• Patent Reform Measure Passes House
• The Construction Industry And The Tax Gap
• NASE Survey Examines Budgeting Practices of Micro-Businesses
• Quick Look: SCHIP Update

Patent Reform Measure Passes House

A new bill designed to tweak the regulations that govern patents was recently passed in the House of Representatives. The Patent Reform Act of 2007 would tighten rules for awarding damages for patent infringement, provide additional structure for those wishing to challenge patents within the first 12 months of their issue and give the U.S. Patent Office greater authority to disseminate information on regulations. In remarks made earlier this year by the bill’s sponsor, Rep. Howard Berman of California, focused on the need to encourage innovation: “When it functions properly, the patent system should encourage and enable inventors to push the boundaries of knowledge and possibility,” he said. “If the patent system allows questionable patents to issue and does not provide adequate safeguards against patent abuses, the system ends up stifling innovation and interfering with competitive market forces. The legislation would work to award damages to patent infringement by weighing how integral the patent is to the larger significance of the product. It would also alter the regulations to recognize those who are the first to file for a patent, instead of the current rule to award patents to the first to invent the product or service. The Senate patent bill, which does not grant the Patent Office this authority, will likely be debated this fall. To read more about the Patent Reform Act of 2007, visit http://thomas.loc.gov/.

The Construction Industry And The Tax Gap The following article excerpt comes to you courtesy of the communication and education team at the Internal Revenue Service. For additional tax information, visit http://www.irs.gov or http://taxtalk.nase.org. Not reporting or under-reporting business income, including income from construction activities, contributes to the tax gap. This fact sheet is the 15th in a series to help reduce the tax gap by helping taxpayers better understand the tax code. The tax gap is the difference between the amount of taxes that should be paid in a given year and the amount actually paid voluntarily and in a timely way. Income Contractors, subcontractors, and workers must pay taxes on income received for all work, including side jobs and work that is paid for with cash. This includes work in exchange for credit on a bill. It also includes work that is done in exchange for goods or services in a barter exchange. You are required to report your income even if a Form 1099 or a W-2 is not issued to you. Income and expenses are reported on tax returns based on one of two accounting methods, which include either the cash method or the accrual method. Either method must clearly reflect a consistent treatment of income and expenses from year to year. Expenses Ordinary and necessary business expenses are deductible. An “ordinary” expense is one that is common and accepted in the construction business. A “necessary” expense is one that is helpful and appropriate for the construction business. An expense does not have to be indispensable to be considered necessary. Common business expenses deductible in the year incurred include utilities, car and truck expenses, advertising, employee salaries, trade association dues, rent expense, supplies, continuing education, small tools expected to last one year or less, steel toe work boots and business licenses. Expenses for business assets that are expected to last more than a year must be capitalized and depreciated over their useful lives. Examples of assets include: Cement mixer Compressor Ladder Other heavy machinery Buildings and real property Personal expenses including clothing that can be worn off the job site, fines and penalties, and the non-business use of vehicles or computers cannot be deducted.   NASE Survey Examines Budgeting Practices of Micro-Businesses   Only 22 percent of micro-business owners prepare and follow an annual budget, according to a new survey by the National Association for the Self-Employed (NASE). The survey asked respondents how they watch their spending and increase profits. Half of said that they pinch pennies on every expense and a third said they closely track business expenses to maximize tax deductions. “These findings emphasize the bookkeeping challenges that the self-employed face,” said Kristie Darien, executive director of the legislative office for the NASE, “Due to their limited cash flow, budgeting and financial planning is critical for micro-businesses to weather fluctuations in their business and our economy. The NASE tries to assist our members with finance issues through our ABCs of Finance and TaxTalk programs.” In addition, just over a quarter of micro-business owners said they cut costs by carefully reviewing supplier contracts on items such as cell phones and Web site maintenance costs. For more information on the survey, please visit http://advocacy.nase.org/membersurveyAlso /default.asp. For more information on what the TaxTalk and ABCs of Finance programs, visit www.NASE.org and click on the “Business Resources” tab. Quick Look: SCHIP Update House Democrats say they are ready to informally renegotiate the terms of the State Children’s Health Insurance Program (SCHIP) legislation in order to meet the renewal deadline of September 30th. The decision comes on the heels of efforts by Senate Republicans to hinder the finalization of the bill in their chamber, citing goals to reduce the reach and cost of the legislation. The House bill calls for an expansion of SCHIP which, at $75 billion over five years, is an additional $15 billion above projections made in the Senate bill. To offset costs, the measures call for a variety of tax cuts and increases, including cutting payouts to insurers participating in the Medicare Advantage program in the House to increasing taxes paid for cigarettes by 61 cents per pack in the Senate. Though legislators have acknowledged that another short-term extension for the program may be necessary, no formal announcement has been made to indicate such plans. Share your experiences as a micro-business owner! Sound off on key legislative issues and get some free publicity for your business in the process by becoming a media contact. Visit www.NASE.org/mediarelations/contactsheet.asp to fill out an informational sheet on the background of your business. Then, send it back to us at the contact information listed on the sheet. If getting involved in the legislative process suits you better, go to the Advocacy page and “Tell Your Story” (http://advocacy.nase.org/issues/issues.asp). You have the option of allowing the NASE to share your micro-business story with your Members of Congress. By allowing the NASE to tell your story to legislators, you can play a vital role in illustrating the real life consequences and affects of issues they debate on a daily basis.