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Congress Approves JOBS Act As Dueling Small Business Tax Cuts Emerge

Congress approved the Jump-Start Our Business Startups Act (JOBS Act) earlier this week, sending it along to President Barack Obama for signature into law.

The House approved an amended version of the bill by a 380-41 vote, after the Senate passed the legislation last week, 73-26. Essentially, the bill aims to spark business and job creation by loosening regulations and reporting requirements for small businesses and startup firms seeking to raise cash, including through public offerings.

"Since 2007, we've seen a 23% drop in new business creation, according to the Bureau of Labor Statistics, and October's annual World Bank's Doing Business report found that the United States fell to No. 13 for ease of starting a business, down from No. 3 in 2007," said House Small Business Committee Chairman Sam Graves (R-MO). "The JOBS Act helps address this by increasing opportunities for capital formation and easing the pathway for high-growth companies to go public."

Specifically, the bill makes it easier for companies to solicit private investors and relaxes Securities and Exchange Commission (SEC) filing requirements associated with initial public offerings.

The goodwill that ushered the JOBS Act through Congress seems to have been short-lived, however, as dueling tax cut proposals emerging over the last week have once again ramped up the partisan rancor. House Republicans unveiled a bill, the Small Business Tax Cut Act of 2012, that would allow qualified small businesses to deduct an amount equal to 20% of their business income. Senate Democrats responded with a proposal of their own, one that would give small businesses a 10% tax credit for any new hiring or pay raises in 2012, while also allowing them to write off the full cost of new capital investments for expanding operations.

Aside from the obvious differences between the bills, the House proposal has received a great deal of criticism for its general lack of exclusions. In essence, if a business has fewer than 500 employees, then, according to the legislation, it's technically a small business, and can take the 20% deduction. Democrats were quick to point out that under this definition, sports franchises, celebrity companies and hedge funds would all benefit from the tax cut, despite the fact that few would consider these companies among those most in need of federal assistance.

Jacob Barron, CICP, NACM staff writer