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Small Business Committee Newsletter Printer Friendly Version
Small Business Committee Notes
Friday, June 30, 2006 Printer Friendly Version
Small Business Committee Notes June 30, 2006 -- Issue 109-49 Phil Eskeland, Policy Director, House Committee on Small Business _______________________________ Chairman Manzullo Opposes Legislation to Weaken SBA’s 7(a) Loan Program On Tuesday, June 27, House Small Business Committee Chairman Don Manzullo (R-IL) voted against legislation that would weaken an important federal loan guarantee program that helps thousands of small businesses expand and create jobs each year. The legislation, an amendment to the Science, State, Justice and Commerce (SSJC) Appropriations Act for Fiscal Year 2007, would return the U.S. Small Business Administration’s (SBA’s) 7(a) guaranteed loan program to a state of instability and uncertainty by adding back a taxpayer subsidy which nearly crippled the program two years ago. Chairman Manzullo issued the following remarks on the floor of the House: “Mr. Chairman, if it ain’t broke, don’t fix it. The 7(a) program ain’t broken. In fact, it’s operating on full cylinders breaking record after record in program usage throughout all demographic and regional groups. The Velázquez amendment is simply not needed. If removing the 7(a) loan subsidy was having a detrimental effect, the 7(a) program volume should have dropped back to pre-FY 2002 levels. But that hasn’t happened. In fact, there have been more 7(a) loans made thus far in the nine months of FY 2006 than in all of FY 2000 or FY 2001. Removing the 7(a) loan subsidy from the uncertainties of the annual appropriations process has produced a stable and predictable program. Knowing that the 7(a) program will not be subject to shutdowns or curtailments has proven to be more important than the extra $10 per month in fees charged on an average SBA 7(a) loan. “The noble intent of the Velázquez amendment is to re-establish a lower 7(a) fee structure exactly as it existed in 2003 and 2004. However, with a higher 7(a) program level, an appropriation of $168 million is required, according to the SBA. The Velázquez amendment falls woefully short. The amendment will not result in cutting fees to small businesses. “I also urge my colleagues to read the amendment carefully before voting. The Velázquez amendment directs the funds to pay for the salaries and expenses of the employees at the SBA who work in the Business Loan Division, not to the 7(a) business loan subsidy account. This amendment will not help any small business owner or lender. “Finally, this is a rare instance where most in the small business community do not want our ‘help.’ The main association that represents 7(a) lenders – the National Association of Government Guaranteed Lenders – now supports a zero subsidy rate. Neither the U.S. Chamber of Commerce nor the National Federation of Independent Businesses supports the Velázquez amendment. The National Taxpayers Union and Citizens Against Government Waste oppose the Velázquez amendment. “Mr. Chairman, if there is ever an example of wasteful spending, the Velázquez amendment fits the bill. It’s not needed. It will not help small businesses. It’s incorrectly written. It’s offset with cuts in other higher priority programs within this spending bill. And, industry doesn’t want it. “The debate over reinstating a federal loan subsidy is not worth jeopardizing the stability of the 7(a) program. We should not return to the days of program shutdowns and curtailments in product offerings because of the uncertainties of the appropriations process. If it ain’t broke, don’t fix it! Vote no on the Velázquez amendment.” The Velázquez amendment passed the House though by a much smaller margin than previous years (see SBC Notes 109-15) – 214 to 207. On Thursday, June 29, the full FY SSJC Appropriations bill (H.R. 5672), which contains the FY 2007 funding levels for the SBA (see SBC Notes 109-48 for details) passed the House by a wide bipartisan margin of 393 to 23. For more information, please contact Phil Eskeland, Policy Director. _______________________________ RR&O Subcommittee Hearing on S Corporations On Tuesday, June 27, the Subcommittee on Regulatory Reform & Oversight, chaired by Representative Todd Akin (R-MO) held a hearing examining the history and challenges of S Corporations. Below is a copy of Chairman Akin’s opening statement: “We are here today to explore a very important business structure that has helped to foster an entrepreneurial environment since the late 1950’s. Prior to the development of this corporate structure, entrepreneurs had two options in creating a business entity. They could form a partnership, which would allow for a single layer of tax on profits but expose an entrepreneur to high levels of risk. Or, they could form a C corporation, which would shield the entrepreneur from excess risk, but create a double layer of tax on profits. Neither business structure adequately addressed the needs of entrepreneurs and so in 1958 Congress and President Eisenhower acted to create the S corporation. The S corporation allows for limited liability and a single layer of taxation for small closely held businesses. The adoption of subchapter S was a huge step forward in encouraging small and family-owned businesses in America. Today, S corporations are the most popular corporate entity. The IRS estimates that there were 3.2 million S corporation owners in the United States in 2003 – compared to approximately 2.1 million C corporations and 2.3 million LLCs and other partnerships. But while the S corporation community has grown and matured, the rules governing S corporations have remained largely the same. The number of shareholders is still limited, an S Corporation may have only a single class of stock, and the rules still limit who or what may own shares in an S corporation. I look forward to learning more about how S corporations benefit the American entrepreneur and what more can be done to aid this important component of the U.S. economy.” For more information, please contact Chris Szymanski, Professional Staff. _______________________________ WE&GP Subcommittee Hearing on Immigrant Employment Verification On Tuesday, June 27, the Subcommittee on Workforce, Empowerment & Government Programs, chaired by Representative Marilyn Musgrave (R-CO) held a hearing on immigrant employment verification and small business. Below is a copy of Chairman Musgrave’s opening statement: “While traveling around my congressional district, the problems of illegal immigration are consistently among the top concerns communicated to me. Individuals, community leaders, law enforcement officials, and business leaders all recognize the adverse affects and want Congress to pass laws to promote America’s tradition of lawful immigration. The increasing number of immigrants crossing our borders illegally is a burden to our economy and a threat to our national security. Official census data predicts there are 8.7 million individuals living here illegally; however, some unofficial estimates predict closer to 10-12 million. There are also approximately 500,000 illegal aliens that enter the United States every year. Because this is a pressing issue, the House of Representatives passed H.R. 4437, the Border Protection, Antiterrorism, and Illegal Immigration Control Act, prior to adjourning the first session of this Congress, in December 2005. In May 2006 the Senate also passed a significant immigration reform bill, S. 2611, the Comprehensive Immigration Reform Act of 2006. Both bills make numerous significant changes to our immigration law and border security efforts. H.R. 4437 also aims to crack down on alien smugglers and the alien gang members who terrorize our communities. In addition, the bill would direct the Secretary of Homeland Security to devise a plan to provide systematic surveillance coverage and, within one year, introduce a plan for border security including risk assessment of ports of entry. This plan would include a description of border security roles of federal, state, regional, local and tribal authorities and ways to ensure such security efforts would not impede commerce. The focus of the hearing today, however, will be on the expansion of the Basic Pilot Program for employee verification that is contained in both bills. The Immigration Reform and Control Act of 1986 (IRCA) made it unlawful for employers to knowingly hire or employ aliens not eligible to work and required employers to check the identity and work eligibility documents of all new employees. This act was designed to end the “job magnet” that draws the vast majority of illegal aliens to the United States. Unfortunately, the easy availability of counterfeit documents has made a mockery of the 1986 legislation. Fake documents are produced by the millions and can be obtained cheaply. Through the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, Congress responded to the deficiencies of the 1986 Act by establishing three employment eligibility verification pilot programs for volunteer employers in selected areas. This is known as the Basic Pilot Program. Since November 1997, the Social Security Administration (SSA) and the Systematic Alien Verification for Entitlements (SAVE) Program have been conducting the Basic Pilot Program in the States of California, Florida, Illinois, Nebraska, New York and Texas. The program was made available to employers in all states starting December 20, 2004. The Basic Pilot involves verification checks of the SSA and the now Department of Homeland Security databases of all newly hired employees, regardless of citizenship. The Basic Pilot is currently a voluntary program and is free to employers who volunteer to participate. It is used by over 4,000 employers and at nearly 15,000 worksites nationwide. The recently passed House and Senate legislation both change the name of the Basic Pilot Program to the Employment Eligibility Verification System and would require all businesses to use it when making new hires. The legislation also increases fines for companies failing to comply with the new law. While the House bill prescribes lower penalties for small and medium sized businesses, the Senate bill does not, nor does the Senate bill have an exemption of fines for a “good faith effort” to comply. Our purpose here today is not to compare and contrast the merits of either bill, however. All too often when these gigantic, reform-minded pieces of legislation are formulated, small businesses are often an afterthought. While the House did take small and medium sized businesses into consideration when constructing their legislation, there are many questions we need to ask to ensure that this bill, should it become law, will not unjustly overburden America’s small business community. We need to answer questions such as, “Will making participation mandatory increase the paperwork burden for small businesses?”; “How accurate will it be and how can we ensure the number of false positives and negatives will be extremely minimal”; “How long will it take to certify someone?”; and, “Will the Department of Homeland security be ready for it if it happens and what do we in Congress need to do to make sure they are?” For further information, please contact Joe Hartz, Professional Staff. _______________________________ TF&E Subcommittee Hearing on Natural Gas On Wednesday, June 28, the Tax, Finance & Exports Subcommittee, chaired by Representative Jeb Bradley (R-NH), held a hearing on the effects of the high cost of natural gas on small businesses and future energy technologies. Below is a copy of Chairman Bradley’s opening statement: “At the very core of a strong economy is the availability of inexpensive sources of energy. It is our responsibility as Members of Congress to ensure that government is not interfering with the development and deployment of these energy sources and ensure that these resources are being extracted in an environmentally responsible manner. Our strategies must enable the development and expansion of ideas and the success of entrepreneurs, both domestically and internationally. Currently, our small businesses are suffering from the high cost of natural gas, which, over the last year, has risen to prices as high as $15 per million BTUs. To date, the average customer is paying more than twice as much as they did in 1999, and with demand predicted to increase by roughly 37 percent over the next 15 years, there is no relief in sight. These high prices are not only effecting businesses and consumers, but they are also hampering the technological advancements of our alternative fuel goals; specifically hydrogen. Natural gas and electricity are the primary energy sources for obtaining hydrogen. How can we realistically expect to advance the objectives of our alternative fuels strategies when we are providing one of the greatest obstacles ourselves through our energy policies? We need to increase our nation’s natural gas supplies either through increased domestic production or greater importation of international supplies, and above all develop more energy efficient technologies.” For further information, please contact Adam Noah, Counsel. _______________________________ Issues in brief Late on Thursday, June 29, the U.S. Senate unanimously approved the confirmation of Steven C. Preston of Illinois to be the next Administrator of the U.S. Small Business Administration. Also, on Thursday, June 29, the Senate Appropriations Committee passed two FY 2007 appropriations bills covering the Department of Homeland Security and the Department of State that contained identical amendments offered by Senators Patrick Leahy (D-VT) and Ted Stevens (R-AK) to delay by 17 months the implementation of the Western Hemisphere Travel Initiative (WHTI). The Leahy/Stevens amendment also contained some other reforms to WHTI, including alternative procedures for groups of children traveling across the border under adult supervision with parent consent. On the same day, the House of Representatives also defeated an amendment to the FY 2007 SSJC Appropriations bill by a vote of 90 to 318 that would have abolished WHTI and replaced it with a passport-only requirement. The problems of WHTI were the subject of a Small Business Committee hearing last November (see SBC Notes 109-29). On Friday, June 30, House Small Business Committee Chairman Donald Manzullo (R-IL) wrote a letter to the Administrator for the Centers for Medicare and Medicaid Services (CMS), Dr. Mark McClellan, regarding the proposed competitive acquisition strategy for certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Chairman Manzullo commends CMS for preparing an initial regulatory flexibility analysis and listed a number of alternatives designed to limit the adverse economic consequences of the proposed rule on small business. Chairman Manzullo recommends that CMS work with the Office of Advocacy at the SBA and the small medical supplier community to develop other alternatives that will reduce the regulatory burden on small business. _______________________________ Upcoming Events Friday, June 30 through Monday, July 10 – Independence Day District Work Period. Next edition of SBC Notes will be published on Friday, July 14. _________________________________ 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?” March 2, 2006 – Workforce Empowerment & Government Programs (WE&GP) Subcommittee hearing on the “Oversight of the Small Business Administration’s Entrepreneurial Development Programs.” March 8, 2006 – TF&E Subcommittee hearing on the “Oversight of the Small Business Administration’s Finance Programs.” March 15, 2006 – REA&T Subcommittee hearing entitled, “The Missouri River and its Spring Rise: Science or Science Fiction?” March 15, 2006 – hearing on the Fiscal Year 2007 Budget and Reauthorization Proposals of the SBA. March 16, 2006 – RR&O Subcommittee hearing entitled, “The State of Small Business Security in a Cyber Economy.” March 30, 2006 – RR&O Subcommittee hearing on the “Procurement Assistance Programs of the SBA.” April 5, 2006 – hearing on “IRS Latest Enforcement: Is the Bulls-Eye on Small Businesses?” April 6, 2006 – RR&O Subcommittee hearing entitled “Can Small Healthcare Groups Feasibly Adopt Electronic Medical Records Technology?” April 26, 2006 – hearing on “Cutting Our Trade Deficit: Can the U.S. Muster Its Diverse Trade Promotion Operations to Make an Impact?” April 27, 2006 – WE&GP Subcommittee hearing on “Healthcare and Small Business: Proposals that will Help Lower Costs and Cover the Uninsured.” May 3, 2006 – REA&T Subcommittee hearing on “The Future of Rural Telecommunications: Is Universal Service Reform Needed?” May 3, 2006 – hearing on “What is the Proper Balance between Investor Protection and Capital Formation for Smaller Public Companies?” May 10, 2006 – hearing on “Bridging the Equity Gap: Examining the Access to Capital for Entrepreneurs Act of 2006.” May 23, 2006 – RR&O Subcommittee hearing on “Data Protection and the Consumer: Who Loses When Your Data Takes a Hike?” May 25, 2006 – REA&T Subcommittee hearing on “Unlocking Charitable Giving.” June 7, 2006 – hearing on “Contracting the Internet: Does ICANN Create a Barrier to Small Business? June 21, 2006 – Joint hearing with the Government Reform Committee on “Northern Lights and Procurement Plights: The Effect of the ANC Program on Federal Procurement and Alaska Native Corporations.” June 27, 2006 – RR&O Subcommittee hearing on “S Corporations: Their History and Challenges.” June 27, 2006 – WE&GP Subcommittee hearing on “Immigrant Employer Verification and Small Business.” June 28, 2006 – TF&E Subcommittee hearing on “The Effects of the High Cost of Natural Gas on Small Businesses and Future Energy Technologies.” _____________________________ 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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