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GROW (Generating Reinvestment Opportunities with) America’s Small Businesses Act of 2009

DETAILS

Capital is the oxygen of business growth.  Entrepreneurs often start out financing their dreams through a second mortgage, juggling credit cards, and drawing on the support of families and friends.  Many small business owners make it through that harried start-up stage only to find that growth brings its own difficulties.

After that initial stage, financing remains difficult to secure, yet accessing capital is still critical.  Small businesses need capital to fuel business growth and demonstrate long-term viability in the marketplace.  The amount of capital needed is often not large, but for small business owners already stretched by start-up costs, access to commercial financing is often elusive.  As credit markets continue to squeeze them out, small businesses need a better way to invest in their company.

The GROW America’s Small Businesses Act will allow small businesses to use their federal tax liability to help meet the capital needs of growth.  The bill would allow small businesses a one-time deferral of payment on their income taxes to reinvest in their businesses.  By allowing a business-owner the flexibility to expand their business, we can help entrepreneurs survive the recession and create jobs.  As interest-free, short-term loans, GROW Accounts would strengthen small businesses at a minimal cost to the federal government.

Companies would begin re-paying the taxes after two years.  The re-payment would be spread out, in equal payments, over a four-year period.  While businesses could defer their taxes only once, they could extend that deferral period if they demonstrate strong job growth. 

DETAILS

  • Eligibility:  Small businesses with annual revenues up to $12 million and which have not previously taken advantage of the bill’s deferral provisions would be eligible.  Eligible entities include C corporations, S Corporations, partnerships and Limited Liability Companies (LLCs.)
  • GROW Accounts:  The bill enables qualifying small businesses to create GROW Accounts with up to $275,000 in deferred federal income taxes.  Accounts would be established as trusts that could be used only to secure loans or repay the taxes.
  • Repayment:  Under the terms of the bill, companies would begin re-paying the taxes after two years.  The re-payment would be spread out, in equal payments, over a four-year period.  the grace period, the deferred taxes would be repaid interest-free over four years. 
  • Job Creation Provision:  Companies that add jobs can extend the grace period by one year.   If a business increases its American workforce by at least 10 percent by the end of the two year grace period, then that business could defer repayment for an additional year.   
  • National Guard/Reserve duty:  Companies that cover the difference between a National Guard/Reservist employee's private-sector salary and the salary that employee earns while mobilized for active-duty could count that employee as an “added job.”  The value of continued health care benefits qualifies for the purposes of calculating the coverage of the income differential.