Small business gets some of what it wants from Congress - is more to come?In its 1995 legislative agenda, the National Federation of Independent Business The National Federation of Independent Business (NFIB) is a lobbying organization with offices in Washington, D.C. USA, and in all 50 state capitals. NFIB claims a membership base in excess of 600,000. (NFIB NFIB National Federation of Independent Business NFIB National Foreign Intelligence Board ) called on the federal government to make major changes in five areas important to small-business owners: taxes, regulations, health care, legal reform and deficit reduction. A number of bills that would bring about some of these proposed reforms are working their way through Congress. CPAs need to follow developments closely so they can help their clients benefit from newly enacted tax and other provisions. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Jack Faris, NFIB president, overregulation is "the fastest growing of all government created problems facing-small business owners today" The organization, which represents more than 600,000 small businesses nationwide, including CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. firms, estimated that small-business owners spent one billion hours and more than $100 billion annually on federal paperwork. Michael J. Knight, principal of the CPA firm Michael J. Knight & Company, Fairfield, Connecticut Fairfield is a town located in Fairfield County, Connecticut, United States. It is situated along the Gold Coast of Connecticut. Fairfield is a town of many neighborhoods, two of which -- Southport and Greenfield Hill -- are notably affluent. , and chairman of the American Institute of CPAs small business taxation committee, agrees that regulatory overload is a major problem for CPAs and their clients, especially small businesses. Knight, whose firm's clients are mainly closely held companies Closely held company A company who has a small group of controlling shareholders. In contrast, a widely-held firm has many shareholders. It is difficult or impossible to wage a proxy battle for any closely-held firm. , gave examples of legislation he thinks are the most troublesome to small businesses: the Americans with Disabilities Act Americans with Disabilities Act, U.S. civil-rights law, enacted 1990, that forbids discrimination of various sorts against persons with physical or mental handicaps. , the Clean Air Act, the Civil Rights Act and the Fair Labor Standards Act Fair Labor Standards Act or Wages and Hours Act, passed by the U.S. Congress in 1938 to establish minimum living standards for workers engaged directly or indirectly in interstate commerce, including those involved in production of goods bound . "These have so many rules that it's hard to keep track of them, and very few CPAs know as much as they should," Knight said. "In many cases there are hidden tax items in these laws. Or clients may unwittingly be doing something illegal, without their CPAs' knowledge. The cost of complying with regulations, and the paperwork involved in doing so, are so great that some clients may be tempted "Tempted" was the second single released from Squeeze's fourth album, East Side Story. Though it failed to crack the Top 40 in the UK or the U.S., over the years "Tempted" has become one of Squeeze's most well known songs, especially in North America. to cut corners." Given current federal regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. and tax rules, as well as the changes being made as many of the provisions in the "Contract With America In the historic 1994 midterm elections, Republicans won a majority in Congress for the first time in forty years, partly on the appeal of a platform called the Contract with America. Put forward by House Republicans, this sweeping ten-point plan promised to reshape government. " are passed by Congress, Knight said CPAs will be called on to do much more for their clients and to become more knowledgeable about their businesses and legislation that affects them. "Knowing taxes isn't enough. As CPA, wear many hats; we are, in effect our clients' controllers and financial advisers and their management, human resources The fancy word for "people." The human resources department within an organization, years ago known as the "personnel department," manages the administrative aspects of the employees. and tax consultants. At my firm, we try to keep up with developments and to be aware of what other advisers our clients need." This year's legislative changes will require CPAs to do more planning for their clients, he added, sitting down with them well in advance of any important decisions. CPAs should encourage clients to focus on growth, rather than holding onto the status quo [Latin, The existing state of things at any given date.] Status quo ante bellum means the state of things before the war. The status quo to be preserved by a preliminary injunction is the last actual, peaceable, uncontested status which preceded the pending controversy. . Small-business agenda. Here is a summary and status report of the NFIB legislative agenda. Taxes: * Cut capital gains taxes. Capital gains assets should be indexed for inflation and rates should be cut in half generally and eliminated for investments made in small businesses, the NFIB says. It calls for changes in current laws to encourage entrepreneurship, job creation and economic growth. * Simplify tax accounting for small firms. Businesses with less than $10 million in gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. should be allowed to use simplified accounting methods in cash accounting, full expensing of all assets and bad debts and deduction meals and automobile expenses. additionally, they should be exempted from alternative minimum ax calculations, the NFIB says. * The NFIB also was pushing for the following tax-related goals: eliminating estate taxes for closely-held businesses; raising the expensing limit from $17,500 to $100,000 (allowing businesses to fully deduct the first $100,000 they invest in equipment in the year it is purchased) to grant tax relief, increase cash flow and encourage investment; clarifying the independent contractor A person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another's control except for what is specified in a mutually binding agreement for a specific job. definition; relaxation of the rules for home office deduction; and simplification of the pension system. Status: The House voted to index capital gains assets for inflation and cut the tax rates, raise the expensing limit to $35,000 and relax some of the home office rules. The AICPA AICPA See American Institute of Certified Public Accountants (AICPA). tax division supports most of these proposed changes, Knight said. "Anything that helps our small-business clients expand or save on taxes will be beneficial for the CPAs who work with them," he added. Knight said clarifying the independent contractor-employee designation was a very serious issue for small businesses. "Having the Internal Revenue Service dispute a company's returns over this issue could jeopardize the entire business." The AICPA small business taxation committee has developed an "independent contractor safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " proposal that would allow a business that meets four objective criteria to avoid the classification controversy. According to the proposal, there must be a written agreement between the parties that recognizes the independent contractor status; the business must deduct withholding tax The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. (at a 20% rate) from its payments to the contractor; the business must issue a 1099 form; and the business can't treat an individual as an independent contractor if he or she was its employee within the previous year. The proposal has been sent to the Institute's tax executive committee for approval. "If it is approved, we'll try to get legislation to that effect passed," Knight said. "We are looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. sponsors in Congress, focusing on the House Small Business Committee." The NFIB says that rising administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. and the legal complexity of pension plans are forcing increasing numbers of small-business owners to drop their pension plans. It wants federal law regarding pensions simplified. Knight also wants small-business owners to be allowed to borrow against the vested portion of their company pension plan or from IRAs or rollover IRAs Rollover IRA A traditional individual retirement account holding money from a qualified plan or 403(b) plan. These assets, as long as they are not mixed with other contributions, can later be rolled over to another qualified plan or 403(b) plan. Also known as a conduit IRA. . Reducing capital gains taxes also is very important to small businesses, Knight said. "Investors will be more willing to take risks to start or expand businesses if the taxes are not so high," he said. Earlier this year, Knight and members of his and other AICPA committees visited members of Congress and various regulatory bodies to promote legislation to ease the tax and regulatory burdens on small businesses. For example, he said, AICPA tax division testimony has been submitted supporting the expanded use of a home office deduction. Testimony also has been given supporting the restoration and expansion of the self-employed medical insurance deduction and reduction of the estate tax costs tax costs n. a motion to contest a claim for court costs submitted by a prevailing party in a lawsuit. It is called a "Motion to Tax Costs" and asks the judge to deny or reduce claimed costs. of family-owned businesses. Regulatory reform Regulatory Reform concerns improvements to the quality of government regulation. At the international level, the "OECD Regulatory Reform Programme is aimed at helping governments improve regulatory quality -- that is, reforming regulations that raise unnecessary obstacles to : * Enhance private property rights. The NFIB wants the government to pay landowners fair compensation whenever a property owner's use of land is restricted by environmental regulations. * Allow court challenges. Proposed amendments to the Small Business Regulatory Flexibility Act The Regulatory Flexibility Act is perhaps the most comprehensive effort by the U.S. federal government to balance the social goals of federal regulations with the needs and capabilities of small businesses and other small entities in American society. would give small businesses the right to challenge government regulations, which the NFIB says bring enormous compliance costs. * Implement regulatory impact and cost benefit analysis. The NFIB says Congress should ensure that any new laws New Laws: see Las Casas, Bartolomé de. or regulations provide benefits that outweigh costs and that the methods used to calculate the impact be reasonable and responsible. * Reduce paperwork. The group says government paperwork demands on small businesses should be reduced systematically, by 10% per year, for example. After five years of reductions, the government should not be allowed to create new paperwork requirements unless it eliminates existing requirements. Status: The above four items were incorporated into an omnibus bill a large box in a theater, on a level with the stage and having communication with it. - Thackeray. See also: omnibus , HR 9, and passed by the House. The Senate is looking at these items separately and so far has passed only the paperwork reduction bill. However, it called for a 5% annual reduction for five years, instead of the House's 10%. House and Senate committees are reconciling differences. * Establish a regulatory budget. The NFB NFB National Federation of the Blind NFB National Film Board of Canada NFB Negative Feedback NFB No Fuse Breaker NFB Normal for Bridgewater (music album) believes new regulations should not be allowed without the elimination of an existing regulation. Adopting a regulatory budget would force federal agencies to disclose the costs of their regulations to businesses and individuals. Status: This item was not included in proposed House or Senate legislation. * Enact a "sunset" law for all federal regulations. Many regulations have outlived their effectiveness, the NFIB said. A requirement to retire and reauthorize all government regulations every five years would force Congress and agencies to review each program's merits before reestablishing it. Status: This was not included in proposed House legislation. * Rewrite wage, overtime, health, safety and disabilities laws to ease the administrative burdens on small businesses. These would include the Fair Labor Standards expensing limit to $35,000 and relax some of the home office-rules. The AICPA tax division supports most of these proposed changes, Knight said. "Anything that helps our small-business clients expand or save on taxes will be beneficial for the CPAs who work with them," he added. Knight said clarifying the independent contractor-employee designation was a very serious issue for small businesses. "Having the Internal Revenue Service dispute a company's returns. over this issue could jeopardize the entire business." The AICPA small business taxation committee has developed an "independent contractor safe harbor" proposal that would allow a business that meets four objective criteria to avoid the classification controversy. According to the proposal, there must be a written agreement between the parties that recognizes the independent contractor status; the business must deduct withholding tax (at a 20% rate) from its payments to the contractor; the business must issue a 1099 form; and the business can't treat an individual as an independent contractor if he or she was its employee within the previous year. The proposal has been sent to the Institute's tax executive committee for approval. "If it is approved, we'll try to get legislation to that effect passed," Knight said. "We are looking for sponsors in Congress, focusing on the House Small Business Committee." The NFIB says that rising administrative costs and the legal complexity of pension plans are forcing increasing numbers of small-business owners to drop their pension plans. It wants federal law regarding- pensions simplified. Knight also wants small-business owners to be allowed to borrow against the vested portion of their company pension plan or from IRAs or rollover IRAs. Reducing capital gains taxes also is very important to small businesses, Knight said. "Investors will be more willing to take risks to start or expand businesses if the taxes are not so high," he said. Earlier this year, Knight and members of his and other AICPA committees visited members of Congress and various regulatory bodies to promote legislation to ease the tax and regulatory burdens on small businesses. For example, he said, AICPA tax division testimony has been submitted supporting the expanded use of a home office deduction. Testimony also has been given supporting the restoration and expansion of the self-employed medical insurance deduction and reduction of the estate tax costs of family-owned businesses. Regulatory reform: * Enhance private property rights. The NFIB wants the government to pay landowners fair compensation whenever a property owner's use of land is restricted by environmental regulations. * Allow court challenges. Proposed amendments to the Small Business Regulatory Flexibility Act would give small businesses the right to challenge government regulations, which the NFIB says bring enormous compliance costs. * Implement regulatory impact and cost benefit analysis. The NFIB says Congress should ensure that any new laws or regulations provide benefits that outweigh costs and that the methods used to calculate the impact be reasonable and responsible. * Reduce paperwork. The group says government paperwork demands on small businesses should be reduced systematically, by 10% per year, for example. After five years of reductions, the government should not be allowed to create new paperwork requirements unless it eliminates existing requirements. Status: The above four items were incorporated into an omnibus bill, HR 9, and passed by the House. The Senate is looking at these items separately and so far has passed only the paperwork reduction bill. However, it called for a 5% annual reduction years, instead of the House's 10%. House and Senate committees are reconciling differences. * Establish a regulatory budget. The NFIB believes new regulations should not be allowed without the elimination of an existing regulation. Adopting a regulatory budget would force federal agencies to disclose the costs of their regulations to businesses and individuals. Status: This item was not included in proposed House or Senate legislation. * Enact a "sunset " law for all federal regulations. Many regulations have outlived their effectiveness, the NFIB said. A requirement to retire and reauthorize all government regulations every five years would force Congress and agencies to review each program's merits before reestablishing it. Status: This was not included in proposed House legislation. * Rewrite wage, overtime, health, safety and disabilities laws to ease the administrative burdens on small businesses. These would include the Fair Labor Standards Act, the Occupational Safety and Health Administration Occupational Safety and Health Administration (OSHA), U.S. agency established (1970) in the Dept. of Labor (see Labor, United States Department of) to develop and enforce regulations for the safety and health of workers in businesses that are engaged in interstate and the Americans with Disabilities Act and other labor legislation. Status: This was not included in proposed House legislation. Health care reform: * Allow health insurance deductions. Self-employed business owners cannot deduct health insurance costs. A permanent 100% deduction on health insurance premiums must be part of any reform package, the NFIB says. * Sanction alliances. The NFIB says Congress should allow smallbusiness owners to band together across state lines to purchase health insurance coverage to reduce premiums and avoid costly state laws and mandates. * Insurance industry reforms. The NFIB calls for malpractice reforms and elimination of state laws that cause small-business premiums to rise. Status: The House and Senate voted to restore the 25% deduction of the health insurance premiums for self-employed small-business owners retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a for 1994. It rises to 30% for 1995 and beyond. The president signed the bill in April. Legal reform: * Limit punitive damage awards. The NFIB wants this done. * Establish proportionate liability. The NFIB urges this. * Discourage wasteful litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . The NFIB supports legislation requiring the loser in a civil lawsuit to pay the winner's legal costs. * Limit product liability lawsuits. Product liability insurance is one of the most expensive items in a business's budget, the NFIB says. Status: These four items were joined together in one House bill, HR 956, which passed, although only a modified provision regarding litigation costs was adopted to encourage alternative dispute resolution Procedures for settling disputes by means other than litigation; e.g., by Arbitration, mediation, or minitrials. Such procedures, which are usually less costly and more expeditious than litigation, are increasingly being used in commercial and labor disputes, Divorce rather than a lawsuit. Limiting liability for firm partners has long been a major concern of CPAs because, in many cases, accountants are the only ones viewed as having "deep pockets" when investor lawsuits are filed. As: states have passed legislation to allow it, firms both large and small have moved to change their status to limited liability partnerships. * Reform the "Superfund cleanup law." The NFIB supports reduction of the liability of small businesses, faster evaluation of claims by the Environmental Protection Agency Environmental Protection Agency (EPA), independent agency of the U.S. government, with headquarters in Washington, D.C. It was established in 1970 to reduce and control air and water pollution, noise pollution, and radiation and to ensure the safe handling and , allowance of installment payments Installment payments Distribution of plan assets to beneficiaries based upon a regular schedule. for those businesses, that have e cleanup responsibility and elimination of third-party litigation. Status: The NFIB expected this issue to come up for a vote before the House in May. Deficit reduction: * Balance the budget. The NFIB wants the Constitution to be amended to require a balanced budget Balanced budget A budget in which the income equals expenditure. See: budget. balanced budget A budget in which the expenditures incurred during a given period are matched by revenues. , because "high budget deficits rob small businesses of available capital and mean less money for private investment." Status: The balanced budget amendment Balanced Budget Amendment is any one of various proposed amendments to the United States Constitution which would require a balance in the projected revenues and expenditures of the United States government. passed in the House but failed to pass in the Senate by one vote. * Allow the line-item veto line-i·tem veto n. Authority, as of a government executive, to reject provisions of a bill individually. Also called item veto. . The NFIB wants Congress to give the president authority to strike individual line items from spending bills in order to decrease the federal budget. Status: This passed in both the House and Senate. * Reduce mandate burden. Congress should be prohibited from enacting any unfunded federal mandates that the states have to finance, the NFIB says. According to the organization, unfunded mandates An unfunded mandate is a statute that requires government or private parties to carry out specific actions, but does not appropriate any funds for that purpose. Examples Status: This passed in both the House and the Senate and a bill to this effect was signed by President Clinton in March. * Reform spending cut Noun 1. spending cut - the act of reducing spending cut - the act of reducing the amount or number; "the mayor proposed extensive cuts in the city budget" procedures. The NFIB wants Congress to pass reforms making it easier for representatives and senators to amend bills to reduce spending. Status: This passed in the House and Senate and differences are being worked out, according to the NFIB. For a related story on the contract's tax provisions, see "The Contract With America," by Robert Willens and Andrea J. Phillips, JofA, Apr.95, page 33. |
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