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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | SEPTEMBER 1, 2000 WHAT WORKS Tax Relief That's No Relief At All A 1999 rule crippled many small-business sales, but it may soon get repealed
Sounds obscure. But to entrepreneurs looking to sell their businesses, it's anything but. Installment sales have long been popular because they give buyers additional time to come up with the cash and allow sellers to spread the tax burden over a number of years. The new law, according to the National Federation of Independent Business, will change, stall, or scuttle at least half of the country's 260,000 expected sales this year. As entrepreneurs and their accountants seek ways around the legislation, small-business groups are lobbying hard to get Congress to change the provision. They've already scored some successes. In late April, the U.S. Treasury Dept. allowed an exception, letting businesses with income of less than $1 million use the previous installment method of accounting. But that helps only the smallest outfits. FIGHTING FOR MORE. In early May, House Small Business Committee Chairman Jim Talent (R-Mo.) and his Senate counterpart Christopher Bond (R-Mo.) sent a joint letter to Treasury Secretary Lawrence Summers. They urged the Treasury to increase the limit to $5 million, claiming that the department is violating the Small Business Regulatory Enforcement Fairness Act (SBREFA). This law requires the Treasury and IRS to analyze the impact their regulations have on small business and solicit their opinions on what the effects might be. "They've done neither, at least not that we're aware of," says Terry Neese, public-policy advisor for the National Small Business Assn. Meanwhile, legislation to repeal the provision has been introduced in the House and Senate. Undoing this law seems to have plenty of support, though it's not clear whether it will be passed this year. "With it being an election year, not much is going to happen in the fall," says Mark Luscombe, principle analyst for the federal and state tax group of research firm CCH. Indeed, as fired up as small-business groups and tax pros are about the issue, awareness is still low. Many entrepreneurs find out about the provision only when they make plans to sell their business and find the deal undoable because of the huge tax bill. Does repeal stand a chance? "The more small-biz owners who call [Congress members], the quicker we'll get it done," says Neese. "I'm told by [congressional members] that if they hear from just five or six constituents, that raises that issue on their radar."  By Sarah Rose  | | |
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