Small business legislation signed into law
Eleni and Jerry Sica took advantage of government-backed small business financing to construct a new liquor and specialty foods store in Grand Junction.
The financing allowed the couple to purchase property rather than continue to lease space as well as expand the operation in what the Sicas consider a better location. In the process, they also hired an additional employee.
Eleni Sica said she hopes other small business owners now will be able to take advantage of the financing programs and tax breaks included in newly enacted federal legislation. Sica, co-owner of Crossroads Wine & Spirits, was among a group of small business owners who attended a signing ceremony with President Barack Obama in Washington, D.C.
The legislation has drawn praise for measures intended to help the small businesses that create most new jobs in the United States, but also have been hit hardest by the economic downturn. The legislation has been criticized as well, though, for falling short of addressing other problems small firms face, among them uncertainty over taxes.
Sica, for one, was enthusiastic about the legislation — as well as the opportunity to attend a signing event with the president in the East Room of the White House. “It was pretty exciting,” she said in a telephone interview with the Grand Valley Business Times.
Sica said she was selected to join in the event because of her involvement in a financing program backed by the U.S. Small Business Administration. The Sicas obtained a loan through the SBA 504 program to help finance construction of a new building that opened a year ago near the intersection of 24 and F roads.
At 8,000 square feet, the new building was large enough to not only accommodate a bigger inventory of wines, beers and liquors, but also a boutique specialty foods store that sells steaks, seafood and artisan cheeses. The Sicas also took advantage of a new tax benefit in hiring a worker who previously was unemployed.
The Small Business Jobs and Credit Act signed into law by Obama enacts eight new tax cuts for small businesses and enlarges SBA lending programs. The legislation also creates a $30 billion fund intended to help small banks make loans to businesses.
The new tax cuts, which all apply to small business taxes this year, include provisions that increase the amount of capital investments businesses are eligible to immediately write off to $500,000, temporarily double the deduction for startup business expenses to $10,000, eliminate capital gains taxes on investments held for five years, extend a carry back of general business credits to offset five years of taxes and create a new deduction on health insurance costs for the self-employed.
Provisions of the legislation also increase SBA 7 (a) and 504 loan guarantees to 90 percent while reducing the fees for those programs.
The measure permanently increases the maximum loan size to $5 million for the 7 (a) program, $5.5 million for the 504 program and $50,000 for the micro loan program. In addition, the maximum loan size for the SBA Express loan program will be temporarily increased to $1 million.
What’s more, the Treasury Department will implement programs to provide $30 billion to small banks with incentives to increase business lending and support at least $15 billion in new lending through state small business credit initiatives.
“This law will do two big things: It’s going to cut taxes and it’s going to make more loans available for small businesses,” Obama said at the signing ceremony. “It’s a great victory for America’s entrepreneurs.”
“At this difficult time for our country, it’s essential that we keep up the fight for every job, for every new business, for every opportunity to strengthen this economy,” he added.
Bill Rys, tax counsel for the National Federation of Independent Business, agreed the legislation constitutes a step in the right direction, but falls short in addressing other issues small businesses face. The NFIB is a nonpartisan advocacy group representing small business owners.
In a telephone interview with the Business Times, Rys said two tax provisions of the legislation should prove especially beneficial.
One provision not only increases to $500,000 the amount of capital investments businesses can immediately write off, but also covers renovations for retail businesses and restaurants. The provision should help firms that can take advantage of the tax break as well as construction businesses involved in remodeling work, Rys said.
A second provision that allows the self-employed to deduct the cost of health insurance for themselves and their family members puts business owners on equal footing with employees, Rys said.
Rys questioned whether or not another provision of the legislation creating the small business lending fund actually will elicit a substantial response. He said demand for small business financing has declined in the aftermath of a recession and uncertainty over when and to what extent a recovery will occur.
At the same time, the legislation doesn’t include one provision for which the NFIB had lobbied, Rys said.
Lawmakers rejected an amendment that would have repealed a new 1099 reporting requirement included in health care legislation enacted earlier this year. That provision requires businesses to issue 1099 tax forms to people or companies that sell them more than $600 worth of goods or services a year.
Rys said the Small Business Jobs and Credit Act also fails to address uncertainty over taxes. Bush-era tax cuts are scheduled to expire at the end of this year and Congress has yet to decide whether or not to allow the cuts to expire or extend some or all of the cuts. Most business income passes through to owners, Rys said.