April 20,2021

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Wyden, Cardin, Hassan, Cortez Masto Introduce Bill to Boost Capital Access for Businesses Owned by Women, People of Color

PROGRESS Act would create two new tax incentives to help small businesses hire and grow

Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., Senate Small Business Committee Chair Ben Cardin, D-Md., Senator Maggie Hassan, D-N.H., and Senator Catherine Cortez Masto, D-Nev., today introduced legislation to expand women entrepreneurs’ access to capital.

“Women business owners, particularly women of color, are underestimated, underrepresented and undercapitalized. This problem has only gotten worse during the pandemic, with millions of women forced to drop out of the workforce,” Wyden said. “One driver of these disparities is that widely available tax benefits are less likely to help women and people of color, particularly those who are self-employed and want to grow their business. Our bill would help close these gaps, allowing women-owned businesses to grow.”

“The COVID-19 pandemic has exacerbated the pervasive, historic barriers to business ownership that women entrepreneurs face, especially for minority women,” Cardin said. “This bill will empower small business owners without employees to make their first hire and grow their business.”

“Our economy and communities are stronger when entrepreneurs can turn their innovative ideas into reality and open new businesses, but women and rural entrepreneurs disproportionately face barriers to starting and growing their small businesses,” Hassan said. “This bill will help women and rural entrepreneurs access the capital and hire the employees that they need for their small businesses to thrive. I look forward to working with my colleagues to move this bill forward and continue supporting the small businesses that are the bedrock of New Hampshire communities.”

“Women and minority-owned businesses have been hit especially hard by the coronavirus pandemic, and it’s crucial that we give these business owners the support they need to get back on their feet,” Cortez Masto said. “This legislation will provide new tax credits targeting women and people of color who want to hire employees, grow their businesses, and jumpstart our economy. We owe it to them to level the playing field and support their entrepreneurial spirit.”

Businesses without employees are more diverse than businesses with employees. One in three of these businesses are owned by people of color and four in 10 are owned by women. Unfortunately, these business owners face significant barriers to accessing funding and struggle to grow. They have also been among the most vulnerable during this economic crisis.

Even before the pandemic, minority and women entrepreneurs struggled to access funding. White business owners, on average, start with three times the working capital of Black-owned businesses.

Male entrepreneurs, on average, start with nearly twice as much capital as women entrepreneurs. The disparities are even worse when considering only third-party capital. In 2018, only 2.3 percent of venture capital funding went to companies founded solely by women. This gap is acutely felt by women of color. Even though Hispanic and Black women account for 50 percent of all women-owned firms, they raised only 0.32 percent and 0.0006 percent of venture capital funding over the past decade.

To unlock the growth potential of these small businesses, the Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success Act (PROGRESS) would create two new tax incentives, a first employee and investor credit:

First Employee Credit:

  • A new first employee credit will stimulate business growth and job creation.
  • A credit equal to 25 percent of W-2 wages reported can be claimed annually, up to $10,000 in a single tax year, with a lifetime limit of $40,000.
  • Because many businesses do not turn a profit in their early years, the first employee credit is creditable against the business’ payroll tax liability.
  • Certain businesses that have not reported full-time equivalent W-2 wages in a previous year are eligible for the credit.
  • Eligible businesses must be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers).

Investor Credit:

  • A new investment credit will encourage third-party capital investment and allow small businesses to grow and thrive. 
  • A credit of up to 50 percent of a qualified debt or equity investment can be claimed, up to $10,000 in a single tax year, with a lifetime limit of $50,000.
  • Investors that fund certain businesses can use the credit to boost their rate of return.
  • Eligible businesses must have at least 1 full-time equivalent employee and be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers). 

A detailed summary of the bill is available here.

Statements of support follow:

Didier Trinh, Government Affairs Director, Main Street Alliance: “Tax policy should build a more equitable, thriving economy. Supporting main street small businesses also means supporting the initial growth that allows them to provide quality jobs. The PROGRESS Act takes an important step toward tackling inequality in the growth and support of small businesses.”

John Arensmeyer, founder & CEO, Small Business Majority. “Even before the COVID-19 pandemic, women and people of color faced systemic barriers to launching and growing their businesses. Entrepreneurship has become even more challenging over the past year as women entrepreneurs and business owners of color have faced disproportionate impacts from the pandemic and greater challenges accessing capital," "In order to promote a more level playing field, we must address inequities in the tax code that are putting these entrepreneurs at a disadvantage. That's why we strongly support Senator Wyden's legislation creating two new tax incentives that are designed to boost the potential of all small businesses, but particularly the smallest businesses owned by women and people of color.” 

Caroline Bruckner, Kogod Tax Policy Center: “The bill is critical step forward for using targeted tax policy to help small businesses hire their first employee and attract capital—particularly now as new data shows surges in pandemic start-ups. This will be chiefly useful to women business owners, 99% of which are small businesses and that research shows struggle to access capital on equal footing. By specifically targeting tax incentives to finance firms with gross revenues below $100,000, the bill addresses existing financing inequities that will help women business owners attract capital, which is a long-overdue boost to help these firms grow and scale.   

“In addition to the lives tragically lost, the COVID-19 pandemic has inflicted major damage to American society on many fronts.  Among the most serious are the disproportionate impact on working women and minority-owned businesses. Nearly 2.5 million women have left the workforce since February of 2020, pushing the labor force participation rate among women to a 33-year low. Meanwhile, Black-owned businesses have closed during the pandemic at more than twice the rate of white-owned businesses, according to the Federal Reserve. Entrepreneurship offers a powerful pathway to economic re-engagement and empowerment, but new and small businesses need capital to successfully launch and grow – and women and entrepreneurs of color continue to struggle with institutional and systemic barriers to the capital they need. 

“The PROGRESS Act will assist entrepreneurs – particularly women and people of color – in two important ways: the first-employee tax credit will facilitate new business growth by rewarding the creation of that critical first job, and the investor tax credit will encourage the investment that new and small businesses need to survive and grow. Center for American Entrepreneurship thanks Senator Ron Wyden (D-OR) for focusing on the unique importance and needs of women entrepreneurs and entrepreneurs of color at a time when the U.S. economy needs them more than ever.”

Yesenia Gallardo Avila, Principal, Occam Advisors in Portland, Ore.: “Senator Wyden's PROGRESS Act supports small businesses--the lifeblood of the US economy and where we see the majority of entrepreneurial activity from minority-owned businesses. Supporting businesses in hiring their first employee is an important tool that will help small businesses grow and create jobs within their communities. Lastly, the caps on the business size are a meaningful step in the right direction of supporting truly emerging businesses instead of seeing tax relief going to large corporations.”

Kamelah Adams, Mimi’s Fresh Tees, Portland, Ore.: "The PROGRESS Act would elevate small businesses like Mimi's Fresh Tees to expand. I believe in order to broaden my business efficiently, access to working capital and the ability to hire and sustain employees is vital."

Samuel Brooks, Chair, Board of Oregon Association of Minority Entrepreneurs (OAME): “The PROGRESS Act creates two new tax incentives that will help minority and women-owned businesses access capital to help grow their businesses.  These credits will go a long way to help businesses grow and will provide more job opportunities. The PROGRESS Act goes a long way to help small entrepreneurs have a chance to grow and succeed.”