With Congress back in session this week, the Senate approved a bill yesterday that has the support of both the National Marine Manufacturers Association and the Marine Retailers Association of America, who believe it will provide tax relief for small businesses and improve access to loans.
Key provisions of the bill include the creation of a $30 billion fund that provides capital to small community banks to prompt small business lending, and $12 billion in tax breaks for businesses. To encourage community banks to lend, they would pay a 5 percent dividend on the government capital investments, but dividend payments would decrease to as low as 1 percent as the banks increase small business lending relative to a 2009 base level.
Banks that do not increase their small business lending in the first two years after receiving the capital are to pay a 7 percent dividend. To encourage timely repayment of investments, the rate increases to 9 percent after four and a half years.
MRAA Chairman Ed Lofgren, in a Membership Advisory notice distributed yesterday, hailed another provision of the bill, saying the increase in the loan limits on SBA-backed 7(a) loans from $3 million to $5 million was one of the most important parts of the legislation. “MRAA has pushed Congress for this provision because 7(a) loans are used by some dealers for floor plan financing,” Lofgren said.
Other important provisions of the bill include:
– $1.5 billion to support existing state small business credit initiatives.
– Small businesses would be able to immediately expense up to $250,000 in capital spending. The bill also extends tax provisions that allow all businesses to more quickly write off purchases of new equipment and other depreciable property.
– To encourage investments in small businesses, the bill would exclude some small business stock sales from capital gains taxes.
– Small business deductibles for start-up costs would be doubled to $10,000.
– The bill frees up capital by allowing small businesses to carry back general business tax credits to offset taxes paid over the previous five years, instead of the current one year carry back. Anything left over can be carried forward for 20 years.
– The bill’s cost is to be offset by revenue-raising provisions aimed at clarifying and tightening tax rules, including tightening eligibility for a tax credit on corrosive biofuels such as crude tall oil, a by-product of paper manufacturing.
In an editorial this morning, the Miami Herald said the bill “provides the type of stimulus small businesses need – not a year from now but today,” and called on Congress to quickly move the legislation through its final steps.
That call was echoed by the NMMA’s PR manager, Government Relations, Christine Pomorski, who released a statement on Wednesday in anticipation of the Senate’s vote, urging the House to quickly approve a reconciled version of the bill so that President Obama can sign it into law. And most observers expect that is what will happen.
Let us know what you think. Is the legislation a good idea and will it make a difference for your business?