career

Small business gets stimulus breaks

Highlights
  • Breaks allow small businesses to cut 2009 tax bill.
  • SBA incentives aim to boost lending to businesses.
  • Questions raised about likely effectiveness of incentives.

The 2009 American Recovery and Reinvestment Act contains measures to aid small businesses, which employ about half the nation's private-sector workforce, according to the Small Business Administration.

However, some business advocates question whether the aid is enough to make a substantial difference in entrepreneurs' fortunes.

"There is something in the stimulus bill for small business, but it's targeted and temporary," says Karen Kerrigan, president of the Small Business and Entrepreneurship Council. "That doesn't help the broad swath of business which needs to be helped to get the economy going again."

Tax breaks and provisions to spark bank loans guaranteed by the SBA make up most of the stimulus package's small business assistance.

Some increased government spending -- such as the billions of dollars devoted to infrastructure improvement -- also is likely to help small businesses, according to Molly Brogan, vice president of public affairs for the National Small Business Association.

"At some point, some of that will flow to small businesses," Brogan says. "Someone will need to do construction on things like bridges, and we hope that will be small businesses. There will be a trickledown effect, though it may take a while."

Small business tax breaks

The stimulus legislation offers a slew of tax breaks for small businesses during 2009.

For example, it extends a provision allowing businesses to expense up to $250,000 of new capital equipment immediately rather than over time through depreciation. The $250,000 amount originally was established for 2008, nearly doubling the amount from 2007. The new amount now applies to all of 2009 as well.

The expensing provision will help some small businesses trim 2009 taxes, but the effect will be limited, says Bill Rys, tax counsel for the National Federation of Independent Business.

"Capital expenditures are slowing down now because with the economy so slow, there is no reason to expand," he says. "And most businesses don't have the cash to spend on it anyway."

The package also extends, through the end of 2009, a 50 percent bonus depreciation on some capital expenses that had been slated to expire after last year.

Businesses with annual revenue, based on a three-year average, of up to $15 million can now take their 2008 losses and carry them back over a period of five years. This allows businesses to reduce their tax burden in those earlier years. Previously, businesses could carry back their losses only two years.

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Of course, the loss carry-back stipulation will help only businesses that have been profitable in the past.

"It's going to be more medium-size businesses than mom-and-pop businesses," Rys says. "If 'mom and pops' are having a loss, they're probably closing their doors."

Tax breaks for small business
The 2009 stimulus package offers several tax breaks for small businesses, including:
  • Extends a provision allowing businesses to expense up to $250,000 of new capital equipment immediately.
  • Extends through the end of 2009 a 50 percent bonus depreciation on some capital expenses.
  • Allows some businesses to take their 2008 losses and carry them back over a period of five years.
  • Reduces estimated tax bills for small business owners.

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