NEWSRELEASE
For Release: April 29, 2004
Contact: John McDowell, (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 04-13 ADVO
Meals And Entertainment Tax Credit Helps Small Firms More Than Their Larger Counterparts
Small Incorporated Firms Benefit Up To Seven Times More
WASHINGTON, D.C. Small incorporated firms benefit more than larger firms from the meals and entertainment deduction, according to a study released today by the Office of Advocacy of the U.S. Small Business Administration. Small firms that take advantage of this deduction reduce their effective tax rate by 0.75 percent on average, while larger firms only receive a 0.11 percent reduction in their effective tax rate.
"This study confirms what we have believed all along," said Thomas M. Sullivan, Chief Counsel for Advocacy. "Small firms use the meals and entertainment deduction as their primary marketing tool. They dont have the budget for big ad campaigns, but they can talk with their potential clients over lunch. The study reinforces how important that deduction is for smaller incorporated firms," he said.
The finding is reported in "The Impact of Tax Expenditure Policies on Incorporated Small Business" written by Innovation & Information Consultants with funding from the Office of Advocacy. Released at the Hampshire House restaurant in Boston in conjunction with the National Restaurant Association, the report analyzes how "tax expenditure" programs affect effective tax rates.
"We are thrilled with the study's finding that validates what we have consistently maintained for years - that the business meal deduction is a tool used widely among small businesses, and that an increase in the meal and entertainment deduction would provide an immediate boost to the nation's economy," said Tom Kershaw, owner of the Hampshire House restaurant in Boston and former Chairman of the National Restaurant Association. "Smaller operations rely heavily upon restaurants as their conference rooms to turn business meals into business deals," added Kershaw.
The Office of Advocacy, the "small business watchdog" of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.
For the complete study, visit the Office of Advocacy website at www.sba.gov/advo.
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Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsels efforts. For more information on the Office of Advocacy, visit www.sba.gov/advo, or call (202) 205-6533.