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Small Business Committee Newsletter Printer Friendly Version
Small Business Committee Notes
Friday, June 23, 2006 Printer Friendly Version
Small Business Committee Notes June 23, 2006 -- Issue 109-48 Phil Eskeland, Policy Director, House Committee on Small Business _______________________________ Chairman Manzullo Votes to Protect Small Family Businesses, Family Farms from the Death Tax On Thursday, June 22, House Small Business Committee Chairman Donald Manzullo (R-IL) voted to protect small family businesses and family farmers from the job-killing death tax that has destroyed the livelihoods and futures of many American entrepreneurs and their families. The House passed the Permanent Estate Tax Relief Act of 2006 (H.R. 5638) by a wide bipartisan vote of 269 to 156, with 43 Democrats in support. H.R. 5638 would provide permanent relief from the death tax, which gives the government the right to take up to 55 percent of many small businesses and family farms upon the death of the owner. Congress voted in 2001 to phase out the death tax, but a technical rule championed by Senate Democrats forced the relief to sunset in 2010. The full force of the devastating death tax will come back to unfairly punish small family businesses and family farmers in 2011 unless Congress acts to provide permanent relief. More than 80 percent of small employers must spend costly resources to protect their families from the death tax. Despite serious estate planning efforts, 70 percent of small and family-owned businesses do not survive through the second generation and 87 percent do not make it through the third generation. Nine of every 10 successors whose family business failed within 3 years of the owner’s death said death taxes played a major role in their company’s demise. Chairman Manzullo has witnessed the devastation of the death tax firsthand. Before he came to Congress, Chairman Manzullo practiced law in a rural community in northern Illinois. “I was there at the estate sale when the mom and her kids had to sell off half the family farm because they couldn’t afford to pay the death tax after dad died. All they wanted to do was continue on with their lives, continue to work their farm to put food on the tables of people across the world. But in their most vulnerable time, after they had lost their dad and husband, after they had spent their lives paying taxes, the government said, ‘We need more.’ And their American Dream was crushed,” Chairman Manzullo said. Richard and Judy Beuth of Seward, Illinois, almost lost the family farm when Richard’s father died and the Internal Revenue Service (IRS) hit them with a huge $185,000 death tax bill. Similarly, Gary Hall and his four sisters of Lindenwood, Illinois had to sell equipment, sell part of their land, and take out huge loans to pay a whopping $2.7 million death tax bill they received shortly after their father died in 1996. "This immoral tax has already devastated too many family farms and mom-and-pop businesses like the Beuths of Winnebago County and Halls of Ogle County. These families work hard all their lives to put food on our dinner tables, and in the end they simply want to be able to turn their life’s work over to their children," Chairman Manzullo said. "It’s time to do away with this immoral tax that has destroyed so many families.” H.R. 5638 exempts and indexes for inflation all estates worth less than $5 million from taxation and would tax estates between $5 million and $25 million at the capital gains rate, currently at 15 percent. Estates worth over $25 million would also be taxed at double the capital gains rate. For more information, please contact John Westmoreland, Chief Tax Counsel. _______________________________ Northern Lights and Procurement Plights: The Effect of the ANC Program on Federal Procurement and Alaska Native Corporations On Wednesday, June 21, Chairman Donald Manzullo (R-IL) held a joint Small Business Committee hearing with Chairman Tom Davis (R-VA) of the House Government Reform Committee on the subject of effect of the participation of Alaska Native Corporations on procurement opportunities for small businesses, particularly minority 8(a) firms. Below is a copy of Chairman Manzullo’s opening statement: “I welcome this hearing because there have been various newspaper articles concerning the increased use of Alaska Native Corporations. This increased use is the subject of a U.S. Government Accountability Office (GAO) study that was released in April of this year. The GAO study found that the amount of 8(a) contracts going to Alaska Native Corporations increased from $265 million in fiscal year 2000 to $1.1 billion in 2004, which represented 13 percent of the 8(a) contract dollars in that year. Federal agencies have awarded large sole-source contracts to Alaska Native Corporations since they enjoy statutory advantages not enjoyed by other 8(a) contractors. Federal agencies may award contracts on a sole-source basis to Alaska Native Corporations without reference to the dollar value of the contract. Other 8(a) contractors must compete among themselves if the procurement is in excess of $5 million for manufacturing and in excess of $3 million for goods and services. In addition, Alaska Native Corporations are not subject to the “affiliation rule” which requires for other certified 8(a) small businesses that affiliates or subsidiaries of the small business be counted in determining the size of the business concern. The result is that Alaska Native Corporations including their subsidiaries can grow to large businesses in comparison with other 8(a) small businesses that are constrained by size standards. Alaska Native Corporations have used their procurement advantages to help stockholders of the corporations back in Alaska. Various benefits have been enjoyed by Alaska Natives that include dividends, jobs, burial assistance, education scholarships, and improvements in community infrastructures. Again I welcome this hearing as another means of getting the facts concerning Alaska Native Corporations’ role in the 8(a) contracting program.” For more information, please contact Nelson Crowther, General Counsel. _______________________________ U.S. Small Businesses Secure Record Amount of Federal Prime Contract Dollars On Wednesday, June 21, House Small Business Committee Chairman Don Manzullo (R-IL) hailed the announcement that America’s small businesses reaped a record $79.6 billion in federal prime contracts in FY 2005 and easily surpassed the statutory goal set by Congress. According to the U.S. Small Business Administration (SBA), the small business contracts represented 25.4 percent of all federal prime contracting dollars, surpassing the 23 percent statutory goal for the third year in a row. Overall, the federal government purchased $314 billion in goods and services from businesses large and small in 2005. “This is great news for the federal government, for taxpayers, and for our small employers, who can often provide higher-quality, lower-cost goods and services to the government than their larger competitors,” Chairman Manzullo said. “Small businesses create the majority of jobs in this country, and it is important to continue to reach out to these job creators with federal contracts. I congratulate SBA Administrator Hector Barreto, President Bush, and all the contracting officials at the agencies for their efforts to continue to invest in America’s small businesses.” The SBA report showed that the government surpassed the five percent goal of contracts going to small disadvantaged businesses. Participants in the SBA’s 8(a) Business Development program received $10.5 billion in contracts, a 25 percent increase over the previous year. Firms in the Historically Underutilized Business Zone (HUBZone) program received $6.1 billion in contracts, a 27 percent increase over the previous year. Contracting dollars awarded to women-owned small businesses increased by $1.4 billion to a record $10.5 billion, a 15 percent increase over the previous year. Contracts to service-disabled veteran-owned small businesses increased significantly, reaching $1.9 billion, up from $1.2 billion in FY 2004 and a 58 percent increase over the previous year. Chairman Manzullo also praised the SBA for issuing a proposed rule last week to establish the Women-Owned Small Business Federal Contract Assistance Program, which will help even more women-owned businesses secure federal contracts. Comments are due to the SBA by July 17, 2006. For further information, please contact Nelson Crowther, General Counsel. _______________________________ SBA Spending Proposal Passes House Appropriations Committee On Tuesday, June 20, the House Appropriations Committee passed the annual spending bill (H.R. 5672) for Science, the Departments of State, Justice, Commerce, and Related Agencies (SSJC) for Fiscal Year 2007, which starts on September 30, 2006. The discretionary funding for the Small Business Administration (SBA) falls within this spending bill. As reported last week, H.R. 5672 provides $642.8 million for the five appropriations accounts of the SBA. This is $4 million above the President’s FY 2007 budget request. More details were released earlier this week. The Committee recommends $303.5 million for the salaries and expenses of the SBA, which is $5.5 million below the FY 06 level and is the same as the President’s request. Of this amount, the Committee recommends $110 million for non-credit initiatives as follows: Veterans Programs $750,000 Small Business Development Centers $90 million SCORE $5 million Women’s Business Centers $12.5 million Women’s Business Council $750,000 Drug Free Workplace $990,000 The Committee instructs the SBA not to reduce these non-credit programs to fund general operating costs. In addition, the Committee directs the SBA to support at no less than then FY 2006 level of funding for the HUBZone Contracting Program; the National Ombudsman; Native American Outreach; the Office of Advocacy, including support for the Advocacy Database; international trade programs; and the defense transition program. The recommendation also includes making $500,000 available for the National Veterans Business Development Corporation. The Committee recommends $13.722 million for the Office of Inspector General at the SBA, which is the same as the amount appropriated in FY 2006 (excluding supplemental appropriations). The Committee recommends a total of $2.824 million for the Surety Bond Guarantees Revolving Fund, which is $146,000 below the request and the same as the current year level. The Committee recommends a total of $123.7 million for the Business Loan Program Account to cover the administrative expenses related to business loan programs, which is $1.283 million below the FY 2006 level and is $2.43 million below the request. H.R. 5672 provides for a $17.5 billion budget authority level for the 7(a) business loan guarantee program, which is the same as the request. The recommendation includes a $7.5 billion budget authority level for the 504 Certified Development Company program, which is $1.5 billion over the FY 2006 level and the same as the request. H.R. 5672 provides for a $3 billion budget authority level for the Small Business Investment Company (SBIC) debenture program, which is the same as the request. The Committee recommends a total of $199 million for the Disaster Loans Program Account for loan subsidies and associated administrative expenses. This includes $85.14 million for the subsidy costs of disaster loans, which, when combined with estimated recoveries and anticipated carry-over balances, will provide for a five-year average lending level. Finally, during the Appropriations Committee mark-up on Tuesday, an amendment was adopted that took money from the SBA’s Salaries and Expenses account to restore funding the Microloan program – $10 million for technical assistance and $1 million for loan subsidy. For further information, please contact Phil Eskeland, Policy Director. _______________________________ Issues in brief On Thursday, June 22, the Senate Appropriations Committee adopted their subcommittee allocations. The Commerce, Justice, State spending bill, which funds the SBA in the Senate, received an allocation of $51 billion, which represents a 3.2 percent increase over FY 2006 levels. On Tuesday, June 20, House Small Business Committee Chairman Donald Manzullo (R-IL) joined with Representatives Todd Akin (R-MO), Chairman of the Subcommittee on Regulatory Reform and Oversight; Candice Miller (R-MI), Chairman of the Subcommittee Regulatory Affairs of the Government Reform Committee; and Chris Cannon (R-UT), Chairman of the Subcommittee on Commercial and Administrative Law of the Judiciary Committee, in co-signing a letter to the Director of the Office of Management and Budget (OMB), Robert Portman, to encourage him to quickly fill the vacancy at the Office of Information and Regulatory Affairs (OIRA) left by the departure last January of the former administrator of that office, Dr. John Graham. OIRA plays a critical role as the last stop in the process of finalizing new regulations or amending/repealing existing regulations. The letter praised the work of Dr. Graham and hopes that a new administrator can be named soon to continue to cement the reforms already made or proposed. _______________________________ Upcoming Events Tuesday, June 27 10:00AM – Regulatory Reform & Oversight Subcommittee (RR&O) Subcommittee hearing on the history and challenges of S Corporations. For further information, please contact Chris Szymanski, Professional Staff. Tuesday, June 27 2:30PM – Workforce, Empowerment & Government Programs (WE&GP) Subcommittee hearing on immigrant employer verification and small business. For further information, please contact Joe Hartz, Professional Staff. Wednesday, June 28 2:00PM – Tax, Finance & Exports (TF&E) Subcommittee hearing on the effects of the high price of natural gas on small business. For further information, please contact Adam Noah, Counsel. Thursday, June 29 10:00AM – Rural Enterprises, Agriculture & Technology (REA&T) and TF&E joint subcommittee hearing on Chinese barriers to trade. For further information, please contact Piper Largent, Professional Staff. Expected House floor consideration of the FY 2007 SSJC Appropriations bill (H.R. 5672) as early as Tuesday evening, June 27th. _________________________________ 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.” _____________________________ 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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