House Small Business Committee
Bloomberg BNA: House Republican Challenges IRS on Complicated ACA Forms
October 8, 2014
Small businesses and their tax preparers face the daunting tasks of understanding and completing new tax forms to comply with provisions of the Affordable Care Act, the chairman of the House Small Business Committee said.
“Most small businesses do not have tax advisors, attorneys or accountants on their staff. They must rely on outside assistance to navigate these complicated tax rules,” Chairman Sam Graves (R-Mo.) said in an Oct. 8 letter to IRS Commissioner John Koskinen.
Graves asked Koskinen to respond by Oct. 22 on whether the Internal Revenue Service is working with the Department of Health and Human Services to educate small business owners about the forms and issues, and what the IRS is doing to listen to the concerns of owners and tax preparers.
Tax preparers have told the committee the IRS hasn't issued guidance on the due-diligence requirement they will face, he said.
In his letter, Graves referred to Form 8965, Health Coverage Exemptions, which is used to claim an exemption from the individual health insurance mandate. A draft of the form has “15 pages of complicated forms, instructions and worksheets,” which “millions of small business owners may be forced to rely on to determine if they are entitled to an exemption and to claim it,” he said.
Graves also referred to Form 8962, Premium Tax Credit (PTC), which involves 12 pages of instructions and worksheets. The form is used to calculate the tax credit amount for qualified health plans purchased through a health insurance marketplace.
The Congressional Budget Office estimates that the individual mandate penalty may apply to 30 million people, of which 23 million may qualify for an exemption, Graves said.
The forms mention exemptions but “do not explain when taxpayers must apply for them, when or how that decision will be communicated, what appeals process will be used, and how long the exemption will be effective,” he wrote.
The IRS released draft instructions for Forms 8962 and 8965 in September (183 DTR G-2, 9/22/14).
Separately, the IRS reminded small employers about the value of the health care tax credit that begins in 2014.
“The maximum credit is 50 percent of premiums paid for small business employers, and 35 percent of premiums paid for tax-exempt small employers, such as charities,” the IRS said in an e-newsletter released Oct. 8.
The e-newsletter explains eligibility requirements and benefits and provides links to resources for more information.
Bloomberg BNA: House Republican Challenges IRS on Complicated ACA Forms
By Brett Fergusen
October 8, 2014
Oct. 8 (BNA) - Draft forms and instructions for compliance with the Affordable Care Act are long and confusing, presenting tax preparers for small businesses with daunting new tasks, the chairman of the House Small Business Committee told IRS Commissioner John Koskinen.
Rep. Sam Graves (R-Mo.) asked for an accounting by Oct. 22 of what the tax agency is doing to help. In an Oct. 8 letter, Graves referred to Internal Revenue Service Form 8965 for claiming an exemption from the individual health insurance mandate. A draft of the form has “15 pages of complicated forms, instructions and worksheets,” which “millions of small business owners may be forced to rely on,” he said. Graves also referred to Form 8962 for claiming a premium tax credit, which involves 12 pages of worksheets and instructions.
Tax preparers have told the committee that the IRS hasn't issued guidance on the due diligence requirement they will face, according to Graves, who asked Koskinen whether the IRS was working with the Department of Health and Human Services to educate small business owners about the forms and issues, and what the IRS is doing to listen to the concerns.
“In mid-September, the Internal Revenue Service (IRS) published numerous draft forms and instructions for compliance with the tax provisions of the Affordable Care Act. These documents are lengthy, complex and confusing to tax preparers who serve America’s small businesses,” the letter states.
The letter from Chairman Graves specifically inquires about two complicated and lengthy forms that millions of small businesses may encounter for the first time in tax preparations. Form 8965 is required for those claiming an exemption, and includes 15 pages of forms, instructions and worksheets.
“As you know, the Congressional Budget Office estimated that 30 million people could be subject to the individual mandate penalty, and 23 million of them may qualify for an exemption. This means that millions of small business owners may be forced to rely on these forms and instructions to determine whether they are entitled to an exemption and to claim it,” Graves states in the letter. “In addition, we are told that the Department of Health and Human Services (HHS) will issue some or all of the hardship exemptions. The forms mention those exemptions and that HHS or the exchanges will issue them, but do not explain when taxpayers must apply for them, when or how that decision will be communicated, what appeals process will be used, and how long the exemption will be effective.”
Similarly, Form 8962, which is required for taxpayers who wish to claim a premium tax credit, is 12 pages of forms, worksheets and instructions.
Graves concluded, “Most small businesses do not have tax advisors, attorneys or accountants on their staff. They must rely on outside assistance to navigate these complicated tax rules. On all of the above issues, is the IRS working with HHS to educate small business owners about these new forms and issues? What steps has the IRS undertaken to listen to the concerns of small business owners and their tax preparers?”
In his letter, Graves requests a response by October 22, 2014, to allow small businesses the necessary time for tax preparations. The full Graves letter to the IRS is available HERE.
WASHINGTON, DC – The House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement regarding the Small Business Administration (SBA) Office of Advocacy’s new position that the Environmental Protection Agency (EPA) should withdraw their Waters of the U.S. rule:
“The SBA Office of Advocacy is saying what our Committee and small businesses all across America have been saying since April – the EPA Waters of the U.S. Rule is an unnecessary regulatory overreach and will have costly economic consequences,” said Chairman Graves. “I applaud the SBA Office of Advocacy for speaking up for small businesses, putting it at odds with another agency in the Executive Branch. They are 100 percent correct in their analysis of this rule-making process – the Waters of the U.S. Rule hasn’t been properly analyzed and it was created without legitimate small business input. I continue to maintain that the EPA must withdraw this rule.”
In April, the EPA and the Army Corps of Engineers proposed a rule that would redefine “waters of the United States” under the Clean Water Act. The Small Business Committee held hearings on the economic impact of this rule and the EPA rulemaking process on May 29, 2014 and July 30, 2014. In May, Graves and members of the Committee also wrote to EPA Administrator Gina McCarthy and Assistant Secretary of the Army Jo-Ellen Darcy, who oversees the U.S. Army Corps of Engineers, to urge withdrawal of the rule. Among their concerns, the EPA and Corps of Engineers did not adequately assess the impact of their proposed rule on small businesses and the EPA failed to conduct a Small Business Advocacy Review panel, as required by the Regulatory Flexibility Act. In September, the House passed the Waters of the United States Regulatory Overreach Protection Act (HR 5078), which would prohibit the EPA and the Army Corps of Engineers from finalizing their proposed rule.
CQ Roll Call: CMS: SBA Calls for Withdrawal of Water Rule
October 1, 2014
By Philip Brasher
The Small Business Administration said Wednesday that it is “extremely concerned” about the potential economic impact of a proposed Clean Water Act rule and called on the EPA and Army Corps of Engineers to withdraw it.
In a letter to those agencies, the SBA’s Office of Advocacy says they improperly analyzed the rule’s impact on agriculture, utilities and other sectors. Contrary to the language in the proposed rule, it would have “direct, significant impacts” on small businesses, the nine-page letter says.
The letter also says the EPA should convene a review panel to consider the rule’s impact on small businesses before proposing a revised version. The rule, issued this spring, would define the tributaries, wetlands and other bodies of water regulated by the law (PL 95-217).
The EPA and corps improperly certified that the rule would not have a significant economic impact on small businesses, in part because the agencies incorrectly compared the rule’s jurisdiction with a previous rule issued in 1986, according to the SBA. The proposed rule should have instead been analyzed in comparison to current practice, the letter says. According to the economic analysis that accompanied the rule, it would increase the area regulated under current practice by 3 percent.
“The 1986 regulation does not represent the current method for determining jurisdiction and has not served that purpose for more than 13 years. Using an obsolete baseline improperly diminishes the effects of this rule,” the letter says.
The letter also argues that the economic analysis cited in the rule itself contradicts the conclusion that the impact on businesses wouldn’t be direct or significant.
The letter echoes many complaints directed at the Obama administration during an intense lobbying campaign by farm groups, developers, mining companies and other interests.
The SBA also posted a fact sheet summarizing its comments.
Earlier this week, the EPA’s 52-member scientific advisory board approved a four-page letter that generally supports the rule but suggests it should be written more broadly in some ways.
House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement about the ongoing problems of the Small Business Health Options Program (SHOP) one year into Obamacare’s troubled operations.
“From the time then-Speaker Pelosi proclaimed Obamacare should be passed ‘so you can find out what’s in it’ to today’s one-year anniversary of this burdensome law’s botched implementation, the administration has wildly over-promised and painfully under-delivered every step of the way. The past year has been littered with problems, including rising costs, cancellation notices and a faulty $2 billion website. Likewise, Obamacare’s Small Business Health Options Program has fallen woefully short of any kind of acceptable standard. To this day, the administration is unable to answer basic questions such as how many are enrolled in the program – the question this Committee has asked repeatedly since January. Instead of simplifying the health insurance process for small businesses, the SHOPs program has created confusion and uncertainty with five delays along the way. Small businesses have paid the price of this inept management. Many questions remain, including this straightforward one: How many small businesses are enrolled?”
During the recent September 18, 2014 hearing of the Small Business Subcommittee on Health and Technology, Chairman Chris Collins (R-NY) specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, yet the administration was still unable to provide the information, despite repeated claims of transparency. Beginning in January, Chairman Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal or state SHOPs, but the requests have gone unanswered. A June 2013 GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, as evidenced by the program’s track record since. The Committee’s first hearing on the SHOPs mismanagement took place in December 2013.
The SHOPs challenges have occurred while small businesses are grappling with rising health insurance costs; in fact, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. And the National Federation of Independent Business found that 64 percent of small business owners paid more per employee for health insurance in 2013 than in 2012.
Bloomberg BNA: CMS Needs to Provide Congress SHOP Data On Enrollments, Rep. Collins Says at Hearing
By Sean Forbes
September 18, 2014
Republican members of a subcommittee of the House Committee on Small Business insisted at a hearing on Affordable Care Act small business exchanges that the administration must provide hard data to Congress in order to have an unbiased discussion about the effectiveness of the exchanges.
Rep. Chris Collins (R-N.Y.), chairman of the Subcommittee on Health and Technology, said that the Small Business Committee sent letters in January and June to the Department of Health and Human Services and the Centers for Medicare and Medicaid Services requesting enrollment figures for the Small Business Health Options Program (SHOP), but the HHS hasn't supplied any data yet.
Collins several times asked Mayra E. Alvarez, director of the state exchange group in the CMS Center for Consumer Information and Insurance Oversight, about whether the information is available and when the Congress can expect to receive the data. Alvarez didn't have a precise date, but promised that, after the CMS collected the data from the state SHOPs, it would give the information to Congress and the public “as soon as it's available.”
“As soon as it's available,” Collins repeated.
The CMS data will take the bias out of the debate over the SHOPs, but until then people “are just talking past each other,” Collins said.
After the Sept. 18 hearing, Collins told Bloomberg BNA that, “I'm not holding my breath” for the data to arrive soon.
The 90-minute hearing was titled Update on the Small Business Health Options Program: Is It Working for Small Businesses?
Fixing the SHOPs
All the members of the subcommittee, Republicans and Democrats, agreed that the SHOPs aren't perfect and are in need of repair, but differed as to their effectiveness.
Ranking Member Janice Hahn (D-Calif.) said that Medicare, enacted in 1965, also wasn't perfect and is still being improved today, “but that doesn't mean it was bad.” The same can be said for the ACA, she said.
Other witnesses differed on how to fix the SHOPs.
Roger Stark, health care policy analyst for the Seattle-based Washington Policy Center, an independent, nonprofit think tank, said that insurance rates and benefit levels should be set by the insurance market and not by government regulations, and that the state marketplaces should be able to offer an array of insurance plans without having to include the essential health benefits required under the ACA in order to make the market more competitive.
Alvarez disputed that claim, and said that the “biggest problem” with Stark's solution is that it would lead to adverse selection, which would in turn lead to higher costs for employers and plan participants.
Jon Gabel, senior fellow at the independent research organization NORC at the University of Chicago, agreed with Alvarez and said that plans in the exchanges must at least provide a minimum benefits package. Prior to the ACA, many offered plans had very low actuarial value, he said.
Rather than setting limits on copays, coinsurance and deductibles, the ACA established four actuarial value levels of coverage on plans—bronze, silver, gold and platinum—which represent the share of health-care expenses the plan covers for a typical group of enrollees. Most plans prior to the ACA provided less than 80 percent of actuarial value, the level of a gold plan, Gabel said.
The ACA allows employers with fewer than 25 full-time equivalent employees to apply for a temporary subsidy, called the Small Business Health Care Tax Credit, under which they will only have to pay up to half of the premium for their full-time employees.
Rep. Blaine Luetkemeyer (R-Mo.) asked Alvarez for the basis upon which the CMS made its decisions on whether an employer could get the temporary subsidy.
Alvarez said the decisions are based on flexibility and responsiveness to the needs of the market.
“But what's the basis?” Luetkemeyer asked.
“I can definitely get back to you with that information,” Alvarez said.
The Small Business Subcommittee on Health and Technology, under the chairmanship of Rep. Chris Collins (R-NY), today conducted a hearing to examine the ongoing problems with the Small Business Health Option Program (SHOP) exchanges, exchanges and to seek answers on behalf of America’s small businesses. During the hearing, Chairman Collins specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, however, the administration was again unable to provide the information, despite repeated claims of transparency.
From the very beginning, the SHOPs program has created more uncertainty and confusion for small businesses by delaying rules at least five separate times. A June 2013 GAO report requested by House Small Business Chairman Sam Graves (R-MO) confirmed the administration was ill-equipped for the implementation of the SHOPs, and the program’s record has since confirmed that prediction. SHOPs were meant to simplify the process of purchasing health insurance, expand employee choice and reduce the cost of health coverage for small businesses, but those goals have come nowhere close to being met. Chairman Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal or state SHOPs, but the requests have gone unanswered.
All of these challenges regarding SHOPs have occurred while small businesses are grappling with rising health insurance costs that are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. And the National Federation of Independent Business found that 64 percent of small business owners paid more per employee for health insurance in 2013 than in 2012.
“Uncertainty and confusion are a recipe for disaster for small businesses,” said Chairman Collins. “The ability to plan ahead is key for small companies, especially since they don’t have large staffs to deal with tax, regulation, employee benefits and government mandate compliance. So, for the Small Business Health Options Program to be implemented so poorly is a major headache for the nation’s small business community. I’m pleased that CMS sent an official to testify today, but questions still remain about the viability and data collection for this program moving forward. It’s shocking that, after the billions of taxpayer money that has been spent on Obamacare, there was no process created for recording and measuring the SHOP enrollment data on a regular basis. HHS and CMS need to do a better job of operating and tracking the exchanges and communicating what lies ahead for the program.”
The Committee’s first hearing on this topic took place in December 2013. Materials from this hearing are available on the Committee’s website HERE.
Dr. Roger Stark, Health Care Policy Analyst at the Washington Policy Center in Seattle, WA said, “Although the employer mandate is a critical part of the ACA, the SHOP marketplace for small businesses seems to be almost an afterthought in the law. There is no clear evidence of interest on the part of small companies to provide health insurance through a marketplace with tax credits.
The paperwork and regulatory burden in the SHOP exchange are definite hurdles for a small business employer. There is no real free market in the individual exchanges or in SHOP. Proponents will claim that competition exists, yet all insurance plans offered in the exchanges must contain the ten government-mandated essential benefits. Insurance premium prices must be approved by the government. Consequently, individuals and employers only have government-approved plans and not meaningful choices or real competition.”
Adam Beck, Assistant Professor of Health Insurance at The American College of Financial Services in Bryn Mawr, PA said, “The Small Business Health Options Program, or SHOP Marketplace, was designed by the 111th Congress to lower health costs for small business, increase competition and therefore choice for business owners, and simplify the process of offering health coverage. These are laudable goals, however it is my opinion that the SHOP Marketplace as it is currently structured and presented falls short of these goals. I believe the SHOP Marketplace will remain inadequate and continue to enroll relatively few companies so long as three factors remain: the existing tax incentives, the lack of engagement of agents and brokers, and shortcomings in information technology infrastructure.”
POLITICO Pro: CMS: No enrollment numbers for SHOP
September 18, 2014
By Brett Norman
A CMS official told a House panel this afternoon that she could not provide enrollment numbers in Obmacare’s small business exchanges.
Mayra Alvarez, director of the state exchange group at CCIIO, said that the agency “is not the source of SHOP enrollment," because businesses did not have online access in the first year, requiring them to apply by paper, through an agent or broker or directly through insurers.
But CMS is “working to get that information from issuers, and as soon as we have it, we will share it with you,” Alvarez told Rep. Chris Collins, chairman of the Small Business Subcommittee on Health and Technology.
CMS has been forthcoming about individual exchange enrollment. This morning, Administrator Marilyn Tavenner told the House Oversight Committee that 7.3 million people were paying Obamacare customers through mid-August — the first update since the administration reported more than 8 million sign-ups after the end of open enrollment in April.
SHOP enrollment in many states this year was minimal. In Washington state, for instance, 11 companies with about 40 employees total enrolled, despite more than 2,000 businesses setting up accounts, according to testimony at the hearing.
Washington was not typical, however. Jon Gabel, a senior fellow of NORC at the University of Chicago, told the hearing that it was the only state with just one insurance company offering coverage through SHOP. He also said “SHOP plans cost less than the plans” outside of the exchange.
“Washington’s mounting regulatory burden is destructive to America’s 28 million small businesses and harmful to the economy,” said Chairman Graves. “A recent study found that federal regulations cost $2 trillion in 2012 and that small businesses annually spend $11,724 per employee to comply with federal mandates. The provisions of the Regulatory Flexibility Improvements Act, now part of the Jobs for America Act, ensure that federal agencies fully consider the impact of new red tape on small businesses, and get valuable input from small businesses before a rule is completed. Too often, federal agencies ignore the requirements of the Regulatory Flexibility Act of 1980 (RFA) and implement regulations that impose unnecessary burdens on small businesses. Under this legislation, federal agencies can no longer exploit statutory loopholes to avoid meeting their obligations to America’s job creators. Not all regulations are bad, but many impose heavy costs on small businesses, and unnecessary barriers to growth and job creation should be reduced.”
TIMELINE: In September 2013, the Small Business Committee favorably reported out the Regulatory Flexibility Improvements Act of 2013 (HR 2542). In February 2014, HR 2542 was included as Title III of the ALERRT Act, which passed the House by a bipartisan vote of 236-179. To date, the Senate has failed to act. The transcript and video of Graves’ floor speech on the ALERRT Act can be viewed here. Last Congress, the similar Regulatory Flexibility Improvements Act of 2011 (H.R. 527) passed the House by a bipartisan vote of 263-159, but died in the Senate.
SMALL BUSINESS QUOTE: “Unfortunately, all too often federal agencies view RFA compliance as either a technicality of the federal rulemaking process or, worse yet, as unnecessary. In an effort to ensure that regulations are crafted in accordance with the Congressional intent of the RFA, I urge Congress to seek out ways to improve agency compliance with the Regulatory Flexibility Act.” – Carl Harris, Homebuilder from Wichita, Kansas. (3/14/2013 hearing)
View more quotes HERE.
Reducing unnecessary regulatory burdens for small business has been a priority of Chairman Graves’ tenure at the Committee. In January 2013, the Small Business Committee launched the "Small Biz Reg Watch" initiative, which encourages small businesses to participate in the federal rulemaking process by regularly highlighting new agency proposed rules that may have a significant effect on small firms and encouraging business owners to submit comments to agencies.###
Bloomberg BNA: Bill Calls for SBA to Use Electronic Signatures in Loan Process
September 18, 2014
Sept. 18 (BNA) - A legislative proposal unveiled Sept. 18 would require the Small Business Administration to accept e-signatures in its financing programs.
Rep. Sam Graves (R-Mo.) says a long, complicated loan application process “is often a great impediment for many small businesses to secure the capital they need to get their products or services to market.”
“The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers,” said Graves, who chairs the House Small Business Committee. “The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
House Small Business Committee Chairman Sam Graves (R-MO) today introduced legislation that will streamline and simplify the loan application process at the Small Business Administration (SBA) by requiring the agency to permit the use of e-signature and electronic records. The Small Business Loan Simplification Act of 2014 would statutorily bring the SBA up-to-speed with technology already being used by private lenders and other federal agencies. Rep. Steve Chabot (R-OH), Rep. David Schweikert (R-AZ), Rep. Richard Hanna (R-NY), Rep. Tim Huelskamp (R-KS), and Rep. Chris Collins (R-NY) are original co-sponsors.
“Access to capital continues to be a major issue for many small businesses and people trying to start new companies,” said Chairman Graves. “A lengthy and complicated loan application process is often a great impediment for many small businesses to secure the capital they need to get their products or services to market. The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers. The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
The Electronic Signatures in Global and National Commerce Act (ESIGN) of 2000 made valid the use of e-signatures on binding documents, but the SBA has not yet permitted their use during the application process for its array of financing programs.
General bank lending to small businesses still has not returned to pre-recession levels. According to the Federal Deposit Insurance Corporation, at the end of the first quarter, banks held $585 billion in loans to small businesses, which is 18% lower than in 2008. And the number of loans for $1 million or less held by banks is down about 14% from 2008.
The bill is widely supported by industry, including the leading providers of electronic signature and record technology, the banking community, and a number of organizations representing various types of SBA lenders.
Small Business Loan Simplification Act of 2014:
• Permits participants in SBA financing programs, both borrowers and lenders, to use electronic signatures and records in the certification and transmission of documents.
• Requires the SBA to accept electronic signatures and records associated with the management of its financing programs.
The Committee explored telecommunications issues that are important to small firms, including net neutrality, broadband deployment, Universal Service Fund reform efforts, and wireless spectrum availability. The Honorable Thomas Wheeler, Chairman of the FCC, testified about efforts to promote wireless connectivity and ensure reliable systems. Members of the Committee repeatedly conveyed the importance of an FCC agenda that analyzed the intended and unintended consequences of their actions on innovation and rural access for small businesses.
“American small businesses depend more than ever on communications, and advances in technology have opened doors to distant marketplaces from rural America,” said Chairman Graves. “Access to these opportunities is indispensable for small businesses to grow and compete. The technology revolution in the telecommunications industry has fundamentally changed the way small firms do business not only nationally, but worldwide. Continued congressional oversight of the FCC is critical to ensure that burdensome or unnecessary regulation does not hamper innovation and growth for small firms, which are key to our economic recovery.”
Materials from the hearing are available on the Committee’s website HERE.
On Thursday, the Small Business Subcommittee on Health and Technology will conduct an oversight hearing to examine the ongoing implementation problems with the Obamacare Small Business Health Option Program (SHOP) exchanges.
Unfortunately, the program has created more uncertainty and confusion for small businesses, on top of the rising health insurance costs that are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. The Committee has conducted extensive oversight of SHOPs this Congress. In January, House Small Business Committee Chairman Sam Graves (R-MO) requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. And again in June, Graves wrote to CMS Administrator Marilyn Tavenner to request information about the SHOP enrollment. To date, the information has not been produced.
The SHOPs have experienced numerous delays and mismanagement, going back to April 2013. Here is a list of all the changes that small businesses are trying to keep up with:
“Every year, the tax burden becomes more costly for America’s 28 million small businesses. The tax code is increasingly complicated and changes often. Most small businesses spend 40 hours or more preparing their taxes, and four out of ten businesses spend two full workweeks on compliance. That is a high cost in lost time and productivity for a small business. One in three small firms spends $10,000 on compliance. Jobs are still scarce, and the combined burdens of complex taxes and high rates are obstacles to growth. The jobs-stifling tax code is not just a Tax Day problem for small companies, but a year-round burden on their budgets that can impact their entrepreneurial decisions. Small businesses overwhelmingly support sensible reforms for lower rates, simpler preparation and clearer guidelines.”
Last week, the Small Business Committee examined these very challenges for small businesses. The growing number of tax provisions means that owners must spend significant resources on compliance that could otherwise be spent growing their companies. According to the Internal Revenue Service’s own National Taxpayer Advocate, there were over 500 changes to the tax code in 2010 alone, an average of more than one per day. And the steep tax rates mean small firms have less capital to invest back into hiring or expanding.
The National Small Business Association released a survey on April 9, 2014, in conjunction with the testimony of NSBA member Tim Reynolds, a small business executive. The growing complexity of the tax process causes 86 percent of small businesses to pay tax preparers.###
House Small Business Committee Sam Graves (R-MO) today released the following statement on House passage of the Employee Health Care Protection Act (HR 3522), which would give Americans in the group insurance market the opportunity to keep their policies in 2014 through 2019 and also give small businesses and their workers the option to choose plans even if they don’t comply with the Affordable Care Act’s rules.
“Complying with Obamacare has been a nightmare for small businesses. Under the health care law’s rules, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees, according to a CMS report released in February. The frequent delays and changes with the Small Business Health Options Program (SHOP) have also made assurances of more competition and choice ring hollow. Despite the President’s promise that you could keep your plan, millions of Americans have had their plans cancelled, and many employees of small businesses are likely to get those notices this Fall. The Employee Health Care Protection Act is desperately needed because it gives small businesses and their workers the option to keep or choose the health plan they want, despite the ACA’s benefit requirements. This will provide more affordable options than what is available under Obamacare.”
The Committee has conducted extensive oversight of the Small Business Health Options Program this Congress. In June, Graves wrote to CMS Administrator Marilyn Tavenner to again request information about the SHOP enrollment. In January, Graves requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. To date, the information has not been produced.
List of SHOP delays and mismanagement:
• On April 1, 2013, the Obama Administration announced that the employer health insurance choice on the federal SHOP exchanges would be delayed until 2015, limiting employers to one single plan.
• On June 19, 2013, a GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, showing potential for “implementation challenges going forward.”
• On September 26, 2013, HHS announced the SHOPs online enrollment would be postponed from October 1 until November, forcing small businesses to enroll using paper forms. That same day, White House Press Secretary Jay Carney clarified the enrollment would begin on November 1, 2013.
• During a Ways and Means Committee hearing on October 29, 2013, CMS Administrator Marilyn Tavenner said the SHOPs would be operating at the end of November.
• On November 22, 2013, the Administration extended the Obamacare federal exchange signup deadline (for January 1 coverage) from December 15 to December 23.
• On November 27, 2013, the day before Thanksgiving, the Administration announced a fourth SHOP-related delay, postponing online enrollment for a full year.
The Small Business Subcommittee on Contracting and Workforce, under the chairmanship of Rep. Richard Hanna (R-NY), today conducted a hearing to examine the declining rate of small business creation over the past 30 years and the state of entrepreneurship during this latest economic recovery.
The rate of new business creation has dropped by nearly 50 percent from 1978. In 1978, there were 12 new businesses created for each existing business while in 2011 this dropped to 6.2 new firms. Under the Obama Administration, entrepreneurial job creation has declined by one-third to 7.8 percent. By comparison, the average rate for entrepreneurial job creation under the previous three presidents was 11.3, 11.2, and 10.8.
“Our economy is facing a crisis that most Americans are not aware of – a decline in entrepreneurship,” said Chairman Hanna. “For the first time in over 30 years, more businesses are dying off than being created. Today’s hearing provided further evidence that Washington must do more to provide a better regulatory and tax environment for enterprise growth. We must not allow a declining rate of business formation and sluggish growth to be considered the new normal, and we should pursue policies which unleash the economic power of entrepreneurship and the American spirit."
Materials from the hearing are available on the Committee’s website HERE.
John Dearie, Executive Vice President, Financial Services Forum, Washington, DC said, “New businesses create an average of 3 million new jobs annually, while existing firms of any age, type, or size, in aggregate, shed a net average of about 1 million jobs each year, as some businesses fail and others incorporate technology and become more efficient. Were it not for new businesses, there would be no net new job creation in most years.”
“…the policy needs and priorities of new businesses are unique. Start-ups are different from existing businesses. While they confront challenges similar to those of existing businesses, their ability to successfully navigate those challenges is more limited.”
Jonathan Ortmans, Senior Fellow, Kauffman Foundation, Washington, DC said, “Congress should… examine the role regulatory accumulation may play in depressing entrepreneurial activity. As new regulations are enacted on top of existing rules, businesses are faced with the challenge of navigating an increasingly complex regulatory regime. A handful of ideas have been proposed to address this challenge, including the establishment of a Regulatory Improvement Commission and the automatic sunset of major rules after a set amount of time.”
Chad Moutray, Chief Economist, National Association of Manufacturers, Washington, DC, said, “Beyond these issues, the best way to increase firm formation is to have a growing economy. Policymakers need to adopt pro-growth measures that will enable manufacturers and other businesses to expand, to hire more workers and to invest in more capital spending. A healthy economy will encourage more participants, and that should spur more entrepreneurship and innovation. The pro-growth priorities of manufacturers include, but are not limited to: passing comprehensive tax reform, providing regulatory relief, expanding trade opportunities, enacting sensible energy policies, investing in more infrastructure, encouraging research and development, and developing the next generation of workers.”
“Small businesses face record levels of red tape under President Obama’s policies, and America’s small manufacturers can attest that the regulatory burden is a growing problem. A study showing that federal regulations annually cost $2 trillion should be a wake-up call to this administration. Compliance costs are soaring for small businesses, which often do not have the employee expertise to decipher and handle more government paperwork and other mandates. The study finds that small businesses are annually spending $11,724 per employee to comply with federal regulations. The number increases for small manufacturers to $34,671 per employee, which means that small manufacturers are spending two-and-a-half-times more on federal regulatory compliance than large manufacturers. They are forced to invest in attorneys, accountants, consultants, tax preparers and other advisors, rather than their companies. Under this burden, the economy cannot sustain the growth needed to restore the good jobs and wages that can put more Americans back on track to budget for educational goals, homes and retirements. Small manufacturers and the entire economy would benefit from a major course correction away from burdensome government. It’s time for Washington policies to start working with small businesses for growth, not against them.”
Chad Moutray, the Chief Economist for the National Association of Manufacturers, will testify in tomorrow’s Small Business Committee hearing: The Decline in Business Formation: Implications for Entrepreneurship and the Economy.
“The SBA is responsible for managing a set of core programs designed to help small businesses succeed, but the agency has a recent history of ignoring the law and being sidetracked by its own pet projects,” said Chairman Graves. “The Committee remains concerned that the SBA’s resources are not focused on reforms and programs that Congress has mandated. For instance, the number of small businesses trained in many of the SBA’s proven entrepreneurial development programs has been in decline while the agency spends millions of dollars to fund unauthorized efforts that duplicate services available from other federal agencies and the private sector. This diversion of resources also comes at the expense of implementing contracting reforms signed into law two years ago that will help small businesses compete in the federal procurement arena. Over 40 of the tasks assigned to the SBA to implement the law remain incomplete.”
Materials from the hearing are available on the Committee’s website HERE.
Graves: Waters of the U.S. Regulatory Overreach Protection Act Is Needed To Protect Family Farms and Small Businesses
House Small Business Committee Chairman Sam Graves (R-MO) released the following statement in support of the House vote on the Waters of the United States Regulatory Overreach Protection Act (HR 5078), which would prohibit the Environmental Protection Agency (EPA) and the Army Corps of Engineers from finalizing their proposed rule that would redefine “waters of the United States” under the Clean Water Act:
“This unprecedented ‘waters of the U.S.’ proposal is indicative of many of the problems with the federal government,” said Chairman Graves. “This proposed rule creates more confusion, and applies an Washington-knows-best mentality to an issue with many variables at the local level. Under this expansive Clean Water Act proposed rule, all tributaries, including small streams and ponds that only flow irregularly or when it rains, fall under this definition as federally-controlled waters and would be subject to the Clean Water Act’s permitting and other onerous regulatory requirements. Despite the obvious consequences for farmers, home builders and other small businesses, the EPA did not conduct a Small Business Advocacy Review panel and the agencies did not assess the impact of the proposed rule on small businesses as required by law. The Waters of the United States Regulatory Overreach Protection Act is needed to protect family farms and small businesses from this gross overreach by this Administration.”
The Committee held a hearing on the Waters of the U.S. proposed rule on May 29, 2014. Small business leaders have overwhelmingly maintained that the rule creates more confusion, would be economically detrimental on many levels, and wouldn’t improve water quality.