Senators who sit on two of the chamber’s committees hosted a roundtable on June 7th that focused on reducing complexity in the tax code for small businesses.
“The financial burden of increased taxes and compliance costs resulting from a complicated tax system and regulatory environment make it hard for small businesses to make sound financial decisions,” said Senator Mike Crapo (R-Idaho).
Senators who participated in the roundtable sit on either the chamber’s Finance Committee or Small Business Committee.
Crapo is the Ranking Member of the Senate Finance Committee.
“According to the latest National Federation of Independent Business (NFIB) annual tax survey, nearly two-thirds of small business owners reported that the administrative burden of the federal tax code is significant,” the Senator said.
Despite complexity being a problem, roundtable participants who weren’t lawmakers seemed more interested in lowering their tax bill than reducing compliance burdens, according to their written testimony.
Alicia Chapman, owner and CEO of Willamette Technical Fabricators, a metal manufacturer, participated in today’s event and would like to expense her R&D outlays.
“Willamette Technical Fabricators has conducted substantial research and development throughout our startup years,” she said, adding “We are already struggling with the updated requirement for the first time in 70 years to amortize these investments over time, instead of being able to immediately deduct our R&D expenses. This is a stark contrast to the 200% R&D deduction provided to our Chinese competitors by their own government.”
Legislation could be introduced as soon as this week that would allow R&D costs to be expensed. However, it is unclear when or if both chambers of Congress will act on this bill.
Stephanie Camarillo, owner of the cleaning business Molly Maid of Boise and the Treasure Valley, urged lawmakers to extend the pass-thru deduction (Section 199A) beyond its 2025 current expiration date.
The deduction allowed Camarillo to pay her workers larger salaries.
“Tax relief saves jobs and elevates working families,” she said, adding, “The Small Business Deduction, also known as Section 199A, has made a difference to our business.”
It is unclear if the upcoming tax bill will extend Section 199A. The provisions is currently scheduled to expire at the end of 2025.
Michael Norris, CEO and President of the software company Warrant Technologies LLC, seconded the calls to keep tax breaks on the books.
He warned that allowing 199A to expire and not letting R&D costs to be expensed would be detrimental to small businesses.
“If these tax [positions] persist, the impact on small businesses, like Warrant Technologies, could be devastating,” Norris said, adding that Congress should fix these tax issues this year.
“Fixing the tax burdens that start this year is in the interest of every small business, our Nation’s economic growth, and the ability of our small business to continue thrive and pursue research and development efforts,” he said.
Addressing these business tax issues will likely depend on lawmakers supporting an expansion of the Child Tax Credit.
Several lawmakers have threatened to withhold their support for these business tax breaks if the Child Tax Credit is not extended. This threat has stopped Congress from modifying these business tax breaks for over a year. It is not clear how long this impasse will last.
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