NFIB

Oct. 3, 2008

On Wednesday, Sept. 30, the Senate passed HR 1424, the Emergency Economic Stabilization Act, 75 - 24, and the House passed the bill today, 263 – 171.

NFIB supports Congress’ efforts to address the current economic crisis. The fact remains that this has been a very difficult pill for small business to swallow. The crisis on Wall Street is not the fault of small business. However, small business owners recognize that their ability to grow their business depends upon stability and liquidity in the credit markets. Small business men and women, even those who don't use credit to run or expand their own businesses, understand that they do not live on an island. They know that credit and functioning financial markets are important to them and to their customers, suppliers and vendors.

Provisions of HR 1424 that are important to small business include

• A provision to help local community banks clear worthless government-sponsored assets from their balance sheets by treating these losses as ordinary losses instead of capital losses.
• Community banks are critically important to small businesses across the country: 48 percent of small businesses are customers at banks with less than $1 billion in assets.
• Failure to help community banks clear bad assets off the books could decrease the bank’s lending capacity by as much as $450 billion. 
• An increase in the FDIC insurance limits from $100,000 to $250,000.
• This will give small businesses greater confidence that their business banking assets are secure.
• It also provides more certainty for banks, especially community banks, that their customers will not remove their money.
• Substantial provisions have been added to give the taxpayers significantly greater protections, including real oversight with teeth.
• The Treasury Department does not get a blank check for $700 billion dollars, and does not receive the entire sum up front.
• The secretary must request funds and must provide justification to congress for each installment requested.
• The secretary must report to congress every month and on every $50 billion spent.
• Places limits on executive compensation for financial institutions that participate in the Treasury program.
• Penalizes “golden parachutes” for executives fired or leaving a financial institution that files for bankruptcy.

Provisions removed from the original bill

The following anti-small business provisions are opposed by NFIB and were removed from the bill:

• Providing unions and other partisan groups with access to the executive boards of corporations taken over by the government.
• Mandating shareholder votes on compensation issues (a union priority), also only for corporations taken over by the government.
• Funds would be placed into an account to support partisan groups like the Association for Community Organizations for Reform Now (ACORN) before funds are allotted to the Treasury for credit recovery.
• Allowing trial judges to arbitrarily adjust mortgages that were subject to foreclosure.
• Requiring the government to sell to state and local governments at a discount homes the government acquires as a result of foreclosure.

The following tax extenders provisions were included in HR 1424

• Tax relief for small business owners from the Alternative Minimum Tax (AMT)
• NFIB was pleased that HR 1424 includes a non-offset AMT patch.
• This patch will help prevent 22 million Americans from paying the AMT, which was only intended to ensure that a small number of wealthy individuals could not entirely avoid paying taxes.
• NFIB believes AMT relief should not be paid for by raising other taxes.
• Tax relief for small business owners from state and local sales taxes
• H.R. 1424 extends the deduction for state and local sales taxes for taxpayers in states without a state income tax. 
• This provision provides tax relief and equity for taxpayers in these states with no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
• Tax relief for small businesses by extending and expanding the shortened depreciation period for restaurant, leasehold and retail construction
• H.R. 1424 extends the shortened 15-year deprecation period for improvements to existing restaurant and leasehold property. 
• The bill also extends recovery period to new restaurant, and existing retail construction. 
• Because of the wear-and-tear caused by longer hours and more customer traffic, a 15-year period better reflects the life of these properties than the 39 ½ -year period.
• Tax relief for family farms by allowing certain farming business machinery and equipment to be treated as five-year property
• The proposal shortens the period over which an individual in the farming business can expense machinery and equipment to 5 years.
• This provision will put money back in the pockets of the farm business owner faster.
• Mental Health Parity (MHP)
• NFIB is pleased that the version of MHP included in HR 1424 retains the current exemption for businesses employing 50 or fewer workers.
• Requires parity for physical and mental health components of a health plan including co-payments, deductibles and limits hospital stays.
• Does not pre-empt more stringent state laws, and allows exemptions if the federal parity mandates increase coverage costs by more than 2 percent in the first year, or 1 percent in subsequent years.
• NFIB worked hard to ensure that the least onerous version of MHP was included in the final legislation.
• Federal disaster and tax relief for small businesses impacted by a series of recent natural disasters
• Provides tax relief for victims in all Federally-declared disaster areas occurring this spring and during Hurricane Ike and the Midwestern floods and tornadoes in Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Texas and Wisconsin.
• The tax relief provisions include:
• Expensing Property
• The proposal would increase by $100,000 (or the cost of qualified property, if less) the amount of expensing available for qualifying expenditures.
• This proposal would also increase by $600,000 (or the cost of qualified property, if less) the level of investment at which benefits phase-out, thus allowing more businesses to use this tax benefit in rebuilding.
• Treatment of Net Operating Losses
• The proposal extends from two to five years the time period taxpayers can claim casualty losses or qualified disaster expenses.
• When taxpayers carry losses back to prior years, they receive a refund of the taxes that they paid in the earlier year.
• This prompt refund can help them reinvest in their businesses or make ends meet in the aftermath of a disaster.
• Additional Depreciation
• Permits an additional first-year depreciation deduction equal to 50 percent of the cost of new real and personal property investments made in disaster area.
• The additional deduction applies to computer software, leasehold improvements, certain commercial and residential real estate expenditures and equipment.
• All depreciation deductions (including bonus depreciation) would be exempt from the AMT.

Additional information about the process

Was there an NFIB member ballot?

• Because of the complexity of the issue and the very short time frame, an individual member ballot was not possible.
• However, we do know from previous ballots that the tax relief provisions in the bill are important for small businesses.
• We also know that small businesses need credit not just for their businesses but for their suppliers and customers, as well.

Hasn't the NFIB SBET said that credit has not been a problem for most small businesses?

• Yes, and the important words are "has not."
• The SBET looks backward, not forward, and all the indicators were that without action community banks would be severely hurt and access to capital for small businesses would dry up very quickly.