Small businesses would win new tax incentives under Democratic-led bill

Small businesses owned by women and people of color would have improved access to capital under a bicameral bill proposed Tuesday by congressional Democrats that would create two new tax incentives to help these businesses grow and hire employees.

Entitled the Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success (PROGRESS) Act, the bill would provide a tax credit for investors in start-up businesses and a credit for wages paid by start-up businesses to their first employees, according to the text of the bill.

“Women business owners, particularly women of color, are underestimated, underrepresented, and undercapitalized,” said U.S. Senate Finance Committee Chairman Ron Wyden (D-OR), who sponsored his chamber’s version, S. 5144.

“Nobody can question the entrepreneurial spirit of women small business owners in America, but tax laws on the books today aren’t doing nearly enough to support them compared to others,” Wyden said.

Specifically, the First Employee Credit is designed to stimulate business growth and job creation, according to a bill summary provided by the lawmakers.

Under an enacted bill, a credit equal to 25 percent of W-2 wages reported could be claimed annually, up to $10,000 in a single tax year, with a lifetime limit of $40,000.

Because many businesses do not turn a profit in their early years, the First Employee Credit would be creditable against the business’ payroll tax liability, says the summary.

Certain businesses that have not reported full-time equivalent W-2 wages in a previous year would be eligible for the credit, and eligible businesses must be majority-owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers), the summary says.

“The Biden-Harris administration has overseen a boom in small business growth. But for many small businesses, particularly those owned by enterprising women and people of color without long-term relationships with financial institutions, securing access to capital remains far too tough, which hurts their ability to grow,” said U.S. Rep. Judy Chu (D-CA), who sponsored H.R. 9781 in her chamber.

“Sen. Wyden and I are introducing the PROGRESS Act to create first employee and investor tax credits so we can level the playing field for women-owned and minority-owned small businesses and unlock their full growth potential,” Chu said.

The Investor Credit proposed under the bill aims to encourage third-party capital investment and allow small businesses to grow and thrive. A credit of up to 50 percent of a qualified debt or equity investment could be claimed, up to $10,000 in a single tax year, with a lifetime limit of $50,000 once the bill is enacted, states the bill summary.

Additionally, investors that fund certain businesses would be able to use the credit to boost their rate of return, among other provisions, according to the summary.

“Everybody wins when more small business owners have a chance to get ahead and grow, and that’s what this bill is all about,” Wyden said.

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