SBIA backs BDC tax bill

The new bill, which was introduced by US Congressman Erik Paulsen, is meant to amend a tax provision that would allow for more foreign investment in BDCs.  

The Small Business Investor Alliance (SBIA), an association of lower mid-market private equity funds and investors, is backing a bill introduced by Congressman Erik Paulsen that aims to make permanent a tax provision that would attract greater foreign investment in business development companies (BDCs). The SBIA called the bill “a critical milestone that will enable business development companies to increase support for America’s small businesses,” in a statement on 1 May.

“This bill will eliminate a significant hurdle blocking foreign capital investment in BDCs,” Brett Palmer, president of SBIA, said in a statement. “BDCs are a major source of capital that stimulates job creation and growth in small and mid-sized businesses. This bill is one of the priorities identified in the SBIA Capital Formation Agenda and of great importance to our BDC members.”

“Increasing investment in our small and medium-sized businesses will mean more jobs and a healthier economy,” commented Congressman Paulsen, a Republican Party representative in Minnesota, in a statement. “Eliminating barriers that prevent foreign capital from reaching our job creators will increase the opportunities for American businesses to grow and expand.”

The H.R.2115 bill would make permanent a temporary tax provision in the US Tax Code removing withholding tax on dividend interest payments to foreign investors that expired at the end of 2014. This move could introduce billions of dollars of available capital into the vehicles, the SBIA estimates.

BDCs are government-regulated investment companies created by Congress in 1980 to provide capital to small and mid-sized American companies. There are about 80 active BDCs in the US managing about $70 billion. “Access to foreign investment sources increases the ability of BDCs to pour more capital into small businesses and further stimulate job creation and economic growth,” the SBIA said.