(October 21, 2010) According to the Small Business Administration (SBA) and U.S. Chamber of  Commerce, the Small Business Jobs Act will provide critical resources to help small businesses continue to drive economic recovery and create jobs.

While imperfect, the legislation, signed by President Barack Obama on September 27, is a step toward addressing needs of the small business community, but much work remains.

The bill includes increases to SBA loan limits, a temporary extension of government guarantees, and a reduction of fees that will encourage lending to credit-worthy small businesses in need of capital to start, expand and grow their businesses.

Other provisions would help modernize outdated code sections, thus promoting more fairness and allowing small business owners to better allocate existing resources. The bill’s trade resources aim to help bolster small and mid-sized businesses’ ability to export their goods. The bill also takes steps to help small businesses operating in the procurement arena.

Top Benefits for Small Business

Among the many important provisions in the bill, 12 of the top benefits to small businesses are:

• Extension of Successful SBA Recovery Loan Provisions—Immediately Supporting Loans to More than 1,400 Small Businesses. With funds provided in the bill, SBA began funding new recovery loans within a few days of the President’s signature, starting with the more than 1,400 businesses—with loans totaling more than $730 million—that are waiting in the recovery loan queue. In total, the extension of these provisions provides the capacity to support $14 billion in loans to small businesses. The SBA recovery loan provisions have already supported $30 billion in lending to more than 70,000 small businesses.
• More Than Doubling the Maximum Loan Size for the Largest SBA Programs. The bill also increases the maximum loan size for SBA loan programs, which will allow more small businesses to gain access to credit, allowing them to expand and create new jobs. The bill will permanently raise the maximum size for SBA’s two largest loan programs, increasing the maximum 7(a) and 504 loans from $2 million to $5 million, and the maximum 504 manufacturing-related loan from $4 million to $5.5 million. In addition, it will temporarily increase the maximum loan size for SBA Express loans from $350,000 to $1 million, providing greater access to working capital loans that small businesses use to purchase new inventory and take on their next orders.
• A New $30 Billion Small Business Lending Fund. The bill would establish a new $30 billion Small Business Lending Fund, which—by providing capital to small banks with incentives to increase small business lending—could dramatically increase the amount of available credit for small business loans.
• An Initiative to Strengthen Innovative State Small Business Programs—Supporting More than $15 Billion in Lending. The bill will support at least $15 billion in small business lending through a new State Small Business Credit Initiative, strengthening state small business programs that leverage private sector lenders to extend additional credit, many of which have been forced to cut back due to budget cuts.
• Eight New Small Business Tax Cuts—Effective Immediately, Providing Immediate Incentives to Invest. Adds another eight small business tax cuts that go into effect immediately, in addition to eight others already signed into law.
• Zero Taxes on Capital Gains from Key Small Business Investments. Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place, for the rest of 2010, a provision called for by the President—elimination of all capital gains taxes on these investments if held for five years. More than 1 million small businesses are eligible to receive investments this year that could be eligible for this exclusion.
• Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments. The bill increases, for 2010 and 2011, the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the bill’s passage, the expensing limit would have been $250,000 this year, and only $25,000 next year. This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
• Extension of 50 Percent Bonus Depreciation. The bill extends, as the President proposed in his budget, a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.
• A New Deduction of Health Insurance Costs for Self-Employed. The bill allows 2 million self-employed workers to receive a deduction for the cost of health insurance for themselves and their family members in calculating their taxes this year. This provision is estimated to provide more than $1.9 billion in tax relief for these entrepreneurs.
• Tax Relief and Simplification for Cell Phone Deductions. The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation, making it easier for most small businesses to receive deductions that they are entitled to, beginning on their taxes for this year.
• An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses. The bill temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business.
• A Five-Year Carryback Of General Business Credits. The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes—providing them with relief on their taxes for this year—while also allowing these credits to offset the Alternative Minimum Tax, further reducing taxes.
• Limitations on Penalties for Errors in Tax Reporting that Disproportionately Affect Small Business. The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount—which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances—to a percentage of the tax benefits from the transaction.

Small Business Priorities

Critics of the legislation, point out that Congress can do more to better address priorities of the small business community.

For example, Congress can address the imminent increase in marginal tax rates and long-term capital gains and dividends, the regulatory burden recently imposed by the 1099 reporting requirements of the new health care law, and uncertainty in the lending community posed by the financial reform bill.

In addition, concluding pending trade agreements with Colombia, Panama and South Korea would open up foreign markets for U.S. businesses, including small businesses.