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Washington Watch - April 17, 2013

NASE Provides Constructive Feedback to Small Business Tax Proposal

The NASE provided feedback to the House Ways and Means Committee on their small business tax reform discussion draft. In blunt terms, only one of the four components has any bearing on the self-employed community, the Unified Deduction for Start-Up and Organizations Expenses. And it is ironic that the framework for the unified deduction is included in H.R. 886, the Small Business Tax Relief Act of 2013, which includes an additional six other tax measures that the small-business draft overlooks (Note: the small business draft does include the permanent expensing provision which is included in H.R. 866).

Due to our concern, the NASE has met with various tax staff members to discuss additional items that we encourage the House Committee on Ways & Means as well as the House Committee on Small Business to consider as they near finalizing draft legislation reforming the tax code.

The following are additional tax proposals put forth by the NASE:

  • Deduction of health insurance costs for the self-employed as a qualified business expense by adding a line item on the Schedule C form and not on page one of Form 1040;
  • Amend the definition of “employee” to include the owner and spouse of a sole proprietorship, or a 2 percent or greater shareholder in an S Corporation – a simple legislative or administrative fix to current language;
  • Simplified and streamlined definition of independent contractor versus employee by expanding the Form 1099 that requires the owner and contractor to agree to their business relationship in a transparent manner;
  • Simplified depreciation calculators, reporting requirements, and accelerated options for most standard business items and amounts, all of which would be included as a line on the Schedule C form;
  • Building off the simplified home office deduction, identify other areas to establish standard deduction options based on industry and location, resulting in the development of a Standard Schedule C-EZ form.

All of the above proposals meet the criteria of creating a lean, simplified, equitable tax code – inspiring entrepreneurship and growth within the small-business community.

It goes without saying that any significant reform to the tax code will be challenging, but we believe that putting forth a dynamic, common-sense proposal for bringing the tax code into the 21st Century can be accomplished if the proposal provides for a transformational change to all aspects of the tax code, individual and corporate.

As it stands now, our concern remains that the draft proposal looks only to modify or tweak the current tax code, but falls short of taking a path to overhauling the dysfunctional and byzantine tax code with a vision for complete reform of the individual and corporate tax structure.

Read the NASE’s Comment Letter on Small Business Working Group Tax Discussion Draft

Rep. Ryan (R-Wis.) and Sen. Murray (D-Wash.) Offer Very Different Budget Plans

As the debate over immigration reform heats up in Congress, the NASE released an online survey of over 400 of its’ members nationwide on the issue. The survey, conducted between February 25 – March 18, 2013, shows that America’s smallest businesses – the self-employed and micro-businesses (with ten employees or fewer) – find the issue of immigration reform important, want Congress to develop a balanced solution, and are willing to comply with new reform regulations.

“Our survey clearly demonstrates that small-business owners and self-employed Americans want Congress to come up with a sensible, bipartisan immigration reform solution. Not only do small-business owners overwhelmingly want to comply with new reform measures, but also want Congress to come up with a balanced approach for how to pay for things such as a verification process,” said Kristie Arslan, President and CEO of the NASE.

Some of the key findings from the online survey of 432 NASE Members on the issue of immigration reform that was released today included:

  • Over 77 percent indicated that immigration reform was important to them and to their business, with 26.6 percent responding that the issue was “extremely important,” 26.4 percent indicating that it was “very important,” and 24.3 percent responding it was “slightly important.
  • Close to 60 percent of respondents indicated that employers with either full or part time employees should have to comply with an employment verification system (58.8 percent of respondents).
  • Seventy-nine percent of respondents indicated that they would not pay to outsource employment verification on the immigration status of all new hires, should it become mandatory.

“We want to comply with any new immigration requirements as long as they are not burdensome and impact our businesses and bottom-lines,” said Stephen McNeilly, owner of ServiceProz, Inc., and a member of the 2013 NASE Member Council. “The E-Verify system we currently use takes too long to verify employment. We need a system that is efficient, easy to use and isn’t complex.”

Learn more about the self-employed perspective on Immigration Reform.

Delays in JOBS Act Implementation Hurt Small Businesses

The House Small Business subcommittee on Investigations, Oversight and Regulations recently held a hearing on the implementation of the JOBS Act, which has been significantly delayed due to regulatory inaction. The NASE submitted an official Statement of the Record expressing our exacerbation on the lack of activity by the Securities and Exchange Commission in promulgating proposed and final rules for the provisions included in the JOBS Act at the hearing. The NASE strongly endorsed the JOBS Act, applauding Congress’s bi-partisan action on legislation aimed at supporting and encouraging small-business growth, especially embracing the ability for individuals and small businesses to raise capital through crowdfunding.

The NASE believes that crowdfunding is an exciting avenue for both new entrepreneurs and established small businesses to raise needed capital to launch or grow a small business. At present, nearly 48 percent of the self-employed and micro-businesses are utilizing personal or retirement savings to keep their businesses afloat, accordingly to a 2012 poll of NASE Members. Furthermore, friends and family have been a primary source of funding for many new entrepreneurs. Crowdfunding will bring together this age-old approach to financing with technology and investment practices, allowing small-business owners and aspiring entrepreneurs the opportunity to reach out to their communities, investors and the world to secure necessary funding to start and expand their business.

While we understand that the regulatory process is not designed to be expedient, the NASE struggles to understand how it is that the Securities and Exchange Commission continues to be deaf to the growing calls to release at a minimum a timeline for anticipated action. Crowdfunding plays an important part in helping small-business owners navigate challenging financial times while also opening new avenues of funding opportunities for America’s smallest businesses.

Read the NASE’s recent statement on the failed implementation of the JOBS Act to the House Small Business Committee.

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