Small businesses are the engine of our economy, creating two-thirds of the new jobs over the last 15 years. America's 27 million small businesses continue to face a lack of credit and tight lending standards, with the number of small businesses loans down nearly 5 million since the financial crisis in 2008 under President Bush.
After months of Republican obstruction, the House passed a key to recovery for America's small businesses by a vote of 237-187 on September 23rd and President Obama signed the bill into law on September 27th. The Senate amendments to the Small Business Jobs Act (H.R. 5297) will expand much needed lending to millions of small businesses and offer tax incentives to help small businesses grow, hire, and fuel our economy -- which is fully paid for over 10 years and will not add to the deficit.
The Small Business Jobs Act to help small businesses create 500,000 new jobs:
- Gives small businesses $12 billion in tax cuts to spur investment, growth, new starts and hiring
- doubling and enhancing small business expensing and extending bonus depreciation
- allowing for 100% exclusion of capital gains on investments in small business
- doubling the deduction for start-up expenditures
- allowing self-employed taxpayers to deduct health costs for payroll tax purposes
- Leverages up to $300 billion in private sector lending for small businesses, along with state grants for small business lending
- Expands small business access to private capital to finance an expansion and hire new workers
- Helps Main Street businesses compete with large corporations
- Doesn't add a dime to the deficit--is fully paid for over 10 years, closing tax loopholes and reducing the tax gap
House Democrats will continue to promote ideas from the House-passed bill, which are not included here, in future legislation. The bill is supported by National Small Business Association, Small Business Majority, National Retail Federation, National Restaurant Association, Hispanic Chamber of Commerce, Independent Community Bankers of America, American Bankers Association, Financial Services Roundtable, Business & Professional Women's Foundation, International Franchise Association, Motor & Equipment Manufacturers, and National Association for the Self-Employed.
Expand Small Businesses Access to Capital
- Creates a $30 billion Small Business Lending Fund to provide community banks with capital to increase small business lending. The fund is limited to the smallest banks, those holding $10 billion or less in assets, with key performance-based standards to incentivize those lenders that extend new credit to small businesses (decreasing the dividend rate banks pay as they increase small business lending).
- Invests $1.5 billion in grants to support $15 billion in new small business lending through already successful state programs.
- Expands access to and lowers costs for small business to access SBA loans and increases Small Business Administration (SBA) loan limits:
- Continues the small business lending program that eliminates fees charged for SBA loans [7(a) and 504 loans] and increases the government guarantees on 7(a) loans from 75 percent to 90 percent through the end of the year. Since its creation, this has supported over $26 billion in small business lending, which has helped to create or retain over 650,000 jobs.
- Raises the cap on small business loans to increase lending by $5 billion in the first year, increasing the 7(a) and 504 loan limits from $2 million to $5 million, 504 loan limits for manufacturing firms are increased to $5.5 million, Microloan limits are increased from $35,000 to $50,000 and SBA Express working capital loans are increased from $250,000 to $1 million.
- Spurs investors by giving 100% exclusion from capital gains taxes on small business investments.
- Reduces small business taxes by allowing them to carry back general business tax credits to offset their taxes from the previous five years. Small businesses will also be able to count the general business credits against the Alternative Minimum Tax (AMT), freeing up capital for expansion and job growth.
Spur Small Businesses Investments & Growth
- Doubles small business expensing (to $500,000, phasing out at $2 million) -- for immediate write offs of capital investments, such as equipment and machinery, in 2010 and 2011. Also expands purchases qualifying for expensing to include certain types of real property, such as leasehold, retail and restaurant improvements.
- Extends Bonus Depreciation - allowing businesses to immediately write off 50 percent of the cost of new equipment investments in 2010.
- Spurs investment and growth -- the bill helps give small businesses more cash on hand to create jobs.
Promote Entrepreneurship and Small Business Exports
- Doubles to $10,000 the tax deduction for start-up expenditures for entrepreneurs looking to launch a new venture.
- Creates a variety of new tools to help small businesses gain international market access and export goods (at USTR, SBA, and Commerce), including a new State Export Promotion Grant Program (STEP), which will leverage more than $1 billion in exports.
Promote Fairness in Competition
- Improves tax fairness by preventing small businesses from incurring large tax penalties aimed at large corporations and wealthy individuals investing in tax shelters. (Section 6707A)
- Removes onerous requirements that complicate the ability to deduct costs of cell phone use as a regular business expense.
- Allows self-employed individuals to deduct health insurance costs in paying the self-employment tax in 2010.
- Removes the red tape and closes loopholes that too often put government contracts into the hands of multinational corporations, instead of Main Street businesses - such as periodic reviews of small business size standards in government contracts and requiring prompt payments to small business subcontractors from large businesses with government contracts.
- Ensures that no business contracting program - HUBZone, 8(a), and Service-Disabled Veterans and Women Owned Businesses - takes priority over another in competing for federal contracts.
Fully Paid for/Closing Tax Loopholes & Tax Gap
- Takes another in series of steps to close tax loopholes that promote corporations shipping jobs overseas -- dealing with the source rules on guarantee fees for indebtedness.
- Closes a loophole that allows paper mills to claim biofuel tax credit for a byproduct known as 'crude tall oil'-- a waste by-product of paper manufacturing. The bill would limit the tax credit to fuels that are not highly corrosive (i.e., fuels that could be used in a car engine or in a home heating application).
- Allows 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a Roth account. Contributions to Roth accounts are taxed when made, but distributions of both principal and earnings are tax-free upon withdrawal.
- Reduces the tax gap by requiring information reporting for rental property expense payments, increasing penalties for failure to file information returns, and tightening the process for going after federal contractors who have not paid their federal taxes.