The U.S. House of Representatives approved H.R. 5297, the Small Business Lending Fund Act of 2010, by a vote of 237-187 Thursday, setting the stage for President Obama to sign the legislation.  The legislation provides tax relief for small businesses and incentives and federal grants to spur lending to and exports by small businesses.


The legislation is fully offset and will not add to the deficit.  With passage by the House, H.R. 5297 will now proceed to President Obama’s desk for signature into law. The U.S. Senate approved the legislation on Sept. 16.
 
The bill is supported by the National Retail Federation, National Restaurant Association, Hispanic Chamber of Commerce, Independent Community Bankers of America, American Bankers Association, Financial Services Roundtable and International Franchise Association, among other organizations.

 

“The U.S. apparel and footwear industry applauds the House and Senate for quickly approving this bill because of its direct benefit to small and medium sized businesses,” said Kevin M. Burke, President and CEO of the American Apparel & Footwear Association. “By voting to expand access to credit for small and medium sized businesses at this critical time, this legislation equips businesses, and the millions of U.S. workers they employ, with a key tool as they continue to face a difficult economic environment. I urge President Obama to sign this bill into law as soon as possible.”

A summary of key provisions follows:


Expand Small Businesses Access to Capital


  • Creates a $30 billion Small Business Lending Fund to provide community banks with capital to increase small business lending.  The fund is limited to the smallest banks, those holding $10 billion or less in assets, with key performance-based standards to incentivize those lenders that extend new credit to small businesses (decreasing the dividend rate banks pay as they increase small business lending).
  • Invests $1.5 billion in grants to support $15 billion in new small business lending through already successful state programs.
  • Expands access to and lowers costs for small business to access SBA loans and increases Small Business Administration (SBA) loan limits:

    • Continues the small business lending program that eliminates fees charged for SBA loans [7(a) and 504 loans] and increases the government guarantees on 7(a) loans from 75 percent to 90 percent through the end of the year.  Since its creation in spring 2009, this has supported over $26 billion in small business lending, which has helped to create or retain over 650,000 jobs. 
    • Raises the cap on small business loans to increase lending by $5 billion in the first year, increasing the 7(a) and 504 loan limits from $2 million to $5 million, 504 loan limits for manufacturing firms are increased to $5.5 million, Microloan limits are increased from $35,000 to $50,000 and SBA Express working capital loans are increased from $250,000 to $1 million.

  • Spurs investors by giving 100% exclusion from capital gains taxes on small business investments.
  • Reduces small business taxes by allowing them to carry back general business tax credits to offset their taxes from the previous five years.  Small businesses will also be able to count the general business credits against the Alternative Minimum Tax (AMT), freeing up capital for expansion and job growth.  

Spur Small Businesses Investments & Growth



  • Doubles small business expensing (to $500,000, phasing out at $2 million) — for immediate write offs of capital investments, such as equipment and machinery, in 2010 and 2011.  Also expands purchases qualifying for expensing to include certain types of real property, such as leasehold, retail and restaurant improvements.
  • Extends Bonus Depreciation – allowing businesses to immediately write off 50 percent of the cost of new equipment investments in 2010.

Promote Entrepreneurship and Small Business Exports



  • Doubles to $10,000 the tax deduction for start-up expenditures for entrepreneurs looking to launch a new venture.
  • Creates a variety of new tools to help small businesses gain international market access and export goods (at USTR, SBA, and Commerce), including a new State Export Promotion Grant Program (STEP), which will leverage more than $1 billion in exports.

Promote Fairness in Competition



  • Improves tax fairness by preventing small businesses from incurring large tax penalties aimed at large corporations and wealthy individuals investing in tax shelters. (Section 6707A)
  • Removes onerous requirements that complicate the ability to deduct costs of cell phone use as a regular business expense.
  • Allows self-employed individuals to deduct health insurance costs in paying the self-employment tax in 2010.
  • Removes the red tape and closes loopholes that too often put government contracts into the hands of multinational corporations, instead of Main Street businesses – such as periodic reviews of small business size standards in government contracts and requiring prompt payments to small business subcontractors from large businesses with government contracts.
  • Ensures that no business contracting program – HUBZone, 8(a), and Service-Disabled Veterans and Women Owned Businesses – takes priority over another in competing for federal contracts.

Fully Paid for/Closing Tax Loopholes & Tax Gap



  • Takes another in series of steps to close tax loopholes that promote corporations shipping jobs overseas — dealing with the source rules on guarantee fees for indebtedness.
  • Reduces the tax gap by requiring information reporting for rental property expense payments, increasing penalties for failure to file information returns, and tightening the process for going after federal contractors who have not paid their federal taxes.