The Main Street Employers Coalition joined with over 40 national organizations in support of H.R. 23, the Family and Small Business Taxpayer Protection Act. The bill would rescind billions in questionable funding enacted in 2022 by the previous congress which expanded the Internal Revenue Service’s (IRS) audit enforcement activities, while doing little to improve woefully inadequate taxpayer service.
To access a copy of the letter, please click here.
What’s the real story behind all these firms offering a big payday through the Employee Retention Credit? The S Corporation Association’s latest podcast, featuring veteran tax practitioner Lynn Mucenski-Keck, has all the answers.
The episode is available at the link below, or through your favorite podcast app:
Talking Taxes in a Truck Episode 24: “I’m Worried About Everything”
Today, the Main Street Employers Coalition joined with dozens of its trade association allies to oppose the ENABLERS Act, legislation that would put some 30 million law-abiding small businesses in the crosshairs of federal law enforcement.
At its core, the ENABLERS Act relies on criminals, including the lawyers and other financial professionals who assist them, to voluntarily provide an accurate picture of their activities to Treasury. As the letter signed by MSEC makes clear, the chances of bad actors self-reporting their crimes is miniscule at best, meaning the bill’s reporting requirements — and the threat of hefty fines and jail time — will fall almost entirely on the small business community.
The text of the letter is below, and can be accessed by clicking here.
The undersigned organizations represent millions of Main Street businesses and strongly oppose the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act, which passed the House as part of this year’s National Defense Authorization Act (NDAA).
Under the guise of combatting illicit activities, the ENABLERS Act would require a broad pool of covered businesses, foundations, and charities to collect and report beneficial ownership information, report any suspicious transactions, and establish and enforce anti-money laundering policies.
This legislation would dramatically expand the recently-enacted Corporate Transparency Act’s (CTA) reporting requirements, despite the fact that those requirements have yet to be put in place and are unlikely to result in any meaningful law enforcement successes.
While the bill’s stated goal is to increase reporting by “professional service providers who serve as key gatekeepers to the U.S. financial system,” its broad language would cover the owners, board members, and senior executives of most businesses and charities. Anyone engaged in an entity’s formation, acquisition, or disposal would be covered, as would owners and employees engaged in nearly every financial activity of the business, including money management, payment processing, wire transfers, or buying and selling currencies.
These covered individuals would be subject to audits conducted by the Treasury Department initially, while the Act requires Treasury to recommend additional enforcement tools after a year. By way of comparison, the related CTA imposes fines of up to $10,000, and jail time of up to two years for covered business owners and employees who fail to make the appropriate reports.
The irony is that neither the ENABLERS Act nor the Corporation Transparency Act are likely to improve our law enforcement efforts as, at their heart, they both rely on criminals to self-report their crimes. That is obviously unlikely. Instead, the ENABLERS Act places a disproportionate burden on millions of law-abiding businesses in America.
Finally, the Act’s proponents claim the information collected by Treasury will remain secure, private, and used solely for law-enforcement purposes, but several high-profile leaks and breaches in recent years suggest otherwise. Meanwhile, supporters already are calling for Congress to make Treasury’s database public, in order to make the private information of business owners and other covered individuals more easily-accessible for political and other purposes.
The ENABLERS Act and related Corporate Transparency Act are unlikely to assist law enforcement agencies in cracking down on money laundering and illicit drug trades, but they are guaranteed to subject millions of law-abiding businesses, non-profits, and other entities to costly and time-consuming reporting, audits, fines, and possible jail terms.
We therefore respectfully ask that you reject this poorly-crafted provision and make certain it is excluded from this year’s NDAA.
Today, the Main Street Employers Coalition joined with more than 70 trade associations in opposing the Inflation Reduction Act. A letter sent to lawmakers highlighted the various tax provisions that are harmful to the small and family-owned business community, and points out that now is simply not the time to be raising taxes on these employers. The letter, which can be accessed by clicking here, reads:
The undersigned organizations represent millions of Main Street businesses and employ tens of millions of workers and we oppose the Senate-passed Inflation Reduction Act. Inflation is at 40-year highs, we have had two consecutive quarters of negative economic growth, and we are witnessing a shrinking small business sector, yet the Inflation Reduction Act does nothing to address these immediate issues even as it increases the burden of the tax code shouldered by America’s small and family-owned businesses.
The Biden Administration claims the savings in the IRA are “front-loaded” and will reduce the deficit in the short-term, helping to ease inflationary pressures. That is simply not the case. Recent analysis by the Congressional Budget Office, Penn-Wharton, and others shows the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long run.
At the same time, the bill would give the IRS an additional $80 billion in funding, more than half of which would pay for thousands of additional IRS agents to conduct millions of additional audits. We support addressing the tax gap and oppose illegal tax evasion, but as former National Taxpayer Advocate Nina Olson observed recently, it is wrong and counterproductive to characterize the entire tax gap as willful tax evasion. From experience, we know many, if not most, of these additional audits will be conducted on the owners of family businesses who have fully complied with the tax code.
Finally, the Warner Amendment adopted at the last minute presented the Senate with a clear choice between Wall Street and Main Street, and the Senate chose Wall Street. The amendment extends for two years the Section 461(l) cap on losses a business owner is permitted to claim. This $52 billion tax hike on pass-through businesses was adopted with almost no consideration, and the revenues it raises were used to offset the cost of exempting private equity investors from the fifteen-percent corporate minimum tax. The cap on active pass-through loss deductions is bad policy at any time, but it is particularly harmful when the economy is weak and an increasing number of businesses are suffering losses. The timing of this amendment’s adoption could not have been worse.
The Inflation Reduction Act would fail to reduce price pressures even as it raises the cost of the tax code to small and family-owned businesses at a time of economic weakness. We ask that you reject the IRA’s Main Street tax hike when it is considered by the full House
“The Main Street Employers Coalition – comprised of national trade groups representing individually and family-owned businesses employing millions of Americans in every state – believes the “Inflation Reduction Act” would fail to address the major challenges confronting Main Street today: high inflation, a slow economy, and a tight labor market.
“Recent NFIB member surveys make clear that inflation is the number one concern for Main Street businesses right now. With the CPI and PPI indexes measuring forty-year highs, businesses are struggling to balance rising prices with the need to accommodate their customers. A recent analysis from Penn-Wharton, however, finds the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long term.
“The legislation also provides the IRS with $80 billion in additional funding over the next decade. Its sponsors argue the funds will enable the agency to go after tax cheats and close the so-called tax gap, but Main Street knows better. More than half this funding will pay for new agents and increased audits, and the IRS has been transparent the primary target of these audits will be smaller private businesses. Meanwhile, only four percent of the funding will go to improving customer service, a long-term priority for Main Street.
“This is not a case where only tax cheats need to worry. Any business that has undergone an audit knows the cost and stress the process can impose on a business, even when no taxes are ultimately owed. The Tax Code is dense and ambiguous, so law-abiding businesses are at risk from this massive fishing expedition.
“Main Street faces numerous challenges in the current environment, but none of these are addressed in the Inflation Reduction Act. The bill will increase prices in the short term and increase the costs of complying with the Tax Code.”
The Main Street Employers Coalition joined with more than 190 business organizations, representing millions of Main Street businesses and tens of millions of American workers, to oppose Senate Democrats effort to raise tax rates on individually and family-owned businesses. The latest proposal includes a 3.8 percent tax rate hike on the active income of 1 million businesses struggling with high inflation and looming recession fears. The letter makes it clear: It’s a tax rate hike, not a loophole closer.
Expanding the 3.8 percent NIIT represents nothing more than an eleven percent increase in the rates imposed on family-owned businesses. Based on Treasury data, we estimate up to 1 million small and family-owned businesses, representing over half of all pass-through business activity, would be at risk of having their rates increased under this policy. This small business tax hike would hurt the ability of businesses that survived the worst global pandemic in a century to remain viable in the coming months.
Main Street Opposes Inflationary Tax Hikes on Individually & Family-Owned Businesses
“It’s the kind of thing you’d do to start a recession, not prevent one.”
WASHINGTON, D.C. (July 11, 2022) – The Main Street Employers Coalition—comprised of national trade groups representing individually and family-owned businesses employing millions of Americans in every state and district—released the following statement on a Democratic plan to raise tax rates on individually and family-owned businesses:
“We oppose Senate Democrats’ double-digit tax hike on the active business income of America’s individually & family-owned businesses,” said Chris Smith, Executive Director of the Main Street Employers Coalition. “These businesses already pay the highest effective tax rates, as well as payroll and self-employment taxes to Medicare. This tax rate increase would only make that disparity worse, add to inflation, and hasten a possible recession. It’s yet another ‘tax the rich’ smokescreen that ends up hitting Main Street instead.”
“Raising rates on small and family-owned businesses is the kind of thing you’d do to start a recession, not prevent one. Voters understand that if companies have to pay more in taxes, those costs will be passed on to consumers in the form of higher prices. Instead, we need to do everything we can to help businesses get back on their feet so they can get Americans back to work and the economy moving in the right direction.”
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Our allies at the S Corporation Association recently held a webinar to highlight the results of its new national survey. David Winston, whose research and polling firm conducted the survey, was on hand to break down the results and explain how voters feel about inflation, the Build Back Better Act, the current state of the economy, and their potential impact on November’s elections.
As David made clear, the polling shows that Americans are well aware of the impact additional federal spending and tax hikes would have on inflation and are simply not on board with the Administration’s plans to increase taxes, particularly those on Main Street businesses.
The survey results and a recording of the webinar can be accessed via the links below:
Chris Smith, Executive Director of the Main Street Employers Coalition, recently joined the S Corporation Association’s Talking Taxes in a Truck podcast for a timely discussion about what effect the leaked Supreme Court draft decision will have on the tax policy outlook, and the odds of an overhauled Build Back Better Act being passed in the coming months. Chris and S-CORP President Brian Reardon also broke down the reconciliation bill’s various tax hikes, and explained how they specifically target family businesses.
The podcast is available here:
In an op-ed published in Roll Call today, David Winston of The Winston Group highlights a glaring disconnect between the goals of the Build Back Better Act and the priorities of everyday Americans.
The entire piece is worth a read, but the following paragraph perfectly summarizes why the BBB has stalled:
When asked which was the more important priority for the country, 66 percent said it was dealing with inflation and the scarcity of goods caused by supply chain problems, while only 25 percent picked passing Biden’s Build Back Better plan. Among independents, the gulf was even wider at 69 percent to 19 percent.