SBA Administrator Testifies Before Congress, Tells of Progress in Assisting Small Business Owners

On Thursday, Jan. 7, the House Committee on Small Business held a hearing on the status of the U.S. Small Business Administration (SBA), and heard testimony from SBA Administrator Maria Contreras-Sweet as the lone witness.  Although the hearing was convened to address a recent report by the Government Accountability Office (GAO) that criticized the SBA for its failure to implement management recommendations dating back several decades, the Administrator took the opportunity to highlight the areas where SBA has succeeded in serving America’s small business and helping them continue to grow the economy.

In her testimony, Administrator Contreras-Sweet emphasized that, despite the criticism from the GAO and the Committee, FY 2015 was one of the most successful years in the history of the agency.  SBA backed 22 percent more loans to American small businesses, with a 23 percent increase in the dollar value of those loans compared to FY 2014.  Although lending to small businesses has increased in the years since the recession, she said, it has only returned to 84 percent of its pre-recession level, making the SBA’s role in helping small businesses secure vital financing even more important.  In addition, Contreras-Sweet shared that loan approvals to women in the flagship 7(a) loan program increased 29 percent over 2014, while loan approvals to minorities increased 27 percent and those to veterans increased 47 percent.  All of this progress, the Administrator noted, occurred while the 7(a) program has operated at zero-subsidy, with no direct cost to taxpayers.

The well-established 7(a) program is paramount in ensuring that qualified small businesses, especially franchise businesses, are able to survive and increase their production in a fragile economy.  In 2014 alone, SBA lending programs were used in the financing of nearly 30,000 new franchised units and guaranteed an estimated $6 billion in loans to new and prospective franchisees.  That number is likely to increase since SBA lending for the 7(a) program increased by 23 percent in 2015.  In 2015, nearly a quarter of all new single-unit franchises were financed with the help of SBA loan guarantees, with 17 percent of medium-sized multi-unit franchisees and 19 percent of large multi-unit franchisees utilizing SBA-guaranteed loans to expand their operations.  According to IFA estimates, for every $1 million in lending to a franchise, 40 new direct and indirect jobs are created.  These figures show that SBA loan programs are a vital lifeline to franchises and other small businesses as the small business lending market continues its recovery.

Although the Administrator focused on many of the agency’s high points, the Committee members sought clarification on the Administrator’s plans to address management deficiencies in cybersecurity, staff retention, and disaster relief programs.  Committee Chairman Steve Chabot (R-OH) pressed the Administrator for a commitment to addressing the GAO report’s recommendations, explaining that 62 of the GAO’s 69 recommendations have not been implemented.

IFA submitted a statement for the hearing record praising the SBA for its essential loan programs, while stressing the need for continued recognition of the needs of small business owners in the U.S. Congress.  The Committee will continue with its series of hearings on the oversight of the SBA this week.  SBA Associate Administrator of Capital Access Ann Marie Mehlum and Linda Rusche, Director of the Office of Credit Risk Management will testify on the status and management of the SBA’s capital access programs tomorrow at 10:00am ET.  For more information on last week’s hearing, or for more information on this week’s activity, click here.

Small business owners to Congress: NLRB’s new test is targeting franchises

On Tuesday, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing to address the NLRB’s revised “joint employer” standard as detailed in its August 27 decision in Browning-Ferris Industries.  The Board indicated that “indirect, potential, or ultimate” control over another employer’s workers could be enough to trigger a finding of joint employment, a change from the previous standard requiring direct and immediate control over terms and conditions of employment.  The committee is also considering a legislative solution – Chairman Lamar Alexander (R-TN) introduced legislation last month, the Protecting Local Business Opportunity Act, to restore the decades-old definition of joint employer.

Among the panel of witnesses was Ciara Stockeland, Owner and Founder of MODE, a fashion retail franchise based in Fargo, ND.  MODE is a small franchisor with 12 locations, and plans to expand to 75 by 2024.  “The uncertainty introduced by the NLRB’s BFI decision jeopardizes the expansion of my business,” Ms. Stockeland testified.  “As a small business owner who meets countless public and private demands and competes against massive corporations each day, I find it terribly frustrating to have regulators harming my business and the careers of so many others in our system.”

Despite the NLRB’s ongoing litigation against franchise companies alleging joint employer liability, some Senators insisted that a new joint employment standard will not present a problem for franchise businesses, pointing to the NLRB General Counsel’s advice memorandum in the Freshii case declaring that a single franchisor was not a joint employer with its franchisees.  In response, Ms. Stockeland testified that the Freshii memo “is simply a distraction,” noting that the memo does not hold the force of law and has not been fully litigated like the Browning-Ferris Industries case was.  She also pushed back on the Senators’ arguments that Browning-Ferris does not impact franchise companies since it was a ruling on contracting relationships, saying that “every franchisor-franchisee relationship is based on a contractual franchise agreement.  Franchising is contracting.”

Ms. Stockeland also attended yesterday’s White House Summit on Worker Voice, an event designed to bring together leaders from the labor, employer, and advocate communities to explore ways to collaborate to improve jobs and the economy.  However, the event has been criticized as being biased towards labor unions, with very few representatives from the employer community invited to participate.  “I think from what I have heard, I am in the minority there,” she told The Daily Caller News Foundation in an interview on Tuesday.  “But I am excited to tell my story.”

Chairman Alexander’s bill, S. 2015, continues to gain momentum in the Senate and currently has 60 co-sponsors.  Identical legislation in the House of Representatives, H.R. 3459, is sponsored by Rep. John Kline (R-MN), Chairman of the House Committee on Education and the Workforce, and has 44 co-sponsors.

To watch video of Tuesday’s hearing, click here.  To send a letter to your legislators urging them to support the Protecting Local Business Opportunity Act, click here.

House Panel Passes Six Business Tax Provisions

Today, the House Committee on Ways and Means held its first markup of tax legislation in several years to consider six separate pieces of legislation.  All six bills would make certain expired or expiring tax provisions permanent, including tax incentives important to businesses of all sizes.    Although the votes on the measures were mainly party-line votes, these measures (frequently called “tax extenders”) are among many that lawmakers from both parties have been supportive of in the past to boost economic growth and development, especially among small businesses.

One bill, H.R. 4457, would permanently extend the limit on Section 179 small business expense write-offs to $500,000.  Since the previous tax extender expired at the end of 2013, the current write-off is only $25,000.  This provision, which the Committee approved by a 21-14 vote, is among the most important tax extenders for franchise small businesses, and IFA has consistently advocated for its inclusion in tax extenders packages proposed in recent years.

Another measure, known as the “CFC look through” rule, addresses the treatment of payments between related controlled foreign corporations, and allows multinational companies to more easily move money between foreign subsidiaries.  The Committee passed this measure by a vote of 22-14.  A third bill, which passed by a vote of 21-13, addresses the tax implications of companies converting to Subchapter S, or “pass-through,” tax status.  The Joint Committee on Taxation (JCT) estimates that the six measures will cost a combined $310 billion over a 10-year period.

House Committee to Consider Employer Mandate Fix

On Tuesday at 10:15am, the House Committee on Ways & Means will consider legislation that would repeal the 30-hour definition of “full-time employee” in the Affordable Care Act and restore the traditional 40-hour per week definition.  H.R. 2575, the Save American Workers Act, is sponsored by Rep. Todd Young (R-IN) and has 192 co-sponsors in the House.

The Committee held a hearing on the bill last week, where IFA member and multi-unit Marriott and Hilton franchisee Peter Anastos testified on the law’s impact on his business.  Although he plans to continue to offering coverage to his existing employees who work at least 30 hours per week, he said, that may change for new employees that he hires to staff the new hotels that his company, Maine Course Hospitality Group, will open in the next 18 months.

Asked by Rep. Charles Boustany (R-LA) about the constant stream of new regulations and delays associated with the Affordable Care Act, Mr. Anastos compared ACA compliance for small business to “trying to nail Jello to a wall.”  Although the Obama Administration announced a one-year delay of the employer mandate last July, the collective weight of new costs and regulations are enough to crush small businesses that are forced to offer coverage to full-time employees or pay tax penalties.  Asked by Rep. Boustany if his business is facing uncertainty as a result of the law’s implementation, Mr. Anastos bluntly replied, “that’s the understatement of the year.”  Click the thumbnail below to view a video excerpt from Mr. Anastos’ testimony.

To take action on this important issue by emailing your Representative, click here to visit IFA’s grassroots action center, www.FranchisingVotes.com.

IFA Applauds Court Decision Striking Down Swipe Fee Rule

The IFA applauded U.S. District Court Judge Richard Leon’s decision today to throw out the debit swipe fee cap rule limiting the fees that banks receive from merchants when customers use their debit cards.  The IFA has lobbied aggressively alongside a broad range of other businesses for a more competitive and transparent card system that works better for consumers and merchants alike.

“We applaud the Court’s decision to invalidate a misguided rule granting banks and credit card companies a windfall of billions of dollars while saddling the nation’s franchise small businesses with drastically increased operating costs,” said IFA President and CEO Steve Caldeira.  “We look forward to seeing a revised rule from the Federal Reserve that both restores normal interchange fee levels and establishes reasonable caps.”

The overturned Federal Reserve rule was prompted by an amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act sponsored by Sen. Dick Durbin (D-Ill.)  Judge Leon ruled that the Fed misinterpreted the intent of the Durbin Amendment, which directed the Fed to consider the costs that banks incur when setting the fee standard.  The court ruling will remain in place until the Fed can agree on provisional standards or replace portions of the rule entirely.