THE ECONOMIC BAILOUT PACKAGE:

Why It's Important to Small Business

In an effort to address the current economic crisis, Congress recently passed H.R. 1424, "The Emergency Economic Stabilization Act." The result has been a very difficult pill for many small business owners to swallow. While the crisis on Wall Street is not the fault of small business, small business owners must recognize that their ability to access credit to grow their businesses depends upon stability and liquidity in the credit markets.

Let's be clear, NFIB wants those who perpetrated this financial mess to be punished and brought to justice. But in the meantime, the organization is working hard to make sure Wall Street's problems don't become Main Street's. While NFIB opposes any effort to bail out Wall Street, we are supportive of H.R. 1424 because the provisions in the bill create a firewall to protect our members during this unstable economic time.


Why is the H.R. 1424 important to small business?

H.R. 1424 is a complex bill that amasses more than 100 pages. While the bill impacts many facets of the financial market, the following provisions are important to small business:

1. 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.


2. 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.


  • Limits are placed on executive compensation for financial institutions that participate in the Treasury program.


  • Penalties are in place on "golden parachutes" for executives fired or leaving a financial institution that files for bankruptcy.


What tax relief provisions does H.R. 1424 provide to small business?

  • Tax relief for small business owners from the Alternative Minimum Tax. This provision will prevent 22 million Americans from Main Street from paying the AMT, which was only intended to ensure that a small number of wealthy individuals could not entirely avoid paying taxes.


  • Tax relief for small business owners from state and local sales taxes. This provision will extend the deduction for state and local sales taxes for taxpayers in states without a state income tax. These states are: 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. This provision extends the shortened 15-year depreciation period for improvements to existing restaurant and leasehold property.


  • Tax relief for family farms by allowing certain farming business machinery and equipment to be treated as fiveyear property. This provision shortens the period over which an individual in the farming business can expense machinery and equipment to five years and will put money back in the pockets of the farm business owner faster.


  • Federal disaster and tax relief for small businesses impacted by a series of recent natural disasters. This applies to small businesses in Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Texas and Wisconsin. These provisions would increase expensing limits for small businesses and provide greater depreciation benefits for new investments that are being made as a result of the destruction caused by floods, tornadoes and hurricanes in these states.

 

 

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