Standing at Queen City Cupcakes in Patchogue, U.S. Senator Kirsten Gillibrand and Congressman Tim Bishop announced federal legislation designed to extend targeted tax breaks for small businesses. Women-run small businesses are among the fastest growing segments of the economy, but start with eight times less capital. Senator Gillibrand urged the U.S. Senate to vote on the SUCCESS Act of 2012, legislation that would provide investors with strong incentives to invest in small business stock, double deductions for start-up expenses, purchase new equipment, and continue tax credits that small businesses can take advantage of. Congressman Bishop is introducing the companion version of the SUCCESS Act in the House of Representatives.
"Small businesses are the backbone of our economy and the most powerful job creators we have," Senator Gillibrand said. "I've heard from women on Long Island and across the state. I know women are ready to lead us to a thriving and stable economy, with new good-paying jobs that can support a family. When we provide the tools that small business leaders need, we can help this economic engine take off."
"Small businesses like Queen City Cupcakes drive the economy and job growth in our communities," said Congressman Bishop, who recently organized an information forum in Patchogue with the U.S. Undersecretary of Commerce for International Trade to help local small businesses access export markets. "That's why I have voted for eighteen small business tax cuts since 2009 and why I support Senator Gillibrand's work to pass the SUCCESS Act to give entrepreneurs, especially women and members of minority groups, the tools they need to expand and hire new workers."
Last fall, Senator Gillibrand held women's economic empowerment roundtables across the state, and heard firsthand from small business owners. Small businesses play a critical role in the national and local economy, with more than 10 million firms owned by women. Between 1997 and 2007, women-owned businesses added roughly 500,000 jobs, while other private firms lost jobs. However, women, on average, start their business with eight times less funding than men, making tax credits a critical part of their business plan.
To bolster small business growth, Senator Gillibrand has been working with a group of bipartisan women Senators to extend targeted small business tax benefits, which expired at the start of 2012, through at least 2013. These tax breaks are included in a larger bill aimed to help small businesses grow, called the Success Ultimately Comes from Capital, Contracting, Education, Strategic Partnerships and Smart Regulation (SUCCESS) Act of 2012.
In September 2010, Congress passed the Small Business Jobs Act, which provided a number of key tax benefits to American small businesses, such as eliminating capital gains tax on investments in small business, and cutting taxes for businesses that invest in new equipment. With roughly two-thirds of new jobs in the U.S. generated by small businesses, extending these tax provisions for businesses is a key way to encourage growth and hiring.
Small Business Tax Breaks Under the SUCCESS Act
These tax benefits include a number of provisions that help give small businesses the ability to grow and expand now by providing incentives to invest in small businesses, helping businesses make new investments in equipment, and extending benefits that help out new start-ups.
Tax Relief for Small Business Capital Gains:This provision would provide investors a strong incentive to invest in small business stock. Prior to 2009, 50 percent of the gain of a small business stock was subject to tax. Senator Gillibrand supported legislation that increased this exclusion to 75 percent and the Small Business Jobs Act expanded that benefit to 100 percent of the gain. Eligible small businesses are defined as those with gross assets under $50 million and the stock must be held for at least five years.
Doubles Existing Deductions for Start-up Costs for New Small Businesses:New start-ups typically face a number of substantial expenses in their first year they get off the ground, such as permits, consulting costs, expenses in finding clients and customers and other needs, but are limited in the amount of expenses they can deduct that year on their taxes. This provision would extend the increased deduction for start-up expenses, from $5,000 to $10,000. Eligible expenses include studies of potential markets, products, labor markets, or transportation systems; advertisements for the opening of a new business; compensation for consultants and employees undergoing training and their instructors; and travel for the purpose of securing suppliers, distributors, and customers.
Extends Section 179 Expensing:This provision allows small businesses to write-off up to $500,000 in tangible property, such as investments in machinery and plant equipment, or other physical equipment (such as refrigerators or stoves for a restaurant or gas pumps for a gas station).
General Business Credit Carryback:This provision would allow businesses to continue to carryback (i.e., count against profits from previous years) general business credits for up to five years. This helps businesses who are currently not profitable by allowing them to claim credits against years where they were making money.
Another measure included in the SUCCESS Act is the Expanding Access to Capital for Entrepreneurial Leaders (EXCEL) Act, which would modify the Small Business Investment Company (SBIC) program to raise the amount of SBIC debt the Small Business Administration (SBA) can guarantee from $3 billion to $4 billion. It would also increase from $225 million to $350 million the amount of SBA guaranteed debt a team of SBIC fund managers who operate several funds can borrow.