09/24/10 Thursday, Congressman Joe Donnelly supported The Small Business Jobs and Credit Act of 2010, H.R. 5297, which contained two Donnelly-backed provisions to help north central Indiana businesses. First, The Small Business Jobs and Credit Act includes a common-sense tax fix to ensure that small businesses are not overly penalized due to simple filing errors, an issue that Donnelly led the House in resolving after a Hoosier small business owner brought the issue to his attention. The bill also included an extension of the Small Business Administration (SBA)’s Dealer Floor Plan Program, which Donnelly first called for through bipartisan legislation he introduced in July 2010.
Promoting Small Business Tax Fairness
The bill passed today makes 6707A tax penalties fair, an issue championed by Congressman Donnelly since a 2nd District businessman contacted Donnelly about a complicated tax penalty that threatened to bankrupt his business with excessive fines. The owner of an asphalt paving company employing four people was assessed $600,000 in penalties for unknowingly failing to alert the IRS of a transaction that resulted in a total tax savings of $38,000 over two years. While he has since fully paid his back taxes to the IRS, these mandatory penalties, which the IRS is required by law to enforce without exception, would now bankrupt him for a simple filing error.
In response, Congressman Donnelly was the first in the House to put forward a solution this Congress. Congressman Donnelly introduced H.R. 2143 in the spring of 2009 to make 6707A penalties proportionate and fair. His bill earned the support of the U.S. Chamber of Commerce, the National Federation of Independent Businesses, the Small Business Council of America, and 14 bipartisan co-sponsors. After introducing his legislation, he worked with the House Ways and Means Committee to prioritize the issue and gain support for a fix based on Donnelly’s legislation. Congressman Donnelly also worked with Senator Evan Bayh to ensure that this fix was a priority in the Senate.
“This started out as a casework issue—someone came to me for help on a very complicated, very unfair, and also largely unknown problem,” said Donnelly. “Even though it took an Act of Congress to fix, I’m proud to have led this effort on behalf of a Hoosier small business. With the legislation passed today, we’ve permanently fixed a tax penalty that is inherently unfair to small businesses that make honest mistakes. Now my constituent and others like him will be able to stay in business and keep Americans on the job.”
“When Congress passed tough new penalties on corporate tax evaders in 2004, some small businesses were unintentionally caught in the crossfire,” said Bayh. “One Hoosier small business owner who made an honest mistake wound up owing the IRS hundreds of thousands of dollars in penalties. This isn’t what Congress had in mind. The common sense legislation that Congressman Donnelly and I worked to get through the House and Senate will protect middle-class Hoosiers and other small business owners from being forced out of business by the IRS simply because they made a filing error.”
The legislation passed today would make IRS Section 6707A penalties proportional to the amount of tax benefit accrued as a result of the activity “listed” by the IRS. This will bring 6707A penalties more in line with traditional IRS penalty structures. Specifically, the penalty would be 75 percent of the tax benefit received, with a minimum penalty of $10,000 for corporations and $5,000 for individuals, and a maximum penalty of $200,000 for corporations and $100,000 for individuals.
To learn more about the 6707A IRS penalty, click here.
Extending SBA Floor Plan Financing
Additionally, a provision similar to Donnelly’s bill, The Dealer Floor Plan Program Extension and Improvement Act of 2010, was included in The Small Business Jobs and Credit Act. The U.S. Small Business Administration (SBA)’s Dealer Floor Plan (DFP) Financing Pilot Program was created in July 2009 to provide loan guarantees through SBA lenders for titleable assets such as autos, RVs, boats, and trailers through the SBA’s 7(a) loan program.
Previous to this legislation, the DFP Pilot Program was set to expire on September 30, 2010. Congressmen Donnelly and Fred Upton introduced H.R. 5734, The Dealer Floor Plan Program Extension and Improvement Act, in July 2010 that would extend the DFP program for 5 years. The legislation passed today renews the DFP program for another 3 years and increases the loan limits to $5 million.
“I’ve heard from dealers, manufacturers, and lenders back home that while the Dealer Floor Plan Financing Pilot Program is well-intentioned, it needs to be extended and the government guarantee needs to be raised,” said Donnelly. “I’m pleased that soon, some of the changes the RV, auto, and marine industries and lenders have identified as necessary to increase participation in the program will become law.”
To learn more about Donnelly’s efforts to extend the DFP program, click here.
The Small Business Jobs and Credit Act passed the House with a vote of 237 to 187 and is now sent to the president for his signature.