Tax Provisions Highlighted in Recent Address

By PlanetLaundry staff | Dec 11, 2009

This week, President Obama announced a proposal to help reinvigorate job growth in the U.S. with a key focus on small business. During his speech, Obama emphasized the role of small businesses in job creation and also highlighted their critical contributions to U.S. innovation.

Citing a drop in unemployment and the beginnings of economic growth, Obama stated that more must be done. In his address, four key tax provisions were highlighted, three of which would expand on provisions passed in American Recovery and Reinvestment Act of 2009 (ARRA) earlier in the year. Those three provisions would provide:

• A one-year elimination of the tax on capital gains, up from the current – but temporary – 75 percent exclusion.

• A one-year extension on enhanced Section 179 expensing of up to $250,000 in 2010.

• A one-year extension allowing for accelerated bonus depreciation through 2010.

These relatively moderate expansions of ARRA tax provisions will help small-business owners reinvest in their business and have more cash on-hand.

The fourth tax proposal would provide a short-term employment tax credit. Though no specifics were outlined, Obama did state that such a credit would be available to help small businesses add and keep employees. The two leading proposals in this line of thinking are a hiring tax credit, which would be a temporary elimination of payroll taxes on new employees, and the other is a payroll tax holiday on all employees. While both proposals certainly can help small-business owners, it is doubtful either would be enough incentive alone for a small-business owner to hire a new employee, unless that owner had already been considering a new hire.

Obama also proposed critical funding to extend SBA lending provisions passed under ARRA, which recently ran out of money, forcing many small businesses to hold off on growth plans. Under the ARRA – and now Obama’s – proposal, SBA 7(a) loans were given a 90 percent guarantee, and upfront borrower fees were eliminated.

The final key provision Obama outlined was a possible mechanism to use TARP funds to support small-business lending. Unfortunately, Obama fell short of describing in any detail what such a mechanism would look like and instead called upon the Treasury to continue exploring this option.

“We are pleased to see President Obama paying close attention to small business and offering some sound proposals,” stated National Small Business Association President and CEO Todd McCracken. “But the time for talk has long-since passed. We need the administration and Congress to act now on these proposals – they simply can’t wait.”

“At the end of the day, these proposals will help, but more can and should be done,” added NSBA Chair Keith Ashmus. “There are bills before Congress right now that can help: a long-term reauthorization of the Small Business Innovation Research program, a permanent fix to the estate tax, health care reform that reduces costs, and credit card reform that includes small businesses. I hope that, just as there isn’t a shortage on good ideas, there isn’t a shortage of support for America’s small-business community.”