House Small Business Committee
Curbelo Hearing Spotlights Importance of Small Companies to NASA
WASHINGTON – Today small business owners told a key Congressional subcommittee that their companies and others like them play a vital role in meeting the needs of the National Aeronautics and Space Administration (NASA).Witnesses and lawmakers also discussed ways to strengthen and improve the critical partnership between small companies and NASA as the agency prepares to celebrate its 58th anniversary later this month.
“Designing next generation spacecraft takes time and in recent years, thankfully, there has been bipartisan consensus on the path forward for human exploration of deep space,” said Rep. Carlos Curbelo (R-FL), the Chairman of the House Small Business Committee’s Subcommittee on Agriculture, Energy and Trade which convened today’s hearing. “With a new Administration taking office in January, we must build upon that commitment and provide the certainty the industry needs to continue growing, innovating, and building our economy to ensure our nation continues its preeminence in human space flight.”
SPACE, THE FINAL FRONTIER
“One thing is clear: We must not allow the uncertainties of the past to prevail again. We must advance – and accelerate – into the next administration,” said Chris Carberry, the Co-Founder of Explore Mars, Inc.“There is strong bi-partisan support for the goal of sending humans to Mars, and there is clear excitement about that goal from the general public. We must harness that strong consensus.”
“We are approaching another major hurdle, and that is the uncertainty that traditionally accompanies a change in Administrations. Will we once again shift directions and throw our space program – and the small business community upon which its success depends - into turmoil, or will we fully embrace our current policy of sending humans to Mars? We have come so far in recent years, and it benefits no one if we radically change course again,” added Carberry.
“I am today – at a crossroads of how to keep the manufacturing side afloat while waiting for delayed payments, extended NASA contract decisions and lack of access to working capital because of stringent banking regulations imposed by the Federal Government. I’ve effectively robbed Peter to grow Paul,” explained Carol Craig, President and CEO of Craig Technologies, a small business based in Cape Canaveral, FL. “I did so because it was the right thing to do – for our business, for our employees and for our community. I believe in our free market system and always strive to offer the very best product and/or service for the price agreed upon. Unfortunately, the cards remain stacked against a small business entrepreneur - even one who overcomes the odds and makes it to the next level.”
“Creating valuable employment opportunities in my community remains my number one goal and priority. But money has to come in the front door on a logical and planned timeline in order to properly budget and ensure the books remain solvent,” added Craig.
NASA OVER THE MOON FOR SMALL BUSINESSES
“I want to emphasize that for small businesses, NASA remains one of the Federal government’s most supportive organizations, testified Stephen Gorevan of Honeybee Robotics, Ltd, a small business based in Brooklyn, NY. “I believe NASA understands the ways in which the small business community can help it succeed with its mission, and it takes seriously its mandate to provide opportunities for small businesses such as Honeybee Robotics to thrive. We are excited for what the future holds and, along with our small business colleagues, look forward to the exciting and important missions ahead.”
CREATING JOBS, SPURRING INNOVATION
“Another challenge Small Businesses face in supporting NASA is the long-term stability of the SBIR-STTRprogram,” added George Davis, Ph.D, the president and founder of Emergent Space Technologies, noting that the program is budget-neutral. “Many U.S. Small Businesses rely on the SBIR-STTRprogram for seed funding in developing a unique product. Others, like Emergent, rely on it to perform strategic R&D for NASA, Air Force and DARPA. Ultimately this funding translates into jobs, both now and in the future.”
“As Albert Einstein once said, 'if we knew what we were doing, we would not call it research.' Congress can help Small Businesses by continuing its strong support of the SBIR-STTR program, especially when it comes to reauthorization in FY2020. Any delay or disruption in this vital program could result in the loss of thousands of job across the country,” concluded Davis.
Chabot: “Impacts both our national security and our economic security”
WASHINGTON – Leading cybersecurity experts warned members of the House Small Business Committee today that American small businesses are at great and growing risk of cyberattacks from foreign hackers. Today’s hearing was part of the Committee’s ongoing effort to spotlight the cyber security threats faced by America’s 28 million small businesses and develop solutions to combat the threat.
“Small business cyber security has been a top priority for our Committee throughout this Congress,” said House Small Business Committee Chairman Steve Chabot (R-OH). “In our previous hearings, we have heard stories from small business owners who have been the victims of cyber attacks. We have also heard dire warnings from cyber security experts about the new and varied cyber threats facing America’s 28 million small businesses.”
“Small businesses play an indispensable role in providing the federal government with products and services. They are integral links in the government supply chain but are often ill-equipped to combat against sophisticated foreign cyber attacks. This makes them a prime target for state sponsors of cyber terrorism who wish to undermine America’s commerce and security,” explained Chabot, who is also a senior member of the House Foreign Affairs Committee.
“This is an important dimension of the cyber security threat that impacts both our national security and our economic security and I believe it demands much more attention than it has received so far,”concluded Chairman Chabot.
AS FBI DIRECTOR JIM COMEY SAID YESTERDAY…
“As we know from FBI Director Jim Comey’s statement yesterday, the FBI has recently “developed evidence that the security culture of the State Department in general, and with respect to use of unclassified e-mail systems in particular, was generally lacking in the kind of care for classified information found elsewhere in the government,” testified Jamil N. Jaffer, the Director of the Homeland and National Law Program at the George Mason University School of Law.
“This is troubling news indeed, given the important role that the State Department plays in our relations with other nations, the type of sensitive information it receives from our allies, and the critical nature of the negotiations it conducts on behalf our people,” added Jaffer, who also praised Chairman Chabot’s successful effort to include an amendment to a State Department Authorization measure thatrequires a cybersecurity investigation into the State Department’s possible use of equipment and services purchased from suppliers linked to key cyber threat nations.
“The potential use of such equipment and services by the U.S. government is a key issue for congressional oversight, particularly given the threat environment that our nation—in both the public and private sectors—faces from nation-state actors and their proxies,” stressed Jaffer. “The innovative small businesses that are key engines of job growth and investment in our economy… must confront the very real threats we face in cyberspace.”
CYBER SECURITY EXPERTS SOUND THE ALARM
“As small businesses increase their connectivity to the Internet, they face significant challenges and additional costs, not just in infrastructure and the ‘nuts and bolts’ of establishing businesses’ connectivity, but also security-related costs,” testified Nova Daly, a Senior Public Policy Advisor at Wiley Rein LLP and former Director of International Trade at the National Security Council (NSC). “Both domestic and foreign criminals, as well as foreign governments, have been known to exploit and are actively targeting internet based vulnerabilities in order to gain access to financial information, customer data, and intellectual property.”
“In fact, according to McAfee, the well-renown security company, if cybercrime was a country, its GDP would rank 27th in the world,” testified Justin Zeefe, the Co-founder and Chief Strategy Officer of the Nisos Group, a cybersecurity consulting firm. “How would we collectively react if we knew that the 27th largest economy was absolutely dedicated to attacking our value? What if they were overwhelmingly directing their actions against small businesses? In fact, both of these statements are accurate.”
“Symantec found in June 2015 that 75% of cyberattacks were directed at organizations with fewer than 2,500 employees – a dramatic increase from years prior. Not a week goes by that we don’t read of a major data breach in the paper, with mention of what the attackers stole, and often how they managed to gain access.” Zeefe added.
1. Hearing Notice
2. Witness List
Layoffs, Benefit Cuts Coming Soon Due to Obama Overtime Rule
WASHINGTON – As the December 1, 2016 compliance deadline for the Department of Labor’s new overtime rule rapidly approaches, traditional small businesses, technology start-ups, and other small employers told the House Small Business Committee today that they may soon be forced to layoff workers, reduce benefits and lower wages to cover the costs of the new federally-mandated requirements.
“The DOL has heralded this rule as a long-overdue action that will provide tremendous benefits to workers,” said House Small Business Committee Chairman Steve Chabot (R-OH). “However, like so many of this Administration’s policies, this one-size-fits-all mandate will do far more harm than good.”
“Numerous small employers weighed in on this proposal and told the Department of Labor that the unprecedented salary level increase would have very negative repercussions,” Chairman Chabot noted. “They asked for a common sense rule that recognized that not all employers have the same resources or utilize the same compensation structures. Unfortunately, their pleas fell on deaf ears.”
“I want to assure the small employers here today, and those tuning in from across this great country, that while DOL didn’t listen to you, we are,” Chairman Chabot added.
Painful Choices Looming for Small Businesses
“From a personal perspective, this rule is likely to have negative consequences - not only to my company, but to my employees as well,” testified Albert F. Macre, a general partner at Payroll+ Services in Steubenville, OH.
“In addition to these negative impacts, the implementation window is very short. This rule will become effective on December 1, 2016, just over five months from now. Given that many small businesses are still struggling with the implementation of the Affordable Care Act five years after the enactment, this window of compliance seems barely cracked open,” Macre explained.
“As a small business owner with several salaried employees positioned between the current exempt overtime earnings threshold and that created by the Department of Labor’s new rule, I now find myself standing with countless other small business owners forced to swallow more government 'medication' prescribed before an accurate attempt at diagnosis has been completed,”Macre added.
Stunting the Growth of Tech Start-ups
“Looking back on when I started my company in 2010, I can tell you with 100% certainty that I would have not been able to hire my first employee had this rule been in place,” said Adam Robinson, the Co-founder of Hireology, a human resources technology business, in Chicago, IL.
“My company now has 100 employees with a median annual compensation that exceeds $70,000 a year - well above the US average. How many “Hireology’s” won’t get started as a result of this rule making that 1st employee unaffordable for an entrepreneur? Are fewer good-paying jobs created and fewer businesses launched the outcomes that are desired here?” asked Robinson.
“Like most federal regulations, the overtime rule is a one-size-fits-all policy that doesn’t distinguish among firm size, sector, location, or compensation structure. This means that companies that don’t fit the Department of Labor’s outdated model will be disproportionately hurt by the rule,” explained Robinson.
“At a time when the middle-class in this country is already being squeezed, the tech sector, sales jobs, and middle-management positions are a few areas that still provide relief. The overtime rule threatens to close those career pathways that have been paved by hard work,” he added.
Small Local Governments and Non-Profits Also Affected
“Mineral County is the very definition of a small governmental entity and we are very concerned about the potential impact of the new overtime rule on our ability to fulfill our fundamental responsibilities — many of which are mandated by the state and federal government,” testified Jerrie Tipton, the Chairman of the Mineral County Board of Commissioners in Nevada.
“Unfortunately, the new overtime rule does not adequately address the wide variations in local labor markets in counties across the country. And ultimately, please remember that the new rule will have broad consequences for taxpayers — and county services,” observed Commissioner Tipton.
“[T]he rule will drastically impact the budget and operations of nonprofits, as well as colleges and universities, health care providers, small businesses and local governments. These employers may be unable to absorb such costs without adverse impact to employee relations or fiscal operations,” testified Christine V. Walters, the Sole-Proprietor of FiveL Company in Westminster, MD.
“One of my clients provides rehabilitation services to a disadvantaged population, of which 85 percent of their clients meet the current poverty threshold. Unlike other employers, this organization cannot transfer increased costs to their lower-income consumers,” explained Walters.
1. Hearing Notice
2. Witness List
Mr. Adam Robinson
*Testifying on behalf of the Job Creators Network
The Honorable Jerrie Tipton
Commission Chair Mineral County
*Testifying on behalf of the National Association of Counties
Mr. Ross Eisenbrey
Economic Policy Institute
WASHINGTON – Today small business owners and advocates told a key Congressional subcommittee that increasingly aggressive audit tactics by the Internal Revenue Service (IRS) have been used to intimidate small companies, creating an atmosphere of fear and uncertainty in the small business community.
“In the administration of the tax code, the IRS has dual roles: collection and enforcement,” said Subcommittee on Economic Growth, Tax and Capital Access Chairman Tim Huelskamp (R-KS) in his opening remarks. “Small businesses have a right to be treated fairly on both counts. Unfortunately, that isn’t always the case.”
“The Small Business Committee has heard from a number of small businesses that have been harmed in one way or another by the IRS. In at least two cases, aggressive audits have resulted in these companies closing their doors.” Subcommittee Chairman Huelskamp added.
National Taxpayers Union Speaks Out
“To this day, taxpayers and advisers continue to report on troublesome developments in IRS audits that range from isolated cases to broader policies,” testified Pete Sepp, the President of the National Taxpayers Union (NTU).
“From the view of the small business person immersed in an audit, such matters of policy seem academic. What, therefore, are the more palpable “fear factors” foremost in business owners’ minds when undergoing this process?” asked Sepp.
“Based on NTU’s review of research literature, statistical analysis, oversight reports, and hundreds of anecdotes over the past several decades, we believe the following are most pertinent,” said Sepp pointing to “uncertainty” and “intimidation tactics.”
“A September 2014 report for the National Association of Manufacturers calculated that the regulatory cost per worker for all tax compliance activities in firms of any size was a whopping $960 (using 2012 data and expressing in 2014 dollars). For companies with fewer than 50 employees, the tab was much worse – over 50 percent more, at $1,518 per worker. Unfortunately, these considerable outlays and resources do not buy peace of mind for small business owners who, as Ranking Member Velázquez stated, often operate in fear of vague laws being used against them,” Sepp added.
“Time Consuming,” “Expensive” and “Devastating”
“If Federal Express can manage millions of packages all over the world, it seems that the IRS could come up with some sort of bar code or other tracking system that would allow both the IRS and the taxpayers to track correspondence responding to notices and the status of their cases," testified Roger Harris, a franchise owner based in Athens, Georgia.
“The vast majority of small business audits are correspondence audits. While they are intended to cover only simple issues, because of the IRS’s focus on efficiency, they can be frightening to small business taxpayers, as well as being time consuming and expensive. In some circumstances when things go wrong, they can be devastating to a business,” Harris added.
A Lack of Transparency
“Aligned with this issue is a lack of transparency with the IRS,” said Lee Davenport, a Member of the Electronic Tax Administration Advisory Committee (ETAAC). “For most taxpayers, the information the IRS has about them is a mystery. It’s not easy for taxpayers to access and understand their tax information on file with the IRS, their previous tax-related interactions or their tax compliance obligations.”
“For small-business taxpayers, this issue is even more critical, because small businesses are more likely to complete multiple year-round transactions with the IRS. In many cases, when there is a compliance issue, small-business taxpayers find out with a surprising IRS notice after they file, or – even more stressful – an audit that can take months or years to resolve. For all types of taxpayers, accessing and using their tax information to proactively comply is almost entirely out of the question in the current system,” Davenport noted.
1. Hearing Notice
2. Witness List
Mr. Pete Sepp
President National Taxpayers Union
Mr. Lee Davenport
Member Electronic Tax Administration Advisory Committee (ETAAC)
Mr. Roger Harris
President & COO
Padgett Business Services
Job Creators Tell Committee Members: DOL Overtime Rule Bad for Their Businesses
WASHINGTON – Today, House Small Business Committee Chairman Steve Chabot (R-OH) held a roundtable discussion with small business owners from across the country on how their businesses and workers will be harmed by the new overtime rule issued by theDepartment of Labor last month. Committee members and entrepreneurs discussed how the Obama Administration’s pattern of regulatory overreach has created an atmosphere of uncertainty for America’s small businesses and hurt the very employees they claim to help.
“For months now, our Committee has been warning the Obama administration that the proposed DOL overtime rule will be a disaster for America’s 28 million small businesses and their workers,” said Chairman Chabot (R-OH). “With the December 1st compliance deadline approaching, small employers and their employees are now dealing with the consequences of this terrible policy in the form of job losses, demotions, less flexibility, lower wages, and reduced benefits.Today’s discussion highlighted just how devastating this rule will be for the millions of Americans who go to work every day at a small business. During these difficult times, small businesses need to know we have their back and will continue to do all we can to slash the government red tape that is harming them.”
Participants in the roundtable included Committee members Rep. Trent Kelly (R-MS) and Rep. Warren Davidson (R-OH), as well as Ms. Rudaina Hamade of Renaissance Property Management Solutions, LLC in Dearborn, MI, Mr. Ron Collins, of JCM Industries in Nash, TX, Mr. Harold Jackson of Buffalo Supply in Lafayette, CO, Ms. Ciara Stockeland, the Founder and COO of Mama Mia Inc. / MODE in Fargo, ND, Dr. Herb Sohn, the Owner of Strauss Surgical Group in Chicago, IL, Ms. Maxine Turner, President of Cuisine Unlimited Inc. in Salt Lake City, UT, Mr. Ian MacLean, of Highland Landscaping, LLC in Southlake, TX, and Mr. Jeffrey G. Tucker of Tucker Company Worldwide, Inc. in Haddonfield, NJ.
Chabot, Committee Members talk cutting government red tape with a diverse roundtable of small business owners from across the United States
Third Plank of Bold Agenda Includes More Than 100 Ideas to Tackle Excessive Regulations, Develop American Energy, and Promote Financial Independence
This is the third plank of A Better Way, a bold agenda to tackle some of our country’s biggest challenges. Last week, Republicans unveiled initiatives aimed atlifting people out of poverty andkeeping the American people safe.
Our plan—available now at better.gop—is comprised of at least 101 ideas, including:
· Fewer and smarter regulations. Cut down on needless regulations and make the rules we do need more efficient and effective.
· More affordable and reliable energy. Connect our energy boom to consumers, responsibly produce more of our own resources, and end needless delays that hold up jobs and projects.
· More financial independence and no more bailouts. Reward people who work hard and do the right thing, and put an end to Wall Street bailouts.
· More choices for workers and students. Make it easier for people to excel in schools and workplaces, and rip up the red tape that gets in their way.
· Real Internet innovation. Establish clear and consumer-friendly rules that prevent the FCC from making up regulations as it goes along.
· A crack down on lawsuit abuse. Keep trial lawyers in check, and improve protections for consumers and small businesses.
These ideas were developed by the Task Force on Reducing Regulatory Burdens, which includes: Agriculture Committee Chairman Mike Conaway (R-TX), Energy & Commerce Committee Chairman Fred Upton (R-MI), Financial Services Committee Chairman Jeb Hensarling (R-TX), Judiciary Committee Chairman Bob Goodlatte (R-VA), Natural Resources Committee Chairman Rob Bishop (R-UT), Oversight & Government Reform Committee Chairman Jason Chaffetz (R-UT), Science, Space, and Technology Committee Chairman Lamar Smith (R-TX), Small Business Committee Chairman Steve Chabot (R-OH), and Transportation & Infrastructure Committee Chairman Bill Shuster (R-PA).
About A Better Way. A Better Way is a bold policy agenda to address some of the country’s biggest challenges. It takes our timeless principles—liberty, free enterprise, consent of the governed—and applies them to the problems of our time. Developed with input from around the country, it starts the debate now on what we can achieve in 2017 and beyond. It is our vision for a Confident America, at home and abroad. Now we are taking these ideas to the people, so you have a clear choice about the direction of the country. To learn more, visit better.gop.
1. Hearing Notice
2. Witness List
3. Hearing Memo
4. Hearing Video
Mr. Shan Hanes
First National Bank of Elkhart
Mr. Roger M. Beverage
President & CEO
Oklahoma Bankers Association
Oklahoma City, OK *
Testifying on behalf of the American Bankers Association
Dodd-Frank Destroying Jobs, Communities in America’s Heartland
WASHINGTON – Today representatives from community banks in America’s heartland told a key Congressional subcommittee how government regulations like the Dodd-Frank Act are killing small businesses in rural communities. The witnesses shared their stories with the House Small Business Subcommittee on Economic Growth, Tax and Capital Access about how new red tape like Dodd-Frank has killed jobs and devastated communities in rural America over the past six years.
“Across the country community banks are seeing the costs of complying with regulations soar, and the result has been less capital available for the main street shop looking to expand, for the entrepreneur looking to start a business, or for our neighbor hoping to purchase a new home,” explained Subcommittee on Economic Growth, Tax and Capital Access Tim Huelskamp (R-KS) in his opening remarks. “The impact of regulation on community banks is felt especially hard in our country’s rural areas, like my district in Kansas.”
“The rising cost of regulation is causing many small banks to merge with large entities that may not understand the local community, or causing some to shut their doors entirely,” Huelskamp added. “In rural towns without many other alternatives for access to capital, the results of top-down regulation can be devastating and impact the whole town. Home mortgage lending, small business lending, agricultural lending‒ all areas where community banks play a lead in providing capital‒ become much more difficult, and much more costly to consumers.”
COMMUNITY BANKS: VIEWS FROM THE HEARTLAND
“Rural banks will continue to serve their customers to the best of their abilities despite the many obstacles that have hurt their business models,” testified Shan Hanes of the First National Bank of Elkhart, Kansas. “Rural banks will compete with anyone on a level playing field and they have not backed down from such competition in the past. But when there is a combination of an unfair playing field and over burdensome regulations, all banks have great difficulty in surviving, not just competing. Banks are drivers of the economy, and this is especially true for rural banks.”
“Due to these factors in banks similar to mine, banks are exiting the mortgage lending market not due to credit decisions, but due to compliance and regulatory decisions,” Hanes stated. “The mortgage lending rules were intended to address the credit risk side; however the compliance risk has become greater than the credit risk.”
“America’s hometown banks are resilient, and have found ways of meeting our customers’ needs in spite of the ups and downs of the economy,” said Roger Beverage of the Oklahoma Bankers Association. “But it is a job that has become much more difficult because of the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators. This new regulatory atmosphere—not the local economic conditions—is often the tipping point that drives small banks to merge. The fact remains that there are nearly 1,500 fewer banks today than there were 5 years ago—a trend that will continue until some rational changes are made that will provide some relief to America’s hometown banks.”
- According to research by the Mercatus Center at George Mason University, community banks provide over 48 percent of small business loans and 44 percent of all farmland lending and all farm lending.
- According to a study by the American Action Forum, new rules under the Dodd-Frank Act have created over $20 billion in compliance costs, and over 60 million paperwork burden hours, with the promise of more still to come.
- Regulatory burdens and compliance costs are generally greater for small businesses that have less revenue and a small employee base to spread over costs. Given this, small financial institutions such as community banks have been forced to bear a severe regulatory burden.
Chabot Hails House Passage of Ozone Standards Implementations Act
Bipartisan Measure Protects Jobs and Public Health
WASHINGTON – House Small Business Committee Chairman Steve Chabot (R-OH) made the following statement after H.R. 4775, the Ozone Standards Implementation Act of 2016, was passed by the U.S. House:
“Over the last seven years, we have seen a disturbing pattern of regulatory overreach by President Obama’s EPA. To make matters worse, this dangerous pattern has been accompanied by an alarming lack of candor and clarity from the EPA about what exactly their new standards entail. This has left state governments and small businesses at a serious disadvantage as they try to navigate this maze of costly new environmental regulations and fight back against the EPA. With this bipartisan, common sense legislation, the House has restored important powers back to the states that will enable them to better protect the small businesses in their states against the EPA’s overreach.”
Chabot, Connolly Introduce Bill to Help More Small Businesses Export
WASHINGTON – Small Business Committee Chairman Steve Chabot (R-OH) and Congressman Gerry Connolly (D-VA) have introduced H.R. 2586, the Export Coordination Act of 2015, a bill to improve the coordination of federal export promotion resources and to streamline the export process so that more small businesses can sell goods overseas.
“When it comes to exporting, most small businesses don’t know where to start,” said Chabot. “The process can be incredibly complex and the federal resources that are supposed to help them navigate the process are just as intimidating. The Export Coordination Act would streamline these resources and take steps to make the process easier for businesses.
Chabot added, “It is my hope that this bill – and other solutions that the Small Business Committee is currently working on – will open the door for more small businesses to sell their goods overseas, which ultimately provides more opportunities for working families.”
Congressman Connolly said, “The federal government stands ready to help small businesses access foreign markets and create jobs through exports. This bill will ensure that federal trade promotion agencies are reaching out to state and local partners and making access to these resources as straightforward as possible.”
U.S. exports support more than 38 million American jobs – including 1 in 3 manufacturing jobs. Despite the fact that 95 percent of the world’s consumers live outside of the United States, only 2 percent of all small businesses export their goods.
H.R. 2586 would require the United States Department of Commerce’s Trade Promotion Coordinating Committee (TPCC) to clearly define each federal agency’s role in the export process, establish a central listing of all trade events, give state trade agencies a voice in setting our national export strategy, and reduce overlap of current export resources.
1. Hearing Notice
2. Witness List
3. Hearing Memo
National Taxpayer Advocate: IRS Not Helping Entrepreneurs in the Sharing Economy
WASHINGTON – The National Taxpayer Advocate told members of the House Small Business Committee today that the Internal Revenue Service (IRS) has not been helping Americans navigate tax rules and regulations in the new sharing economy. Today’s hearing was the second in a two-part series held by the Committee examining tax compliance challenges for entrepreneurs in the sharing economy.
“When the IRS is behind the times, it puts small businesses behind the eight ball,” said House Small Business Committee Chairman Steve Chabot (R-OH). “This failure has left on-demand platform companies and their workers confused and frustrated as they try to do the right thing and pay the taxes they owe.”
“Here’s the real kicker: many on-demand companies say they would gladly provide tax compliance training but they don’t because they are afraid the IRS will reclassify their relationship and subject them to whole new host of regulations and obligations,” Chairman Chabot observed.
“Congressional committees like ours have a duty to provide robust oversight of the IRS and ensure they are providing small businesses with clarity and treating them fairly,” Chabot added.
THE NATIONAL TAXPAYER ADVOCATE’S VIEW
“If a person working in the sharing economy called the IRS toll free line today, he or she would hear a recording saying the IRS is not answering any tax law questions after April 15th, so please check IRS dot gov,” testified Nina Olson, the National Taxpayer Advocate at the IRS. “The same message is given to people asking questions at IRS walk-in sites. For a tax agency to not answer questions from taxpayers trying to learn what they need to do to comply is beyond unacceptable, it’s absurd.”
Under current IRS rules, Olson explained, “An Airbnb host would have to sift through a 24 page publication 527 residential rental property and an Uber driver would have to navigate through the 50 page publication 463 travel, entertainment, gift and car expenses and they still might not understand how these rules apply to themselves as service providers in the sharing economy.”
WASHINGTON—House Small Business Committee Chairman Steve Chabot (R-Ohio), joined by House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-Utah) today asked the Office and Management and Budget for a long overdue status update on the federal paperwork burden.
Chairmen Chabot and Chaffetz, whose Committees have jurisdiction over the Paperwork Reduction Act, pointed out to OMB Director Shaun Donovan that “the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses and others by federal agencies and efforts to reduce those burdens.”
As Chabot and Chaffetz noted, “OMB’s report, which it calls the Information Collection Budget, is long overdue. Congress did not receive a report in 2015.”
Read full text of the letter here.
May 26, 2016
The Honorable Shaun Donovan
Office of Management and Budget
Washington, D.C. 20503
Dear Director Donovan:
As Chairmen of the Committees with jurisdiction over the Paperwork Reduction Act,
5 U.S.C. §§ 3501-21 (PRA), we write to inquire about the Office of Management and Budget’s annual report on the federal paperwork burden. Pursuant to the PRA, the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses, and others by federal agencies and efforts to reduce those burdens. OMB’s report, which it calls the Information Collection Budget, is long overdue.
Congress did not receive a report in 2015. The last report that OMB issued was in 2014 and covered the paperwork burden imposed on the public in Fiscal Year (FY) 2013. We are concerned that OMB is not fulfilling its obligations under the PRA. Congress needs the Information Collection Budget to evaluate the overall federal paperwork burden and determine whether legislative changes are necessary to ensure the PRA operates as Congress intended. Therefore, we request that OMB provide the following information:
1. Why did OMB fail to issue a report to Congress on the federal paperwork burden in 2015?
2. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2014?
3. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2015?
4. Please explain how OMB will ensure that it provides Congress with an annual report on the federal paperwork burden as required by 5 U.S.C. § 3514 from now on.
5. Please provide all policies and guidance documents explaining how OMB approves information collection requests.
Please provide your responses no later than June 23, 2016
Committee on Small Business
Committee on Oversight and Government Reform
cc: The Honorable Howard Shelanski, Administrator
Office of Information and Regulatory Affairs, Office of Management and Budget
1. Hearing Notice
2. Witness List
3. Hearing Memo
Ms. Caroline Bruckner
Executive-in-Residence, Accounting and Taxation
Managing Director, Kogod Tax Policy Center
Mr. Rob Willey
San Francisco, CA
Mr. Morgan Reed
ACT The App Association
Mr. Joe Kennedy
Information Technology and Innovation Foundation
TaskRabbit, Experts Describe Challenges of the Sharing Economy to Congress
WASHINGTON – A representative for the on-demand platform company TaskRabbit told the House Small Business Committee today that the current tax, regulatory and legal climate threatens the success of entrepreneurs in the new sharing economy. The panel of experts described to lawmakers the bevy of new tax compliance challenges faced by small employers, employees and their customers as they navigate the online, app-driven sharing economy.
“No matter what you call it, the sharing economy is changing the face of American entrepreneurship and small businesses before our very eyes,” said House Small Business Committee Chairman Steve Chabot (R-OH). “The dizzying pace of this change has presented many new opportunities and new challenges for the millions of Americans who participate in it.”
“These new platforms have dramatically changed the way companies provide goods and services, giving their workers unprecedented freedom and independence. However, in their enthusiasm, these entrepreneurs are running smack-dab into the buzz-saw of an outmoded tax code that is not designed to accommodate them,” observed Chabot.
“Unfortunately, the IRS has not been part of the solution for entrepreneurs in navigating this new sharing economy. Too often, it has been part of the problem. Our current tax system isn’t working for these new small businesses. In many ways, it is working against them. We can do better, we must do better,” Chabot added.
ENTREPRENEURS TASK WASHINGTON WITH TAX & REGULATORY REFORM
“Tax compliance is just one area of many where our Taskers could benefit from better training. Our Taskers also are looking for direction on how to better market themselves and their services, access health care, and plan for retirement,” testified Rob Willey, the Vice President of Marketing for TaskRabbit.“We at TaskRabbit would like to be a resource, a partner, and a collaborator for that training – it is one of our main areas of focus in determining what types of services we can provide for our Taskers. We hesitate to pursue the kinds of training services we want to provide simply because the threat of litigation and the risks tied to worker classification laws and regulations at the federal and state level are real.”
Pointing to a proposal by economist Joseph V. Kennedy, who also testified at today’s hearing, Willey called for a legal and regulatory “time-out” for new sharing economy companies.
“In the early years of the Internet, Congress imposed a moratorium on federal and state taxation of Internet transactions. Doing so helped a young, nascent sector of the economy develop and provide real benefits for consumers,” explained Willey. “A limited period of legal and regulatory relief would enable platform economy companies to pursue innovative ways to develop and provide services and benefits to those small business owners and entrepreneurs who utilize platform services.”
“What we want to avoid is a situation in which the burdens of tax compliance become so great that it forces Taskers to scale back on their tasks, if not compel them to leave the network altogether,” added Willey.
NEW STUDY: SMALL BIZ GETTING “SHORT-CHANGED” IN SHARING ECONOMY
“The current tax administration system isn’t working for a significant percentage of on-demand platform small business operators or Treasury or IRS,” noted Caroline Bruckner, the Managing Director of the Kogod Tax Policy Center at American University. “At the root of this problem is a lack of information and understanding of tax filing obligations, which is compounded by an information reporting regime that results in widespread confusion. And these tax compliance challenges are only going to continue to grow and impact more and more self-employed small business owners.”
“Everyone is losing under the current rules. Both on-demand economy players and the IRS deserve greater efficiency and less hassle. We can do better,” said Bruckner.
Bruckner is the author of a brand new study released this week titled“Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy.”
“Although millions of Americans are engaging in the on-demand platform economy every day as sellers and service providers, the tax compliance challenges this new frontier presents have gone relatively unnoticed,” Bruckner’s study found. “At the same time, these challenges will grow with this fastest growing segment of the labor economy—creating unnecessary and ongoing burdens for the small business operators who power the on-demand economy.”
“At best, these small business owners are short-changed when filing their taxes; at worst, they fail to file altogether. In addition, these taxpayers face potential audit and penalty exposure for failure to comply with filing rules that are triggered by relatively low amounts of earned income and inconsistent reporting rule adoption,” the study concluded.
IS THERE AN APP FOR THAT?
“Congress and the IRS should take great care to make sure that the federal tax code enables—rather than stifles—the sharing economy,” testified Morgan Reed, the Executive Director of ACT/The App Association. “Specifically, the treatment of all sharing economy workers as 'employees' under the federal tax code would be detrimental to the sharing economy, especially small businesses.”
“Congress should work to advance legislation that would provide taxpayers with certainty and transparency in the tax resolution process and would provide the ability to settle disputes with the IRS in an effective and efficient manner,” Reed suggested.
*Today’s hearing was the first in a two-part series on tax compliance for small businesses in the sharing economy. On Thursday, the Committee will hear from the IRS’ National Taxpayer Advocate Nina Olson.
1. Hearing Notice
2. Witness List
Mr. Joe Steffy
Poppin Joe’s Gourmet Kettle Korn
Accompanied by: Mr. Ray Steffy
Ms. Lisa Goring
Executive Vice President
Programs and Services
Autism Speaks New York, NY
Ms. Terri Hogan
Contemporary Cabinetry East Cincinnati, OH
Mr. Rajesh Anandan
ULTRA Testing New York, NY