A Look At The 104th Congress
by Robert L. Redding, Jr. Starting with the "Contract with America," the Republican-controlled Congress sent a clear signal that change was imminent. Progress was made on many long-heralded business issues.
The contract achieved success and failure. The proposal to send to the states a constitutional amendment requiring a balanced budget passed in the House, but failed in the Senate. A limited line-item veto that allows the president to excise individual spending items became law. Death row appeals were limited.
Legal reform was mixed. The president vetoed a bill to cap product liability punitive damage awards, but a follow-up document preventing shareholder lawsuits became law. Federal cash assistance guarantees were limited and states now have broad power to set up their own programs. There were no major defense reforms or actions on term limits. Broad regulatory reform initiatives were also denied.
One of the contract's greatest achievements was the limitation placed on unfunded mandates for the states.
As part of the debt limit bill, provisions were designed to help small business deal with regulatory agencies. The measure allows a small business to file suit to compel a federal agency to comply with the Regulatory Flexibility Act of 1980, which requires federal agencies to measure the impact of regulations on small business. Business owners are also allowed to recover attorneys' fees and related costs in civil and administrative actions between businesses and federal agencies. Congress also has review authority over the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA). These agencies have to collect advice and recommendations from small business to improve their analysis of the impact of proposed regulations.
Two labor-related issues also became law. Individuals who lose or leave a job will be able to retain their health coverage, even if they are ill. The minimum wage was also increased for the first time since 1991.
The sleeper for the small business community is the 1996 Tax Law that did not make headlines. Beginning in 1997 and continuing through 2000, certain taxpayers can make tax-deductible contributions to a medical savings account (MSA). If the taxpayer is an employee, his or her employer may make MSA contributions on the taxpayer's behalf that are excluded from the taxpayer's gross income. The tax law gradually increases the deduction for health insurance expenses for a self-employed individual and the individual's spouse and dependents from the current 30 percent to 80 percent. The new law clarifies that, for tax years after 1995, a home office deduction is allowed for expenses related to a storage unit in a taxpayer's home used regularly for inventory and/or product samples where the taxpayer is in the trade or business of selling products at retail or wholesale and the home is the sole fixed location of the trade or business.
The 10 percent luxury tax on automobiles priced above $34,000 will be reduced one percentage point a year, reaching a final rate of 3 percent in 2002.
For tax years prior to 1995, amounts up to $5,250 a year paid or incurred by an employer for educational assistance provided to the employee were not included as income for income tax purposes or wages for FICA tax purposes if the education met certain requirements. The education did not have to be job-related. The new law retroactively extends the exclusion for employer-paid educational assistance.
The tax law allows a qualifying taxpayer to write off in the current tax year, within limits, the cost of otherwise depreciable assets placed in service during the last year. The 1996 law increases the amount allowed to be expensed from $17,500 to $25,000 in stages over seven years, effective for taxable years beginning after 1996. With regard to leasehold improvements, where the lessor of property erects a building or otherwise makes improvements to the leased property on behalf of a lessee, and where the lessor disposes of those improvements, the lessor may take a gain or loss if the improvement is irrevocably disposed of or abandoned at the termination of the lease. The 1996 law expands the number of shareholders in an "S" corporation from 35 to 75.
The 1996 law also creates a "savings incentive match plan for employees" retirement plan for small business, one of a series of steps to improve retirement options for small business employers.
Finally, the Taxpayer Bill of Rights became law, increasing taxpayer rights in dealing with the Internal Revenue Service and its administration of tax laws.
The appropriations process provided opportunities for legislators through the re-direction of funds in various agencies. Shop owners benefited when OSHA's funding shifted from enforcement initiatives to educational and training programs.
Hopefully, the emphasis on small business legislative reform will continue in the 105th Congress.
Bob Redding is ASA's Washington representative. He holds a law degree from the George Washington University School of Law.
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Remanufactured Engines: An Overlooked Alternative ||
Effective Communications In The Workplace ||
Service Selling And Customer Convenience
A Look At The 104th Congress || Classic Headache? ||
Guest Editorial: Coordinate Your Efforts For Optimal Results
Tech To Tech || TechTips || News Briefs || Taking The Hill
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AutoInc. Magazine ®, Vol. XLIV No. 12, December 1996