President’s FY 2014 Budget ReleasedApril 10, 2013
The President’s Fiscal Year 2014 Budget released Wednesday includes some notable proposals that will impact small business. As is typically the case, the budget includes proposals supported by NSBA such as simplifying SBA loan processes and increasing funding for export measures, as well as some NSBA opposes such as corporate-only tax reform and consolidation of SBA into one massive business agency.
The FY 2014 Budget directs Congress to take up corporate tax reform that will close loopholes and lower the corporate tax rate. NSBA has continually urged that any corporate tax reform must also address small-business pass-through income. The overwhelming majority of small businesses (83 percent) pay taxes on their business at the personal income level, meaning that, absent the inclusion of pass-through income language, corporate tax reform would eliminate many deductions utilized by small business without a corresponding reduction in taxes paid on business income.
The Budget once again proposes to consolidate business agencies into a single government agency – combining the Department of Commerce, the U.S. Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency. NSBA is wary of any effort to roll the SBA into one massive agency due to the likelihood—as is often the case—small business will be an afterthought.
The Budget would reduce SBA’s overall budget by $109 million due largely to improved default rates through its loan programs. NSBA supports improved efficiency but warns against moves that will cause program caps to be instituted which are devastating to small businesses seeking capital through these critical programs.
Unfortunately the SBA Office of Advocacy received a proposed cut in funding of $500,000 million, a notable cut to an already under-funded but highly important office.
On the plus side, the Budget calls for the development of a new SBA lending platform called “SBA ONE” where borrowers and lenders will have one uniform set of forms for all SBA 7(a) loans as well as a one-stop shop for eligibility, credit scoring, authorization, closing and purchase of SBA loans.
In 2018, the budget calls for returning the estate tax to 2009 levels. The current level is a $5 million exemption, indexed for inflation, with a maximum rate of 40 percent; in 2018 it would jump to a 45 percent top rate with a lower exemption level of $3.5 million. NSBA supports a predictable and permanent fix to the estate tax such as what was approved under the Fiscal Cliff deal – this current proposal constitutes an estate tax increase.
Additionally, the 2014 budget will:
- Reauthorize SBA’s highly successful 504 Refinancing Program through Sept. 30, 2014, which helps small business owners lock in lower interest rates for their mortgage debts at no cost to taxpayer;
- Authorizes $17.5 billion in loan guarantees through SBA’s 7(a) program;
- Waive fees on 7(a)loans less than $150,000 starting in FY 14 for at least one year;
- Authorizes $6.3 billion through the agency’s 504 CDC program;
- Increases the annual authorization amount for the SBA’s Small Business Investment Company (SBIC) program from $3 billion to $4 billion;
- Increase by $11 million efforts to enhance export control reform measures and expand export licensing in order to promote exporting fairness for U.S. firms;
- Provide a one-time, temporary 10 percent tax credit for increases in companies’ wage payments over wages paid in 2012, whether driven by new hires, increased wages or salaries or both;
- Simplify and make permanent the R&E Tax credit, but would reduce the credit from a max of 20 percent to 17 percent;
- Close the loophole on taxing carried interests which currently are taxed at a 20 percent capital gains tax rate and tax it as ordinary income; and
- Enhance IRS funding for tax enforcement to the tune of $400 million.