WASHINGTON -- The National Automatic Merchandising Association is endorsing proposed legislation that would increase tax incentives for starting or expanding a small business. The measure was introduced by Rep. Nydia Velázquez (D-NY), who chairs the House Small Business Committee.
Titled the Small Business Tax Relief and Job Growth Act of 2010, the bill (HR 4841) would amend the Internal Revenue Code of 1986. It has been referred to the House Committee on Ways and Means.
Under current law, NAMA reported, taxpayers may deduct up to $5,000 of the startup costs incurred in launching a new business venture. "Newly formed small businesses rely on this deduction to increase cash flow early in its business life when many small businesses are most vulnerable," the association explained. HR 4841 would increase this first-year deduction to $20,000.
The measure also would broaden the scope of expensing under Section 179 of the tax code. "In order to help small businesses quickly recover the cost of business purchases, Section 179 allows an immediate deduction for property used in their trade or business," NAMA observed. Under current law, only purchases of tangible personal property -- cars, computers, manufacturing equipment, and the like -- are eligible for Section 179 expensing. The small business tax relief bill would allow deduction of improvements to structures and real property, too.
"For example, improvements to roofs, electrical systems, heating, ventilation and cooling systems, along with fences, paved parking, or security systems would all qualify," NAMA noted, adding that this would enhance business productivity by lowering taxable income and so increasing purchasing power.
And the bill would decrease the corporate capital gain rate for small corporations from 35% to 15%. According to NAMA, this provision is directed at small corporations with less than $15 million in annual revenues to ensure that only small firms would benefit.
"Many small businesses have appreciated assets, such as land and stock, which could be quickly sold to increase cash flow for the business," NAMA observed. At the present 35% rate, whenever a corporation sells an appreciated capital asset, it must pay over a third of the gain back to the federal government. "Most corporations would rather hold onto that asset than pay the tax," the association pointed out.
Another benefit is that the provision is simple and straightforward, NAMA continued, allowing a small corporation simply to look at its balance sheet and determine which appreciated assets to sell. The rate reduction would increase cash flow for operations, expansion, hiring new employees or retaining present staff.
For these reasons, NAMA strongly endorses HR 4841. "Job creation and small business development are currently at the forefront of the legislative agenda," said Ned Monroe, the association's senior vice-president of government affairs. "In this economic climate, small businesses face decreased access to credit and diminished demand for their products." Moreover, he added, "Millions of unemployed Americans are finding it harder to start their own businesses.
"This bill will certainly provide tax relief for the vending industry's small business owners and enable them to create jobs," Monroe continued. "We support it wholeheartedly."