September 27,2010

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Baucus Bill to Help Small Businesses Create Jobs Signed into Law

Finance Chairman Helped Craft Bill Signed Into Law Today Providing Small Businesses with Access to Capital, Promoting Entrepreneurship, Stimulating Investment

Washington, DCSenate Finance Committee Chairman Max Baucus (D-Mont.) lauded the signing today of legislation that helps small businesses get capital, stimulates investment in small businesses and promotes entrepreneurship.  Baucus and Small Business and Entrepreneurship Committee Chair Mary Landrieu (D-La.) wrote and introduced the Small Business Jobs Act to help create the right economic conditions for small businesses to create jobs.  A detailed summary of the legislation is attached.

“This targeted new law will help small businesses create jobs and get Americans back to work right away,” Baucus said.  “These tax cuts create the right conditions for small businesses to create jobs by spurring investment and entrepreneurship.”

The Small Business Jobs Act includes the following provisions to help small businesses grow and create jobs:

Helping Small Businesses Get Capital

  • The legislation encourages investment in small businesses by allowing investors to exclude the gains from the sale of certain small business stock from their income for tax purposes if the stock is held for more than five years.  This policy helps small business owners get more private capital to finance an expansion and hire new workers.
  • The legislation reduces the tax burden for small businesses by allowing them to carry back general business tax credits to offset their tax burdens from the previous five years.  Small businesses will also be able to count the general business credits against the Alternative Minimum Tax (AMT), freeing up capital for expansion and job growth. 
  • The legislation establishes a Small Business Lending Fund of $30 billion to provide capital investments to small community banks to increase small business lending. The fund is limited to only the smallest banks, those who hold less than $10 billion in assets, and the performance-based program would incentivize only those lenders that extend new credit by decreasing the dividend rate banks pay as they increase lending.
  • The legislation establishes the State Small Business Credit Initiative to provide $1.5 billion in grants to existing successful state small business programs that help private lenders extend more credit to small businesses.
  • The legislation raises the cap on small business loans to increase lending by $5 billion in the first year after enactment, and refinances commercial real estate debt into long-term, fixed-rate loans, provisions that are expected to be budget neutral and could create or save 200,000 jobs.
  • The legislation builds on successful initiatives put in place through the Recovery Act, namely simple and cost-effective changes to the Small Business Administration’s (SBA) two largest lending programs and to its microloan program, which have pumped more than $20 billion into more than 40,000 businesses in our economy.  This legislation calls for an extension of these lending provisions through December 31, 2010.
  • The legislation extends the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75 percent to 90 percent.  Since its creation, the program has supported over $26 billion in small business lending, which has helped to create or retain over 650,000 jobs. 

Increasing Small Businesses’ Ability to Make Investments

  • The legislation allows taxpayers to write off more of the cost of purchases for their business, such as equipment and machinery, in the year the purchase is made.  The legislation also expands the types of purchases that would qualify for special expensing to include some types of real property, such as leasehold, retail and restaurant improvements.  When small businesses are able to deduct the cost of purchases more quickly, they have more cash on hand to create jobs.

Promoting Entrepreneurship

  • The legislation doubles the amount of start-up expenditures that may be deducted by someone starting a small business, making it easier for new businesses to open.
  • The legislation targets resources to support the Office of the United States Trade Representative’s small business export promotion and trade enforcement activities.  These efforts help U.S. small business exports grow in foreign markets and ensure small businesses compete on a level playing field.
  • The legislation improves the Small Business Administration’s (SBA) trade and export finance programs, elevates the Office of International Trade within the SBA and adds export finance specialists to the SBA’s counseling programs.
  • The legislation establishes the State Export Promotion Grant Program (STEP), which would increase the number of small businesses that export goods to other countries.
  • The legislation allows the SBA to waive or reduce the state-matching share of its funding requirement for up to one year to continue providing technical assistance to underserved communities to start and grow small businesses.

Promoting Equity

  • The legislation promotes tax fairness by preventing small businesses from incurring large tax penalties aimed at large corporations and wealthy individuals investing in tax shelters.
  • The legislation allows self-employed individuals to deduct health insurance costs for purposes of paying the self-employment tax.
  • The legislation removes the red tape and closes loopholes that too often put government work into the hands of multinational corporations, instead of Main Street businesses.
  • The legislation makes clear that no single contracting program receives priority over another program when competing for federal contracts.

The legislation is fully paid for, closes unintended tax loopholes and reduces the tax gap.

Text and a summary of the Small Business Jobs Act are available on the Finance Committee website at: