On Feb. 17, President Obama signed into law the American Recovery and Reinvestment Act — an economic stimulus plan totaling $787 billion in federal spending and tax cuts. For small business owners who haven’t had the time to wade through the actual document, your Better Business Bureau offers a summary on some items in the stimulus package that might benefit you.
The main goal of the stimulus package is to spur job creation — the Congressional Budget Office estimates that employment could increase by as much as 3.6 million jobs by 2010 — with the concept being that more jobs will provide additional assistance to struggling consumers and businesses. For business owners, this means increased federal spending on projects such as funding for the U.S. Small Business Administration to assist businesses with financing needs and some tax breaks.
Following are examples of how the American Recovery and Reinvestment Act will benefit small businesses nationwide:
Small Business Financing
The U.S. Small Business Administration received $730 million from the stimulus package — more than doubling its operating budget from 2008 — to assist businesses with financing.
According to a press release from the SBA, funds are being divided among many programs including:
• $375 million for temporary fee reductions or eliminations on SBA loans, and for increased SBA guaranteed shares, up to 90 percent for some loans;
• $255 million for a new loan program to help small businesses meet existing debt payments; and
• $30 million to expand SBA's Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders.
For complete details on how the U.S. Small Business Administration is using the new funding from the stimulus package and how small businesses can benefit, go to www.sba.gov.
Small Business Tax Breaks
Qualified Property Expense Increased. The ceiling on the Section 179 tax break, which allows companies to expense qualified assets in the first year of service, has been increased to $250,000 from $133,000 in the first year that qualifying assets are placed in service.
Bonus Depreciation Extended. Originally instituted in 2008, businesses will again be able to take an additional bonus depreciation expense of up to 50 percent of the cost of newly acquired fixed assets.
Loss Carry Back Expanded. Only available to companies with sales less than $15 million, a business that incurs operating losses in tax years ending after Dec. 31, 2007, can offset such losses against income earned in previous years and obtain a refund on previously paid taxes. Losses can now be carried back for five years instead of two.
Vehicle Depreciation Expense Increased. The depreciation expense for passenger vehicles in their first year of service, limited only to those placed into service in 2009, was increased to $10,960 from $2,960. The depreciation expense for light trucks and vans increased to $11,160 from $3,160.
Industry and State-Specific Benefits
The stimulus package will provide state and local governments with billions of dollars to fund assistance programs and infrastructure projects, such as road construction or mass transit development. More details on how state-specific funding will be dispersed and which projects will benefit will be announced soon.
Green businesses will also see a benefit, including $20 billion dollars set aside for companies that produce solar panels and wind turbines, $6 billion in loan guarantees for renewable energy projects, and a 30 percent tax break for investments in wind and solar energy.
Additional information on the stimulus package can be found at www.recovery.gov.
For more small business advice from your BBB including tips for surviving a tough economy, go to wynco.bbb.org.