Economic Stimulus: What's in it for Small Business?

Feb 4, 2009

Although the economic stimulus package likely to come out of Congress in the next week or so is continually changing based on House and Senate machinations, one thing is clear: it is going to be big. As the bill nears $900 billion it includes everything from tax cuts for middle-income workers to infrastructure funding for highway projects.

So what’s in it for small business? NSBA has put together a list of key provisions in both the House and Senate bill that will have a significant impact on small businesses. Additionally, and perhaps most important, NSBA has listed key proposals that stand to help the small-business community that are not yet included in either bill.

Both Bills Would:

Waive repayment requirements for the $7,500 homebuyers tax credit created in 2008, if they make less than $75,000 per year;

Provide a broad array of tax credits for the production and use of clean energy products;

Companies that have received TARP funds cannot participate in the NOL carry back election.;

Extend 50 percent bonus depreciation through 2009 for investing in new plants and equipment; and

Extend by two years the increased level ($250,000 for 2008) for small-business expensing—currently only $125,000.

Extend the net operating loss (NOL) carry back from two to five years, however businesses utilizing this provision would have to permanently reduce the value of the losses by 10 percent;

Provide a “Making Work Pay” credit of $500 for individuals or $1,000 for couples--essentially a payroll tax credit, with companies able to reduce the tax they withhold from employees' paychecks;

Repeal in its entirety the requirement that federal, state, and local governments withhold three percent on all contracts;

Subsidize premiums for individuals’ COBRA health insurance and—in some cases—extend indefinitely COBRA eligibility;

Mandate federal contractors hired for stimulus-related projects to verify their employees’ eligibility through the government’s Everify system;

Provide SBA $430 million for new direct small-business lending and loan-guarantee authorities, including—it appears—waiving the borrower and lender fees for 7(a) and 504 through 2010;

Authorize SBA to guarantee up to 95 percent of its small-business loans;

Establish the SBA Secondary Market Guarantee Authority to provide guarantees for pools of first lien 504 program loans that are to be sold to third-party investors;

Provide $100 million for the Rural Business-Cooperative Service for grants, loans and loan guarantees;

Provide $70 million to Technology Innovation Program to accelerate research into new technologies;

Provide $30 million for the Manufacturing Extension Partnerships; and

Provide $250 million to Economic Development Assistance programs.

Provide a one-year, $70 billion alternative minimum tax (AMT) patch designed to be a “hold harmless” patch, keeping the number of taxpayers paying the AMT at 4.2 million in 2009;

Extend the NOL carry back from two to five years without a penalty on businesses to permanently reduce the value of the losses by 10 percent as they would in the House version;

Provide a reduced “Making Work Pay” credit of a $300 one-time payment;

Delay by one year implementation of the requirement that federal, state, and local governments withhold three percent on all contracts;

Allow businesses to defer tax payment—spread out over eight years—on income resulting from debts that have been forgiven;

Provide $515 million to temporarily eliminate 7(a) fees and $100 million for the temporary waiver of 504 fees, as well as increase the loan limit on 7(a) SBA loans to $3 million from $2 million;

Likely provide $6 million for SBA’s Microloan Program and $24 million for technical assistance; and

Provide the SBA Inspector General $25 million for oversight on SBA stimulus funds and increased lender oversight.

Increase or remove the interest-rate cap SBA imposes on lenders;

Mandate that Treasury require banks that receive any future TARP funding dedicate at least 25 percent of those funds to expand their small-business lending;

Utilize $3 billion of the remaining half of the $700 billion in TARP funding to directly purchase SBA 7(a) pooled securities—the House bill only does this for the 504 program, and not to the extent NSBA proposes;

Mandate that 23 percent of any infrastructure stimulus funds—whether spent at the federal, state, or local level—be contracted out to small businesses and repeal the 3-percent withholding requirement;

Abolish the self-employed tax on health insurance, making the tax code fairer and granting more than 21 million entrepreneurs greater access to affordable health insurance; and

Reauthorize the Small Business Innovation Research program and provide an additional $2.3 billion for small-business research and development and commercialization funding in FY 2009.