113th Congress Wrap-Up for Small Business

United States Capitol Buildingby Bob Carlstrom – New House and Senate Small Business Committees Chairs

The new Chairman of the House Small Business Committee for the new 114th Congress is Rep. Steve Chabot (R-OH) and the Ranking Democrat has been Rep. Nydia Velazquez (D-NY).  Outgoing is Rep. Sam Graves (R-MO), who has chaired this committee since 2011 and has been a Member of the Committee since 2001.  Graves is credited with providing small business interests a higher profile in the Congress and making the Committee relevant — small businesses creating seven out of every 10 jobs — through active pursuit of small business relief legislation, reducing regulatory burdens upon small business and holding more than 200 hearings on such issues as health care, taxes, availability of bank loans and federal regulations.

In the Senate, the new Chair of the Committee on Small Business and Entrepreneurship is Sen. David Vitter (R-LA) and the Ranking Democrat is Sen. Ben Cardin (D-MD).  Outgoing chair is Sen. Maria Cantwell (D-WA), who will remain on the Committee but take the senior Ranking Member position on the Senate Energy Committee.

Legislation Enacted by the 113th Congress

National Defense Authorization Act (NDAA), approved by the President on December 26, 2013.

The NDAA includes (i) an amendment to ensure women-owned small businesses have equal access to federal contracting and (ii) two amendments to help increase federal contracting opportunities for small businesses.

Women Owned-Businesses.  The NDAA legislation adopts recommendations from the Senate Committee on Small Business and Entrepreneurship and authorizes federal agencies to award sole-source contracts to women-owned small businesses, which would put women-owned businesses on equal footing with other small businesses owned by minorities and veterans, as well as businesses located in underserved areas. Authorizing sole-source awards for women would give parity to the Women-Owned Small Business Federal Contracting program, creating more opportunities for them to grow their businesses and create jobs.

The legislation also would require the U.S. Small Business Administration to verify the ownership status of women-owned small businesses. Currently, businesses self-report whether they are owned by women when competing for federal contracts. This change will ensure that the women’s contracting program benefits those for whom it was intended. Women entrepreneurs account for just $1 out of every $23 in small business lending, despite representing 30 percent of all small companies.

Increasing Federal Contracting Opportunities for Small Business

Outgoing House Small Business Committee Chair Sam Graves said, “Providing more opportunities for small businesses through federal contracting saves taxpayer money and helps our economy… (T)hese two amendments… will help small businesses compete for federal subcontracts and will clarify complex subcontracting rules so that small businesses can more easily navigate the procurement system. When more small businesses compete for federal contracts, prices fall, jobs are created, and the industrial base is strengthened.”

The new amendments would:

  • Allow contracts that are subject to the Small Business Act’s limitations on subcontracting to be exempt from Sec. 802 of the FY 2013 NDAA, which applied limitations on subcontracting to Dept. of Defense contracts to prevent excessive pass-throughs of work.
  • Add an incentive for prime federal contractors to consider small firms for more subcontracts. Currently, large firms only receive credit for small businesses they use at the first tier, to meet their subcontracting obligations. Meanwhile, the government takes credit for all small business subcontractors to meet its goals. This disparity defies common sense. The amendment will incentivize large prime contractors to make sure that there are opportunities for small businesses working as lower tier subcontractors.

Small Business Tax Extensions – The Tax Increase Prevention Act

The Tax Increase Prevention Act, approved by the President on December 19th, reinstates expired 2013 tax breaks and extends them law only through December 31, 2014.  These extensions include:

Section 179 Expensing

First, the bill contains a retroactive increase of the limit on business equipment eligible under Section 179 small business expensing to $500,000 for eligible new and used equipment purchased in 2014. Without this bill, the maximum eligible for Section 179 expensing in 2014 would have been $25,000.

The bill also includes an extension of the 50 percent bonus depreciation deduction for new business equipment acquired and placed in service in 2014. In addition to these changes, there is an extension of the additional $8,000 in first-year depreciation for certain business vehicles purchased in 2014.

Under Section 179 of the tax code, small companies are allowed to deduct the cost of investments in large assets like equipment, property and software at the time of purchase, rather than over many years. That allows employers to see a more immediate tax windfall.

However, a temporary expansion of the program expired last year, dropping the expensing limit for businesses from $500,000 to $25,000. Under the legislation, that cap returns to the half-million-dollar mark, but only until the end of the year. The proposed long-term deal that fell through would have made the higher limit permanent.

Research and development credit

An oft-used research and development credit expired completely at the end of 2013. Open to companies of any size, the provision offers tax credit covering as much as 20 percent of the cost of research or experimentation related to creating new products or improving existing manufacturing processes.

Considered for permanent status, as well, the research and development credit was instead restored through the end of this year.

Renewable energy credits

Last year, business owners who built or renovated property featuring renewable energy technology — such as solar panels or “green” lighting equipment — could take advantage of a special tax deduction. Until now, the deduction could only be claimed on property placed in service before the end of 2013. Now, any such property opened this past year would qualify for the deduction, as well.

Credits for hiring military veterans

Under the tax extender bill, companies can again apply for tax credits if they hire military veterans and active reservists. An even larger credit is available to small businesses that hire long-unemployed or service-disabled veterans.

Work Opportunity Tax Credit

Other hiring-related provisions that were restored this year include credits for companies that hire qualified ex-felons, qualified summer youth employees, and individuals who receive supplemental security income or long-term family assistance.

Other Business extenders include:

  • 100% exclusion for gain on qualified small business stock
  • 5 year recognition period for S Corp built-in-gains

Other Energy extenders include:

  • Production tax credit – electricity generated by qualified energy resources and sold to an unrelated taxpayer
  • Biodiesel and small agri-biodiesel producer credits
  • Credit for energy-efficient new homes

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