12 U.S.C. § 5702 — Federal funds allocated to States

Page 2014 TITLE 12—BANKS AND BANKING § 5702 (ii) is not a State capital access pro- gram; and (iii) meets the eligibility criteria in sec- tion 5705(c) of this title; and (B) includes, collateral support programs, loan participation programs, State-run ven- ture capital fund programs, and credit guar- antee programs. (13) State program The term ‘‘State program’’ means a State capital access program or a State other credit support program. (14) Secretary The term ‘‘Secretary’’ means the Secretary of the Treasury. (15) Business enterprise owned and controlled by socially and economically disadvan- taged individuals The term ‘‘business enterprise owned and controlled by socially and economically dis- advantaged individuals’’ means a business that— (A) if privately owned, 51 percent is owned by one or more socially and economically disadvantaged individuals; (B) if publicly owned, 51 percent of the stock is owned by one or more socially and economically disadvantaged individuals; and (C) in the case of a mutual institution, a majority of the Board of Directors, account holders, and the community which the insti- tution services is predominantly comprised of socially and economically disadvantaged individuals. (16) Community development financial institu- tion The term ‘‘community development finan- cial institution’’ has the meaning given that term under section 4702 of this title. (17) Minority depository institution The term ‘‘minority depository institution’’ has the meaning given that term under section 308(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. (18) Socially and economically disadvantaged individual The term ‘‘socially and economically dis- advantaged individual’’ means an individual who is a socially disadvantaged individual or an economically disadvantaged individual, as such terms are defined, respectively, under section 637 of title 15 and the regulations thereunder. (19) Tribal government The term ‘‘Tribal government’’ means the recognized governing body of any Indian or Alaska Native tribe, band, nation, pueblo, vil- lage, community, component band, or compo- nent reservation, individually identified (in- cluding parenthetically) in the list published most recently as of March 11, 2021, pursuant to section 5131 of title 25. (Pub. L. 111–240, title III, § 3002, Sept. 27, 2010, 124 Stat. 2568; Pub. L. 117–2, title III, § 3301(e), (f), Mar. 11, 2021, 135 Stat. 71.) Editorial Notes REFERENCES IN TEXT The Federal Credit Union Act, referred to in par. (2)(B), is act June 26, 1934, ch. 750, 48 Stat. 1216, which is classified principally to chapter 14 (§ 1751 et seq.) of this title. For complete classification of this Act to the Code, see section 1751 of this title and Tables. Section 308(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, referred to in par. (17), is section 308(b) of Pub. L. 101–73, which is set out in a note under section 1463 of this title. AMENDMENTS 2021—Par. (10)(E). Pub. L. 117–2, § 3301(e), added sub- par. (E). Pars. (15) to (19). Pub. L. 117–2, § 3301(f), added pars. (15) to (19). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Pub. L. 117–2, title III, § 3301(g), Mar. 11, 2021, 135 Stat. 72, provided that: ‘‘The amendments made by this sec- tion [amending this section and sections 5702 to 5706, 5708, and 5710 of this title and enacting provisions set out as a note below] shall apply with respect to funds appropriated under this section and funds appropriated on and after the date of enactment of this section [Mar. 11, 2021].’’ SHORT TITLE Pub. L. 111–240, title III, § 3001, Sept. 27, 2010, 124 Stat. 2568, provided that: ‘‘This title [enacting this chapter] may be cited as the ‘State Small Business Credit Ini- tiative Act of 2010’.’’ APPROPRIATION Pub. L. 117–2, title III, § 3301(a)(2), Mar. 11, 2021, 135 Stat. 69, provided that: ‘‘(A) IN GENERAL.—In addition to amounts otherwise available, there is hereby appropriated to the Secretary of the Treasury for fiscal year 2021, out of any money in the Treasury not otherwise appropriated, $10,000,000,000, to remain available until expended, to provide support to small businesses responding to and recovering from the economic effects of the COVID–19 pandemic, ensure business enterprises owned and con- trolled by socially and economically disadvantaged in- dividuals have access to credit and investments, pro- vide technical assistance to help small businesses ap- plying for various support programs, and to pay reason- able costs of administering such Initiative. ‘‘(B) RESCISSION.—With respect to amounts appro- priated under subparagraph (A)— ‘‘(i) the Secretary of the Treasury shall complete all disbursements and remaining obligations before September 30, 2030; and ‘‘(ii) any amounts that remain unexpended (wheth- er obligated or unobligated) on September 30, 2030, shall be rescinded and deposited into the general fund of the Treasury.’’ § 5702. Federal funds allocated to States (a) Program established; purpose There is established the State Small Business Credit Initiative, to be administered by the Sec- retary. Under the Program, the Secretary shall allocate Federal funds to participating States and make the allocated funds available to the participating States as provided in this section for the uses described in this section. (b) Allocation formula (1) In general Not later than 30 days after March 11, 2021, the Secretary shall allocate Federal funds to Page 2015 TITLE 12—BANKS AND BANKING § 5702 1 So in original. Two subpars. (C) have been enacted. participating States so that each State is eli- gible to receive an amount equal to what the State would receive under the 2021 allocation, as determined under paragraph (2). (2) 2021 allocation formula (A) In general With respect to States other than Tribal governments, the Secretary shall determine the 2021 allocation by allocating Federal funds among the States in the proportion that each such State’s 2020 State employ- ment decline bears to the aggregate of the 2020 State employment declines for all States. (B) Minimum allocation The Secretary shall adjust the allocations under subparagraph (A) for each State to the extent necessary to ensure that no State re- ceives less than 0.9 percent of the Federal funds. (C) 1 2020 State employment decline defined In this paragraph and with respect to a State, the term ‘‘2020 State employment de- cline’’ means the excess (if any) of— (i) the number of individuals employed in such State determined for December 2019; over (ii) the number of individuals employed in such State determined for December 2020. (C) 1 Separate allocation for Tribal govern- ments (i) In general With respect to States that are Tribal governments, the Secretary shall deter- mine the 2021 allocation by allocating $500,000,000 among the Tribal governments in the proportion the Secretary deter- mines appropriate, including with consid- eration to available employment and eco- nomic data regarding each such Tribal government. (ii) Notice of intent; timing of allocation With respect to allocations to States that are Tribal governments, the Sec- retary may— (I) require Tribal governments that in- dividually or jointly wish to participate in the Program to file a notice of intent with the Secretary not later than 30 days after March 11, 2021; and (II) notwithstanding paragraph (1), al- locate Federal funds to participating Tribal governments not later than 60 days after March 11, 2021. (D) Employment data If the Secretary determines that employ- ment data with respect to a State is unavail- able from the Bureau of Labor Statistics of the Department of Labor, the Secretary shall consider such other economic and em- ployment data that is otherwise available for purposes of determining the employment data of such State. (c) Availability of allocated amount The amount allocated by the Secretary to each participating State under subsection (b) shall be made available to the State as follows: (1) Allocated amount generally to be available to State in one-thirds (A) In general The Secretary shall— (i) apportion the participating State’s al- located amount into thirds; (ii) transfer to the participating State the first 1⁄3 when the Secretary approves the State for participation under section 5703 of this title; and (iii) transfer to the participating State each successive 1⁄3 when the State has cer- tified to the Secretary that it has ex- pended, transferred, or obligated 80 per- cent of the last transferred 1⁄3 for Federal contributions to, or for the account of, State programs that have delivered loans or investments to eligible businesses. (B) Authority to withhold pending audit The Secretary may withhold the transfer of any successive 1⁄3 pending results of a fi- nancial audit. (C) Inspector General audits (i) In general The Inspector General of the Department of the Treasury shall carry out an audit of the participating State’s use of allocated Federal funds transferred to the State. (ii) Recoupment of misused transferred funds required The allocation agreement between the Secretary and the participating State shall provide that the Secretary shall re- coup any allocated Federal funds trans- ferred to the participating State if the re- sults of the an audit include a finding that there was an intentional or reckless mis- use of transferred funds by the State. (iii) Penalty for misstatement Any participating State that is found to have intentionally misstated any report issued to the Secretary under the Program shall be ineligible to receive any addi- tional funds under the Program. Funds that had been allocated or that would oth- erwise have been allocated to such partici- pating State shall be paid into the general fund of the Treasury for reduction of the public debt. (iv) Municipalities In this subparagraph, the term ‘‘partici- pating State’’ shall include a municipality given special permission to participate in the Program, under section 5703(d) of this title. (D) Exception The Secretary may, in the Secretary’s dis- cretion, transfer the full amount of the par- ticipating State’s allocated amount to the State in a single transfer if the participating State applies to the Secretary for approval Page 2016 TITLE 12—BANKS AND BANKING § 5702 to use the full amount of the allocation as collateral for a qualifying loan or swap fund- ing facility. (2) Transferred amounts Each amount transferred to a participating State under this section shall remain avail- able to the State until used by the State as permitted under paragraph (3). (3) Use of transferred funds Each participating State may use funds transferred to it under this section only— (A) for making Federal contributions to, or for the account of, an approved State pro- gram; (B) as collateral for a qualifying loan or swap funding facility; (C) in the case of the first 1⁄3 transferred, for paying administrative costs incurred by the State in implementing an approved State program in an amount not to exceed 5 percent of that first 1⁄3; or (D) in the case of each successive 1⁄3 trans- ferred, for paying administrative costs in- curred by the State in implementing an ap- proved State program in an amount not to exceed 3 percent of that successive 1⁄3. (4) Termination of availability of amounts not transferred (A) In general Any portion of a participating State’s allo- cated amount that has not been transferred to the State under this section may be deemed by the Secretary to be no longer al- located to the State and no longer available to the State and shall be returned to the general fund of the Treasury or reallocated as described under subparagraph (B), if— (i) the second 1⁄3 of a State’s allocated amount has not been transferred to the State before the end of the end of the 3- year period beginning on the date that the Secretary approves the State for participa- tion; or (ii) the last 1⁄3 of a State’s allocated amount has not been transferred to the State before the end of the end of the 6- year period beginning on the date that the Secretary approves the State for participa- tion. (B) Reallocation Any amount deemed by the Secretary to be no longer allocated to a State and no longer available to such State under sub- paragraph (A) may be reallocated by the Secretary to other participating States. In making such a reallocation, the Secretary shall not take into account the minimum al- location requirements under subsection (b)(2)(B) or the specific allocation for Tribal governments described under subsection (b)(2)(C). (5) Transferred amounts not assistance The amounts transferred to a participating State under this section shall not be consid- ered assistance for purposes of subtitle V of title 31. (6) Definitions In this section— (A) the term ‘‘allocated amount’’ means the total amount of Federal funds allocated by the Secretary under subsection (b) to the participating State; and (B) the term ‘‘1⁄3’’ means— (i) in the case of the first 1⁄3 and second 1⁄3, an amount equal to 33 percent of a par- ticipating State’s allocated amount; and (ii) in the case of the last 1⁄3, an amount equal to 34 percent of a participating State’s allocated amount. (d) Additional allocations to support business en- terprises owned and controlled by socially and economically disadvantaged individuals Of the amounts appropriated for fiscal year 2021 to carry out the Program, the Secretary shall— (1) allocate $1,500,000,000 to States from funds allocated under this section and, by reg- ulation or other guidance, prescribe Program requirements that the funds be expended for business enterprises owned and controlled by socially and economically disadvantaged indi- viduals; and (2) allocate such amounts to States based on the needs of business enterprises owned and controlled by socially and economically dis- advantaged individuals, as determined by the Secretary, in each State, and not subject to the allocation formula described under sub- section (b). (e) Incentive allocations to support business en- terprises owned and controlled by socially and economically disadvantaged individuals Of the amounts appropriated for fiscal year 2021 to carry out the Program, the Secretary shall set aside $1,000,000,000 for an incentive pro- gram under which the Secretary shall increase the second 1⁄3 and last 1⁄3 allocations for States that demonstrate robust support, as determined by the Secretary, for business concerns owned and controlled by socially and economically dis- advantaged individuals in the deployment of prior allocation amounts. (f) Additional allocations to support very small businesses (1) In general Of the amounts appropriated to carry out the Program, the Secretary shall allocate not less than $500,000,000 to States from funds allo- cated under this section to be expended for very small businesses. (2) Very small business defined In this subsection, the term ‘‘very small business’’— (A) means a business with fewer than 10 employees; and (B) may include independent contractors and sole proprietors. (Pub. L. 111–240, title III, § 3003, Sept. 27, 2010, 124 Stat. 2570; Pub. L. 117–2, title III, § 3301(a)(1)(A), (b), (c), Mar. 11, 2021, 135 Stat. 67, 69, 70.) Editorial Notes AMENDMENTS 2021—Subsec. (b)(1). Pub. L. 117–2, § 3301(a)(1)(A)(i)(I), amended par. (1) generally. Prior to amendment, par. Page 2017 TITLE 12—BANKS AND BANKING § 5703 (1) required allocation of funds by 30 days after Sept. 27, 2010. Subsec. (b)(2). Pub. L. 117–2, § 3301(a)(1)(A)(ii)(II)(bb), substituted ‘‘2020’’ for ‘‘2008’’ wherever appearing. Pub. L. 117–2, § 3301(a)(1)(A)(i)(II)(aa), substituted ‘‘2021’’ for ‘‘2009’’ in heading and in subpar. (A). Subsec. (b)(2)(A). Pub. L. 117–2, § 3301(a)(1)(A)(i)(II)(cc), substituted ‘‘With respect to States other than Tribal governments, the Secretary’’ for ‘‘The Secretary’’. Subsec. (b)(2)(C). Pub. L. 117–2, § 3301(a)(1)(A)(i)(II)(ee), added subpar. (C) relating to separate allocation for tribal governments. Subsec. (b)(2)(C)(i). Pub. L. 117–2, § 3301(a)(1)(A)(i)(II)(dd), substituted ‘‘2019’’ for ‘‘2007’’ in cl. (i) of subpar. (C) defining 2020 State employment de- cline. Subsec. (b)(2)(D). Pub. L. 117–2, § 3301(a)(1)(A)(i)(II)(ee), added subpar. (D). Subsec. (b)(3). Pub. L. 117–2, § 3301(a)(1)(A)(i)(III), struck out par. (3) which provided for the 2010 alloca- tion formula. Subsec. (c)(1)(A)(iii). Pub. L. 117–2, § 3301(a)(1)(A)(ii)(I), inserted before period at end ‘‘that have delivered loans or investments to eligible busi- nesses’’. Subsec. (c)(4). Pub. L. 117–2, § 3301(a)(1)(A)(ii)(II), amended par. (4) generally. Prior to amendment, text read as follows: ‘‘Any portion of a participating State’s allocated amount that has not been transferred to the State under this section by the end of the 2-year period beginning on the date that the Secretary approves the State for participation may be deemed by the Sec- retary to be no longer allocated to the State and no longer available to the State and shall be returned to the General Fund of the Treasury.’’ Subsecs. (d), (e). Pub. L. 117–2, § 3301(b), added subsecs. (d) and (e). Subsec. (f). Pub. L. 117–2, § 3301(c), added subsec. (f). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Amendment by Pub. L. 117–2 applicable with respect to funds appropriated under section 3301 of Pub. L. 117–2 and funds appropriated on and after Mar. 11, 2021, see section 3301(g) of Pub. L. 117–2, set out as a note under section 5701 of this title. § 5703. Approving States for participation (a) Application Any State may apply to the Secretary for ap- proval to be a participating State under the Pro- gram and to be eligible for an allocation of Fed- eral funds under the Program. (b) General approval criteria The Secretary shall approve a State to be a participating State, if— (1) a specific department, agency, or polit- ical subdivision of the State has been des- ignated to implement a State program and participate in the Program; (2) all legal actions necessary to enable such designated department, agency, or political subdivision to implement a State program and participate in the Program have been accom- plished; (3) the State has filed an application with the Secretary for approval of a State capital access program under section 5704 of this title or approval as a State other credit support program under section 5705 of this title, in each case within the time period provided in the respective section; and (4) the State and the Secretary have exe- cuted an allocation agreement that— (A) conforms to the requirements of this chapter; (B) ensures that the State program com- plies with such national standards as are es- tablished by the Secretary under section 5708(a)(2) of this title; (C) sets forth internal control, compliance, and reporting requirements as established by the Secretary, and such other terms and conditions necessary to carry out the pur- poses of this chapter, including an agree- ment by the State to allow the Secretary to audit State programs; (D) requires that the State program be fully positioned, within 90 days of the State’s execution of the allocation agree- ment with the Secretary, to act on providing the kind of credit support that the State program was established to provide; and (E) includes an agreement by the State to deliver to the Secretary, and update annu- ally, a schedule describing how the State in- tends to apportion among its State programs the Federal funds allocated to the State. (c) Contractual arrangements for implementa- tion of State programs A State may be approved to be a participating State, and be eligible for an allocation of Fed- eral funds under the Program, if the State has contractual arrangements for the implementa- tion and administration of its State program with— (1) an existing, approved State program ad- ministered by another State; or (2) an authorized agent of, or entity super- vised by, the State, including for-profit and not-for-profit entities. (d) Special permission (1) Circumstances when a municipality may apply directly If a State does not, within 60 days after March 11, 2021, file with the Secretary a notice of its intent to apply for approval by the Sec- retary of a State program or within 9 months after March 11, 2021, file with the Secretary a complete application for approval of a State program, the Secretary may grant to munici- palities of that State a special permission that will allow them to apply directly to the Sec- retary without the State for approval to be participating municipalities. (2) Timing requirements applicable to munici- palities applying directly To qualify for the special permission, a mu- nicipality of a State shall be required, within 12 months after March 11, 2021, to file with the Secretary a complete application for approval by the Secretary of a State program. (3) Notices of intent and applications from more than 1 municipality A municipality of a State may combine with 1 or more other municipalities of that State to file a joint notice of intent to file and a joint application. (4) Approval criteria The general approval criteria in paragraphs (2) and (4) shall apply.