WIPP Policy Watch

Ann Sullivan 

January 2019 

Partial Government Shutdown Enters Fifth Week. Today marks the 33rd day of the partial federal government shutdown.  Congressional leaders and the President have yet to resolve the shutdown, but proposals have started to surface suggesting a deal could be in the works. In a Saturday address the President offered three years of deportation relief for “dreamers” under the Deferred Action for Childhood Arrivals program, changes to the asylum rules for immigrants with Temporary Protected Status and reopening the government under a continuing resolution. This is in return for Trump’s requested $5.7 billion for a U.S.-Mexico border wall. Senate Majority Leader Mitch McConnell (R-KY) plans to move ahead with a Senate vote this week on the President’s latest offer, with nearly all Republicans indicating they will back the plan. This is the first vote the Senate will take on such a measure and this shutdown has far surpassed the prior record for the longest government shutdown in history (21 days in 1995-1996).  

WIPP has been advocating on Capitol Hill for an end to this shutdown, and sent an open letter to the House Small Business Subcommittee and the Senate Small Business & Entrepreneurship Subcommittee calling on legislative solutions. What Can You Do? One of our themes this year is learning how to leverage your local voice. This is our first opportunity. Please call and write your Representatives and Senators to let them know that this shutdown is affecting you, your family, and your local economy. Our eco-system is made of tough women leaders, and we will continue to make the hard decisions and the necessary choices so our businesses can remain sustainable and relevant. 

House Passes Multiple Small Business Bills– Last year, Congress ran out of time to pass some of the changes they wanted to small business programs and policies. Instead of letting these priorities fade, the House started off the new Congress by passing seven small business bills that support from both sides of the aisle. The bills now head to the Senate, and descriptions can be found below: 

• Expanding Contracting Opportunities for Small Businesses Act (H.R. 190): The purpose of this bill is to try and start to bring parity to SBA’s small business set aside programs. The bill would allow contracting officers to award sole-source contracts of greater value by eliminating the inclusion of option years in the award price. It increases the sole-source award amount for manufacturing to $7 million and allows the $4 million/$7 million sole source amounts to be awarded each year instead of for the total the life of the contract. For example, instead of a total sole source amount of $4 million, a five-year contract could be up to $20 million. WIPP advocated for this bill. 
• Best-in-Class Reporting (H.R. 226): As the government continues to increase its buying through larger vehicles, there has been a concern that small businesses will be shut out of the marketplace. This bill would start to address these concerns by shining a light on small business participation on existing “best-in-class” vehicles. The bill would require the Small Business Administration (SBA) to report on “best-in-class” contract awards to small businesses. WIPP advocated for this bill. 
• Subcontracting Plans (H.R. 227): Again, as the government is buying through larger vehicles, subcontracting opportunities continue to be crucial for small businesses. This bill creates incentives for prime contractors to reach their subcontracting goals by receiving additional credit. The bill also instructs agencies to collect and report data on meeting the goals and objectives in subcontracting plans, as well as creates a dispute process for non-payment from primes to subcontractors. WIPP advocated for this bill. 

• Small Business Office of Advocacy (H.R. 128): The SBA Office of Advocacy is the voice for small businesses within the federal government. This bill would instruct the SBA’s Office of Advocacy to represent small businesses in international trade and regulation initiatives. It is critical for the small business voice to be explicitly represented in both trade and regulation.  
• Encouraging Small Business Innovators Act (H.R. 206): The Small Business Innovation Research (SBIR) / Small Business Technology Transfer (STTR) programs allow small businesses to receive federal funding for innovative research. This bill would incentivize participation in the Mentor-Protégé program by providing an increase to the past performance rating of any small business that has participated in the SBIR/STTR programs and then serves as a mentor to another small business that is looking to participate in the SBIR/STTR programs.    
• Investing in Main Street Act (H.R. 116): The SBA’s Small Business Investment Company (SBIC) program provides an alternative source of financing for small businesses lacking access to adequate capital from traditional sources. This bill increases the amount of capital that a bank or federal savings association may invest in one or more Small Business Investment Companies (SBICs) from 5% to 15%.   
• Stimulating Innovation through Procurement Act (H.R. 246): The SBIR/STTR programs provide small businesses with the resources they need to develop cutting edge solutions. This bill would instruct procurement officials at federal agencies, Office of Small and Disadvantaged Business Utilization (OSDBU) Directors, and Procurement Center Representatives (PCRs) to assist small businesses in the SBIR/STTR programs with researching federal contract opportunities. It would also instruct those officials to provide technical assistance on contract bids to small businesses in SBIR/STTR programs. 

SBA Issues Proposed Rule Impacting Small Business Government Contracting. The Small Business Administration (SBA) issued a proposed rule that makes several changes to small business government contracting. Changes are proposed to areas such as: subcontracting plan requirements, the non-manufacturer rule, size recertifications, limitations on subcontracting rule, size determinations, and more. Comments are due February 4, 2019. If you want to learn more about the rule, please contact WIPP.  

IRS Issues Final Tax Deduction Rules for Pass Through Entities. The IRS has issued final guidance on the new 20 percent deduction for pass-through entities. WIPP advocated for inclusion of pass-through entities in the tax law overhaul in 2017. The regulations clarify how businesses can comply with the new tax law, which allows a percentage of income to be considered business income instead of personal income. The IRS estimates the rules will affect about 10 million taxpayers. Read the guidance here and see the highlights below. The rule: 

• Allow owners of partnerships, S corporations and limited liability companies to take up to a 20% deduction off their business income. 
• Gives taxpayers clarity ahead of tax filing deadlines: March 15 for pass-through entities and April 15 for owners of those businesses 

• Allows all taxpayers who earn less than $157,500, or $315,000 for a married couple, to deduct 20 percent of the income they receive via pass-through businesses from their overall taxable income. If taxpayers earn above those amounts and aren’t service professionals -- such as lawyers or accountants; they must meet certain tests to take the full deduction -- the size of their deduction depends on how much they pay in employee wages or how much they’ve invested in capital like real estate. 
• Clarifies that for service professionals, the break fully phases out if they earn more than $207,500 (single), or $415,000 (married). 
• Is limited for employers who pay low wages or hire few workers. The rules make it easier for related pass-through businesses to maximize their deduction by allowing companies to combine at the entity level or at the owner level. For example, two related businesses -- one with a lot of employees but little profit, and another with a lot of profit but few wages -- could aggregate their payroll and income to get a bigger tax break. 
• Retains a provision meant to simplify record-keeping if companies only have a small amount of income from ineligible activities, such as health or law. If less than 10 percent of the income is from ineligible sources, the company can still get the full deduction on all its profits. 

Important to note is that the final rule allows taxpayers to choose whether to use prior law or the new regulations when preparing their returns. Final rules usually supersede earlier rules; however, the Treasury Department made an exception because many taxpayers have already begun working on the filing season due in April. 

House Democrats Release Infrastructure Priorities.  A $500 billion infrastructure package and changes to aviation financing are among this year’s plans for new House Transportation and Infrastructure Chairman Peter DeFazio (D-OR). Last year, President Trump issued his plan in February, which failed to gain traction. DeFazio’s counterpart, Ranking Member Sam Graves (R-MO), has indicated he will push to switch the Highway Trust Fund’s revenue source to a vehicle miles traveled tax from the current motor fuels taxes ahead of the highway reauthorization that Congress must pass by next October. Democrats plan to release a full package by the end of May 2019. Funding for the proposals could include either increasing the fuel tax by 1.5 cents per year or creating a ‘vehicle miles traveled’ tax that ensures electric vehicles contribute to the road fund. The plan is similar to H.R. 1664 from the 115th Congress. To read the priorities, click here.