(WASHINGTON) At the close of the 108th Congress, House Small Business Committee Chairman Don Manzullo (R-IL) today recalled the many successes for small businesses in 2003 and 2004 with a promise to secure even more victories for America’s 25 million entrepreneurs in 2005.

Small businesses are a critical part of our economy. They represent more than 99 percent of all employers, employ 52 percent of private-sector workers, and provide 51 percent of the private sector output. While many large companies are “shedding” workers, small businesses provide two-thirds to three-quarters of the net new jobs. Clearly, Republicans recognize that small business is the engine of job growth in our country and the key to our economic recovery.

This past session, the House Small Business Committee worked with Congressional leadership and the Bush Administration to reduce the tremendous tax and regulatory burden that hamper small businesses and stifle their growth. Among the major successes:

1. Jobs and Growth Reconciliation Act of 2003 (HR 2): on May 28, 2003, President Bush signed into law (P.L. 108-27) a bill to accelerate the 2001 tax cuts by speeding up the individual income tax rate reduction from 2006 to 2003 (85 percent of small businesses pay at individual rates); increasing the “bonus” depreciation from 30 to 50 percent and extending it until December 2004; and increasing small business expensing from $25,000 to $100,000 until 2005 and also increasing the definition of small business from $200,000 of capital purchases to $400,000 (indexed for inflation in 2004 and 2005).
   
   
2. FSC/ETI repeal (HR 4520): on October 22, 2004, the President signed into law the American Jobs Creation Act of 2004 (P.L. 108-357), which provides a 9 percent tax deduction for U.S. manufacturers – large and small regardless of how they are organized – while repealing the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) tax regime to comply with the World Trade Organization (WTO) ruling against the United States. P.L. 108-357 also includes other significant benefits for small businesses, including an extension of Section 179 expensing, which will allow small businesses to immediately expense up to $100,000 of new investments through 2007; a reduction of the depreciation period for restaurants and leasehold improvements from 39 years to 15 years; and S-Corporation reform and simplification
   
   
3. Health Savings Accounts (HR 1): as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the President signed into law on December 8, 2003 (P.L. 108-173) Health Savings Accounts (HSAs) which will further increase the availability of affordable health care by allowing a tax deduction to uninsured individuals or for those individuals in health plans with high deductibles (usually those who own a small business or who work for a small business) for amounts contributed to an HSA ($2,600 for an individual or $5,150 for families) to pay for uncovered medical expenses.
   
   
4. Veterans Benefits Act of 2003 (HR 2297): on December 16, 2003, the President signed into law a bill that made various changes to veterans benefits, including promoting veteran small business development. P.L. 108-83 permits the use of G.I. bill educational benefits for self-employment training; allows states the right to approve various entrepreneurial courses run by Small Business Development Centers (SBDCs) and the National Veterans Business Development Corporation, and grants discretion to federal contracting officers to set-aside contracts up to $3 million ($5 million for manufacturers) to service-disabled veteran-owned small businesses. On May 5, 2004, the Small Business Administration (SBA) and the Federal Acquisition Regulatory (FAR) Council issued an interim rule to immediately implement the discretionary set-aside contract authority for service-disabled veteran business owners. On October 21, 2004, the President signed an Executive Order to require heads of federal agencies to provide increased contracting and subcontracting opportunities for service-disabled veteran small business owners.
   
   
5. Small Business Access to Credit Act (S. 141): on February 25, 2003, the President signed into law (P.L. 108-8) legislation that led to the removal of a $500,000 lending cap in the SBA’s main business loan guarantee program – the 7(a) program. P.L. 108-8 allowed the Office of Management and Budget (OMB) to retroactively apply a more sophisticated econometric model to calculate what needed to be set aside to cover potentially bad loans. Correcting this problem freed up an additional $4.8 billion in capital for small businesses for the rest of Fiscal Year 2003.
   
   
6. Temporary 7(a) fix (HR 4062): on April 5, 2004, the President signed into law (P.L. 108-217) a bill that restored and enhanced the SBA’s 7(a) guaranteed lending program. In January 2004, the SBA was forced to shut down the 7(a) program for several days. With a variety of fees imposed on the lenders (not small business borrowers), P.L. 108-217 freed up $3 billion in extra loan authority for the rest of Fiscal Year 2004, which allowed the SBA to guarantee an additional 30,000 loans to small employers.
   
   
7. Small Business Reauthorization and Manufacturing Assistance Act of 2004 (HR 5108/ S. 2821): on December 8, 2004, the President signed into law, as part of the Fiscal Year 2005 Omnibus Appropriations bill (Division K of HR 4818), key elements of legislation jointly introduced by House Small Business Committee Chairman Donald Manzullo and Senate Small Business & Entrepreneurship Chair Olympia Snowe to reauthorize the programs of the SBA for two years. Division K of HR 4818 raises the guarantee limit in the 7(a) loan guarantee program to $1.5 million and makes the 7(a) program self-sufficient (not requiring taxpayer funding), makes the International Trade loan program more useful for small manufacturers suffering from import competition, and increases the loan limits and job creation/retention goals in the 504 Certified Development Company loan program. Division K of HR 4818 also helps small businesses establish drug-free workplaces, protects the privacy rights of small businesses seeking assistance from Small Business Development Centers (SBDCs), and makes various improvements to veterans entrepreneurship programs and the surety bond program. It also strengthens and expands the Historically Underutilized Business Zone (HUBZone) procurement program.
   
   
8. U.S. Patent & Trademark Fee Modernization Act (HR 1561): on December 8, 2004, the President signed into law, as part of the Fiscal Year 2005 Omnibus Appropriations bill (Division B, Title VIII of HR 4818), almost all of the provisions of HR 1561 that will modernize and reform the U.S. Patent & Trademark Office (USPTO). Patents and trademarks are important to our nation’s economy because small “patenting firms” spur more innovation by producing 13 to 14 times more patents per employee than their larger competitors. Of key importance, Division B, Title VIII of HR 4818 will stop the siphoning off of excess fees to the U.S. Treasury collected from USPTO applicants. In addition, these provisions provide a variety of fee discounts to small entities, thus encouraging innovation and new product development from this dynamic sector. Chairman Manzullo played a key role in refining the manager’s amendment (H.Amdt. #466) to further benefit small inventors during House consideration of HR 1561 last March.
   
   
9. Federal Prison Industries reform (HR 1829): on December 8, the President signed into law, as part of the Fiscal Year 2005 Omnibus Appropriations bill (Division H, Section 637 of HR 4818), making permanent the prohibition of Federal Prison Industries (FPI) mandatory sourcing preference in government contracting, which is the core of HR 1829, in over 250 broad classes of products and services. Division H, Section 637 of HR 4818 simply requires the federal government to purchase products or services at the “best value,” thus allowing small businesses the opportunity to bid on federal government contracts, which was previously reserved exclusively for FPI, totaling $700 million. The temporary removal of FPI’s mandatory sourcing provision was first added to the Consolidated Appropriations Act, 2004 (P.L. 108-199) but it expired last September. This issue was discussed during a Small Business joint subcommittee hearing on October 1, 2003.
   
   
10. Regulatory compliance costs: The independent Office of Advocacy at the Small Business Administration, which is charged to challenge potential bad regulations, saved small businesses $6 billion in regulatory compliance costs in 2003 through enforcement of the Regulatory Flexibility Act (RFA). Overall, the growth of new regulations has dropped 75 percent in the past four years as compared to the previous eight, thanks, in part, to vigorous oversight by the Small Business Committee (see below for some examples).
    
    
11. B-2 visitor visa: in March 2003, the Department of Justice withdrew its proposed rule that would have changed the automatic default period for tourist visas from most countries from six months to 30 days. It would have required those wishing to stay longer than 30 days to justify their intentions to a U.S. immigration inspector. Over 939,000 visitors from the affected countries (usually from the developing world or former East bloc nations) stayed in the U.S. beyond 30 days and contributed $2.1 billion to the U.S. economy in 2000. Many in the tourism industry, which is overwhelmingly dominated by small businesses, feared the foreign visitors simply would not come to the United States if they had to go through the hassle and uncertainty of justifying their visits. This topic was first addressed in a Small Business Committee hearing on June 19, 2002.
    
    
12. Withdrawal of HUD’s RESPA rule: on March 22, 2004, the Department of Housing and Urban Development (HUD) voluntarily withdrew its proposed regulatory changes, which were awaiting final review and approval from OMB to the Real Estate Settlement Procedures Act (RESPA), that would have hurt thousands of small companies – from real estate agents to home inspectors, from pest control to title search companies – involved in the home buying process. The proposed rule would have given big mortgage lenders the ability to bundle support services when offering home mortgages without the ability of consumers to substitute support services, thus increasing costs to home purchasers by pushing small real estate settlement companies out of business. This issue was addressed in two Small Business Committee hearings – March 11, 2003 and January 6, 2004.
    
    
13. Business use of vehicles: in October 2003, the Internal Revenue Service (IRS) announced that beginning in 2004, taxpayers who use up to four vehicles can choose to use the standard mileage reimbursement rate, which was increased from 36 cents to 37.5 cents per mile, up from the current level of one vehicle. The IRS estimates that this will help over 800,000 businesses, saving 8 to 10 million hours per year in record keeping burdens. General oversight of how the IRS treats small business in the regulatory process was subject to a Small Business Committee hearing on May 1, 2003.
    
    
14. Schedule C-EZ form: on September 23, 2004, the IRS announced it expanded the number of small business eligible to file a simplified expense form by doubling the business expense threshold from $2,500 to $5,000. This change will mean a savings of 5 million hours of paperwork for approximately 500,000 small businesses.
    
    
15. Tax Deposit Rule Simplification: on November 30, 2004, the IRS announced that it will increase the minimum threshold for Federal Unemployment Tax Act (FUTA) deposits, which will reduced paperwork burdens for more than 4 million small businesses. On January 1, 2005, employers will be required to make a quarterly deposit for unemployment taxes only if the accumulated tax exceeds $500 (the current threshold is $100, which was last set in 1970). Raising the requirement to $500 will reduce paperwork burdens for employers with eight employees or less by eliminating their requirement to make up to four FUTA tax deposits yearly.
    
    
16. FairPay Overtime Initiative: on August 23, 2004, the Department of Labor enacted a new rule providing more overtime to more workers than ever while reducing the complexity of compliance for small business owners. Workers earning $23,660 per year or $455 per week are now guaranteed overtime protection. The initiative also removes complexity from the "duties test" that has complicated small business compliance under the existing regulations. The simplified duties test in the FairPay Overtime initiative will enable small business employers to understand the regulations without needing to consult outside experts or attorneys. This issue was addressed in a Small Business subcommittee hearing on May 20, 2004.
    
    
17. Growing procurement opportunities for small businesses: on March 24, 2004, the SBA announced that in fulfillment of the President’s pledge in 2002 to provide more contract opportunities to small businesses and vigorous oversight by the Small Business Committee, the federal government exceeded its 23 percent prime contract goal for small business for the first time in many years. In 2003, the federal government purchased a record $65.5 billion worth of goods and services from small businesses to reach a total of 23.6 percent of the prime contract dollars, an increase of $12.5 billion from 2002 levels. The federal government also purchased $19.46 billion from small disadvantaged businesses in 2003, of which a record $10.1 billion was from 8(a) minority contractors, exceeding the five percent goal by an additional two percent. Record amounts of prime contract dollars were also awarded to HUBZone firms ($3.42 billion), women-owned small business ($8.28 billion), and service-disabled veteran-owned small companies ($549 million) in 2003. The Small Business Committee was instrumental in allowing small businesses to compete to sell office products to the U.S. Postal Service in August 2003 and the U.S. Army in May 2004.

Credit: http://wwwc.house.gov/smbiz/press/asp_display_press_releases.asp?pressReleaseId=63

Press Release
House of Representatives: Small Business Committee
Thursday, December 09, 2004

"Manzullo Hails Small Business Victories in 2003/2004 Congressional Session"

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