Great News for Small Businesses: 4 New Financial Incentives That Will Help Now!

Written by Michael Zucchi on March 26, 2010 - 0 Comments
Categories: Construction Business, Medical Practice, Small Business

On March 18^th, the President of the United States signed into law H.R. 2847 – Hiring Incentives to Restore Employment Act. The HIRE Act comes on the heels of Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 as an extension. Many of the financial incentives offered to small businesses in the previous two bills have been extended to 2010 through the HIRE ACT.

The 4 pillars of the HIRE ACT

1. New hire payroll tax exemptions

a. Incentives for hiring and retaining unemployed workers between February 3, 2010 and January 1, 2011.

b. Requirements to qualify: a new hire must an addition to the staff and not a replacement of an existing employee, the employee must certify by affidavit that the employee has not been employed for more than 40 hours a week in the past 60 days, and the employer must retain the employee for a 52 week period.

c. Receive $1000 or 6.2 percent of the wages (only the employer’s responsible portion of social security).

2. Section 179 extension

a. Increase the total amount of allowable write-offs for 2010 depreciable expenses from $185K to $250K. The total amount of allowable purchased assets is still limited to $800K.

b. In short: any business can make capital improvements and take 5 years of depreciation upfront. Some examples that are applicable: software, computer systems & support, vehicles, office equipment, electronic medical record systems.

3. Expanding the Build America Bonds

a. Allows state and local governments to borrow via low interest bonds to finance infrastructure projects.

4. Extension of Current Surface Transportation Programs

a. The Highway Trust Fund will be utilized in the same manner as of 2009 to fund public works projects that improve transportation systems throughout the U.S. Appropriations will be based on what States received last year for specific sections of the ACT.

What does this mean for our construction clients?

Infrastructure projects requiring heavy construction and contractor services for job owners like NYDOT, MTA, etc will have access to low interest loans (bonds) allowing existing projects to continue and new projects to be funded. Don’t forget about the second half of the ARRA2009 funds that are still owed to states if obligations are met by June 29^th of this year. If that wasn’t enough to foster hope of improvement, the extension of the current surface transportation program via the Highway Trust Fund will create new projects that have not yet been funded.

With the available funds, there are more opportunities for winning jobs but much more competition. Construction companies will be required to find new ways of controlling costs, deploying project sites faster, limiting reworks, and limiting project delays.

Receiving stimulus dollars pertaining to new hires will only be available if construction bids can be won and that requires significant investment in business process management and technologies to empower process improvements. Luckily, Section 179 will be able to offset the necessary investments in technology and infrastructure improvements necessary to gain a competitive advantage and win more project bids.

What does this mean for our medical practice clients?

Many medical practices are now investigating how to go digital in an effort to meet upcoming federal regulations, meet the challenges of pay for performance, and quite frankly control costs. Section 179 also offers a great opportunity to fund Electronic Medical Record systems in year 1 without having to wait for the $44K committed for “meaningful use.”

Being that medical practices also are the largest employers in a number of states, the employer tax credit can provide some relief to strained cash flow.

What does this mean for small business?

Small businesses will benefit from the new hire tax exemptions, but it will be the small businesses that provide support services for construction and healthcare that will really benefit. As the construction industry recovers, there will be a larger need for business support services.

Where can you find more information?