Stimulus Law Aids Small Business, but Benefits Are Not Easy to Find
THE $787 billion recovery package that President Obama signed into law on Tuesday has a little something for most small-business owners, though some complained that the law’s benefits were not easy to figure out.
“Who has time to read it?” said Michael J. Fredrich, president of MCM Composites, a maker of highly engineered composite molding parts in Manitowoc, Wis.
Ethan Siegel, chief executive of Orb Audio, a maker of home theater speakers and systems, said his initial impression was that “there is nothing in here for me as a small-business owner.”
But Mr. Siegel said that as he started to dig deeper, he found a provision that would increase loan guarantees for Small Business Administration lenders. That, he said, would make it easier for Orb, whose main office is in New York, to secure a line of credit. “With a line of credit we can do a lot more with the same amount of capital,” he said, “which is exactly the purpose of the stimulus package.”
Several other items also caught his eye, including one that offers a tax credit for businesses that hire disadvantaged workers like veterans and “disconnected youth,” those who are not in school or working. That credit could be a tipping point between hiring and not, he said. “This is especially true since we build the speakers in the U.S.A., and the people with production skills can fall into these groups.”
Business owners and their tax advisers are finding that a little detective work is needed to reap the full benefits of the law, which includes tax relief for businesses and individuals, as well as spending provisions.
Todd Flemming, chief executive of the Advantor Systems Corporation, a military contractor, for example, said he found spending allocated to military construction. His company, based in Orlando, Fla., makes and installs high-security systems at military installations worldwide. “That’s spending that would be stimulative for us,” he said.
Not everyone will be served directly, said Leonard Steinberg, who owns Steinberg Enterprises, a tax, financial and business advisory company in West Windsor, N.J. His clients, including mom and pop retailers, limited liability companies and S corporations — corporations that elect to have their income pass through to the shareholders — “won’t see the benefits of the stimulus,” he said.
Even so, tax specialists say, those companies may be aided indirectly by the tax relief for individuals, which will give workers more money to spend and will help certain taxpayers avoid the alternative minimum tax.
At the same time, some of the tax provisions for businesses, while they mean well, may not help in the way intended, said Barbara Weltman, a tax specialist and author of “J. K. Lasser’s Small Business Taxes 2009.”
She cited one provision that allows businesses to deduct up to $250,000 for capital investments. “That sounds great,” Ms. Weltman said, “but you can’t benefit from it unless you are profitable.” She added that many businesses were having trouble securing financing, but, if that should free up, the incentive was there.
Another provision gives companies a 50 percent bonus deduction on capital investments made in 2009 that normally would be deducted over many years. “Again, that only benefits those who are making capital investments,” Ms. Weltman said. “So many people are struggling to pay bills that they cannot go out and make purchases.”
One tax measure she likes is the ability of companies to use losses from 2008 to offset profits in earlier years — any full year that is more than two but less than six years ago — and obtain an immediate refund. It is only for 2008, she pointed out, and for companies with annual revenue of up to $15 million.
Mr. Fredrich said he had looked for a silver lining in the law but had yet to find one. “We certainly will have a loss to carry back, but we could do that before the bill passed,” he said. “It does not even move the needle. If you have no revenue, nothing else matters.”
He said he had hoped in vain for a reduction in the highest personal tax rate, a change that would have allowed him to put the money back into his business.
Now that the bill has been signed, he said he had not had time to read all 1,000 pages, but he was not optimistic about finding help for his company, which had its last production day of the week on Wednesday.
Weekly orders at MCM used to generate $100,000 to $180,000, Mr. Fredrich said. Last week, the company took in $32,000, and this week $19,000. “We expect it to be worse,” he said. “You just have to gut it out.”
This article has been revised to reflect the following correction:
Correction: February 21, 2009
The Practically Speaking column on Friday, about benefits for small businesses in the federal stimulus package, described incorrectly a provision that gives companies a 50 percent bonus deduction on capital
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