Yesterday the Health and Oversight Subcommittees on House Committee on Ways and Means conducted a hearing surrounding tax subsidies under the Affordable Care Act. Health Subcommittee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Charles Boustany (R-LA) convened the joint hearing to discuss the income verification system used to determine individuals’ eligibility for tax credits to purchase insurance, and to address reports of incorrect tax credit payments being issued and later reclaimed by the Internal Revenue Service (IRS). The panel of witnesses included experts in health and tax policy including Douglas Holtz-Eakin, President of the American Action Forum and Katie Mahoney, Executive Director of Health Policy for the U.S. Chamber of Commerce.
Much like the sentiment towards the law itself, the views expressed in the joint hearing were split among partisan lines. In opening remarks, Chairman Brady and Chairman Boustany expressed deep concern with the lack of accountability and efficiency with the current income verification system and eligibility requirements for tax credits. Chairman Brady noted that, “Today, eight months after the start of open enrollment and well over a month after the extended open enrollment ended, the income and eligibility verification system is not completed. And the burden and the cost of that failure will fall on the American people. That is simply unfair and unacceptable.” Without proper income verification, individuals in some cases are receiving incorrect tax credits, which they are then required to repay months later when filing tax returns. In order for the verification system to function correctly, massive amounts of data is required to be submitted by employers. However, due to delays in the employer mandate, the regulations around employer reporting requirements have also been delayed. During her testimony, Katie Mahoney from the U.S. Chamber of Commerce acknowledged that it is absolutely necessary for more flexibility for employers to come into compliance with the regulations of the ACA.
The International Franchise Association has submitted comments regarding employer reporting requirements to the IRS and Department of the Treasury as part of a coalition striving to increase flexibility for employers. Accurate employer reporting is crucial to the success of other parts of the ACA, but it must be implemented responsibly and without disrupting employers who have already seen large cost increases because of the employer mandate to provide health insurance to employees. In addition to pushing for changes to the definition of full-time employee, the IFA will continue to protect franchise business owner’s interests from the potentially harmful effects of the ACA requirements.
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.
IFA member Ron Bacskai, owner of CertaPro in West Chester explained to the Philadelphia Inquirer the importance for comprehensive tax reform to include more than just the corporate side of the tax code.
There is no doubt that we need comprehensive tax reform. But as the saying goes, the devil is in the details (“Tour promotes real tax reform,” July 29). As an entrepreneur who works all over Pennsylvania, I am concerned that reform may mean reform only for big companies. Reform that addresses only the corporate side of the tax code would overlook many franchise owners, like myself. The International Franchise Association, of which I am a member as owner of CertaPro Painters in West Chester, has consistently advocated for a simpler tax code that would reduce compliance costs and provide greater certainty for small-business owners. Done right, comprehensive reform will revitalize the private sector and jump-start a more robust recovery. However, because small-business owners file their taxes as individuals, tax reform must fix both the corporate and individual sides to truly be real reform.
Ron Bacskai, West Chester
The announcement by House Small Business Committee Chairman Sam Graves (R-MO) of a new initiative to help small businesses participate in the development of federal regulations is a positive step toward enabling small business like mine, and for my franchisees and other small business owners throughout America, to voice our concerns directly to regulators in Washington, D.C.
Whereas large corporations may have hundreds of lobbyists, lawyers and regulatory experts on staff, my franchisees are focused on growing and executing their business and are unable to retain the type of regulatory guidance necessary to influence the decision-making process on regulations that will have an impact on all businesses. The online resource, “Small Biz Reg Watch, will streamline that process, allowing small business owners like myself to ensure our concerns are taken into consideration when agencies develop final rules for complying with regulations.
While the franchise industry is responsible for the creation of one out of every eight sector jobs, it is essential that small business owners make their voice heard as federal regulations are being considered. I look forward to promoting this new tool and encourage other small business owners to communicate their concerns about regulations.
President & COO
Brian Miller, CFE, COO of The Entrepreneur’s Source, a career and franchise business coaching company with more than 230 offices in the United States and Canada, and COO of AdviCoach, the premier source for business coaching and advisory services for small to mid-sized businesses, weighs in on the fight over the debt ceiling and spending cuts and its impact on the franchise and small-business communities.
“This fight is shaping up to be an Armageddon of congressional battles, and Main Street businesses aren’t quite in the clear,” said Miller. “The fight over individual tax rates may be over, but now both sides of the political isle will have to wrestle with reaching the debt limit ceiling, sequestration and the need for government spending reductions.”
As an advisor for a number of franchises and small businesses across the United States, Miller adds that, “Franchises and small-business owners are starting to hold back on investments, new equipment and hiring because of uncertainty over government spending and the debt ceiling battle, which will have an immediate impact on the economy. What’s more is there may be an even greater impact as consumers spend less due to the elimination of the payroll tax holiday, as well as recent tax rate increases from the fiscal cliff legislation.”
Miller continues: “Uncertainty over pending regulations and a fragile economy is causing employers to take a wait-and-see approach on hiring full-time workers. Consequently we’re seeing a shift to a part-time work force in America. The small-business and franchising community is a major vehicle for creating jobs and growth in this economy, but the new health care laws are forcing major players in the industry to pull back and rethink essential business strategies just to stay afloat. We’ll continue to see slow growth if we can’t make long-term solutions that make the United States fiscally more stable. Without economic growth, it’s hard to see a path out of our current economic woes.”