New Jobs Equal Business Tax Credits

One method which the U.S. government is using in an attempt to strengthen the economy is through job growth. Current efforts focus on helping small businesses create jobs, since over the past 15 years the small business sector has been responsible for creating approximately 65% of all new jobs. Although the government has recently created legislation to provide small businesses with some of the necessary capital to expand, many businesses are still finding that they cannot afford to make new hires. Small business are also wary of hiring new employees since the state governments, currently in fiscal trouble and facing dwindling unemployment insurance funds, may raise taxes in the near term. In addition to providing small business owners with the resources to expand, job creation may also be motivated through government subsidy, specifically business tax credits.

In the current business environment characterized by a tight credit market and a reduction in available financing, small business owners need to find opportunities for business tax credits and any other government sponsored financing programs. Many of these potential financing opportunities, potential business tax credits and other business resources can be found by perusing the Small Business Administration’s website (www.sba.gov)

Even though the Small Business Administration (SBA) is meant to aid small business owners, some of the businesses on the SBA’s list of small business contractors are not that small.  When reviewing the multibillion dollar annual operating earnings streams of companies such as AAI Corp and VSE Corp, you might wonder if they have programs to support your small business.  Fortunately, and according to the new standards, the SBA defines a small business as any commercial concern with a net worth less than $15 million or $5 million in average net income.

One of the goals of the SBA is to help business owners acquire business loans and obtain the capital needed for growth. Recent legislation was created to increase the amount of lending capital and to provide business with tax breaks and business tax credits.  It also intends to address America's high unemployment rate by creating an additional 500,000 new jobs.  The Small Business Jobs Act of 2010 that was signed into law on September 17, 2010, could eventually leverage up to $300 billion in additional financing by funding $30 billion in seed capital, increasing loan limits, expanding government guarantees and offering borrowers better access to credit, all of which is intended to motivate small business investment and development.  To help persuade finance institutions to lend the available funds, the federal government is securing these small business loans by guaranteeing up to 90% of their principal value. The act also contains several key provisions that provide small business owners with approximately $12 billion in tax breaks included to encourage investment and business development.  (For more information on the act see Small Business Job Act of 2010: How your business can benefit from the $30B fund)

In addition to tax deductions, the next step in addressing the unemployment issue is to provide direct business tax credits for small businesses that create new jobs.  Business tax credits would be a direct reduction in a company’s tax liability in relation to the number and type of new jobs created.  This government subsidy would alleviate some of the fear that small business owners have about adding to their payroll and provide the money that companies need to support their business expansion.  Small business owners that are considering adding new employees should contact the SBA and other local business resources in order to find these potential business tax credits.

Whether you are in need of direct business financing or looking to subsidize your business growth, you should start looking for available opportunities and apply for them right away.  Applying for any type of government supported business programs can be a long and arduous process.  For example, obtaining SBA approval for a business loan can take up to three months, which means that owners must begin the process well in advance of the need for capital.  If you are hoping to receive any tax deductions or business tax credits for your activities, you must determine what impact they will have on your annual tax liability so you can make the appropriate adjustments to your quarterly tax payments.