[Congressional Record Volume 151, Number 161 (Thursday, December 15, 2005)]
[Senate]
[Pages S13679-S13680]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAYH:
  S. 2111. A bill to amend the Internal Revenue Code of 1986 to provide 
a credit for small business employee training expenses, to increase the 
exclusion of capital gains from small business stocks, to extend 
expensing for small businesses, and for other purposes; to the 
Committee on Finance.
  Mr. BAYH. Mr. President, I rise today to introduce the Small Business 
Growth Initiative of 2005, which is critical to expanding opportunities 
for our small businesses to excel in the U.S economy and compete with 
larger businesses at home and abroad. Our Nation's competitiveness 
hinges on our ability to cultivate the entrepreneurial spirit and 
provide a policy environment that helps our Nation's job creators start 
or expand small businesses. Since I joined the Small Business Committee 
in 2003, I have redoubled my efforts to help small businesses, and this 
bill represents my latest ideas and work to provide additional 
assistance to the small business community.
  In my home State of Indiana, small businesses employ nearly 1.3 
million Hoosiers and make up 97.5 percent of all Indiana companies. 
Nationwide, small businesses have created between 60 and 80 percent of 
net new jobs over the last decade. Despite this success, small 
businesses are confronted with unique challenges. To understand what 
small business owners must overcome to build a successful enterprise, 
one need only know that one-third of small businesses fail in the first 
2 years, and about half fail in the first 4 years. To help more small 
businesses succeed, my bill is designed to help small businesses train 
their employees, increase access to capital, encourage long-term 
investments in new technologies and equipment, expand opportunities to 
conduct research and development for the Federal Government, and 
finally, offer employee retirement plans.
  The global economy requires that successful small businesses 
continually update workers' skills to remain competitive. To meet this 
requirement, the first section of the bill provides a $1,000 tax credit 
for training costs per employee for up to five employees. This tax 
credit can be used for employees to, among other activities, obtain a 
new job certification, attend a community college course, or attend a 
1-day seminar. Statistics indicate that the U.S. faces a growing skills 
gap in its workforce. With technology playing a critical role in the 
economy, it is vital that we continually educate workers so that they 
are able to meet the challenges of new and innovative tasks. Companies 
are often reluctant to invest in worker training due to the fear that 
workers will take their new training to new jobs. This tax credit 
reduces the cost to the employer and provides much-needed support for 
employers to develop a skilled workforce.
  Access to capital is critical for emerging small businesses as they 
seek to innovate, create jobs, and create wealth. The second provision 
in this bill provides a significant incentive to individuals and 
companies to invest in emerging small businesses, thereby increasing 
the amount of capital available to small businesses. Specifically, this 
bill provides a zero capital gains rate for long-term individual and 
corporate investments in small business stock. A 2004 report by the 
Council on Competitiveness highlighted small businesses' difficulty in 
trying to access venture capital. The study found: ``Recently, (the 
funding gap) has been widening as Venture Capital firms are shifting 
investments to focus on more mature firms with larger capital needs. 
Entrepreneurs report difficulty in raising money between $2 million and 
$5 million.''
  The third section of my bill extends a critical incentive that small 
businesses have used to invest in new technologies, expand their 
operations, and most important, create jobs. Under current law, small 
businesses can expense--rather than depreciate--up to $100,000 in new 
qualifying machinery or equipment in each year through 2007. My bill 
extends this tax provision through the end of 2010. This will allow 
small businesses to enjoy a 5-year planning horizon for new investment. 
It is difficult for small businesses to make significant investments 
when the tax code is riddled with ``here today, gone tomorrow'' 
provisions. This provision will provide tax savings to small businesses 
and reduce the amount of time that small businesses would otherwise be 
forced to spend complying with complex depreciation rules.

  The fourth section of my bill would expand research and development 
opportunities for small businesses by increasing the amount of federal 
R&D opportunities available through the Small Business Innovation 
Research Program, SBIR, and the Small Business Technology Transfer 
Program, STTR. Small businesses produce 13 to 14 times more patents per 
employee than large firms. Small business patents are twice as likely 
as large firm patents to be among the 1 percent most cited patents. 
These programs are critical to expand opportunities for small 
businesses to enter the Federal marketplace and in so doing, develop 
new products that can be commercialized and create new jobs. They play 
a major role in helping the government advance cutting-edge research. 
According to the Small Business Administration, approximately 1 in 4 
SBIR projects will result in the sale of new commercial products or 
processes.
  The fifth and final section of my bill is designed to help small 
businesses offer employee retirement plans. Too many workers at small 
companies do not have the opportunity to contribute to their retirement 
security. Only 31 percent of small businesses with 10 to 24 employees 
provide retirement plans to their employees. By comparison, 72 percent 
of large firms with 1,000 or more employees provide retirement plan 
options to their employees. As we

[[Page S13680]]

consider ways to help small businesses grow and be competitive, it is 
important to provide incentives that allow them to recruit and retain 
qualified employees and better compete with larger businesses at home 
and abroad that provide retirement plans for their employees.
  The problem for small businesses stems, in part, from the 
administrative costs of starting a retirement plan. To address this 
problem, my bill doubles the existing tax credit to offset start-up 
costs associated with setting up new retirement plans. Under this bill, 
small companies would be eligible to take a 50 percent credit on the 
first $2,000 in approved costs incurred in each of the first 3 years of 
a qualified pension plan's existence.
  In conclusion, small businesses are the engine of our economy and we 
need to focus attention on advancing policies that help small 
businesses grow and prosper. I look forward to working with my 
colleagues on these and other proposals to help our Nation's 
entrepreneurs continue to lead the world in innovation and compete 
effectively with large companies both here and abroad in the global 
economy.
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