Creates Tax-Advantaged Savings Accounts for Small Businesses
(Long Island, NY) Rep. Steve Israel (D-NY) introduced legislation that will help small businesses enhance their long-term financial security. The SAVE (Savings Accounts for a Variable Economy) for Small Businesses Act will allow small businesses and start-ups to create special tax-advantaged savings accounts that can be accessed tax-free during certain times of economic downturn. Start-ups and small businesses with 50 or fewer full-time employees can take advantage of these tax-advantaged accounts to thrive in tough times. The legislation would allow these businesses to deposit up to 10 percent of their gross profits per year into a special savings account, incentivizing them to put away money for a rainy day and lessening their need for outside credit during economic downturns.
“Our small businesses are the backbone of our economy and providing them with tools to keep them moving forward is common sense,” saidRep. Steve Israel. “That’s why I have introduced the SAVE for Small Businesses Act to incentivize businesses to create tax-advantaged savings accounts so they can access their hard-earned money tax-free when they need it most. It will provide a needed-cushion for New York small businesses that create jobs and keep our economy moving forward.”
“The small business deferred tax was conceived many years ago as I was discussing with my CPA the benefits of a personal IRA. After much discussion, I concluded that there should be one for small businesses,” said Bob Fonti, Chair of the Long Island Business Council.“With the assistance of the LI Business Council, Dr. Rogers of Dowling College, John Durso of organized labor and Eric Alexander of Vision Long Island, this small business tax-free plan took roots and grew into what appears today. It was the business sense of Congressman Steve Israel that navigated us through the government gauntlet to fruition.”
“The approval of a tax-advantaged savings plan is an important part for the future survival of all small businesses,” said Rich Bivone, Nassau County Chair of the Long Island Business Council. “There is no better way to fuel the economy than by a plan that allows small business owners the ability to save for the future.”
“The financial growth of the small business community is the cornerstone of Main Street redevelopment,” said Eric Alexander, Executive Director of Vision Long Island. “Congressman Israel’s legislation will help local businesses employ staff, make capital investments and grow our economy without a burden to the taxpayer. Vision Long Island was glad to partner with the LI Business Council and Dowling College, the LI Federation of Labor and local chambers to bring this concept forward to help our downtowns.”
“The tax-deferred savings account legislation is another tool to protect small business and at the same time help protect and preserve good middle class jobs which are the backbone of our economy,” said John Durso, President of the Long Island Federation of Labor.
“This is very important legislation that creates tax-breaks for small businesses that will allow them to access their own monies tax free for the purposes of business survival and development,” said Dr. Nathalia Rogers, Director of American Communities Institute at Dowling College. “This is the first time in our nation’s economic history that we have a potential to create a nation-wide infrastructure for delivering a direct and effective stimulus to small businesses when they need it the most. Congressman Israel has a great record of supporting American small businesses, and this is yet another initiative that will make America a stronger and more prosperous nation. We would like to thank the Congressman for supporting middle-class Americans with this important act.”
The SAVE (Savings Accounts for a Variable Economy) for Small Businesses Act would allow businesses with 50 or fewer full-time employees to deposit up to 10 percent of their gross profits per year into a special tax-advantaged account. The money can be invested in certain Treasury-approved investments to allow the money to grow while it is not being used.
A certain amount can be withdrawn tax-free during specific “qualified periods,” as long as that money goes towards the retention of existing jobs or creation of new jobs. To help control the level of stimulus to the economy, the amount of money that can be withdrawn tax-free during a qualified period would be set by the Small Business Administrator in consultation with the Secretary of Treasury.
The qualified periods in which money can be withdrawn tax-free are:
- The one year period after the Bureau of Economic Analysis, in the Department of Commerce, reports two quarters of GDP decline.
- Any period specified by the Administrator of the Small Business Administration. This option was created for scenarios like 2008 where there was an overnight shrinkage in the credit market and many small businesses would close before two quarters of GDP decline.
- In areas designated by the federal government to be disaster areas. This option is for time periods like after Superstorm Sandy where small businesses needed immediate help.
During the first two years of the 2008 recession, the nation lost 170,000 small businesses with fewer than 100 employees. According to the last business statistics collected by the New York State Small Business Development Center in 2014, there were 445,853 small businesses in New York State with more than 1 employee and less than 100. Those firms employ 3,858,732 paid employees
