The House passed legislation that provides $848 million in funding for the Small Business Administration next year, $69 million more than requested by the Obama administration.

Combined with funds provided to the SBA through the economic stimulus package, the appropriations would restore the agency’s budget to almost what it was before President George W. Bush took office, said Rep. Nydia Velazquez, D-N.Y., chairwoman of the House Small Business Committee.

The House bill provides more funding than the Obama administration requested for several entrepreneurial development programs, including Small Business Development Centers, Women’s Business Centers and Veterans Business Development.

It also calls for an $80 million subsidy for the SBA’s 7(a) loan program, the agency’s largest business loan program. The $80 million subsidy, which the Senate’s version of the SBA appropriations bill also includes, will enable the agency to support up to $17.5 billion in government-guaranteed 7(a) loans while keeping fees low.

The bill authorizes up to $7.5 billion in 504 loans, a program primarily used to finance real estate projects.

Neither loan program is going to come close to hitting its authorization level this year. Through July 17, the SBA had approved $6.5 billion in 7(a) loans this fiscal year, a 35 percent decline from the same period a year earlier. The number of loans was down 46 percent to 31,564. The agency’s fiscal year ends Sept. 30.

Lending through the 504 program has declined by 39 percent to $2.6 billion.

The numbers would be even worse if the economic stimulus bill had not reduced or eliminated fees for these loans and increased the government guarantee on 7(a) loans to 90 percent. Those temporary enhancements will expire in September 2010, and SBA lenders are pushing for an extension.

“While this would spur additional lending, it would also take significant resources,” said Sen. Mary Landrieu, D-La. “I am working with my colleagues in the Senate Small Business Committee to determine the costs and benefits of extending the programs.”

Landrieu, committee chairwoman, said she was “sympathetic” to lenders’ requests to increase the maximum size of 7(a) loans to $3 million, and is “looking into raising it as high as $5 million.”

IRS, states urged to link business licenses to taxes

Businesses would be required to show their compliance with federal tax laws in order to get state business licenses, if the leaders of the Senate Finance Committee have their way.

A new Government Accountability Office report found this type of requirement works in California, where applicants for business licenses in three industries have to show that they’ve paid federal employment taxes. As a result of this requirement, 24 percent of the businesses that applied for licenses had to file employment tax returns or pay overdue tax in order to get their licenses.

The Internal Revenue Service currently has arrangements with 13 states that require compliance with one or more federal taxes in order to obtain state business licenses. GAO recommended the IRS consider expanding these arrangements to additional states and the IRS agreed with the recommendation.

Not all states, however, have state business license requirements. The most immediate opportunities for establishing federal tax compliance requirements may be the approximately 20 states that require compliance with state taxes in order to obtain a business license, according to GAO.

“Checking to ensure that taxpayers seeking a business license are up to date on their tax obligations is a common-sense approach to improving tax compliance,” said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.

Baucus and Sen. Chuck Grassley, R-Iowa, have been working on ways to close the estimated $345 billion gap between the taxes owed to the federal government and the amount actually collected.

Columbus Business First