This past Monday President Obama signed into law the Small Business Jobs Act. The bill contains a number of provisions that will assist small businesses in these difficult economic times. SBAM and our national affiliate the National Small Business Association have fought for a many of these provisions over the past several months and in some cases years.
The major provisions of the bill are outlined below.
Health Insurance Affordability
For 2010, self-employed individuals will be allowed to fully deduct the cost of their health insurance from their self-employment taxes for 2010. Currently, self-employed individuals are prohibited from fully deducting the cost of their health insurance from their self-employment taxes, resulting in an additional 15.3 percent tax that no other worker or business owner is forced to pay.
Access to Capital
Small Business Lending Fund – The law creates a $30 billion lending fund for small- and medium-sized banks with strong incentives for them to increase their small-business lending. This is NOT TARP 2.0 – it is a program for strong community banks that pass a stress test and includes meaningful incentives to increase small-business lending.
State Small Business Credit Initiative Program – Funding is set-aside to help states leverage an estimated $15 billion in new lending by strengthening state small-business programs.
SBA Stimulus Provisions – The U.S. Small Business Administration (SBA) lending provisions originally passed under the American Recovery and Reinvestment Act (ARRA) are extended through 2010. Specifically, the law extends the 90 percent guarantee on 7(a) loans and the elimination of the borrower fees on both 7(a) and 504 loans—both which expired at the end of May.
SBA Loan Limits – Limits on various SBA-backed loans will increase: 7(a) loans from $2 million to $5 million; 504 loans from $1.5 million to $5.5 million; and microloans from $35,000 to $50,000.
Tax Incentives
Capital Gains – For the remainder of 2010, all capital gains taxes on investments in small businesses are eliminated provided the investment is held for five years.
Section 179 Expensing – For 2010 and 2011, Sec. 179 expensing is increased to $500,000—doubling the current limit. This provision also raises the phase-out threshold to $2 million, up from $800,000.
Bonus Depreciation – The law restores through 2010 the 50 percent allowable depreciation on capital investments.
Cell Phone Deduction – The law simplifies the rules to deduct the use of cell phones for business purposes beginning in 2010.
Start-up Expenses – The amount of start-up costs allowable to deduct is increased in 2010 from $5,000 to $10,000 with a phase-out threshold of $60,000 in expenditures.
Limits on Small Business Tax Penalties – Beginning in 2010, this law will change the penalty for failing to report certain tax transactions from a fixed dollar amount to a percentage of the tax benefits from the transaction, easing the disproportionate burden on small businesses.
Regulatory Fairness
The bill includes an enhancement of the SBA Office of Advocacy which will increase its independence—critical to the mission of Advocacy as the regulatory watch-dog for small business within the federal government—and create a separate line-item budget for Advocacy. This has been a priority for NSBA for nearly a decade.
Exporting
To enhance exporting opportunities for small firms, the new law will: provide funding for the U.S. Trade Representative’s (USTR) market access and trade enforcement activities; elevate the Office of International Trade within the U.S. Small Business Administration (SBA); add Export Finance Specialists to the SBA’s trade counseling programs; establish the State Export Promotion Grant Program; improve coordination between federal and state agencies and SBA resource partners; and leverage more than $1 billion in export capitol for small businesses.
Federal Contracting
Timely Payment of Subcontractors – Procurement officers will now be required to consider prime contractor failure to make full and timely payments to a subcontractor when evaluating that contractor’s performance.
Transparency for Contract Bundling – Agencies will now be required to publish on their Web sites their policy on contract bundling and consolidation, as well as a rationale for any bundled contract
Size Standards – The law requires periodic reviews of the small-business size standards and requires annual self-certifications of small-business contractors. The relevant agencies are also required to work with SBA to establish a government-wide policy on the prosecution of small business size and status fraud.
Contact Congress
As we reported in our last issue of the Champion, amendments to repeal the new 1099 reporting requirement failed in the U.S. Senate when they passed the Jobs Bill. However, there are still stand alone bills that could be taken up by Congress.
Recall that the controversial new 1099 reporting requirement, which was included in the Patient Protection and Affordable Care Act, would require businesses to report to the Internal Revenue Service (IRS) any purchase from a vendor of goods or services worth $600 or more during the calendar year. The new requirements would be effective for purchases made in 2012 that will be reported on 1099 forms filed in 2013.
Rep. Dan Lungren (R-Calif.) has filed a discharge petition for H.R. 5141 – his full repeal bill. They are currently looking for signers and need 218 signatures to get the bill to the Floor. We encourage you to contact your Representative and ask them to add their names to the discharge petition so we can ensure a real vote to repeal the 1099 provision in the health care law. Click here to do so now.
While this is not likely to take place before the elections, there is a possibility that the bill could see action before the end of the year.