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News from U.S. Senator Olympia J. Snowe
Chair, Senate Committee on Small Business and Entrepreneurship
For Immediate Release: April 17, 2006
Contact: Chris Chichester, 202-228-5843


WASHINGTON, D.C. – Senator Olympia J. Snowe (R-ME), Chair of the Senate Committee on Small Business and Entrepreneurship, today said Tax Day is a reminder that the tax code must be simplified and called on Congress to pass her legislation that will provide small business owners with greater freedom and flexibility in meeting their tax obligations.

“With the tax filing deadline once again upon us, I believe the time is now for the Congress to reform our federal tax code that is overly complicated, time-consuming and tedious for all Americans and most especially for our nation’s small businesses. Despite the fact that small businesses are the real job-creators for our nation’s economy, the current tax system places an entirely unreasonable burden on them as they seek to satisfy their tax obligations,” said Senator Snowe. “As the chair of the Senate Committee on Small Business and Entrepreneurship, I believe the Congress must pass legislation that I have introduced to allow small business owners to satisfy their tax obligations in a less-expensive, more-efficient manner to give them the freedom and resources they need to devote to their business and to create jobs.”

This year Senator Snowe introduced the Small Business Tax Flexibility Act, legislation (S. 2462) that allows start-up small business owners to meet their tax obligations by using a taxable year that is most suitable to their business cycle if they earn less than $5 million during the tax year. Until 1986, businesses could elect the taxable year-end that made the most economic sense for the business. In 1986, Congress passed legislation requiring partnerships and S corporations, many of which are small businesses, to adopt a December 31 year-end.

Senator Snowe noted the Small Business Administration’s Office of Advocacy has reported that small businesses spend an astounding 8 billion hours each year complying with government reports. They also spend more than 80 percent of this time on completing tax forms. What’s even more troubling is that companies that employ fewer than 20 employees spend nearly $1,304 per employee in tax compliance costs; an amount that is nearly 67 percent more than larger firms.

“These statistics are disturbing for several reasons. First, the fact that small businesses are being required to spend so much money on compliance costs means they have fewer earnings to reinvest into their business. This, in turn, means that they have less money to spend on new equipment or on worker training, which unfortunately has an adverse effect on their overall production and the economy as a whole,” said Senator Snowe.”

Senator Snowe’s tax simplification agenda also includes legislation (S. 543) she introduced that will further simplify the tax code by permitting small business owners to use the cash method of accounting for reporting their income if they generally earn fewer than $10 million during the tax year. Currently, only those taxpayers that earn less than $5 million per year are able to use the cash method. By increasing this threshold to $10 million, more small businesses will be relieved of the burdensome record keeping requirements that they currently must undertake in reporting their income under a different accounting method.

In addition, Senator Snowe and Sen. Trent Lott (R-MS) also introduced legislation (S. 2287) that doubles the dollar amount of new investments a small business can expense and makes that change a permanent part of Federal tax law.

"We must provide small businesses with critical incentives like expensing so they continue to invest in new technology, expand their operations, and most important, create jobs. Small businesses drive our nation's economic growth, and my bill strengthens their ability to lead the way," said Snowe. "I'm responding to small business owners in my home state of Maine and across the nation who have demonstrated that this investment incentive works and have asked Congress to expand it and make it permanent."


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