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What the Stimulus Means for Small Businesses

How the Stimulus Will Impact Your Business

The American Recovery and Reinvestment Act icludes $288 billion in tax cuts to put money in the hands of families and businesses to help our economy recover. The new law was strongly endorsed by the National Association of Manufacturers and the U.S. Chamber of Commerce, in large part because of its business tax cuts. The U.S. Chamber of Commerce wrote:

“Since the elections, we’ve vowed to work with the President to quickly develop and pass a stimulus bill that would apply a defibrillator to our economy and shock it back to life… We support the cancellation of indebtedness tax provisions that will encourage businesses to restructure and reduce debt, enabling them to preserve jobs, renew investment, and begin to grow once again”…
 
Following is a brief overview of some of the key tax cuts for businesses included in the stimulus package:

Net Operating Loss: This provision will allow businesses with gross receipts less than $15 million and a net operating loss to use the loss to offset profits made in the past five years, extending from two years. Because it applies for 2008, businesses that have not yet filed their returns will be able to go back five years with 2008 losses and recoup the size of that loss. It is our hope this relief will provide an immediate infusion of cash for struggling companies in a broad, cross-section of industries to help companies retain jobs, make critical investments, and, in some cases, simply keep their doors open.

Small Business Expensing.  Extends enhanced small business expensing, which doubles the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2009 from $125,000 to $250,000.

Bonus Depreciation.  This provision is intended to help businesses quickly recover costs of new capital investments by extending the increased bonus depreciation for businesses in new plants and equipment in 2009.

Cancellation of Indebtedness.  Provides assistance to companies looking to reduce their debt burdens by delaying the tax on businesses that have discharged indebtedness.

Spurring Investments in Small Businesses.  Spurs investments in small businesses by cutting the capital gains tax on investors in small businesses who buy stock (in the next two years) and hold it for more than five years.

3% Government Withholding.  Delays the mandate that federal, state, and local governments withhold 3 percent of payments to businesses for goods and services, which is supported by the National Small Business Association.

Jobs for Unemployed Veterans and Youth.  The new law provides businesses with a tax credit for hiring recently discharged, unemployed veterans, and youth that have been out of work and out of school for the 6 months prior to hire.  

SBA 7(a): This provision would temporarily reduce borrower and lending fees for the Small Business Administration 7(a) and 504 lending programs, which should help to thaw the frozen lending market that has made it difficult for many small businesses to get the capital they need.

Temporary Investment Tax Credit: This provision would help business owners who are in a position to buy new equipment, such as computers, refrigerators, or machinery by permitting an immediate write off the cost of these purchases up to $250,000.

Tax incentives and investments to create green jobs and encourage research in and adoption of renewable energy technologies: The new law provides $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years, including a three-year extension of the production tax credit (PTC) for electricity derived from some renewable sources. It provides grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns.

Real estate: The proposed enhancements to home buyers’ tax credits will encourage people to reenter the housing market, helping to retain and create job opportunities in numerous housing-related industry sectors. By offering tax incentives to first-time home buyers, this new law is intended to provide much needed liquidity to the market while jumpstarting critical industries.

Investments in transportation infrastructure, broadband technology and health information technology: In addition to the provisions specifically intended to assist small businesses, there are major investments to boost the country’s infrastructure and create American jobs, including $29 billion for highways and bridges, $1 billion for health technology, in addition to major tax cuts for families and individuals to enhance their ability to purchase goods and services. The new law also includes major investments in broadband, where the benefits should be experienced immediately in business, education, and healthcare. This is an investment which should particularly benefit Northern Virginia with its national and global technology leadership and expertise.

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