Small businesses need tax extenders now

While Congress is still mapping out its year-end agenda, small and medium-sized businesses across the country continue to plan projects well into the New Year. Yet, these small and medium-sized businesses are currently left hanging as to whether Congress will act on tax extenders, and ultimately, what their tax liability will be for the projects placed into service this year and planned for next year.   

We urge our friends and colleagues to finish this year’s legislative business on tax extenders.  It’s a win-win for Congress and businesses – especially small and medium-sized companies where operating capital is scarce in this economy.  By doing tax extenders now, representatives and senators will have a fresh start in the new Congress, and businesses will have certainty regarding their tax liability for the coming tax filing season and for planning projects into the future.   

{mosads}Waiting until next year to act on tax extenders will be a real blow to the much-needed cash flow for tens of thousands of small and medium-sized businesses and will hurt job creation.  Further, if Congress fails to act before the end of the year, it will mean a significant disruption of the filing season – which will cause a hardship not only to small and medium-sized business owners but also millions of low-income working Americans who are looking to file early and receive their tax benefits.   

We think it especially important for Congress to act on extenders given that the proposed reforms contained in the Senate bill provide a major benefit to thousands of small and medium-sized innovative businesses across the country.  The Finance Committee passed commonsense changes to the Research and Development Tax Credit (such as allowing the R&D tax credit to count against AMT and making the R&D tax credit available for startups) which will make the credit much more available to all businesses – not just the Fortune 500.   

In addition, passing the tax extenders bill will send a strong message from Congress of its support for that engine of job creation – the building sector.  One area of nascent growth is encouraging the private and public sectors to build energy-efficient buildings.  Commercial buildings are some of the biggest consumers of energy, and this bipartisan provision included in the tax extenders bill, also known as the Energy Efficient Commercial Building Deduction, has fueled a movement to promote energy savings that is both technology and energy-neutral. 

The Energy Efficient Commercial Building Deduction provides an immediate depreciation deduction for and reduces high up-front costs associated with energy-efficient building design and construction for commercial buildings. Either the owner of the building may qualify or the government entity that owns the building, such as a middle school, may allocate the deduction to the architect, engineer or contractor responsible for designing the energy saving elements of the property.  The building envelope, the HVAC system and the lighting are eligible as well as new construction and renovations.  

Many small and medium-sized architect, engineer and construction businesses have benefitted significantly from this deduction – keeping their doors open or being able to make new hires.  Many of the firms in these industries are still trying to rebound from the economic downturn. For state and local governments, energy efficiency results in significant cost savings, which translates into taxpayer relief, especially since state and local governments spend approximately $10 billion a year on energy according to the EPA.  

However, this deduction, like so many of the tax extender provisions that expired on December 31, 2013, awaits congressional action to be extended. We have heard from several architectural, engineering and construction firms who are waiting to see if Congress will extend this deduction, which will in return generate much-needed operating capital for projects planned for 2015.  

While we are hopeful Congress will act before the end of the year, pushing tax extenders off to next year creates a sense of uncertainty within the business community that Congress will not act at all, which could possibly stymie further efforts of economic expansion and innovation. This seems counterproductive to the original intent of providing tax relief to spur economic expansion and growth, which our country desperately needs to remain competitive.   

Many credible economists have opined that the private economy has been unnecessarily hindered by policy uncertainty. It is not unreasonable for a business owner who may be considering a business investment to interpret a delay in extending the provision as cause for concern and hesitation. That’s exactly the outcome we don’t want. We want to build confidence in business investment and innovation and Congress can boost that confidence by passing these provisions now.  

Passing tax extenders now – good for the economy and good for Congress.   

Ramstad served in the House from 1991 to 2009. He is currently a senior adviser with alliantgroup. Lazio served in the House from 1993 to 2001. He is currently a director with alliantgroup.