After working to pass a Continuing Resolution (“CR”) to temporarily fund the government through December 3, Congress headed home to work on their re-election campaigns. When they return on November 15th, they will have three weeks to pass the entire 2011 budget or be forced to pass another CR in order to keep the government open.

The Coalition of Franchisee Associations and DDIFO work together in a combined effort to protect your interests on the following issues:

Small Business Jobs Act

On September 27th , President Obama signed into law the Small Business Jobs Act, which included several beneficial tax provisions for franchisees. The new law was intended to increase access to funding for small business owners while extending and increasing tax breaks for business-related expenses.

Specifically, the law allows for the following: 

· An increase in the Section 179 expensing limits to allow businesses to write off $500,000 instead of $250,000 in 2010 and 2011.  The bill also allows businesses of any size to write off 50 percent of the cost of capital expenditures in 2010, extending a bonus depreciation break that had been in effect in 2008 and 2009.

· A deduction for the cost of health premiums to the self-employed as a business expense when they calculate their 2010 self-employment tax. Currently, the inability to deduct these costs means the self-employed pay a 15.3 percent tax on money spent on health insurance premiums.

· The establishment of a $30 billion Small Business Lending Fund to spur and facilitate small banks in lending money to small businesses.

· An increase in the size of Small Business Administration (SBA) loans from $2 million to $5 million and elimination of fees associated with such loans through 2010. It also continues the 90% government guarantee of such SBA loans through 2010.

While the business community generally applauded the bill’s passage, most state that in order to successfully help small businesses owners, Congress needs to address other issues that continue to increase the cost of doing business.

Gift Cards

The Federal Reserve recently issued new rules for gift cards. The rules are intended to provide additional protections to customers and apply to specific stores gift cards as well as cards with a MasterCard, Visa or other credit card brand logo. The new gift card laws took effect on August 22, 2010, and their provisions limit certain fees, require balances to be honored for a specific time period and require new disclosure statements on cards and certificates.

Specifically, the new rules require that:

 · Gift card balances be accepted for at least five years from the date the card is purchased. Any money that might be added to the card at a later date must also be good for at least five years.

· Customers can use unspent money via a replacement card after the original card expires. Therefore, if a customer’s card expires and there is unspent money, they can request a replacement card at no charge.   

· All fees must be clearly disclosed on the gift card or its packaging.

· Fees associated with gift card are limited to cards that haven’t been used for at least one year and are limited to one fee per month. Fees include dormancy, inactivity and maintenance fees. Certain other fees, including fees to purchase or replace a gift card are still valid.

1099 Reporting

As previously reported, Section 9006 of the new Health Care law created new 1099 reporting requirements for business transactions exceeding $600.  According to the new law, businesses must now file an IRS Form 1099 for all payments of more than $600 a year paid to providers—including corporations—that supply tangible property and services. In response to these requirements,  pro-business members of congress have been working to repeal these requirements before they come into effect on January 1, 2012.   

Specifically, Senator Mike Johanns’ (R-NE) introduced an amendment to the Small Business Jobs Act which would have completely repealed the reporting provision. Unfortunately, while the vote was close and included Democratic Senators Evan Bayh (Ind.), Michael Bennet (Colo.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), Mark Pryor (Ark.), Mark Warner (Va.), and Jim Webb (Va.) voting in favor of Sen. Johanns’ amendment, it failed in a 46-52 vote.

In the House of Representatives, leaders have twice put repeal of this job-killing provision in bills which included, among other things, tax hikes – making it difficult for pro-business members to vote for the bill’s passage. While leadership in both parties has expressed interest in voiding the 1099 provision, the business community is asking for a straight “up or down” vote on the repeal.

Health Care Small Business Tax Credits

As previously reported, the Health Care law includes the ability of small business owners to claim tax credits for providing health care to their employees. In order to qualify,  the law requires that the (1) employers have less than 25 full-time equivalent employees, (2) those employees earn an average of less than $50,000 per year and (2) employers pay greater than 50% of their employees’ health care premiums. If these three qualifications are met, the employer can take a credit of the lesser of 50% of their contribution or the average premium of the small group market.

On September 7th, the IRS has released its draft Form 8941 to claim the health care small business tax credit.  The form will be used to calculate the credit and then small businesses owners will include the amount in their general business tax credit on their income tax return.  The final version of the tax form and its instructions is expected to be released later this year.