Senate Democrats

Senate Democrats Are On Your Side: Promoting Small Business Job Creation

When it comes to supporting America’s small businesses, the contrast is clear:  Democrats are fighting for a bill that would help small business owners create 500,000 new jobs, while Republicans are trying to kill the legislation and care more about protecting Wall Street than Main Street.

Senate Democrats have brought forward job-creating legislation aimed at refueling the engine of our economy:  small businesses.  Over the past 15 years, small businesses have created approximately 12 million, or two-thirds of, America’s new jobs.  Small businesses historically have borne the brunt of employment losses during recessions, and the current recession is no exception.  Over the past two years, small firms have accounted for between 64 and 80 percent of net job losses.  

At a time when America’S.27 million small businesses are starving for adequate access to capital and desperately seeking to hire workers and expand their businesses, this fully paid-for bill would increase access to capital, encourage investment, promote entrepreneurship, and promote small business fairness.  According to the Independent Community Bankers of America, the Small Business Jobs and Credit Act that the Senate Democrats are fighting for would help small business owners create 500,000 jobs.

Yet Republicans are trying to kill this bill.  Despite one of their own senators declaring that this bill “should receive 70, 80 or more votes,” and despite the fact that nearly every idea included in the bill has bipartisan support, Republicans have used a rotating series of excuses to try and explain their decision to block these common-sense measures to help small business owners create half a million jobs in this tough economy.

Highlights of the Small Business Jobs and Credit Act 

Tax Cuts for Small Business Job Creation.  The legislation includes a number of tax cuts that would help small businesses hire more workers.  The bill would:

·         Allow investors in small businesses to take a 100 percent exclusion from capital gains taxes on small business investments made in 2010;

·         Temporarily increase the maximum deduction for business start-up expenditures in 2010 and 2011 from $5,000 to $10,000, subject to a $60,000 threshold;

·         Increase the Section 179 expensing provision to allow small businesses to immediately expense up to $500,000 (up from $250,000) of the cost of tangible personal property, including up to $250,000 of the cost of improvements to leasehold property, restaurant property, and retail property;

·         Allow self-employed taxpayers to deduct health care costs for payroll tax purposes on their 2010 tax returns;

·         Extend Recovery Act provisions that allow businesses to immediately write-off 50 percent of the cost of capital expenditures for 1 additional year for qualifying property purchased and placed into service in 2010;

·         Expandbonus depreciation to allow long-term contractors that use the percentage-of-completion method of accounting to elect bonus deprecation on property whose depreciation term is less than seven years;

·         Allow small businesses to use all types of general business tax credits to offset AMT liability; and

·         Allow small businesses with less than $50 million in average gross annual receipts for the prior 3 years, to carryback unused credits for 5 years.

Small Business Access to Credit.  The bill would increase the capacity of SBA’s loan programs, increasing 7(a) loan limits from $2 million to $5 million, 504 loans from $1.5 million to $5.5 million, and microloans from $35,000 to $50,000.  The legislation would also extend Recovery Act provisions to provide 90 percent guarantees on 7(a) loans and fee waivers for borrowers on 7(a) and 504 loans until December 31, 2010. 

SBA has estimated that raising the 7(a) cap to $5 million would increase lending to small businesses by $5 billion in the first year alone.

Export Enhancement for Small Businesses.  The legislation would improve the Small Business Administration’s (SBA) trade and export finance programs, elevate the Office of International Trade within the SBA, and add export finance specialists to the SBA’s trade counseling programs.  The bill would also establish the State Export Promotion Grand Program, which is designed to increase the number of small businesses that export goods and services. 

It is estimated that these provisions would leverage more than $1 billion in export capital for small businesses, creating or saving as many as 40,000-50,000 jobs in 2010.

Small Business Contracting.  The legislation would improve opportunities for small business to access federal contracts and ensure prompt payment to small business subcontractors.  

It is estimated that increasing contracts to small businesses by just one percent could create approximately 100,000 jobs and infuse billions of dollars into small businesses nationwide.

Small Business Management and Counseling. The legislation would allow the SBA to waive or reduce the non-federal share of funding for Women Business Centers or a Microloan intermediary, which provide assistance to underserved communities that are starting or growing a business. 

SBA estimates that this provision would create or save more than 10,000 jobs in Fiscal Year 2011.

Small Business Disaster Relief.  Current law excludes aquaculture businesses from receiving SBA Economic Injury Disaster Loans, and there is often no other federal disaster assistance available to these businesses.  Provided it does not duplicate other federal disaster programs, SBA would be able to make economic injury disaster loans to these businesses, many of which are currently affected by the Gulf oil spill. 

Incentivizing Small Business Lending. The bill would establish the Small Business Lending Fund to provide much-needed capital to community and smaller banks.  The program, run out of the Treasury Department, would target community banks who hold under $10 billion in assets.  To incentivize only those lenders that extend new credit, the performance-based program would decrease the dividend rate that banks pay as they increase lending.  Banks that did not increase lending would face a higher rate after two years.  This program would be established separately from the Troubled Asset Relief Program (TARP), without TARP restrictions or warrant requirements, and with a separate, but strong, oversight regime. 

The program will provide an estimated $30 billion in capital to small banks, which will leverage up to $300 billion in new lending, while saving taxpayers an estimated $1.1 billion.

Financial Credits for Small Businesses. To support innovative small business lending initiatives that have been threatened by state budget shortfalls, the bill would establish the State Small Business Credit Initiative.  States would be required to demonstrate at least $10 in new lending for every dollar in federal funding.  By providing up to $1.5 billion in grants, the program would encourage at least $15 billion in additional lending through state initiatives.  The program would allow states to build upon successful models for state small business programs, including collateral support programs, Capital Access Programs, and loan guarantee programs, including those targeted at rural and agricultural small businesses.