INNOVATE Act

Section 9 of the Small Business Act (15 U.S.C. 638 et seq.) is amended—

(1) in subsection (e)(7)—

(A) by striking 40 and inserting 50; and

(B) by striking 30 and inserting 20;

(2) in subsection (f)(1)—

(A) in subparagraph (H), by striking and at the end;

(B) in subparagraph (I), by striking and each fiscal year thereafter, and inserting; and; and

(C) by adding at the end the following:

(J) not less than 3.45 percent of such budget in fiscal year 2026 and every year thereafter,

(C) ; and

(3) in subsection (n)(1)(B)—

(A) in clause (iv), by striking and at the end;

(B) in clause (v), by striking and each fiscal year thereafter. and inserting; and; and

(C) by adding at the end the following:

(vi) not less than 0.20 percent for fiscal year 2026 and each fiscal year thereafter.

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(1) in subsection (aa), by adding at the end the following:

Participating agencies with a budget for SBIR greater than $100,000,000 shall not be required to receive a waiver from the Administrator to award a small business concern not more than $30,000,000 when using funds made available under a strategic breakthrough allocation (as defined in subsection (ff)).

(1) ; and

(2) in subsection (ff)—

(A) in the subsection heading, by striking and STTR and inserting Phase II;

(B) in paragraph (1), by striking or Phase II STTR award; and

(C) by adding at the end the following new paragraph:

Under this subparagraph, a funding agreement may be awarded to a small business concern by each participating agency using funds made available under a strategic breakthrough allocation, as defined in subparagraph (B).

In this subparagraph, the term strategic breakthrough allocation means, with respect to a participating agency with a required expenditure under subsection (f)(1) in excess of $100,000,000, a required expenditure amount from the SBIR allocation under subsection (f)(1) of such agency of not less than 0.25 percent of the extramural budget for research or research and development designated for such agency for fiscal year 2026 and every fiscal year thereafter.

In the case of a Phase II agreement that is awarded to a small business concern by a participating agency using funds made available under a strategic breakthrough allocation, the following requirements shall apply:

A participating agency may award from a strategic breakthrough allocation not more than $30,000,000 in aggregate to a small business concern, including its affiliates, spinouts, or subsidiaries based on reaching production or development milestone if the total period of performance of the project with respect to which such funds are awarded is not more than 48 months.

The small business concern shall—

(aa) have been awarded not less than 1 prior Phase II award under the SBIR or STTR program;

(bb) demonstrate not less than 100 percent matching funds from sources other than the Government or amounts awarded by participating agencies under a program other than Phase I and II of the SBIR or STTR program as a result of an award using funds made available under a strategic breakthrough allocation;

(cc) is an effective solution, as determined by market research; and

(dd) only be eligible for an award from the strategic breakthrough allocation if the product, process, or technology of the small business concern—

(AA) meets a necessary level of readiness and has a commitment for inclusion in a program objective memorandum from an official with the rank of program executive officer or higher in an acquisition organization of the participating agency making such award; and

(BB) will meet high priority requirements or operational needs of such participating agency through a successful transition and into the acquisition process.

Each participating agency shall complete any contract awards using strategic breakthrough allocation funds not later than 90 days after receiving a proposal from a small business concern for the award.

Eligible activities by a small business concern using strategic breakthrough allocation funds are—

(aa) design for manufacturing;

(bb) establishing manufacturing facilities, tooling, and supply chain capacity;

(cc) buying raw materials or inventory;

(dd) the integration of products with open interoperability standards;

(ee) testing, evaluation, and certification of low-rate production units; and

(ff) the purchase of production units and maintenance.

In making awards using funds made available under a strategic breakthrough allocation, a participating agency shall consider—

(aa) the potential of the small business concern to—

(AA) advance the national security capabilities of the United States; and

(BB) provide new technologies or processes, or new applications of existing technologies, that will enable new alternatives to existing programs;

(bb) whether a customer in the participating agency has expressed an intent to purchase and integrate technology from the small business concern into its operations; and

(cc) whether a particular technology area is undercapitalized by private investment.

A participating agency shall establish a mechanism to provide small business concerns with direct access to program and requirements offices throughout the participating agency that may purchase technology from small business concerns under Phase III of the SBIR program.

Each participating agency shall implement streamlined processes and requirements for submitting proposals and applying for awards using funds made available under a strategic breakthrough allocation.

Section 9(y) of the Small Business Act (15 U.S.C. 638(y)) is amended—

(1) in paragraph (2)—

(A) by striking shall identify and inserting the following:

(A) shall—

(A) identify

(B) in subparagraph (A), as so designated—

(i) by inserting, including small business concerns with an award from the strategic breakthrough allocation, before that have the potential; and

(ii) by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following:

(B) ensure, in collaboration with SBIR program managers of each component, that research programs identified under subparagraph (A) are analyzed within the programming and budgeting process as budget requests are developed; and

(C) provide to the Committee on Small Business and Entrepreneurship of the Senate and the Committees on Small Business and Science, Space, and Technology of the House of Representatives information on the integration of SBIR and STTR awardees in budget rollouts for research, development, testing, and evaluation activities.

(2) by striking paragraph (3) and redesignating paragraphs (4), (5), and (6) as paragraphs (3), (4), and (5), respectively; and

(3) in paragraph (5), as so redesignated—

(A) in the subparagraph heading, by striking and STTR;

(B) in subparagraph (A)—

(i) by inserting substantively before increase;

(ii) by striking and the number of Phase II STTR contracts; and

(iii) by inserting in fiscal year 2028 as compared to fiscal year 2025 before the semicolon at the end;

(C) in subparagraph (B), by striking and at the end;

(D) by redesignating subparagraph (C) as subparagraph (E);

(E) by inserting after subparagraph (B) the following:

(C) establish a mechanism to provide small business concerns with direct access to program and requirements offices that may purchase technology from the small business concern under Phase III of the SBIR program;

(D) allow services to provide operational needs statements directly to chiefs of requirements offices; and

(E) ; and

(F) in subparagraph (E), as so redesignated, in clause (i) by striking and STTR contracts.

Not later than 60 days after the date of enactment of this Act, and on a recurrent basis until the implementation of paragraph (3) of section 9(ff) of the Small Business Act (15 U.S.C. 638(ff)), as added by section 102, is complete, the head of each agency participating in the SBIR or STTR programs that made an award from funds made available under a strategic breakthrough allocation (as defined under paragraph (3)(B) of section 9(ff) of the Small Business Act (15 U.S.C. 638(ff), as added by section 102)) shall brief the Committee on Small Business and Entrepreneurship of the Senate and the Committees on Small Business and on Science, Space, and Technology of the House of Representatives on such implementation.

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(1) in subsection (f), by adding at the end the following:

Any funding agreement that is a contract made with expenditures allocated to the SBIR program under paragraph (1) shall be a firm fixed-price contract (as defined in section 16.202 of the Federal Acquisition Regulation), unless, on a case-by-case basis, the head of the awarding Federal agency makes a written determination to use a different contract structure.

(1) ; and

(2) in subsection (n), by adding at the end the following:

Any funding agreement that is a contract made with expenditures allocated to the STTR program under paragraph (1) shall be a firm fixed-price contract (as defined in section 16.202 of the Federal Acquisition Regulation), unless the head of the awarding Federal agency makes a written determination to use a different contract structure.

Section 9(jj) of the Small Business Act (15 U.S.C. 638(jj)) is amended to read as follows:

The head of a participating agency may award a Phase I or Phase II award to a small business concern only if the total value of the Phase I and Phase II awards awarded to such small business concern, including its affiliates, spinouts, and subsidiaries, does not exceed $75,000,000.

On an award-by-award basis, the Undersecretary or Director overseeing the SBIR or STTR program of a Federal agency may waive the requirement under subparagraph (A) with a written justification by the Undersecretary or Director that explains why the use of the waiver authority for an otherwise disqualified small business concern is imperative for national security purposes and why the work cannot be performed by other qualifying small business concerns.

The waiver authority established under clause (i) may not be delegated.

Participating agencies shall maintain information on any awards made using the waiver established under clause (i), including the amount of the award, the written justification for each award, and the identity of the award recipient.

The Administrator shall include the information described in clause (iii) in the annual report of the Administrator to Congress required by subsection (b)(7).

An individual may not concurrently serve as the principal investigator on more than 1 proposal to a single Phase I solicitation or a single Phase II solicitation.

A small business concern applying for a Phase I award may not have annual receipts (as defined in section 121.104 of title 13, Code of Federal Regulations, or any successor regulation) of more than $40,000,000 for the most recent fiscal year.

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(A) in subsection (e)—

(i) in paragraph (4)—

(I) in subparagraph (A), by striking subparagraph (B) and inserting subparagraph (C);

(II) by redesignating subparagraphs (B) and (C) as subparagraphs (C) and (D); and

(III) by inserting after subparagraph (A), the following:

(B) a 1A phase for the same purposes as the first phase described under subparagraph (A) and intended to increase accessibility to the program for new entrants with proposals submitted pursuant to only SBIR open topic announcements;

(III) ; and

(ii) by adding at the end following:

(20) the term Phase 1A means the phase described in paragraph (4)(B);

(ii) ; and

(B) by amending subsection (pp) to read as follows:

It is the sense of Congress that—

(A) Phase 1A funds will bring thousands of new small business concerns committed to commercialization of critical technologies into the SBIR program; and

(B) in order for participating agencies to benefit from the full scope of American innovation and identify the most promising solutions to scale, Phase 1A awards should fund the strongest technologies in a topic area regardless of—

(i) the location of the small business concern within the United States; or

(ii) the educational background of the principal investigator.

The head of each agency with an SBIR program shall allocate not less than 1.5 percent of funding and not more than 3 percent of funding for the SBIR program of the agency to Phase 1A awards.

A solicitation issued under this subsection shall be conducted as an open topic announcement.

A small business concern, including its affiliates, spinouts, or subsidiaries, is eligible for an award under this subsection only if such small business concern, including its affiliates, spinouts, or subsidiaries, has not previously received an SBIR or STTR award.

A proposal submitted in response to a solicitation under this subsection shall consist of a report that is not more than 5 pages in length and containing the criteria in clauses (i) through (iv) of subparagraph (B).

The small business concern shall describe the problem that the proposal is intended to address for the awarding agency and any commercial customer.

The small business concern shall describe the proposed solution, including the technical basis for the solution to demonstrate how the solution would address the problem described in the proposal, including the level of maturity of the solution at the time of the proposal.

The small business concern shall describe how adoption of the proposed solution would produce potential time savings, cost savings, risk reduction, improvement of mission outcomes, or any other beneficial effects for the awarding agency and any commercial customer.

The small business concern shall—

(I) identify the state of solutions in use at the time of the proposal to address the problem described in the proposal; and

(II) explain how the proposed solution is a unique and novel solution.

The small business concern shall—

(I) describe how the small business concern intends to fund the proposed solution from sources other than the award; and

(II) explain the market for the proposed solution, including the intended Government and commercial end users.

A small business concern or principal investigator is eligible for not more than one Phase 1A award.

An award made under this subsection shall be for not more than $40,000.

Each agency shall notify each small business concern of the award decision of the agency on any proposal submitted by the small business concern not later than 90 days after the date on which the solicitation closes.

A small business concern that receives a Phase 1A award shall be eligible to apply for a Phase II award.

A small business concern may use funds from a Phase 1A award to develop a proposed solution in pursuit of a subsequent proposal for a Phase I award or a Phase II award.

The head of each participating agency shall implement streamlined processes and requirements for submitting proposals and applying for solicitations for Phase 1A awards.

The head of a participating agency may waive any applicable peer review requirements for Phase 1A awards.

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)) is amended—

(A) in paragraph (12)(A), by striking paragraph (4)(B) and inserting paragraph (4)(C); and

(B) in paragraph (13)(A), by striking paragraph (4)(C) and inserting paragraph (4)(D).

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) in subsection (b)(7)(C), by striking owned and controlled by women or by socially or economically disadvantaged individuals and inserting owned by individuals who reside in rural areas;

(2) in subsection (e)—

(A) in paragraph (18), by striking and at the end;

(B) in paragraph (19), by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following:

(21) the term new entrants means a small business concern that has not received an SBIR or STTR award;

(22) the term rural area means a county or other political subdivision of a State that the Bureau of the Census has defined as mostly rural or completely rural in the most recent decennial census;

(3) in subsection (g)(8)(A)—

(A) by striking clause (iii);

(B) by redesignating clauses (iv), (v), and (vi) as clauses (iii), (iv), and (v), respectively; and

(C) in clause (iii), as so redesignated, by striking a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual and inserting an individual who resides in a rural area or has an individual who resides in a rural area or is a new entrant;

(4) in subsection (j)—

(A) by adjusting the margins for paragraphs (2) and (3) 2 ems to the left; and

(B) in paragraph (2)—

(i) by striking subparagraph (F);

(ii) by redesignating subparagraphs (G), (H), and (I) as subparagraphs (F), (G), and (H), respectively; and

(iii) in subparagraph (H), as so redesignated, by striking subparagraph (H) and inserting subparagraph (G);

(5) in subsection (k)(1)(F)—

(A) by striking clause (ii);

(B) by redesignating clauses (iii), (iv), and (v) as clauses (ii), (iii), and (iv), respectively; and

(C) in clause (ii), as so redesignated, by striking a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual and inserting an individual who resides in a rural area or has an individual who resides in a rural area or is a new entrant;

(6) in subsection (o)(9)(A)—

(A) by striking clause (iii);

(B) by redesignating clauses (iv), (v), and (vi) as clauses (iii), (iv), and (v), respectively; and

(C) in clause (iii), as so redesignated, by striking a socially or economically disadvantaged individual or has a socially or economically disadvantaged individual and inserting an individual who resides in a rural area or has an individual who resides in a rural area or is a new entrant; and

(7) in subsection (mm)—

(A) in paragraph (1)—

(i) in the matter preceding subparagraph (A), by striking and until September 30, 2025; and

(ii) in subparagraph (F), by striking or abuse to ensure compliance and inserting abuse, or adversarial influence to ensure compliance;

(B) in paragraph (2)(A), by striking to carry out the policy directive required under subsection (j)(2)(F) and and inserting to increase the participation of States with respect to which a low level of SBIR awards have historically been awarded; and

(C) by adding at the end the following:

An agency may use the funds allocated to the SBIR program of such agency under this subsection only if such agency does not—

(A) consider the race, gender, or ethnicity of the principal investigator, founder, or key personnel of the small business concern applying for an SBIR or STTR award in an award decision under the SBIR or STTR program of the agency;

(B) require or consider a statement or plan to promote diversity or equity as part of an application for an SBIR or STTR award under the SBIR or STTR program of the agency; or

(C) offer supplemental funds to a recipient of an SBIR or STTR award based on the race, gender, or ethnicity of the principal investigator, founder, or key personnel of a small business concern.

Section 9(g)(13) of the Small Business Act (15 U.S.C. 638(g)(13)) is amended—

(1) in subparagraph (F), by striking and at the end;

(2) in subparagraph (G), by striking the semicolon at the end and inserting; and; and

(3) by adding at the end the following:

(H) a current or pending agreement with—

(i) NewsGuard Technologies, Inc. (doing business as NEWSGuard);

(ii) Disinformation Index, Inc., Disinformation Index, Ltd., or Global Disinformation Index gUG (collectively doing business as Global Disinformation Index);

(iii) Internews; or

(iv) an entity that engages in operations or activities, or produces products, the function of which is to demonetize or rate the credibility of a domestic entity (including news and information outlets) based on lawful speech of such domestic entity under the stated function of fact-checking or otherwise exposing or correcting misinformation, disinformation, or misinformation;

Paragraph (16) of section 9(g) of the Small Business Act (15 U.S.C. 638(g)), as redesignated by section 402, is amended by adding at the end the following:

(G) the small business concern submitting the proposal or application has a current or pending agreement with—

(i) NewsGuard Technologies, Inc. (doing business as NEWSGuard);

(ii) Disinformation Index, Inc., Disinformation Index, Ltd., or Global Disinformation Index gUG (collectively doing business as Global Disinformation Index);

(iii) Internews; or

(iv) an entity that engages in operations or activities, or produces products, the function of which is to demonetize or rate the credibility of a domestic entity (including news and information outlets) based on lawful speech of such domestic entity under the stated function of fact-checking or otherwise exposing or correcting misinformation, disinformation, or misinformation;

Section 9(o)(17) of the Small Business Act (15 U.S.C. 638(o)(17)) is amended—

(1) in subparagraph (F), by striking and at the end;

(2) in subparagraph (G), by striking the semicolon at the end and inserting; and; and

(3) by adding at the end the following:

(H) a current or pending agreement with—

(i) NewsGuard Technologies, Inc. (doing business as NEWSGuard);

(ii) Disinformation Index, Inc., Disinformation Index, Ltd., or Global Disinformation Index gUG (collectively doing business as Global Disinformation Index);

(iii) Internews; or

(iv) an entity that engages in operations or activities, or produces products, the function of which is to demonetize or rate the credibility of a domestic entity (including news and information outlets) based on lawful speech of such domestic entity under the stated function of fact-checking or otherwise exposing or correcting misinformation, disinformation, or misinformation;

Paragraph (20) of section 9(o) of the Small Business Act (15 U.S.C. 638(o)(20)), as redesignated by section 402, is amended by adding at the end the following:

(G) the small business concern submitting the proposal or application has a current or pending agreement with—

(i) NewsGuard Technologies, Inc. (doing business as NEWSGuard);

(ii) Disinformation Index, Inc., Disinformation Index, Ltd., or Global Disinformation Index gUG (collectively doing business as Global Disinformation Index);

(iii) Internews; or

(iv) an entity that engages in operations or activities, or produces products, the function of which is to demonetize or rate the credibility of a domestic entity (including news and information outlets) based on lawful speech of such domestic entity under the stated function of fact-checking or otherwise exposing or correcting misinformation, disinformation, or misinformation;

Paragraph (19)(A) of section 9(g) of the Small Business Act (15 U.S.C. 638(g)), as so redesignated by section 402, is amended by striking through (G) and inserting through (H).

Paragraph (23)(A) of section 9(o) of the Small Business Act (15 U.S.C. 638(o)), as so redesignated by section 402, is amended by striking through (G) and inserting through (H).

Section 9(mm)(1) of the Small Business Act (15 U.S.C. 638(mm)(1)) is amended—

(1) in subparagraph (J), by striking and at the end;

(2) in subparagraph (K), by striking the period at the end and inserting; and; and

(3) by adding at the end the following new subparagraph:

(L) connecting SBIR and STTR awardees with small business investment companies (as defined under section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662)) and other domestic private investors.

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(1) in subsection (j), by adding at the end the following new paragraphs:

Not later than 90 days after the date of the enactment of this paragraph, the Administrator shall modify the policy directives issued pursuant to this subsection to require each Federal agency participating in the SBIR program to enhance the outreach efforts of such Federal agency to rural communities to increase the participation of small businesses concerns located in rural communities in the SBIR program, including by ensuring that such Federal agency—

(A) conducts outreach efforts with respect to the SBIR program in rural communities; and

(B) when such Federal agency conducts such outreach in an area served by a small business development center, coordinates with such small business development center.

Not later than 90 days after the date of the enactment of this paragraph, the Administrator shall modify the policy directives issued pursuant to this subsection to require the Administration to place a special emphasis on small business concerns in rural areas when conducting outreach related to the SBIR program, including by ensuring that the Administration includes outreach efforts in rural communities carried out by the Administration with respect to the SBIR program.

(1) ; and

(2) in subsection (p), by adding at the end the following new paragraph:

Not later than 90 days after the date of the enactment of this paragraph, the Administrator shall modify the policy directive issued pursuant to this subsection to require each Federal agency participating in the STTR program to enhance the outreach efforts of such Federal agency to rural communities to increase the participation of small businesses concerns located in rural communities in the STTR program, including by ensuring that such Federal agency—

(A) conducts outreach efforts with respect to the STTR program in rural communities; and

(B) when such Federal agency conducts such outreach in an area served by a small business development center, coordinates with such small business development center.

Not later than 90 days after the date of the enactment of this paragraph, the Administrator shall modify the policy directive issued pursuant to this subsection to require the Administration to place a special emphasis on small business concerns in rural areas when conducting outreach related to the STTR program, including by ensuring that the Administration includes outreach efforts in rural communities carried out by the Administration with respect to the STTR program.

Section 9(j)(2) of the Small Business Act (15 U.S.C. 638(j)(2)), as amended by section 202(4)(B), is amended by revising subparagraph (F) to read as follows:

(F) enhanced outreach efforts to increase the participation of small business concerns that have never participated in Federal research and development to develop innovative technologies, with a special emphasis on small business concerns in rural areas;

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)), as amended by section 202(2), is further amended by adding at the end the following:

(23) the term open topic announcement means a solicitation for SBIR or STTR proposals that—

(A) is a generalized problem statement or broad technology area and does not contain any language requiring that the solutions that a small business concern proposes adhere to specific technological specifications; and

(B) evaluates the ability of the solution proposed by the small business concern to meet the stated innovation need of the agency or Government end user; and

Section 9(ww) of the Small Business Act (15 U.S.C. 638) is amended—

(1) in paragraph (1)—

(A) in the matter preceding subparagraph (A), by striking Secretary of Defense and inserting head of each participating agency; and

(B) by striking the Department of Defense each place it appears and inserting such participating agency;

(2) in paragraph (2)—

(A) by striking Secretary of Defense and inserting head of each participating agency;

(B) by striking each component of and inserting such participating agency and, with respect to; and

(C) by inserting, each component thereof, before per fiscal year; and

(3) by striking paragraph (3).

Section 9(jj) of the Small Business Act (15 U.S.C. 638(jj)), as amended by section 201(a)(1), is further amended by adding at the end the following:

A small business concern, including its affiliates, spinouts, or subsidiaries, may not submit more than 10 proposals to a single Phase I solicitation or a single Phase II solicitation under subsection (cc).

A small business concern, including its affiliates, spinouts, or subsidiaries, may not submit more than a combined total of 25 proposals to Phase I solicitations or Phase II solicitations under subsection (cc) published by a single agency, including the components of the agency, in a single fiscal year.

Section 9(e) of the Small Business Act (15 U.S.C. 638(e)), as amended by section 301, is further amended by adding at the end the following:

(24) the term foreign risk means, in the past 10 years, any foreign affiliation, technology licensing agreement, joint venture, contractual or financial obligation (pending or otherwise), investment agreement, research relationship (including co-authorship), or business relationship between—

(A) a small business concern (including all subsidiaries, spinouts, and affiliates) submitting a proposal for an SBIR or STTR program, and covered individuals, owners, or other key personnel of the small business concern; and

(B) an individual, research institution, business entity, government, or government-owned entity in a foreign country of concern that is disclosed, as required under subsection (g) or subsection (o), or otherwise identified in the due diligence process, as required under subsection (vv).

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) in subsection (g)—

(A) by redesignating paragraphs (15), (16), and (17) as paragraphs (16), (18), and (19), respectively;

(B) by inserting after paragraph (14) the following:

(15) evaluate whether a small business concern presents a risk to national security for any reason, through measures including—

(A) the due diligence process required under subsection (vv);

(B) disclosures submitted under this subsection; or

(C) coordination with the Inspector General of the agency or the intelligence community (as defined under section 3 of the National Security Act of 1947 (50 U.S.C. 3003));

(C) in paragraph (16), as so redesignated—

(i) by striking subparagraph (B);

(ii) by striking that— and all that follows through the small business concern submitting and inserting that the small business concern submitting;

(iii) by redesignating clauses (i), (ii), and (iii) as subparagraphs (A), (B), and (C), respectively, and adjusting the margins accordingly;

(iv) in subparagraph (B), as so redesignated, by striking or at the end;

(v) in subparagraph (C), as so redesignated, by striking and at the end; and

(vi) by adding at the end the following:

(D) has a foreign risk connecting the small business concern to an entity, including any affiliates, spinouts, or subsidiaries of the entity, or individual on one or more of the following lists:

(i) the UFLPA Entity List maintained by the Department of Homeland Security;

(ii) the Non-SDN Chinese Military-Industrial Complex Companies List of the Office of Foreign Assets Control maintained by the Department of the Treasury;

(iii) the Section 889 Prohibition List established under section 889 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Public Law 115–232) and maintained by the Department of Defense;

(iv) the list of Chinese Military companies required under section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116–283) and maintained by the Department of Defense;

(v) the Military End User List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vi) the Entity List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vii) the List of Equipment and Services maintained by the Federal Communications Commission; and

(viii) the Withhold Release Orders and Findings List maintained by U.S. Customs and Border Protection;

(E) has a foreign risk with a primary source that is classified;

(F) has a foreign risk or another national security risk not listed in statute or regulatory guidance that an agency determines warrants a denial; or

(D) by inserting after paragraph (16), as so redesignated, the following:

(17) not, and any personnel of the Federal agency including technical points of contact shall not, communicate to an applicant prior to formal notification of an award decision that an application was denied due to a foreign risk;

(D) ; and

(E) in paragraph (19), as so redesignated—

(i) in subparagraph (B), by striking paragraph (16)(A) and inserting paragraph (18)(A); and

(ii) in subparagraph (C), by striking paragraph (16)(B) and inserting paragraph (18)(B); and

(2) in subsection (o)—

(A) by redesignating paragraphs (19), (20), and (21) as paragraphs (20), (22), and (23), respectively;

(B) by inserting after paragraph (18) the following:

(19) evaluate whether a small business concern presents a risk to national security for any reason, through measures including—

(A) the due diligence process required under subsection (vv);

(B) disclosures submitted under this subsection; or

(C) coordination with the Inspector General of the agency or the intelligence community (as defined under section 3 of the National Security Act of 1947 (50 U.S.C. 3003));

(C) in paragraph (20), as so redesignated—

(i) by striking subparagraph (B);

(ii) by striking that— and all that follows through the small business concern submitting and inserting that the small business concern submitting;

(iii) by redesignating clauses (i), (ii), and (iii) as subparagraphs (A), (B), and (C), respectively, and adjusting the margins accordingly;

(iv) in subparagraph (B), as so redesignated, by striking or at the end;

(v) in subparagraph (C), as so redesignated, by striking and at the end; and

(vi) by adding at the end the following:

(D) has a foreign risk connecting the small business concern to an entity, including any affiliates, spinouts, or subsidiaries of the entity, or individual on one or more of the following lists:

(i) the UFLPA Entity List maintained by the Department of Homeland Security;

(ii) the Non-SDN Chinese Military-Industrial Complex Companies List of the Office of Foreign Assets Control maintained by the Department of the Treasury;

(iii) the Section 889 Prohibition List established under section 889 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (Public Law 115–232) and maintained by the Department of Defense;

(iv) the list of Chinese Military companies required under section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116–283) and maintained by the Department of Defense;

(v) the Military End User List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vi) the Entity List maintained by the Bureau of Industry and Security of the Department of Commerce;

(vii) the List of Equipment and Services maintained by the Federal Communications Commission; and

(viii) the Withhold Release Orders and Findings List maintained by U.S. Customs and Border Protection;

(E) has a foreign risk with a primary source that is classified;

(F) has a foreign risk or another national security risk not listed in statute or regulatory guidance that an agency determines warrants a denial; or

(D) by inserting after paragraph (20) the following:

(21) not, and any personnel of the Federal agency including technical points of contact shall not, communicate to an applicant prior to formal notification of an award decision that an application was denied due to a foreign risk;

(D) ; and

(E) in paragraph (23), as so redesignated—

(i) in subparagraph (B), by striking paragraph (20)(A) and inserting paragraph (22)(A); and

(ii) in subparagraph (C), by striking paragraph (20)(B) and inserting paragraph (22)(B).

Section 9(vv)(2) of the Small Business Act (15 U.S.C. 638(vv)(2)) is amended—

(1) in subparagraph (B), by striking the period at the end and inserting; and; and

(2) by adding at the end the following:

(C) examine any relationship of a small business concern seeking an award to any entity or individual included on the lists, as published on the date of the closing of the solicitation, described under subsections (g)(16)(D) and (o)(20)(D).

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) in subsection (g)(18), as redesignated by section 402—

(A) in the matter preceding subparagraph (A), by inserting, as adjusted for inflation according to the Consumer Price Index published by the Bureau of Labor Statistics, after amounts;

(B) in subparagraph (A)—

(i) by inserting during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, before the small business concern; and

(ii) by striking or at the end;

(C) in subparagraph (B)—

(i) by inserting during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, before there is a change; and

(ii) by striking and at the end; and

(D) by adding at the end the following:

(C) during the 5-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, the small business concern sells, leases, or provides (through joint research, technological licensing, or otherwise) intellectual property that was developed, wholly or in part, using an SBIR award to a foreign entity or individual unless the foreign entity or individual is incorporated in or a citizen of a country that is a member of the North Atlantic Treaty Organization or a major non-NATO ally, as described under section 2321k of title 22, United States Code; or

(D) during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, the small business concern sells, leases, or provides (through joint research, technological licensing, or otherwise) intellectual property that was developed, wholly or in part, using an SBIR award to an entity, government, or individual in a foreign country of concern; and

(D) ; and

(2) in subsection (o)(22), as redesignated by section 402—

(A) in the matter preceding subparagraph (A), by inserting, as adjusted for inflation according to the Consumer Price Index published by the Bureau of Labor Statistics, after amounts;

(B) in subparagraph (A)—

(i) by inserting during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, before the small business concern; and

(ii) by striking or at the end;

(C) in subparagraph (B)—

(i) by inserting during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, before there is a change; and

(ii) by striking and at the end; and

(D) by adding at the end the following:

(C) during the 5 year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, the small business concern sells, leases, or provides (through joint research, technological licensing, or otherwise) intellectual property that was developed, wholly or in part, using an STTR award to a foreign entity or individual unless the foreign entity or individual is incorporated in or a citizen of a country that is a member of the North Atlantic Treaty Organization or a major non-NATO ally, as described under section 2321k of title 22, United States Code; or

(D) during the 10-year period beginning on the date of the award, or during a longer or indefinite period as determined by the head of the awarding agency as necessary for national security, the small business concern sells, leases, or provides (through joint research, technological licensing, or otherwise) intellectual property that was developed, wholly or in part, using an STTR award to an entity, government, or individual in a foreign country of concern; and

Section 9(uu) of the Small Business Act (15 U.S.C. 638(uu)) is amended to read as follows:

The Administrator, in coordination with the heads of all agencies with an SBIR program, the Director of the White House Office of Science and Technology Policy, and the Committee on Foreign Investment in the United States, shall develop best practices to be shared with each recipient of an SBIR or STTR award by the agency granting the award.

The best practices developed under paragraph (1) shall include recommendations for protecting the proprietary technology and intellectual property of the small business concern from being shared unintentionally to foreign individuals and entities through informational rights of limited partners in venture capital, hedge fund, or private equity firms that have investments in SBIR or STTR recipients.

Paragraph (4) of section 4(b) of the SBIR and STTR Extension Act of 2022 (Public Law 117–183; 136 Stat. 2194) is amended to read as follows:

Not later than 18 months after the date of enactment of the INNOVATE Act, and annually thereafter under September 30, 2028, the Comptroller General of the United States shall conduct a study and submit to the Committee on Small Business and Entrepreneurship and the Committee on Armed Services of the Senate and the Committee on Small Business, the Committee on Armed Services, and the Committee on Science, Space, and Technology of the House of Representatives a report on the implementation and best practices of the due diligence programs established under section 9(vv) of the Small Business Act (15 U.S.C. 638(vv)) across Federal agencies required to establish an SBIR or STTR program.

The study shall evaluate—

(i) the effectiveness of each Federal agency that participates in the SBIR program or STTR program in identifying—

(I) enhanced risk in cybersecurity practices in SBIR and STTR projects;

(II) enhanced risk in patents, including co-authorship with academics in foreign countries of concern in SBIR and STTR projects;

(III) enhanced foreign influence risk among employees of small business concerns involved in SBIR and STTR projects;

(IV) foreign ownership of a small business concern seeking an award, including the financial ties and obligations (which shall include surety, equity, and debt obligations) in SBIR and STTR projects; and

(V) security risks among applicants to the SBIR program or the STTR program, including connections to an entity, including any affiliates, spinouts, or subsidiaries of the entity, or individual on one or more of the lists referenced in paragraph (16)(D) of section 9(g) of the Small Business Act (15 U.S.C. 638(g));

(ii) by year, the number of proposals and number of small business concerns with foreign risks by each Federal agency that participates in the SBIR program or STTR program, including a delineation of how many of those small business concerns have previously received an award under the SBIR program or STTR program and the nature of those foreign risks made by each Federal agency; and

(iii) the extent to which the Inspector General and counterintelligence authorities of each Federal agency that participates in the SBIR or STTR program effectively conducts investigations, audits, inspections, and outreach relating to the due diligence program to assess security risks in the SBIR or STTR program.

Section 9(cc) of the Small Business Act (15 U.S.C. 638(cc)) is amended to read as follows:

Each agency with an SBIR program may provide to a small business concern an award under Phase II of the SBIR program with respect to a project, without regard to whether the small business concern was provided an award under Phase I of an SBIR program with respect to such project, if the head of the agency determines that the small business concern has completed the determinations described in subsection (e)(4)(A) with respect to such project despite not having been provided a Phase I award.

Except as provided in subparagraph (B), the head of each agency with an SBIR program may award not more than 10 percent of the funds allocated for the SBIR program of the agency in a given fiscal year under the authority of this subsection.

The Director of the National Institutes of Health may award not more than 30 percent of the funds allocated for the SBIR program of the National Institutes of Health in a given fiscal year and the Secretary of Defense may award not more than 30 percent of the funds allocated for the SBIR program of each component in the Department of Defense in a given fiscal year under the authority of this subsection.

An agency may not make an award under this subsection to a small business concern, including its affiliates, spinouts, and subsidiaries, that has received more than 25 Phase II awards.

An agency may make not more than 25 awards under this subsection to a small business concern, including its affiliates, spinouts, and subsidiaries.

Section 9(k)(1) of the Small Business Act (15 U.S.C. 638(k)(1)) is amended—

(1) in subparagraph (E)(iv), by striking and at the end;

(2) in subparagraph (F)(v), by striking the period at the end and inserting; and; and

(3) by adding at the end the following:

(G) for each award granted, whether the award is classified or designated as—

(i) Phase 1A, under subsection (pp);

(ii) direct to Phase II, under subsection (cc);

(iii) subsequent Phase II, under subsection (bb)(1);

(iv) strategic breakthrough award under subsection (ff)(3);

(v) Phase III prime contract award; or

(vi) Phase III subcontract award.

The Administrator of General Services shall update the Federal Procurement Data System described in section 1122(a)(4) of title 41, United States Code, or any successor system, to—

(A) require reporting on whether an award under the SBIR or STTR program is classified or designated as—

(i) Phase 1A, under subsection (pp) of section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act;

(ii) direct to Phase II, under subsection (cc) of such section;

(iii) subsequent Phase II, under subsection (bb)(1) of such section;

(iv) a strategic breakthrough award under subsection (ff)(3) of such section;

(v) a Phase III prime contract award; or

(vi) a Phase III subcontract award;

(B) require reporting on whether a contract is designated as a Phase III contract; and

(C) allow a Government contracting officer, when recording a Phase II or Phase III contract following on from work done by a small business concern during a Phase I or Phase II award to reference an SBIR or STTR contract identification number for relevant prior SBIR or STTR work done.

No additional funds are authorized to be appropriated for the purpose of carrying out this subsection.

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) in subsection (bb)(3), by inserting or another component of the same Federal agency after another Federal agency;

(2) in subsection (gg)—

(A) in the heading, by striking Pilot Program and inserting Commercialization Readiness Program;

(B) by striking pilot each place the term appears;

(C) by striking paragraph (7);

(D) by redesignating paragraph (8) as paragraph (7); and

(E) by amending paragraph (7), as so redesignated, to read as follows:

In this subsection, the term covered Federal agency —

(A) means a Federal agency participating in the SBIR program or the STTR program; and

(B) does not include the Department of Defense.

(3) in subsection (hh)—

(A) by striking Funding. — and all that follows through Federal agencies participating and inserting Funding. —Federal agencies participating; and

(B) by striking paragraph (2);

(4) in subsection (ii)(2)(B)—

(A) in clause (ii), by adding and at the end;

(B) in clause (iii), by striking; and and inserting a period; and

(C) by striking clause (iv);

(5) in subsection (qq)(3), by striking subparagraph (I);

(6) in subsection (vv)(3), by striking subparagraph (C);

(7) in subsection (yy)—

(A) in the subsection heading, by striking Pilot;

(B) by striking STTR Program.— and all that follows through Not later than and inserting STTR Program. —Not later than;

(C) by striking paragraph (2); and

(D) by striking pilot; and

(8) in subsection (zz)—

(A) in the subsection heading, by striking Pilot;

(B) in paragraph (1)—

(i) in the paragraph heading, by striking pilot and inserting program;

(ii) in subparagraph (B), by striking 3.25 and inserting 3.50; and

(iii) in subparagraph (C), by striking 0.46 and inserting 0.21;

(C) by striking paragraph (3); and

(D) by striking pilot each place the term appears.

Section 9 of the Small Business Act (15 U.S.C. 638), as amended by this Act, is amended—

(1) in subsection (m), by striking 2025 and inserting 2028; and

(2) in subsection (n)(1)(A), by striking 2025 and inserting 2028.

Section 9 of the Small Business Act (15 U.S.C. 638) is amended—

(1) by striking small-business concerns each place it appears and inserting small business concerns;

(2) by striking Committee on Small Business of the Senate each place it appears and inserting Committee on Small Business and Entrepreneurship of the Senate;

(3) by striking Committee on Science and the each place it appears and inserting Committee on Science, Space, and Technology and the;

(4) in subsection (d)(2), by striking small-business firms and inserting small business concerns;

(5) in subsection (e)(3), by inserting concern after small business;

(6) in subsection (g)(4)(A), by striking SBIR proposals and inserting SBIR solicitations;

(7) in subsection (g)(10), by striking,, and inserting,;

(8) in subsection (g)(13)(A), by inserting malign before foreign talent recruitment program;

(9) in subsection (o)(8), by striking,, and inserting,;

(10) in subsection (o)(17)(A), by inserting malign before foreign talent recruitment program; and

(11) in subsection (vv)(2)(B), by inserting subsection before (g)(13).

Subsection (tt) of section 9 of the Small Business Act (15 U.S.C. 638(tt)) is repealed.

Subsection (oo) section 9 of the Small Business Act (15 U.S.C. 638(oo)) is repealed.

If any provision of this Act, or the application of such provision to any person or circumstance, is held to be invalid, the remainder of the Act, and the application of the remaining provisions, shall not be affected.