined within the sole discretion of the Agency, 
then the Administrator of RBS and the Administrator on behalf of SBA 
will license the Applicant as a RBIC.
* * * * *

Subpart H--Recordkeeping, Reporting, and Examination Requirements 
for RBICs


Sec.  4290.610  [Amended]

0
11. Amend Sec.  4290.610 by removing paragraph (b) and redesignating 
paragraphs (c) and (d) as paragraphs (b) and (c), respectively.

Subpart I--Financing of Enterprises by RBICs

0
12. Revise Sec.  4290.700 to read as follows:


Sec.  4290.700  Requirements concerning types of Enterprises to receive 
Financing.

    (a) Financing requirements. Beginning after the third fiscal year 
after the issuance of your RBIC license and at the close of each of 
your fiscal years thereafter, you must be in compliance with the 
Financing percentages specified in this paragraph (a).
    (1) Rural Business Concerns. At least 75 percent of your Financings 
(in total dollars) to your Portfolio Concerns must have been to Rural 
Business Concerns.
    (2) Smaller Enterprises. More than 50 percent of your Financings 
(in total dollars) to your Portfolio Concerns must have been to Smaller 
Enterprises that, at the time of the initial Financing to such 
Enterprise, meet either the net worth/net income test or the size 
standard set forth in the ``Smaller Enterprise'' definition in Sec.  
4290.50.
    (3) Urban Areas. No more than 10 percent of your Financings (in 
total dollars) to your Portfolio Concerns must have been made to 
Portfolio Concerns located in an Urban Area.
    (b) Non-compliance. If you are not in compliance with any of the 
Financing percentages specified in paragraph (a) of this section at the 
end of the third fiscal year after the issuance of your RBIC license or 
any fiscal year thereafter, you must come into compliance by the end of 
the following fiscal year. For as long as you remain out of compliance, 
you are not eligible for additional Leverage (see Sec.  4290.1120).


0
13. Amend Sec.  4290.720 by:
0
a. Revising paragraph (g)(2);
0
b. In paragraph (i), removing ``25 percent'' and adding in its place 
``50 percent''; and
0
c. In paragraph (k), removing ``of ownership'' from the heading and 
adding ``in control'' in its place and removing ``ownership of'' and 
adding ``more than 50 percent control of'' in its place.
    The revision reads as follows:


Sec.  4290.720  Enterprises that may be ineligible for Financing.

* * * * *
    (g) * * *
    (2) Exception. This paragraph (g) does not prohibit either:
    (i) A Financing used to acquire foreign materials and equipment or 
foreign property rights for use or sale in the United States; or
    (ii) A Financing in a subsidiary based in the United States of 
foreign-owned entities with at least 51 percent U.S. ownership.
* * * * *


Sec.  4290.760  [Amended]

0
14. Amend Sec.  4290.760(a) by removing the words ``or Small Business 
Concern''.

    Dated: March 13, 2020.
Mark Brodziski,
Acting Administrator, Rural Business-Cooperative Service.
    Dated: March 13, 2020.
Chad Rupe,
Administrator, Rural Utilities Service.
[FR Doc. 2020-05746 Filed 3-23-20; 8:45 am]
BILLING CODE 3410-XY-P