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Small Business Committee Newsletter Printer Friendly Version
Small Business Committee Notes
Friday, February 17, 2006 Printer Friendly Version
Small Business Committee Notes February 17, 2006 -- Issue 109-35 Phil Eskeland, Policy Director, House Committee on Small Business _______________________________ Supplemental Appropriations for the SBA’s Disaster Loan Program Passes Congress On Wednesday, February 15, the House of Representatives passed by a vote of 410 to 5 legislation (H.R. 4745) to transfer $712 million from the accounts at the Federal Emergency Management Agency (FEMA) to the Small Business Administration (SBA) disaster loan program to avoid an expected shut-down in the program on Tuesday, February 21. This transfer of funding would allow the SBA to offer about $4.8 billion in disaster loans, which should carry them through May 1st. On Friday, February 17, the Senate unanimously passed H.R. 4745 without amendment. Below is a copy of the remarks of House Small Business Committee Donald Manzullo (R-IL) during Wednesday’s debate on the legislation. “Mr. Speaker, I commend the Chairman of the Appropriations Committee, Mr. Lewis, and the Chairman of the Science, Departments of State, Justice, and Commerce Subcommittee, Mr. Wolf, for the expeditious consideration of this legislation. Without passage of this legislation today, the disaster loan program of the Small Business Administration would not be able to offer critical disaster loan assistance to anyone across the nation after February 21. This legislation is also budget neutral - it simply redirects $712 million previously appropriated to the Federal Emergency Management Agency to the SBA’s disaster loan account. This bill does not create any new spending. However, H.R. 4745 will enable the SBA to support about $4.8 billion in disaster loans to homeowners, renters, and businesses through May 1st when the next Katrina-related supplemental is expected to be completed. This legislation is needed because SBA is, in a sense, a victim of its own success. Despite all of the huge hurdles and unfair attacks the SBA has received in recent weeks, the SBA has approved over $4.3 billion in disaster loans to more than 61,500 residents and business owners in the Gulf States region in five and a half months - despite not being able to get into the region until after the first month after Hurricane Katrina hit the Gulf coast. In comparison, it took the SBA more than 12 months to approve a similar amount of disaster loans to the victims of the Northridge Earthquake in California in 1994. The SBA disaster loan program offers low-interest loans up to $200,000 for homeowners and $1.5 million for small business owners in a disaster area for those items not covered by insurance for the purpose of long-term recovery. Most of the victims of Hurricanes Katrina and Rita did not have flood insurance because they weren’t in a designated flood plain. Thus, the average size of a typical SBA disaster loan has doubled for this event. Combine this with the fact that this is the largest unprecedented natural disaster ever to hit the United States, I trust that my colleagues can see why it is very difficult to accurately predict exactly how much should be appropriated for the SBA disaster loan program for an entire year. I commend the hard work of the SBA and their disaster loan officers, led by Administrator Hector Barreto and Associate Administrator Herb Mitchell, in providing this record-amount of assistance to Gulf States victims. I urge my colleagues to support H.R. 4745 so that these fine public servants can continue their good work not just in the Gulf States region but also for other parts of the United States that may unfortunately be hit by a natural disaster in the coming weeks and months.” On Thursday, February 16, the Bush Administration requested another supplemental appropriation to help pay for Gulf hurricane recovery efforts, totaling $19.8 billion, of which $1.3 billion would be designated for the SBA disaster loan program. The new SBA request would pay back the $712 million to FEMA from H.R. 4745 plus provide an additional $600 million to the SBA to enable it to offer disaster loans through the end of Fiscal Year 2006 (September 30th). For further information, please contact Phil Eskeland, Policy Director, or Brad Knox, Chief Counsel. _______________________________ HSBC Views on the President’s Fiscal Year 2007 Budget Request On Friday, February 17, a majority of the Members of the House Small Business Committee (HSBC) sent the following letter to the Chairman of the House Budget Committee, Representative Jim Nussle (R-IA), regarding their views and estimates on the President’s FY 2007 budget request. Below is a copy of the letter: “We are writing to advise you of the views and estimates of the Committee on Small Business on the President’s Fiscal Year 2007 budget proposal. In short, the President’s proposed budget request for the coming year will help small employers grow our economy and create jobs. The Committee again applauds the President for endorsing further tax relief proposals that benefit small businesses such as: 1) Making permanent the tax cuts previously passed by Congress, including estate or “death” tax repeal, in which the average tax savings in 2005 was $3,235 per small business; 2) Making contributions to Health Savings Accounts (HSAs) tax deductible and increasing the amount that can be set aside for HSAs; 3) Enacting an even higher and permanent small business (Section 179) expensing limit by increasing the deduction for qualifying property from $100,000 to $200,000 and increasing the phase-out of the deduction from $400,000 to $800,000 and indexing both levels for inflation thereafter; 4) Making permanent the research and experimentation tax credit; 5) Combining and making permanent the Work Opportunity and Welfare to Work Tax Credit; and 6) Extending for one-year individual Alternative Minimum Tax (AMT) relief. We would further encourage the Budget Committee to add more tax relief for small business owners in the budget resolution to include: 1) Increasing the business meal deduction; 2) Establishing a standard home office deduction; 3) Incorporating the deduction for the health insurance costs of self-employed individuals into the calculation of the self-employment tax; and 4) Permanently repealing individual AMT. These and other high priority consensus small business tax reforms are contained in the Small Employer Tax Relief Act of 2005 (H.R. 3841). This legislation also includes the repeal of the Federal Unemployment Tax Act (FUTA) temporary surcharge of 0.2 percent on employers. This “temporary” surcharge has been in place since 1976. Unfortunately, the President’s FY ’07 revenue proposal includes yet another extension of this tax. Because the unemployment level has dropped to a low rate of 4.7 percent and the unemployment trust fund has an adequate surplus, it is now time to finally let the “temporary” surcharge or tax expire. While there are many agencies, programs, and initiatives within the federal government that directly or indirectly benefit or assist small business, the House Small Business Committee has primary legislative responsibility for the Small Business Administration (SBA). The rest of this letter will focus on the President’s FY ’07 budget request for the SBA, which falls within the broader confines of the 370 Commerce and Housing Credit budget account. The President requests $624.2 million in spending for the SBA in FY ’07. This is about 37 percent less than what was spent on the SBA in FY ’01 while, during the same time, the SBA served more small businesses than ever in its history. The SBA certainly knows how to do more with less and it ought to be commended. While the Committee believes the President’s FY ’07 budget proposal for the SBA is generally sound and reasonable, particularly in context of the overall 2007 budget request that cuts non-security discretionary spending to below last year’s level, and should not be cut further, there are a few notable exceptions. First, the request contains a new proposal to increase fees on all small business loans of over $1 million guaranteed by the SBA over and above what is necessary to keep these programs operating at a zero subsidy rate. The Committee continues to support a zero subsidy rate (no taxpayer financing) for the 7(a), the Certified Development Company (CDC) or 504, and the Small Business Investment Company (SBIC) programs. This proposed fee increase, however, would go beyond what is needed to cover the loan subsidy to apply to some of the administrative expenses associated with providing federal government guarantees on these loans. While relatively modest now, if approved, this $7 million fee increase would set a negative precedent for future budget requests. Subsequent budget proposals could continue to lower the dollar threshold until small business borrowers and/or lenders would eventually have to pay the entire administrative cost of issuing these loans. This has the potential of dampening demand for the various SBA loan guarantee programs. Plus, the proposal unfairly and disproportionately hits the SBIC program, with a higher fee of 0.64 percent, versus 0.04 percent fee for the 7(a) program and a 0.11 percent fee for the 504 program. It is also not clear who exactly will pay these new fees - small businesses, lenders (banks or individual SBICs) or a combination thereof because the proposal incorrectly gives too much discretion to the SBA Administrator to impose these fees. Second, the request proposes to amend the interest rate charged on SBA disaster loans. Current law provides a four percent interest rate to disaster loan borrowers who do not have credit elsewhere. Under this proposal, a disaster loan borrower would receive this rate for only the first five years of a disaster loan. After the fifth year, the interest rate would adjust to the Treasury bill rate, which has increased in recent months. The SBA estimates that $41 million can be raised from disaster loan borrowers with this policy change. However, the vast majority of SBA disaster loans have terms greater than five years. This proposal would undoubtedly add a great deal of uncertainty to disaster loan borrowers because they would not know exactly what they will pay over the lifetime of a loan at precisely the worst time, financially, in their life. The Committee strongly opposes this proposal to impose an adjustable interest rate on SBA disaster loans. Third, the Committee also remains concerned about the SBA’s renewed effort to eliminate the $1 million loan subsidy for the Microloan program and the accompanying $13 million in technical assistance. This program reaches various demographic groups that would otherwise not be served by the private sector and even the SBA’s 7(a) program. Combined with the technical assistance, the Microloan program achieves a default rate of less than one percent. Unless the SBA devises some other means to reach this unique market, which without the program would not have access to capital, the Committee will continue to oppose the elimination of the modest appropriation for the Microloan program. Finally, while recognizing the tough budgetary environment, the Committee believes that the programs at SBA deserve an inflationary increase after years of not receiving much, if any, increase at all. The Small Business Development Center (SBDC) program, the Women’s Business Center (WBC) program, and the SCORE program, which serve their small business clients very well, are cases in point. This would require about an additional $4 million to the SBA’s FY ’07 budget request. In conclusion, the President’s FY ’07 budget request for small business can be supported, with the above exceptions noted, both in terms of his tax relief proposals and the SBA budget request.” For further information, please contact Phil Eskeland, Policy Director, or Brad Knox, Chief Counsel _______________________________ Representatives Manzullo, Blackburn Support USTR Move to Bolster US-China Trade Law Enforcement On Wednesday, February 15, House Small Business Committee Chairman Donald Manzullo (R-IL) and Representative Marsha Blackburn (R-TN) commended U.S. Trade Representative Rob Portman this week for announcing the Bush Administration’s intention to increase enforcement of trade laws governing U.S.-China commerce. "As Chairman of the U.S.-China Interparliamentary Exchange, I applaud Ambassador Portman and his able new Assistant Secretary Tim Stratford for taking a hard look at the difficult issues posed by the emergence of China as a trading partner of the United States," Chairman Manzullo said. "Unless we can address our concerns in a fair and bilateral fashion with the Chinese, trade tensions will continue to increase within Congress for punitive measures. As an ardent free trader, I would hate to see such measures overtake this important bilateral relationship." "I’ve been to China and I’ve seen pirated U.S. goods being sold in the markets," Representative Blackburn said. "The violation of U.S. copyright laws and the theft of our intellectual property must be addressed and I’m glad to see the Administration taking action. Tennessee produces an enormous amount of entertainment content products that are easily pirated and we’ve got to be certain our trading partners are abiding by their agreements. In August I met with several Chinese officials in Beijing and made a point of confronting them with examples of what we’re concerned about. I think that meeting had an impact and I believe we’ve got to keep that up." A new chief counsel position for China trade enforcement will be created within the office of U.S. Trade Representative Rob Portman to spearhead this initiative. Ambassador Portman announced the new position Tuesday while releasing a 29-page review of U.S.-China trade. Chairman Manzullo chairs the House Small Business Committee and the U.S.-China Interparliamentary Exchange and has led numerous delegation trips to China to discuss U.S. concerns regarding intellectual property theft among other issues. Blackburn founded and co-chairs the House Songwriters Caucus, which represents the intellectual property rights concerns of the American songwriting community. For further information, please contact Rich Beutel, Special Counsel. _______________________________ Issues in Brief On Tuesday, February 14, the Internal Revenue Service (IRS) announced that they will survey small business owners about its automatic mail-out program. The survey will query small business owners about IRS tax forms, instructions, and publications that they may be automatically receiving in the mail but did not request. The IRS said it will choose between 1,000 and 2,000 subscribers to its Small Business/Self-Employed News publication for the survey, with most potential participates set to receive the survey via e-mail during the week of February 20th. On Wednesday, February 15, the Senate passed the Stop Counterfeiting in Manufactured Goods Act (H.R. 32) with an amendment. The bill will further enhance the ability of the U.S. government to destroy counterfeited goods regardless of whether the defendant is convicted of an offense (see SBC Notes 109-13). The Senate amendment would expand the definition of trafficking in counterfeited goods based on legislation (S. 1095) authored by Senators John Cornyn (R-TX) and Patrick Leahy (D-VT). The amendment also protects Internet-based companies such as eBay, which are third parties to the transaction. The amended bill is expected to be passed by the House after the President’s Day District Work Period. _______________________________ Upcoming Events Week of February 19th is the President’s Day District Work Period. The House will not be in session until Tuesday, February 28th. The next edition of SBC Notes will be published on Friday, March 3rd. Thursday, March 2 10:30AM - Workforce, Empowerment & Government Programs Subcommittee oversight hearing on the Small Business Administration’s (SBA’s) entrepreneurial development programs. For further information, please contact Joe Hartz, Professional Staff. _________________________________ Past hearings/mark-ups/roundtables/meetings in 2006 February 1, 2006 - Tax, Finance & Exports (TF&E) and Rural Enterprises, Agriculture & Technology (REA&T) joint subcommittee hearing on “Transforming the Tax Code: An Examination of the President’s Tax Reform Panel Recommendations.” February 8, 2006 - Regulatory Reform & Oversight (RR&O) Subcommittee hearing on “The Internet Sales Tax: Headaches Ahead for Small Business?” _____________________________ Small Business Website Check out the Small Business Committee website at http://www.house.gov/smbiz. The site includes regular updates on small business committee news. The site features special projects, press releases, hearings and scheduling information. _______________________________ Phil Eskeland Deputy Chief of Staff & Policy Director House Committee on Small Business Phil.Eskeland@mail.house.gov (202) 225-5821 To contact any staff member listed in the above newsletter, please use the general number for the House Small Business Committee - (202) 225-5821. Please E-mail me if you want to be removed from the mailing list or if you know of others who might be interested in receiving this publication. Mission Statement of the House Committee on Small Business "We promote the success of America’s small businesses by leveling the global economic playing field and reducing domestic burdens that impede their growth. In this spirit, we work to ensure that every branch of the U.S. government understands the critical role America’s small businesses play - both at home and abroad - including the jobs they create and the spirit of entrepreneurship they embody.”
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