This afternoon, at the Greater Lowell Chamber of Commerce, Massachusetts Fifth District Congresswoman Niki Tsongas announced the introduction of the Small Business Tax Relief and Retirement Restoration Act of 2010, bipartisan legislation that would provide immediate tax relief to small businesses. Under Tsongas' bill, small business owners who were forced to make withdrawals from their retirement savings to keep their businesses going during the small business credit crunch could treat their withdrawal as a loan and could file an amended tax return to receive refunds for any income taxes and early-withdrawal penalties they may have paid to the IRS on the loan. In addition to providing tax relief for small businesses, Tsongas' legislation also creates an incentive for small business owners to restore the savings accounts they will need for retirement.
"Small business owners put their hearts into their businesses, often foregoing their own paychecks to keep their businesses afloat and their employees on the payroll," explained Congresswoman Niki Tsongas. "As a result of the financial crisis and ensuing economic downturn, even solid small businesses with a long history of responsible credit use have faced a serious shortage of the credit they need to fund their businesses. The legislation I am introducing today acknowledges the significant personal sacrifices that small business owners made to keep their businesses going, keep jobs in our communities, and to help our economy to recover."
Currently, it is possible to take out a small loan from a 401(k) but not to take a loan from an Individual Retirement Account, so withdrawals before retirement made from an IRA or from a 401(k) above the current limit come with steep early-withdrawal penalties and income taxes. By treating these withdrawals as a loan, Tsongas' legislation puts money back in the hands of small business owners when it is needed most.
"This bill provides tangible, practical relief needed by so many small business owners who have been forced to use retirement funds to keep people employed and their companies alive," said John Williams, a small business owner from Carlisle who proposed the idea to Congresswoman Tsongas earlier this year. "So often we hear Washington talk about helping small business. This bill thoughtfully addresses the very survival of many small companies during the most difficult of times."
"With the financial crisis, many of the local businesses have faced hardships," explained Jeanne L. Osborn President & CEO Greater Lowell Chamber of Commerce, which endorsed the legislation today. "It is the responsibility of the Chamber to keep our members informed of significant legislation such as the Small Business Tax Relief and Retirement Restoration Act of 2010 that Congresswoman Tsongas has acted on that will help small business. This legislation will provide immediate tax relief that will help restore savings and help to restore money needed for retirement. The Chamber is pleased that we can partner with Congresswoman Tsongas' office to keep our members informed on such important issues."
Under Tsongas' bill, a small business owner who lived off of his or her retirement while putting the salary he or she would have taken from the business back into the business, would be eligible. One year from the date of enactment of the bill, the small business owner must begin making regular installment payments over a 5-year period to repay the loan (for a total of 6 years), under similar rules currently governing small loans from 401(k) plans.
"Small businesses are responsible for the majority of new jobs created in this country and we should be doing all that we can to support them in this difficult economy," Tsongas added. "The commonsense nature of this legislation is reflected in the diverse and bipartisan support that it has already attracted."
Reps. Mike Simpson (R-ID), Gerry Connolly (D-VA), Mike Coffman (R- CO), Rob Wittman (R-VA), Yvette Clarke (D-NY), Joe Courtney (D- CT), Leonard Lance (R-NJ), Dale Kildee (D-MI), Laura Richardson (D-CA), Steve Kagen (D-WI), and Nita Lowey (D-NY) are current cosponsors of the legislation.