Fair and Equitable Tax Treatment | NAWBO

NAWBO Advocacy

Advocacy

Fair and Equitable Tax Treatment

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NAWBO's Position

NAWBO supports fair and equitable tax policy for large and small businesses that fosters the economic growth of women-owned and other small businesses. Legislation should be enacted to ensure tax equity and basic fairness for all forms of small business organizations. The privilege of deducting legitimate business expenses should no longer be based upon the entity chosen to operate the business.

Secondary Positions

  • Business meals and entertainment: Small businesses typically rely on close personal relationships and customer service to compete for sales. Thus, small business expenditures for meals and entertainment are an important part of the marketing effort. NAWBO supports legislation that provides small business with relief in this area. An immediate small business tax deduction for 100 percent of the meals and entertainment expenses (with an annual cap of $10,000) is optimal.
  • Fringe benefits: NAWBO supports the position that, if the payments of all fringe benefits are deductions to the C Corporation and exclusions from the taxable compensation of the C Corp owner-employee, then all such benefits should be excluded from the income of the non-C Corp owner as well.
  • Home office deductions: The current home office deduction is difficult to qualify for in terms of space, use of the home, and activities conducted there. Also, the calculation of the amount of the deduction is time consuming and complex. NAWBO supports the greater of a standard home office deduction, allowing home-based small business owners to deduct the costs of office, storage, studio, and retail space in their homes, regardless of whether customers physically visit or revenue is produced there.
  • Estate (death) tax: The “death” tax creates a disincentive to expand a business, create jobs, and invest in capital equipment. Further, the estate tax is a form of double taxation since profits and earnings have already been taxed once when income taxes were paid. NAWBO supports estate tax reform for family-owned and small businesses and encourages Congress to address the sunset provisions of The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) to remove the uncertainty of estate planning. The sunset provisions of EGTERRA would, as of 2010, put the tax policies back into place that were present before EGTERRA was passed in 2001.

Relevant Facts

  • 86% of NAWBO members in a 2010 NAWBO issues survey consider business tax issues to be very or extremely important.
  • President Obama’s 2010 Jobs Plan proposes a $5,000 tax credit for new hires and a payroll tax reimbursement for raises.
  • Advertising campaigns are 100 percent deductible. However, business meals and entertainment frequently used by small businesses as a marketing tool in place of expensive advertising are only 50 percent deductible.
  • According to the Small Business Administration Office of Advocacy, compliance with tax laws is about 67% more difficult for small businesses. Much of that difficulty is due to the fact that the majority of small businesses are run from the home and receiving tax deductions for a home office can be complicated.
  • In 2006, a survey by the National Federation of Independent Business Research Foundation found that 75% of respondents thought they might be eligible for the home office tax deduction. However, a mere 15% were knowledgeable as to how to receive the deduction.
  • The sunset provisions of EGTRRA would increase the capital gains tax from 8% back to 10%, where it was before 2001. They would also increase income tax rates to their previous level prior to 2001.
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