Preventing SBA Assistance from Going to China Act

Bill Number

H.R. 1081

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Commerce

Status

Introduced

Latest Action

2025-02-06: Referred to the House Committee on Small Business.

Last Updated

2025-05-06T13:39:21Z

AI-Generated Summary

Purpose of the Legislation

The "Preventing SBA Assistance from Going to China Act" (H.R. 1081) aims to restrict Small Business Administration (SBA) assistance—such as loans, grants, and contracts—from going to businesses with significant ties to the People's Republic of China (PRC). It seeks to protect U.S. small business support programs from benefiting entities connected to a foreign adversary.

Key Provisions

• Definition Amendment: Adds a new subsection (10) to Section 3(a) of the Small Business Act (15 U.S.C. 632(a)), which defines what qualifies as a "small business concern."
• A business cannot be considered a small business if it is located and incorporated in the PRC.
• Alternatively, it cannot qualify if more than 25% of its voting stock is owned by affiliates that are citizens of or organized under PRC laws.
• This prohibition applies specifically to eligibility for SBA programs, ensuring that only U.S.-based or independently owned businesses can access federal small business aid.

Significant Changes to Existing Law

• Expansion of Eligibility Criteria: Prior to this bill, the Small Business Act defined small businesses based on factors like industry size standards, employee count, and revenue, without explicit restrictions on foreign ownership tied to specific countries. This amendment introduces a nationality-based exclusion focused on the PRC, creating a targeted barrier to affiliation for SBA purposes.
• Affiliation Rules: Builds on existing SBA rules about "affiliation" (where a business is controlled by another entity through ownership or management), but adds a quantitative threshold (25% voting stock) and geopolitical specificity to disqualify PRC-linked entities.

Potential Impacts

• On Government Agencies: The SBA would need to update its application reviews, verification processes, and compliance checks to screen for PRC affiliations, potentially increasing administrative workload and costs. Other federal agencies relying on SBA definitions (e.g., for contracting) may see indirect effects.
• On Citizens and Businesses: U.S. small businesses without PRC ties could face less competition for limited SBA resources, potentially easing access to aid. However, American companies with joint ventures or investments in China might lose eligibility, affecting their operations and growth. Immigrant-owned or international businesses could be indirectly impacted if ownership structures involve PRC elements.
• On International Relations: Could heighten U.S.-China economic tensions by signaling restrictions on bilateral business ties, possibly prompting retaliatory measures from the PRC against U.S. firms operating there. It aligns with broader U.S. efforts to decouple from Chinese influence in sensitive sectors.

Main Stakeholders Affected

• Small Businesses: Primary recipients of SBA aid, particularly those with foreign ownership; U.S.-based firms may benefit from reduced competition.
• Small Business Administration (SBA): Tasked with enforcing the new rules, affecting program administration and outreach.
• Investors and Corporations: Entities with PRC affiliations, including U.S. companies with Chinese partners or shareholders, who may need to restructure ownership to maintain eligibility.
• U.S.-China Business Community: Trade groups, multinational firms, and diaspora entrepreneurs navigating cross-border investments.
• Congress and Policymakers: Sponsors (e.g., Rep. Mills and co-introducers) represent districts focused on economic security; broader implications for committees like House Small Business.

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Strengthens statutory barriers to foreign influence in U.S. federal programs, potentially leading to litigation over ownership verification (e.g., challenges to what counts as "affiliation"). It complements existing laws like the Foreign Investment Risk Review Modernization Act (FIRRMA) but applies narrowly to SBA aid, without creating new enforcement agencies.
• Constitutional Implications: No direct challenges anticipated, as it regulates federal spending and commerce under Congress's enumerated powers (e.g., Article I, Section 8). However, it could raise equal protection concerns if applied unevenly to non-PRC foreign entities, though the bill's focus on a designated adversary likely withstands scrutiny.
• Political Implications: Reflects bipartisan concerns over national security and economic competition with China, amid ongoing U.S. policy shifts (e.g., export controls). Passage could energize debates on "America First" economic measures but risks alienating free-trade advocates; referral to the House Small Business Committee suggests focus on implementation feasibility rather than broad foreign policy overhaul.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Mills, Cory [R-FL-7]

Cosponsors (8)

Rep. Webster, Daniel [R-FL-11], Rep. Steube, W. Gregory [R-FL-17], Rep. Baird, James R. [R-IN-4], Rep. Buchanan, Vern [R-FL-16], Rep. DesJarlais, Scott [R-TN-4], Rep. Perry, Scott [R-PA-10], Rep. Jackson, Ronny [R-TX-13], Rep. Higgins, Clay [R-LA-3]

Recent Actions

• 2025-02-06: Referred to the House Committee on Small Business.
• 2025-02-06: Introduced in House
• 2025-02-06: Introduced in House

Bill Versions

• Preventing SBA Assistance from Going to China Act — issued 2025-02-06 — PDF (2 pages)