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February 2006
by James C. Musser, ASBA Washington Representative

Usually, this column is devoted to one issue each month but there are times when a number of issues need to be addressed even though they are not lengthy enough to have an individual column. In order to address this need and provide a broad update from our nation’s capital, this month’s column can be dubbed the Washington Rodeo as we round up or follow up on a number of issues.

Budget: President Bush submitted his budget proposal for fiscal 2007 right on time in February and it was promptly considered dead on arrival. Congress has begun the process of holding hearings on its annual budget and will craft its own spending blueprint which will be debated in the spring. By law, the Congressional Budget Resolution, which is not binding law but merely a roadmap for congressional spending, is supposed to be voted on by April 15 of each year. Congress rarely completes all work on the budget by that deadline and in an election year there is a great likelihood that this highly political document will be late. The Budget Resolution sets the broad spending limits for the Appropriations Committees in the House and Senate, which actually approve the funding for government programs. Wrangling over the budget is likely to last until Memorial Day.

Taxes: The Senate passed tax legislation that will extend enhanced expensing for small businesses, often called Section 179 Expensing because of the section of the Internal Revenue Code in which it is located. This legislation allows most small businesses to expense the first $100,000 of business investment in plant and equipment during the year in which it is invested rather than having to gradually depreciate it. The latest extension goes through 2010. If the House does not also pass this extension, the amount that small businesses can expense will drop to $25,000.

The Senate also passed a provision to extend Alternative Minimum Tax (AMT) relief through the end of 2006. Many small business owners have become subject to this alternative tax calculation and Congress is expected to take up more comprehensive AMT relief later this year.

Asbestos Litigation Reform: This important legislation suffered a serious set-back in the Senate when a procedural vote failed to receive the necessary sixty votes for debate to go forward. Majority Leader Frist (R-TN) and Judiciary Committee Chairman Specter (R-PA) have vowed to bring the bill back to the Senate floor for a revote. The bill failed by one vote and one Senator who favored the legislation was absent due to a family medical emergency. The legislation protects small businesses from asbestos law suits and exempts small businesses, as defined by the Small Business Act, from paying into a proposed asbestos injury victims’ trust fund. A date for a revote has not yet been set but it is expected later this year.

Economy: President Bush’s newly confirmed head of the Federal Reserve, Ben Bernanke, has been well received both on Capitol Hill and by Wall Street. In testimony before the House and Senate Bernanke has indicated that he is likely to continue the successful policies of his predecessor. Bernanke, who is plainer spoken than Greenspan, has indicated that fighting inflation will continue to be the first priority for the Fed. Bernanke hinted that there could be another round of interest rate hikes to make sure that inflation does not creep into the economy.

ASBA will continue to closely monitor all of these developments and report on any issues that might have an impact on small businesses and the people who run them.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.