More News

The new federal economic stimulus package is expected to provide relief for Maryland's small businesses through tax cuts and incentives that will help pull the country out of the recession, spokesmen for business groups said this week.

Besides cutting the income taxes of 95 percent of working families, the American Recovery and Reinvestment Act provides tax breaks to many small-business owners, said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce.

The stimulus package had received the support from a broad coalition ranging from the U.S. Chamber of Commerce to unions, two groups usually on opposite sides on issues, she said.

"That's recognition of the fact that businesses and unions and citizens all realize the country has the most difficult, complex economic problems that we've had in decades," Snyder said.

While the spending on infrastructure projects has received considerable attention and will help put people back to work, the tax cuts for small businesses also will help with the economic recovery.

"It seemed to me what the president was doing on [last week] was laying out a multifaceted plan to lead the country out of the recession and into an even stronger economic position to lead the world," Snyder said of President Obama's speech to Congress Feb. 24.

"His plan includes tax cuts that will help almost everybody who has a job in the United States and small-business incentives for growing the economy with green jobs," she said. "America's entrepreneurial spirit that he referred to is going to lead us to high-paying jobs for creating new processes that will not just help the economy but help with the environmental issues we're dealing with around the globe."

Many of Maryland's small-business owners fall under the income tax cut for couples who earn $250,000 or less, Snyder said.

"We have so many businesses in Maryland that are sole proprietors and LLCs and they don't pay corporate income tax — they're paying income taxes as earnings on their personal income," she said.

The stimulus package includes tax credits for companies that hire recently discharged military veterans and young adults who have finished school.

There also is an extension of the bonus depreciation through 2009, said Rep. Christopher Van Hollen Jr. (D-Dist. 8) of Kensington. Businesses will be able to write off 50 percent of their depreciable capital expenditures or have the option of using research and development credits or alternative minimum tax credits up to $30 million per company in lieu of the bonus depreciation, Van Hollen said.

The federal stimulus package is projected to help save or create 66,000 jobs in the state, Van Hollen said.

Businesses also will be able to write off $250,000 in capital expenditures for this year, which could help some businesses and is intended to encourage companies to spend money and make investments, but it might not be as useful as intended, said Bill Rys, a tax counsel with the National Federation of Independent Business.

"It's a good thing for some businesses and we supported that deduction," Rys said. "Our biggest concern is how many businesses will be able to take advantage of it in the current climate."

However, businesses may not have the money now to make a capital expenditure or may not be able to get a loan for one with credit markets so tight now, Rys said.

Small businesses with $15 million or less in gross receipts also will be able to apply any losses from this year to any taxes paid in the past five years, which could give them a tax refund.

That extended net operating loss provision extends the current law, which allows for a two-year carry-back, to a five-year carry-back, and also will help some businesses, but not all, Rys said.

It will likely help some businesses with short-term cash flow problems, he said.

The federal stimulus also eliminates some of the Small Business Administration fees, which will help businesses that apply for SBA loans, Rys said.

"The business environment has really slowed," Rys said. "Businesses have got to figure out how to cut costs and I don't know how much this bill will help directly with that. Some of this will help get people back to work and get people money to spend and start the economy back up."

But sales figures for many small businesses are at their lowest levels in decades.

"Until that picks up, many businesses are going to reduce plans for hiring," Rys said.

Budget help for SBA

Obama's fiscal 2010 budget proposal, announced Thursday, authorizes the SBA to support loan guarantees of $28 billion to small businesses. It also includes a roughly $700 million appropriation for the agency.

The spending would be in addition to the $730 million funding provided for SBA credit programs in the stimulus package, the agency said. The package allows the SBA to raise guarantee percentages on some SBA loans to 90 percent, temporarily reduce fees on SBA-backed loans, expand funding for microloans and raise the maximum size of SBA-guaranteed surety bonds.

This report originally appeared in The Business Gazette.