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December 2006
by James C. Musser, ASBA Washington Representative

Another year has nearly spent itself and the 109th Congress has adjourned to be replaced by the 110th when January rolls around. In its final hours, the old Congress did a few good things such as extending a number of expiring tax provisions, such as the Research and Development Tax Credit and the deduction for a portion of a child’s higher education costs, and passing trade legislation to help open Vietnam and a number of African countries to American exports. Sadly, Congress also limped out of town without finishing work on the annual appropriations and simply punted the spending issues to the next Congress to handle. All in all, the old Congress should probably receive a passing grade for its work even if it was not nearly a perfect political season for small business.

Health Care: Small business health plan legislation, often referred to as Association Health Plans or AHPs, which would have allowed small businesses to band together in business and professional associations to purchase health insurance, was taken up in the Senate but became bogged down on a procedural motion. Despite the heroic efforts of Senator Mike Enzi (R-WY), a former small business owner and Chairman of the Committee on Health, Education, Labor and Pensions, the bill failed to gain the 60 votes necessary to pass it. Similar legislation has passed the House on eight different occasions but has repeatedly run into trouble in the Senate. The Enzi bill actually garnered a majority vote of 55 yeas and 43 nays. Senator Enzi gets an A for his efforts, the House gets an A for passing the legislation and the Senate gets an F for blocking this important legislation.

Congress does get a B for increasing the amount of money that can be contributed tax free to Health Savings Accounts (HSAs). The annual tax free contribution limit was raised from $2,700 to $2,850. HSAs are increasingly important to small business owners’ health care and the contribution amount should have been higher but this was a good step.

Taxes: Extension of the provision for enhanced expensing for small business earns Congress an A. Congress also gets an A for extending legislation allowing small businesses to accelerate depreciation on leaseholds. The House passed legislation to provide permanent Death Tax relief. While it was not the permanent repeal that small business had sought, it included a $5million exemption and low permanent rates, indexed for inflation. The House gets a B+ for its effort. The Senate blocked the legislation and gets a grade of F.

Legal Reform: Congress gets an A for passing greatly needed bankruptcy reform legislation. Congress also gets an A- for passing some reforms for class action lawsuits. However, Congress failed to enact meaningful asbestos litigation reform and left small business exposed to frivolous lawsuits. The Senate took up the legislation which failed by one vote to get the super-majority of 60 votes needed to pass it. The House did not even consider such legislation. Congress gets a grade of F for failing to stop asbestos litigation abuse.

The overall grade for Congress has to be boosted as much for what it did not do to small business as for what it did. Congress did not raise taxes or impose significant new regulations on small business. It avoided job killing action such as raising the minimum wage or imposing trade regulations that would damage American exporters. Combined with the positive good that it did, the final grade for the 109th Congress should probably be a B-. Let us hope that small business will fare as well in the year ahead.

To all our members and readers, have a very happy Hanukkah, a very Merry Christmas and a healthy, happy and prosperous New Year. ASBA will continue to keep you informed about all the issues affecting small business in the year ahead.

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