• Advocacy Saves Small Business $21 Billion in Regulatory Compliance Costs
• NASE Welcomes Back House Small Business Committee
• Update: SBA Loan Bill Passes House
• 2002 Tax Changes for Business Taxpayers
   

Advocacy Saves Small Business $21 Billion in Regulatory Compliance Costs

Through its efforts to lessen federal regulatory burdens, the U.S. Small Business Administration Office of Advocacy helped micro-business owners save $21 billion last year.

According to an SBA press release, that’s enough money to purchase over four million computer workstations, or employ close to 500,000 new workers.

The Office of Advocacy details these savings for 2002 in its annual report to the President and Congress on the Regulatory Flexibility Act (RFA) of 1980. The RFA requires federal agencies to consider the impact of their regulations on small businesses, and look for regulatory alternatives to minimize the burden.

“Many federal agencies have demonstrated a commitment to implementing the Regulatory Flexibility Act,” said Thomas M. Sullivan, Chief Counsel for Advocacy. “We work with them to consider the impact their proposed regulations have on small business. By choosing less burdensome alternatives they are able to meet regulatory goals without endangering job-creating small businesses,” he concluded.

The SBA continues to work with federal agencies to lessen regulatory burdens, and the NASE is doing everything it can to make sure the self-employed and micro-business impact gets heard. NASE Member David Alders is traveling to Washington, D.C., this week to testify at a Regulatory Fairness Enforcement hearing sponsored by the SBA’s Washington, D.C., office and the SBA National Ombudsman Michael Barerra. He’s there to represent your concerns on regulatory burdens.

If you have a story about compliance with federal agency rules, share them with the NASE and David here.

For more information on the SBA Office of Advocacy report, visit http://www.sba.gov/ADVO.

 

A 2002 study by the NASE provides empirical evidence to the critical state of health coverage for the self-employed and micro-businesses. The survey, Affordability in Health Care: Trends in American Micro-Business, found that 70 percent of respondents did not have health insurance themselves or provide it for their employees, citing cost as the number one reason. But, 78 percent said they would participate in an AHP if they received group purchasing price breaks. Three in four said they would be motivated to participate in such plans if they were able to have more choice in benefits, or if participation would lessen paperwork and administrative burden.

“The businesses that can least afford it are paying disproportionately more than bigger businesses for access to quality health coverage,” Hughes said. “Finding solutions that provide a fair shake for these enterprises not only is in the best interest of small business owners; it’s in the best interests of the nation as a whole.”

For more information on the NASE 108th Congress Legislative Priorities, click here.

 

Update: SBA Loan Bill Passes House

A few weeks ago, Washington Watch reported on S. 141, a bill passed in the Senate allowing the U. S. Small Business Administration to guarantee an additional $3.4 billion in loans to small businesses this year by changing the formula the SBA uses to calculate its costs in guaranteeing so-called 7(a) bank loans. Last week, the House of Representatives also passed the measure. S. 141 now heads to President Bush, where he is expected to sign the bill into law.

For more information on S. 141, and what House Small Business Committee Chairman Donald Manzullo (R-IL) thinks of the legislation, visit http://www.house.gov/smbiz/press/108th/2003/030211a.html.

 

2002 Tax Changes for Business Taxpayers

(The following “Headliners” article has been provided by the IRS Taxpayer Education and Communication office in an effort to educate micro-business owners and make it easier to fulfill their tax obligations. For more articles, or for more information about any of the information contained in this article, please contact the IRS Small Business/ Self-Employed division.)

Fewer Tax Forms for Small Businesses to File

Starting with the 2002 tax year, companies with less than $250,000 of total receipts and less than $250,000 in assets no longer have to complete Schedules L, M-1 and M-2 of Form 1120; Parts III and IV of Form 1120-A; and Schedules L and M-1 of Form 1120S.

Small businesses will be able to use record keeping based on their checkbook or cash receipts and disbursements journal instead of creating additional records just for tax purposes. The companies must still maintain records detailing assets, liabilities, equity accounts and adjustments used to arrive at taxable income.

Self-Employed Health Insurance Deduction

Self-employed taxpayers generally may deduct 70 percent of their 2002 medical and long-term care insurance payments for themselves and their families as an adjustment to income. They may include the remaining costs with their other medical deductions if they itemize deductions. In 2003, they generally will be able to deduct the full cost of such insurance without itemizing deductions on Schedule A.

Special Depreciation Allowance

Businesses that acquire and begin using new qualified equipment after Sept. 10, 2001, may deduct an additional 30 percent of the depreciable basis in the first year of use. This Special Depreciation Allowance is figured after first reducing the basis by any Section 179 deductions taken. The allowance, in turn, is subtracted from that basis to determine the basis remaining for depreciation. This tax break will be available for property acquired before Sept. 11, 2004 and placed into service by the end of that year. Taxpayers may choose not to claim this allowance by attaching an appropriate statement to their tax returns.

Section 179 Deduction Higher for Enterprise Zone and Renewal Community Businesses

The maximum Section 179 deduction for these businesses is increased by $35,000 (to $59,000) for 2002.

Five-Year Carryback of Net Operating Losses

Taxpayers with net operating losses (NOLs) for tax years ending in 2001 or 2002 will generally carry them back five years, rather than two (three, for certain casualty, theft and disaster-related losses). However, they may choose to use the two- or three-year period instead, or to carry the entire NOL forward for up to 20 years. Taxpayers waiving the five-year rule must do so by their filing deadline (including extensions).

Electric and Clean-Fuel Vehicles

The maximum amounts for the clean-fuel vehicle deduction and the electric vehicle credit, which were scheduled to begin dropping by 25 percent per year in 2002, will remain unchanged until 2004, when the three-year phase out will begin.

Credit for Pension Plan Start-up Costs

This new tax credit helps small businesses offset the costs of setting up and administering a new qualified employer plan and educating employees about it. The credit is 50 percent of these costs, with a maximum amount of $500 per year. After the first year the credit is claimed, it may be claimed again only in the following two years. To qualify, a business must have had no more than 100 employees who received at least $5,000 in pay during the preceding year. The plan must include at least one non-highly compensated employee.

Credit for Employer-Provided Child Care

This new credit is 25 percent of the qualified expenses paid for employee childcare, plus 10 percent of the qualified expenses paid for childcare resource and referral services. The maximum credit amount is $150,000 each year.

Welfare-to-Work and Work Opportunity Credits

These credits, which were scheduled to end in 2001, have been extended to cover qualified wages paid to individuals who begin work before 2004.

New York Liberty Zone

Businesses in the Lower Manhattan area designated as the New York Liberty Zone have several tax breaks to aid in their recovery from the Sept. 11, 2001, terrorist attack. Among these are:

A special Liberty Zone Allowance similar to the 30 percent Special Depreciation Allowance for property placed in service before 2007 that does not already qualify for that allowance. This includes used property that the taxpayer is the first to place in service in the Liberty Zone. Taxpayers may also elect not to claim this allowance.

An additional Section 179 deduction of up to $35,000, for a maximum amount of $59,000. Generally, this limit is reduced by the cost of qualifying Section 179 property in excess of $200,000. For Liberty Zone property, only 50 percent of the property’s cost is taken into account when figuring this reduction.

A new targeted group for the Work Opportunity Credit, consisting of new or existing employees who perform substantially all their services in the Liberty Zone, or elsewhere in New York City for a business that relocated from the Liberty Zone due to 9/11 attack damage.

Classification of qualified Liberty Zone leasehold improvement property as 5-year property, for which the straight-line depreciation method must be used.

Extension of the usual two-year replacement period for a tax-free replacement of involuntarily converted property to five years for Liberty Zone property converted as a result of the 9/11 attack.

 

Do any of these issues affect you? Do you want to be proactive in helping the micro-business community? Visit the NASE's Legislative Action Center and “Tell Your Small Business Story.” This will help the NASE understand - on a personal level - how key legislative issues are affecting your business and your bottom line.

For more information about any of the articles in Washington Watch, contact Maureen Petron, NASE public affairs manager, at (202) 466-2100 or mpetron@nase.org.