Business Lifesavers
Whether you are a couple providing for a family of five, the head of a major conglomerate or an executive at a nonprofit, making ends meet is probably a part of daily conversation.
Tossing a lifeline to struggling businesses, at least, may be on the way if elected officials follow through on some legislation that currently is being floated.
President Obama's fiscal year 2010 budget calls for a broad five-year net operating loss (NOL) carryback provision for businesses of all sizes. This measure, if approved by Congress, would allow businesses of any size to carryback losses to previously profitable years, therefore, generating necessary funds. Current law generally limits the NOL carryback period to two years.
Julie Riccio, director, government affairs for Sewickley, Pennsylvania-based Printing Industries of America, said the organization supports this measure because it would be a major tool to help companies through the economic downturn. It would allow companies faced with limited access to capital the ability to transform a future tax benefit into cash today.
"A cash infusion, such as this, can help companies of all sizes meet payroll, retain jobs and in some cases, keep doors open," Riccio explained. "It really gives a chance to companies to roll back to a time when they were likely profitable."
In the spring, the American Recovery and Reinvestment Act increased the carryback period to five years, but only for businesses with average gross receipts of $15 million or less. In its current form, the legislation will allow small businesses with large losses in 2008 to benefit from these losses now instead of on future tax returns. This latest measure would apply to all businesses.
The Senate had supported a broader NOL carryback provision, such as this during economic stimulus package negotiations, but was eventually dropped over cost concerns.
Riccio added Congress temporarily extended the carryback from two to five years following the terrorist attacks on Sept. 11 as a means to generate cash for companies.
She also noted Congress will likely not make a move on this until late this year. Nevertheless, many are not optimistic.
"It's very hard to get attention on anything other than healthcare right now," Riccio said. "But this is very much an issue that has bipartisan support and is definitely necessary for many businesses in the printing industry and other industries."
Members of the Senate Finance Committee have introduced NOL legislation and so have members of the House Ways and Means Committee.
Another jolt to businesses would be Congress passing a multi-year extension of the research and development tax credit, which would allow companies to reinvest into their workforce, Riccio stated. The credit rewards companies for incurring expenses in the development of new and/or improved products and processes.
Legislation, currently on the table, would extend the credit, which originated in 1985, through 2010. It is set to expire Dec. 31, 2009. This credit is only available for research and development conducted in the United States, and applies only to the portion of a business taxpayer's eligible expenses, known as qualified research expenditures. Qualified expenses have included wages for in-house research and development activities; supplies linked to qualified research activities; and basic research payments made to nonprofits or similar institutions.
Printing Industries of America supports extending the credit, reasoning a permanent research and development credit would enhance its incentive value because companies could count on the credit throughout the term of their multi-year projects. Typically, if there is any uncertainty regarding the availability of the credit, companies discount its value.
"This uncertainty has the counterproductive effect of reducing the credit's benefit to the economy. Thus, a long-term and strengthened R & D tax credit is necessary to allow companies to fully change their investment behavior, especially during the current economic downturn," according to the organization.
Riccio explained this credit is especially significant during an economic downturn since many printers and suppliers depend on the ideas that come as result of the tax credit.
"It's so key for jobs in the United States," she said. "No jobs, suppliers don't get what they need. It affects innovation and productivity. This credit is necessary in order for companies to compete with international companies. It levels the playing field."
- Companies:
- Printing Industries of America, Inc.
- People:
- Julie Riccio
- Obama