Obama administration charts map to help small cos

3 min read ·


NEW YORK (AP) — The Obama administration outlined a series of steps Wednesday aimed at helping small businesses owners improve their cash flow and to make it easier for them to get loans.

Some of the announcements repeated plans that were released earlier.

President Obama will ask Congress to allow small businesses to deduct $250,000 in equipment purchases for 2013, said Gene Sperling, head of the National Economic Council, during a telephone news conference. The equipment deduction, named the Section 179 deduction for a provision of the federal tax code, was expected to drop to $25,000 next year. The administration also will ask Congress to expand what's called bonus depreciation, which allows all businesses to deduct 100 percent of equipment costs. That request covers 2012.

The Section 179 deduction allows small businesses to deduct up-front the cost of certain kinds of equipment rather than depreciate them over a number of years. Manufacturing machines, vehicles, computers, office furniture, store shelving and medical diagnostic equipment are examples of equipment that fall under the Section 179 deduction.

Bonus depreciation, available to companies of all sizes, also allows an up-front deduction. If a small business has used up the Section 179 deduction, it can then use bonus depreciation to deduct equipment costs. Depreciation also can be used for equipment that doesn't qualify for the Section 179 deduction, such as heating and air conditioning units.

The tax breaks "clearly lower the tax costs for investments made by smaller companies," said Dorothy Coleman, vice president for tax and domestic economic policy with the National Association of Manufacturers. "There usually are jobs created that are connected to them."

The president also has signed an executive order that accelerates payments to federal subcontractors, said Jeffrey Zients, acting head of the Office of Management and Budget. Last year, the government established a policy under which contractors would be paid within 15 days, he said. The policy is being expanded to include subcontractors, he said.

"We've heard from small businesses around the country that it's helping them to improve cash flow," he said.

The proposed extension of the tax breaks and accelerated contract payments will benefit Seesmart Inc., a Simi Valley, Calif.-based company that makes commercial and household lights.

"If we have more time to pay taxes and get quicker payment from the government, we have better cash flow," President Ray Sjolseth said. Seesmart is a direct contractor and a subcontractor for the government, making lamps and fixtures for federal office buildings. The tax breaks will "allow us (to) make some purchases that normally we might not make," he said.

Bob Naboicheck, president of Gold Bond Mattress, of Hartford, Conn, said the tax breaks are encouraging. His company is in the process of buying $20,000 in manufacturing equipment. He said the prospect of a tax break next year was an incentive to consider another purchase.

"If we were on the fence, it absolutely helps us to say, 'let's make that commitment,'" he said.

But not everyone is convinced that the extended tax breaks will make much of a difference to a lot of owners. Many small businesses aren't likely to take advantage of them, said David Selig, a tax attorney in New York whose small business clients include doctors and construction companies.

"Many businesses right now have some degree of uncertainty and they're not making capital purchases," Selig said. Some companies are opting to lease rather than buy equipment, he said.

Groups that advocate for small businesses called the announcements a positive move.

The government also highlighted:

—Plans to ask Congress for a 10 percent tax credit on any wage increases in 2012 from 2011 levels.

—The reduction of paperwork on Small Business Administration loans including its disaster loans.

—An increase in the maximum loan amount under the SBA's Small Loan Advantage Program to $350,000 from $250,000. The program is designed to encourage banks to make smaller loans quickly.