Obama Plan Would Offer Tax Relief for Small Business

Many restaurant chains could reap the benefits of the president's new plan for small businesses.

By David Farkas, Senior Editor -- Chain Leader, 3/17/2009 4:43:00 PM

President Barack Obama Monday promised new loans to small business and announced that his administration "firmly believes that economic recovery will be driven in large part by America's small businesses."

The government promises to get credit flowing again by purchasing up to $15 billion in previously frozen securities. The program, a part of the Financial Stability Plan announced last month, also trims lending fees, boosts loan guarantees and shrinks the tax burden on small businesses.

The Restaurant Industry Responds

The announcement won approval from operators and the National Restaurant Association. "We are especially pleased to see the Administration moving forward to purchase securities backed by SBA loans to unfreeze the credit market for small businesses, issue guidance on the expanded net operating loss carry-back period for small businesses, and reduce the cost of lending for borrowers and lenders," said Executive Vice President of Public Affairs Beth Johnson, in a prepared statement.

Tax Relief * Claim losses for up to five years under "carry back" provision * Write off investments of up to $250,000 immediately * Reduce previous year's estimate tax to 90 percent from 110 percent * Increase depreciation for property purchases * Exclude 75 percent of capital gains from taxation for business investment

The "carry back" period extends to five years for businesses with sales of up to $15 million. The administration expects this measure to generate $4.7 million in liquidity for small businesses by September 2009. The government also trims estimated taxes from 110 percent of the previous year to 90 percent in an effort to increase a small business' cash position.

Creating More Jobs

The NRA added that easier access to capital would mean saving "thousands of jobs." Research from People Report, a Dallas-based human-resources consultancy, shows 46 percent of restaurant companies report cutting staff in the fourth quarter of 2008.

The NRA claims 98 percent of restaurant companies fit the SBA definition of a small business. The Small Business Administration defines a small business as one having fewer than 500 employees.

"In the past decade, restaurants created 2 million jobs, and the restaurant industry can do so again with the right economic, regulatory and tax policies in place. The measures announced today are a very positive step in that direction," Johnson said.

MORE: The SBA outlines what President Obama's proposed plan would mean for small business.

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