[House Report 109-740]
[From the U.S. Government Publishing Office]
109th Congress
2d Session HOUSE OF REPRESENTATIVES Report
109-740
_______________________________________________________________________
Union Calendar No. 442
SUMMARY OF ACTIVITIES
__________
A REPORT
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
January 2, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
LETTER OF TRANSMITTAL
----------
House of Representatives,
Committee on Small Business,
Washington, DC, January 2, 2007.
Hon. Karen Haas,
Clerk, House of Representatives,
Washington, DC.
Dear Ms. Haas: On behalf of the Committee on Small Business
of the U.S. House of Representatives, I am pleased to transmit
the attached Summary of Activities of the Committee on Small
Business for the 109th Congress.
This report is submitted in compliance with the
requirements of Rule XI, clause 1(d), of the Rules of the House
of Representatives with respect to the activities of the
Committee, and in carrying out its duties as stated in the
Rules of the House of Representatives.
The purpose of this report is to provide a reference
document for Members of the Committee, the Congress and the
public which can serve as a research tool and historic
reference outlining the Committee's legislative and oversight
activities conducted pursuant to Rule X, clause 1(o), 2(b)(1)
and 3(g), of the Rules of the House of Representatives. This
document is intended to serve as a general reference tool, and
not as a substitute for the hearing records, reports and other
Committee files.
Sincerely,
Donald A. Manzullo,
Chairman.
C O N T E N T S
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Page
Chapter I--Introduction.......................................... 1
1.1 Historical Background................................... 1
1.2 Extracts from the Rules of the House of Representatives. 2
1.3 Number and Jurisdiction of Subcommittees................ 3
1.4 Disposition of Legislation Referred to the Committee.... 4
Chapter II--The Small Business Administration.................... 7
2.1 SBA Programs in General................................. 7
2.2 SBA Business Loans...................................... 8
2.3 Disaster Assistance Loans............................... 9
2.4 Small Business Investment Companies..................... 10
2.5 Procurement Assistance.................................. 10
2.6 Entrepreneurial Development............................. 11
2.7 Surety Bond Guarantees.................................. 13
2.8 Technology and Innovation............................... 13
2.9 Export Assistance....................................... 15
2.10 Office of Advocacy..................................... 16
Chapter III--Hearings and Meetings Held By the Committee on Small
Business and its Subcommittees, 109th Congress................. 19
3.1 Full Committee.......................................... 19
3.2 Subcommittee on Workforce, Empowerment and Government
Programs................................................... 19
3.3 Subcommittee on Regulatory Reform and Oversight......... 20
3.4 Subcommittee on Tax, Finance and Exports................ 20
3.5 Subcommittee on Rural Enterprises, Agriculture and
Technology................................................. 20
Chapter IV--Publications of the Committee on Small Business and
its Subcommittees, 109th Congress.............................. 21
4.1 Reports................................................. 21
4.2 Hearings Records........................................ 21
Chapter V--Summary of Legislative Activities of the Committee on
Small Business, 109th Congress................................. 25
5.1 H. RES. 22--EXPRESSING THE SENSE OF THE HOUSE OF
REPRESENTATIVES THAT AMERICAN SMALL BUSINESSES ARE ENTITLED
TO A SMALL BUSINESS BILL OF RIGHTS......................... 25
5.2 H. RES. 130--RECOGNIZING THE CONTRIBUTIONS OF
ENVIRONMENTAL SYSTEMS AND THE TECHNICIANS WHO INSTALL AND
MAINTAIN THEM TO THE QUALITY OF LIFE OF ALL AMERICANS AND
SUPPORTING THE GOALS AND IDEALS OF NATIONAL INDOOR COMFORT
WEEK....................................................... 26
5.3 H.R. 230--NATIONAL SMALL BUSINESS REGULATORY ASSISTANCE
ACT OF 2005................................................ 27
5.4 H.R. 527--VOCATIONAL AND TECHNICAL ENTREPRENEURSHIP
DEVELOPMENT ACT OF 2005.................................... 35
5.5 H.R. 682--THE REGULATORY FLEXIBILITY IMPROVEMENTS ACT... 38
5.6 H.R. 1148--INSULAR AREAS SMALL BUSINESS DEVELOPMENT
ACT--KEY ELEMENTS WERE INCORPORATED INTO PUBLIC LAW 109-59. 40
5.7 H.R. 2981--TO EXPAND AND IMPROVE THE ASSISTANCE PROVIDED
BY SMALL BUSINESS DEVELOPMENT CENTERS TO INDIAN TRIBE
MEMBERS, NATIVE ALASKANS, AND NATIVE HAWAIIANS............. 41
5.8 H.R. 3207--SECOND-STAGE SMALL BUSINESS DEVELOPMENT ACT
OF 2005.................................................... 45
5.9 H.R. 6159--TO EXTEND TEMPORARILY CERTAIN AUTHORITIES OF
THE SMALL BUSINESS ADMINISTRATION, PUBLIC LAW 109-316...... 51
Chapter VI--Summary of Other Legislative Activities of the
Committee on Small Business.................................... 53
6.1 Committee Meetings...................................... 53
6.1.1 Organizational Meetings........................... 53
6.1.2 Oversight Plan for the 109th Congress............. 53
6.2 Budget Views and Estimates.............................. 59
6.2.1 Fiscal Year 2006 Budget........................... 59
6.2.2 Fiscal Year 2007 Budget........................... 62
Chapter VII--Summary of Oversight, Investigations, and Other
Activities of the Committee on Small Business and its
Subcommittees.................................................. 65
7.1 Summary of Committee Oversight Plan and Implementation.. 65
7.2 Summaries of the Hearings held by the Full Committee on
Small Business............................................. 65
7.2.1 THE PRESIDENT'S FISCAL YEAR 2006 BUDGET........... 65
7.2.2 MEDICAL LIABILITY REFORM: STOPPING THE
SKYROCKETING PRICE OF HEALTHCARE....................... 67
7.2.3 PRESCRIPTIONS FOR HEALTH CARE: SOLUTIONS TO THE
PROBLEM................................................ 68
7.2.4 SMALL BUSINESS PRIORITIES FOR THE 109TH CONGRESS--
H. RES. 22............................................. 70
7.2.5 THE RFA AT 25: NEEDED IMPROVEMENTS FOR SMALL
BUSINESS REGULATORY RELIEF............................. 71
7.2.6 WHAT HAS EX-IM BANK DONE FOR SMALL BUSINESS
LATELY?................................................ 72
7.2.7 PRIVATE EQUITY FOR SMALL FIRMS: THE IMPORTANCE OF
THE PARTICIPATING SECURITIES PROGRAM................... 74
7.2.8 CLOSING THE TAX GAP AND THE IMPACT ON SMALL
BUSINESS............................................... 76
7.2.9 ANTICOMPETITIVE THREATS FROM PUBLIC UTILITIES: ARE
SMALL BUSINESSES LOSING OUT?........................... 77
7.2.10 SMALL BUSINESS ACCESS TO HEALTH INSURANCE:
LESSONS FROM NEBRASKA?................................. 79
7.2.11 ARE SKYROCKETING MEDICAL LIABILITY PREMIUMS
DRIVING DOCTORS AWAY FROM UNDERSERVED AREAS?........... 80
7.2.12 SMALL BUSINESS DEVELOPMENT CENTERS: NEW OFFERINGS
FOR A NEW ECONOMY...................................... 82
7.2.13 FREEDOM OF CONSCIENCE FOR SMALL PHARMACIES....... 84
7.2.14 PROPOSED LEGISLATIVE REMEDY FOR THE PARTICIPATING
SECURITIES PROGRAM..................................... 86
7.2.15 REFORMING THE TAX CODE TO ASSIST SMALL BUSINESSES 87
7.2.16 SMALL BUSINESS AND HURRICANE KATRINA: REBUILDING
THE ECONOMY............................................ 89
7.2.17 PROMOTING PRIVATE SECTOR EMERGENCY PREPAREDNESS.. 90
7.2.18 BUILDING A WALL BETWEEN FRIENDS: PASSPORTS TO AND
FROM CANADA?........................................... 92
7.2.19 FISCAL YEAR '07 BUDGET AND REAUTHORIZATION
PROPOSAL OF THE SBA.................................... 94
7.2.20 HEARING ON IRS LATEST ENFORCEMENT: IS THE BULLS-
EYE ON SMALL BUSINESSES?............................... 95
7.2.21 CUTTING OUR TRADE DEFICIT: CAN THE U.S. MUSTER
ITS DIVERSE TRADE PROMOTION OPERATIONS TO MAKE AN
IMPACT?................................................ 97
7.2.22 SARBANES-OXLEY SECTION 404: WHAT IS THE PROPER
BALANCE BETWEEN INVESTOR PROTECTION AND CAPITAL
FORMATION FOR SMALLER PUBLIC COMPANIES................. 98
7.2.23 BRIDGING THE EQUITY GAP: EXAMINING THE ACCESS TO
CAPITAL FOR ENTREPRENEURS ACT OF 2006.................. 99
7.2.24 CONTRACTING THE INTERNET: DOES ICANN CREATE A
BARRIER TO SMALL BUSINESS?............................. 100
7.2.25 THE AWARD OF CONTRACTS BY FEDERAL AGENCIES TO
ALASKA NATIVE CORPORATIONS............................. 101
7.2.26 FAILURE TO COMPLY WITH THE REGULATORY FLEXIBILITY
ACT: IRS ENDANGERING SMALL BUSINESSES YET AGAIN........ 103
7.2.27 ADVANCING SECURITY AND COMMERCE AT OUR NATION'S
PORTS: THE GOALS ARE NOT MUTUALLY EXCLUSIVE............ 104
7.2.28 FEMA'S RESPONSE TO THE ROCKFORD FLOOD............ 105
7.3 Summaries of the Hearings held by the Subcommittee on
Workforce, Empowerment and Government Programs............. 107
7.3.1 REMOVING OBSTACLES TO JOB CREATION: HOW CAN THE
FEDERAL GOVERNMENT HELP SMALL BUSINESSES REVITALIZE THE
ECONOMY?............................................... 107
7.3.2 HOW ARE VETERAN-OWNED SMALL BUSINESS OWNERS BEING
SERVED?................................................ 109
7.3.3 UNION SALTING--ORGANIZING AGAINST SMALL BUSINESS.. 110
7.3.4 HOW THE CLEAN AIR ACT AFFECTS AUTO REPAIR......... 112
7.3.5 SMALL BUSINESS EXPENSING--JOB GROWTH THROUGH THE
TAX CODE............................................... 114
7.3.6 FREEDOM IN THE WORKPLACE--AN EXAMINATION OF A
NATIONAL RIGHT TO WORK LAW............................. 116
7.3.7 THE SMALL BUSINESS INNOVATION RESEARCH PROGRAM--
OPENING DOORS TO NEW TECHNOLOGY........................ 117
7.3.8 ENTREPRENEURIAL DEVELOPMENT PROGRAMS OF THE SBA... 119
7.3.9 HEALTH CARE PROPOSALS TO HELP LOWER THE COST TO
SMALL BUSINESS......................................... 120
7.3.10 IMMIGRANT EMPLOYMENT VERIFICATION AND SMALL
BUSINESS............................................... 122
7.3.11 HEALTH CARE AND SMALL BUSINESS: REAL OPTIONS FOR
COLORADO BUSINESSES.................................... 124
7.4 Summaries of the Hearings held by the Subcommittee on
Regulatory Reform and Oversight............................ 125
7.4.1 THE ADMINISTRATION'S PROGRAM TO REDUCE UNNECESSARY
REGULATORY BURDEN ON MANUFACTURERS--A PROMISE TO BE
KEPT................................................... 125
7.4.2 ANWR'S BENEFITS FOR SMALL BUSINESS................ 127
7.4.3 VETERAN'S ACCESS TO CAPITAL....................... 127
7.4.4 ENTREPRENEUR SOLDIERS EMPOWERMENT ACT............. 128
7.4.5 THE INTERNET SALES TAX: HEADACHES AHEAD FOR SMALL
BUSINESS?.............................................. 130
7.4.6 THE STATE OF SMALL BUSINESS SECURITY IN A CYBER
ECONOMY................................................ 131
7.4.7 THE SMALL BUSINESS ADMINISTRATION'S PROCUREMENT
PROGRAMS............................................... 133
7.4.8 ELECTRONIC MEDICAL RECORDS........................ 134
7.4.9 DATA PROTECTION REGULATIONS AND SMALL BUSINESS.... 136
7.4.10 S CORPORATIONS--THEIR HISTORY AND CHALLENGES..... 137
7.4.11 AN UPDATE ON ADMINISTRATION ACTION TO REDUCE
UNNECESSARY REGULATORY BURDENS ON AMERICA'S SMALL
MANUFACTURERS.......................................... 138
7.5 Summaries of the Hearings held by the Subcommittee on
Tax, Finance and Exports................................... 140
7.5.1 THE ESTATE TAX AND THE ALTERNATIVE MINIMUM TAX--
INEQUITY FOR AMERICA'S SMALL BUSINESSES................ 140
7.5.2 DOES CHINA ENACT BARRIERS TO FREE TRADE?.......... 141
7.5.3 EXAMINING THE PRESIDENT'S TAX REFORM PANEL
RECOMMENDATIONS........................................ 143
7.5.4 SMALL BUSINESS ADMINISTRATION FINANCE PROGRAMS.... 144
7.5.5 THE EFFECTS OF THE HIGH COST OF NATURAL GAS ON
SMALL BUSINESS AND FUTURE ENERGY TECHNOLOGIES.......... 145
7.5.6 CHINESE BARRIERS TO TRADE......................... 146
7.6 Summaries of the Hearings held by the Subcommittee on
Rural Enterprises, Agriculture and Technology.............. 147
7.6.1 THE HIGH PRICE OF NATURAL GAS AND ITS IMPACT ON
SMALL BUSINESSES: ISSUES AND SHORT TERM SOLUTIONS...... 147
7.6.2 DOES CHINA ENACT BARRIERS TO FREE TRADE?.......... 149
7.6.3 DIFFERENT APPLICATIONS FOR GENETICALLY MODIFIED
CROPS.................................................. 149
7.6.4 THE IMPORTANCE OF THE BIOTECHNOLOGY INDUSTRY AND
VENTURE CAPITAL SUPPORT IN INNOVATION.................. 151
7.6.5 THE NEED FOR IMPROVEMENTS AND MORE INCENTIVES IN
THE ENDANGERED SPECIES ACT............................. 152
7.6.6 EXAMINING THE PRESIDENT'S TAX REFORM PANEL
RECOMMENDATIONS........................................ 154
7.6.7 THE MISSOURI RIVER AND ITS SPRING RISE: SCIENCE OR
SCIENCE FICTION........................................ 154
7.6.8 THE FUTURE OF RURAL TELECOMMUNICATIONS: IS
UNIVERSAL SERVICE REFORM NEEDED?....................... 155
7.6.9 UNLOCKING CHARITABLE GIVING....................... 156
7.6.10 CHINESE BARRIERS TO TRADE........................ 157
Union Calendar No. 442
109th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 109-740
======================================================================
SUMMARY OF ACTIVITIES
_______
January 2, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Manzullo of Illinois, from the Committee on Small Business,
submitted the following
R E P O R T
SUMMARY OF ACTIVITIES
CHAPTER ONE
INTRODUCTION
This is the sixteenth summary report of the standing
Committee on Small Business. The action by the House of
Representatives in adopting the House Resolution 988 on October
8, 1974, provided that the committee be established as a
standing committee, and upgraded the Permanent Select Committee
on Small Business by giving the Committee legislative
jurisdiction over small business matters in addition to the
oversight jurisdiction it had historically exercised.
The adoption of the House rules in the 94th through 109th
Congress confirmed this action and continued the process begun
on August 12, 1941, when, by virtue of House Resolution 294
(77th Congress, 1st session), the Select Committee on Small
Business was created. In January 1971, the House designated the
Select Committee as a permanent Select Committee; and, on
October 8, 1974, the 93rd Congress, recognizing the importance
of the work performed on behalf of this nation's small
businesses, provided that the Committee should thereafter be
established as a standing committee.
1.1 Historical Background
The history of the Select Committee on Small Business from
its inception in 1941 during the 77th Congress through 1972,
the end of the 92nd Congress, may be found in House Document
93-197 (93rd Congress, 2nd session), entitled ``A History and
Accomplishments of the Permanent Select Committee on Small
Business.''
The Committee is bipartisan in recognition that the
nation's small business people represent a major segment of our
business population and our nation's economic strength. This
committee, continuing its vital oversight responsibilities,
serves as the advocate and voice for small business as well as
the focal point for small business legislation.
In recognition of the importance of the Committee, the
House of Representatives has established the Committee's
membership at 33 Members. The following Members were named to
constitute the Committee in the 109th Congress:
Republicans included:
Donald A. Manzullo (IL), Chairman; Roscoe G. Bartlett
(MD) Vice Chairman; Sue W. Kelly (NY); Steve Chabot
(OH); Sam Graves (MO); W. Todd Akin (MO); Bill Shuster
(PA); Marilyn N. Musgrave (CO); Jeb Bradley (NH); Steve
King (IA); Thaddeus G. McCotter (MI); Ric Keller (FL);
Ted Poe (TX); Michael E. Sodrel (IN); Jeff Fortenberry
(NE); Michael G. Fitzpatrick (PA); Lynn A. Westmoreland
(GA); Louie Gohmert (TX).
Democrats included:
Nydia M. Velazquez (NY), Ranking Minority Member;
Juanita Millender-McDonald (CA); Tom Udall (NM); Daniel
Lipinski (IL); Eni F. H. Faleomavaega (AS); Donna M.
Christensen (VI); Danny K. Davis (IL); Ed Case (HI);
Madeleine Z. Bordallo (GU); Raul M. Grijalva (AZ);
Michael H. Michaud (GA); Linda T. Sanchez (CA); John
Barrow (GA); Melissa L. Bean (IL); Gwen Moore (WI).
1.2 Extracts From the Rules of the House of Representatives
----------
RULE X
ORGANIZATION OF COMMITTEES
COMMITTEES AND THEIR LEGISLATIVE JURISDICTIONS
1. There shall be in the House the following standing
committees, each of which shall have the jurisdiction and
related functions assigned by this clause and clauses 2, 3, and
4. All bills, resolutions, and other matters relating to
subjects within the jurisdiction of the standing committees
listed in this clause shall be referred to those committees, in
accordance with clause 2 of rule XII, as follows:
* * * * * * *
(o) Committee on Small Business.
(1) Assistance to and protection of small business,
including financial aid, regulatory flexibility, and paperwork
reduction.
(2) Participation of small-business enterprises in Federal
procurement and Government contracts.
GENERAL OVERSIGHT RESPONSIBILITIES
2. (b)(1) In order to determine whether laws and programs
addressing subjects within the jurisdiction of a committee are
being implemented and carried out in accordance with the intent
of Congress and whether they should be continued, curtailed, or
eliminated, each standing committee (other than the Committee
on Appropriations) shall review and study on a continuing
basis--
(A) The application, administration, execution, and
effectiveness of laws and programs addressing subjects
within its jurisdiction;
(B) The organization and operation of Federal
agencies and entities having responsibilities for the
administration and execution of laws and programs
addressing subjects within its jurisdiction;
(C) any conditions or circumstances that may indicate
the necessity or desirability of enacting new or
additional legislation addressing subjects within its
jurisdiction (whether or not a bill or resolution has
been introduced with respect thereto); and
(D) future research and forecasting on subjects
within its jurisdiction.
(2) Each committee to which subparagraph (1) applies having
more than 20 members shall establish an oversight subcommittee,
or require its subcommittees to conduct oversight in their
respective jurisdictions, to assist in carrying out its
responsibilities under this clause. The establishment of an
oversight subcommittee does not limit the responsibility of a
subcommittee with legislative jurisdiction in carrying out its
oversight responsibilities.
(c) Each standing committee shall review and study on a
continuing basis the impact or probable impact of tax policies
affecting subjects within its jurisdiction as described in
clauses 1 and 3.
SPECIAL OVERSIGHT FUNCTIONS
* * * * * * *
3. (k) The Committee on Small Business shall study and
investigate on a continuing basis the problems of all types of
small business.
1.3 Number and Jurisdiction of Subcommittees
There will be four subcommittees as follows:
--Workforce, Empowerment and Government Programs
(seven Republicans and six Democrats)
--Regulatory Reform and Oversight (seven Republicans
and six Democrats)
--Tax, Finance and Exports (eight Republicans and
seven Democrats)
--Rural Enterprises, Agriculture and Technology (six
Republicans and five Democrats)
During the 109th Congress, the Chairman and ranking
minority member shall be ex officio members of all
subcommittees, without vote, and the full committee shall have
the authority to conduct oversight of all areas of the
committee's jurisdiction.
In addition to conducting oversight in the area of their
respective jurisdiction, each subcommittee shall have the
following jurisdiction:
WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS
Oversight and investigative authority over problems faced
by small businesses in attracting and retaining a high quality
workforce, including but not limited to wages and benefits such
as health care.
Promotion of business growth and opportunities in
economically depressed areas.
Oversight and investigative authority over regulations and
other government policies that impact small businesses located
in high risk communities.
Opportunities for minority, women, veteran and disabled-
owned small businesses, including the SBA's 8(a) program.
General oversight of programs targeted toward urban relief.
Small Business Act, Small Business Investment Act, and
related legislation.
Federal Government programs that are designed to assist
small business generally.
Participation of small business in Federal procurement and
Government contracts.
REGULATORY REFORM AND OVERSIGHT
Oversight and investigative authority over the regulatory
and paperwork policies of all Federal departments and agencies.
Regulatory Flexibility Act.
Paperwork Reduction Act.
Competition policy generally.
Oversight and investigative authority generally, including
novel issues of special concern to small business.
TAX, FINANCE AND EXPORTS
Tax policy and its impact on small business.
Access to capital and finance issues generally.
Export opportunities and oversight over Federal trade
policy and promotion programs.
RURAL ENTERPRISES, AGRICULTURE AND TECHNOLOGY
Promotion of business growth and opportunities in rural
areas.
Oversight and investigative authority over agricultural
issues that impact small businesses.
General oversight of programs targeted toward farm relief.
Oversight and investigative authority for small business
technology issues.
1.4 Disposition of Legislation Referred to the Committee
A total of 65 House bills and 1 Senate bill were referred
to the Committee on Small Business during the 109th Congress.
The Committee acted on 15 bills in some fashion, of which 5
reports were filed. Two bills on which the Committee acted upon
were signed into law either individually or as part of broader
legislation. The House of Representatives passed two Committee-
drafted resolutions to express the sense of the House that
American small businesses are entitled to a Small Business Bill
of Rights (H. Res. 22) and to honor those who work in the
heating, ventilation, and air conditioning (HVAC) industry,
celebrating National Indoor Comfort Week (H. Res. 130). These
resolutions did not require Senate passage or presidential
signature. For a more detailed summary of the Committee's
legislative activities, please refer to Chapter 5 of this
report.
The Committee expended most of its legislative time and
effort in attempting to reach an accommodation to pass a
consensus Small Business Administration (SBA) reauthorization
bill (H.R. 5352) that had broad support with SBA industry
groups and the Administration. Unfortunately, Democrats on the
House Small Business Committee decided to be more partisan in
the 109th Congress by first refusing to meet with Chairman
Manzullo or majority staff to find out their concerns regarding
SBA reauthorization. Then, the minority proceeded with their
plan to offer over 45 mostly frivolous amendments during the
proposed May 17, 2006 mark-up that would have dramatically
increased the size and scope of the SBA. For example, Committee
Democrats offered 10 different but similar amendments that
basically attempted to overturn the zero loan subsidy policy in
the 7(a) program.
Instead of going through a contentious mark-up process,
Chairman Manzullo extended yet another olive branch by
attempting to meet individually with Democrat Members of the
Committee who offered amendments to see where there were areas
to compromise. However, after an initial few meetings, the
Ranking Minority Member banned any more Democrat Members from
meeting with Chairman Manzullo, thus complicating efforts to
find common ground. Throughout the summer and fall of 2006, the
Ranking Minority Member insisted on incorporating controversial
provisions into SBA reauthorization and offered no real
compromise. Thus, to prevent a major increase in spending, the
one major Committee-sponsored bill that was signed into law was
simply a long-term temporary extension of SBA programs (P.L.
109-316) until February 2, 2007.
In a more productive direction, the Committee was able to
work with the Transportation and Infrastructure Committee to
pass a modified version of H.R. 1148, authored by Delegate
Madeleine Bordallo (D-GU), which designated the entire insular
areas of Guam, the Virgin Islands, America Samoa, and the
Northern Mariana Islands, in addition to non-metropolitan areas
of Alaska and Hawaii, as Historically-Underutilized Business
(HUB) Zones, as an amendment to H.R. 3, the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for
Users (SAFETEA-LU). H.R. 3, with H.R. 1148 as modified as the
new Section 10203, was signed into law on August 10, 2005 (P.L.
109-59).
The Committee also passed four bills--two authored by
Republicans and two authored by Democrats--that unfortunately
did not see timely action by the House (H.R. 230, H.R. 527,
H.R. 2981, and H.R. 3207). However, they were incorporated into
the Chairman's SBA reauthorization package (H.R. 5352) but that
legislation, as mentioned above, was halted by the minority.
The Committee also held 11 hearings on seven bills that
were either finalized or still in development (H.R. 682, H.R.
2943, H.R. 3429, H.R. 3939, H.R. 5196, H.R. 5352, H.R. 6204)
but these bills saw no further action. Two Subcommittees of the
House Judiciary Committee held hearings on two Small Business
Committee bills where both committees shared legislative
jurisdiction (H.R. 435 and H.R. 682) but they saw no further
legislative action.
The Committee was very active on other legislation that was
not directly referred to the Committee but had a large impact
upon small business. This included the Tax Increase Prevention
and Reconciliation Act (P.L. 109-222), which provides for a
two-year extension of the higher $100,000 small business
expensing limit; the Junk Fax Prevention Act of 2005 (P.L. 109-
21), which reversed the Federal Communications Commission (FCC)
proposed rule to require written consent prior to a business
sending a fax to a recipient; the Energy Policy Act of 2005
(P.L. 109-58), which aimed to provide adequate, affordable, and
reliable energy supplies; the Transportation Equity Act: A
Legacy for Users (P.L. 109-59), which included a provision to
prevent public transit agencies from competing with small
private bus tour operators; the Department of Homeland Security
Appropriations Act, 2007 (P.L. 109-295), which provides a 18-
month extension to implement the Western Hemisphere Travel
Initiative (WHTI); the Security and Accountability for Every
(SAFE) Ports Act (P.L. 109-347), which eased the proposed
burden of the proposed Maritime Transportation Worker Card
(TWIC) on small businesses in the transportation sector; the
Export-Import Bank Reauthorization Act of 2006 (P.L. 109-438),
which restored a viable Small Business Division within the
Bank; and the Tax Relief and Health Care Act of 2006 (P.L. 109-
432), which expanded the reach and scope of Health Savings
Accounts (HSAs) to provide more health care choices for small
business owners and their employees.
The Committee was also very involved in trying to pass
small business friendly legislation into law but was stymied
because of a determined minority of Democrat Senators prevented
a full debate on the bills. This includes three efforts to
either abolish (H.R. 8) or reform the estate tax (H.R. 5638 and
H.R. 5970); the Small Business Health Fairness Act, which
creates Association Health Plans (H.R. 525/S. 1955); and the
HEALTH Act of 2005 (H.R. 5/S. 22) to reform our medical
liability system.
Finally, the Committee was heavily engaged in helping to
pass other pro-small business bills but they could not be
completed in time for final passage into law. These include the
Federal Prison Industries Competition in Contracting Act (H.R.
2965), which removed the mandatory sourcing preference for FPI;
the U.S. Patent and Trademark Fee Modernization Act (H.R.
2791), which would continue the lower fee structure for small
entities filing patents; and the Business Checking Freedom Act
of 2005 (H.R. 1224), which allows interest on business checking
accounts.
CHAPTER TWO
THE SMALL BUSINESS ADMINISTRATION
The Committee has both legislative and oversight
jurisdiction over the Small Business Administration (SBA),
which was created in 1953, inter alia, to provide opportunities
for entrepreneurship, inventiveness, and the creation and
growth of small businesses; to provide procurement assistance
to small businesses seeking to contract with the federal
government; to help assure the availability of capital to small
businesses; and to provide assistance to victims of disasters.
During the 109th Congress, the Committee held a number of
hearings and passed several bills that focused on the mission
and performance of the SBA. Much of the Committee's effort
focused on disaster recovery associated with the SBA's mission
to provide disaster loans to homeowners and small businesses.
In particular, 2005 was a very active hurricane season that
included the devastation wrought by Hurricanes Katrina, Rita,
and Wilma. A review of the legislative activities of the
Committee appears in Chapter Five and a synopsis of the
hearings held by the Committee may be found in Chapter Seven of
this report.
The major programs of the SBA are briefly described below.
2.1 SBA Programs in General
SBA was has approximately 5,896 employees in the field
(including 3,772 temporary disaster employees) with 692 at the
headquarters in Washington, DC. There are currently 10 regional
offices, 68 district and 13 staffed branch offices, two
commercial loan servicing centers, two liquidation centers, one
liquidation and guaranty purchase center, two disaster home
loan servicing centers, a disaster processing and disbursement
center, a disaster call center, two disaster field operation
centers, a headquarters disaster operations center (located in
Herndon, VA), 26 field disaster operation centers, six
Government Contracting Area Offices, and two commercial loan
servicing centers. The SBA provides small business loan
guarantees, direct loans for physical damage and economic
injury to disaster victims, assistance to small businesses who
are seeking to compete in the federal procurement arena and to
obtain contracts, as a well as management, marketing and
technical assistance provided by Small Business Development
Centers (SBDCs) and the Senior Corps of Retired Executives
(SCORE). The SBA also administers a surety bond program for
small businesses that are not able to obtain bonding elsewhere.
An independent entity within SBA, the Office of Advocacy,
headed by the Chief Counsel for Advocacy appointed by the
President and confirmed with the advice and consent of the
Senate, serves as an advocate for small businesses both in the
Legislative and Executive branches of government primarily in
the area of insuring that proposed rules and regulations do not
unduly harm small business. The SBA also oversees the
implementation of the Small Business Innovation Research (SBIR)
and Small Business Technology Transfer (STTR) programs that
provide research and development opportunities for small
businesses.
2.2 SBA Business Loans
One of the major purposes for SBA is to help assure that
capital is available to small businesses who cannot obtain
credit elsewhere and that demonstrate the ability to repay.
Subject to appropriations, loans are made for a wide variety of
purposes, e.g., plant acquisition, construction, conversion or
expansion, including acquisition of land, material, supplies,
equipment, and working capital. SBA administers three major
loan programs known as the 7(a), 504, and Microloan programs.
SBA's largest business loan guarantee program is the 7(a)
program. In Fiscal Year (FY 2005), 88,845 7(a) loans were made
in the amount of approximately $14 billion and in FY 2006 there
were 90,483 such loans made in the amount of $13.8 billion.
Banks and other lending institutions make loans and the SBA
guarantees up to $1,500,000 of a private sector loan of up to
$2,000,000. Generally, the SBA guarantees up to 85 percent of
loans of $150,000 or less and 75 percent of loans greater than
$150,000.
The Small Business Reauthorization and Manufacturing
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was
added to the Consolidated Appropriations Act, 2005 (Division K
of P.L. 108-447) and signed into law on December 8, 2004,
stabilized and strengthened the popular 7(a) loan guarantee
program by maintaining current fee structure, thus eliminating
the need for federal subsidies, saving taxpayers between $70
million and $80 million. In addition, Public Law 108-447 raised
the maximum 7(a) loan guarantee level from $1 million to $1.5
million (with an accompanying 0.25 percent upfront front
borrower fee surcharge on the amount of the guarantee above $1
million) and raises the maximum loan amount from $250,000 to
$350,000 for paperwork-friendly SBA Express loans.
The 504 loan program was established to encourage economic
development, create and preserve job opportunities, and foster
growth and modernization of small businesses. A small business
may apply to a Certified Development Company (CDC), licensed by
SBA, to finance part of a proposed 504 project. The SBA
guarantees debentures of up to $1,000,000 ($1,300,000 where
certain economic redevelopment objectives are met). The
guarantees are for 100 percent of the debenture that represents
40 percent of the total project costs. The balance of the costs
is provided by a 10 percent or more contribution by the
borrower, and a private sector loan to finance the remaining 50
percent. There are currently 273 licensed CDCs. In FY 2005,
CDCs made 8,974 504 loans totaling $4.94 billion and in FY
2006, CDCs made 9,720 504 loans totaling $5.7 billion.
The Small Business Reauthorization and Manufacturing
Assistance Act of 2004--(H.R. 5108/S. 2821), that was added to
the Consolidated Appropriations Act, 2005 (Division K of P.L.
108-447) also expanded the 504 loan program at no additional
expense to the taxpayer. Public Law 108-447 increased the
maximum loan debenture size in the 504 program to $1.5 million;
$2 million for projects where certain economic redevelopment
objectives are met; and $4 million for small manufacturers. It
also increased the job requirement test to $50,000 of guarantee
for every one job created or retains (up from $35,000);
$100,000 in the case of a project of a small manufacturer; and
$75,000 for areas generally considered to need greater economic
development.
The Microloan program is designed to provide capital to
very small enterprises that cannot be served even by the other
access to capital programs of the SBA. The program has two
types of loans: (1) direct and (2) guaranteed. SBA directly
provides loans to 169 intermediaries who in turn make loans of
up to $35,000 to small businesses. Also, SBA guarantees 100
percent of loans to the intermediaries by banks. SBA funds
grants to intermediaries and other qualified organizations to
provide marketing, management, and technical assistance to
borrowers. In FY 2005, intermediary lenders made 2,436 loans in
the amount of $20,000,000. In FY 2006, intermediary lenders
made 2,395 loans in the amount of $19,000,000.
2.3 Disaster Assistance Loans
Under the Disaster Assistance Program, SBA makes direct
loans rather than loan guarantees. There are three kinds of
disaster loans: (1) home disaster loans, (2) physical disaster
business loans, and (3) economic injury business loans. The
owner of a home may apply for a home disaster loan to cover
physical damage to his or her primary residence and personal
property, and those not owning their primary residence may
apply for a loan with respect to physical loss of their
personal property. Almost any business, non-profit entity, or
charity (big or small) whose real or personal property was
damaged in a declared disaster may apply for a physical
disaster business loan.
A small business located in a declared disaster area may
apply for an economic injury disaster loan, if the small
business has suffered a substantial economic loss as a direct
result of the disaster that has caused it to be unable to meet
its obligations as they mature or to pay its ordinary and
necessary operating expenses. A small business whose owner or
an essential employee is a Military Reservist or a member of
the National Guard may apply for an economic injury disaster
loan, if the small business has suffered or is likely to suffer
substantial economic injury as a result of the individual's
absence while on active duty during a period of a military
conflict.
After a series of devastating hurricanes struck Florida and
other states east of the Mississippi in the summer of 2004, the
108th Congress passed two emergency supplemental appropriations
statutes that provide a total of $16.475 billion to areas
stricken by the hurricanes and other natural disasters. As part
of the recovery effort, SBA received $929 million to cover the
cost and administration of SBA disaster loans.
In FY 2005, SBA approved 41,651 disaster loans totaling
$1.27 billion. In FY 2006, SBA approved 137,803 disaster loans
totaling $8.79 billion. The increase in the disaster loan
program arises from the very active hurricane season in the
summer of 2005, including Hurricanes Katrina, Rita, and Wilma.
2.4 Small Business Investment Companies
SBA licenses and regulates venture capital companies that
specialize in investing in small businesses. These Small
Business Investment Companies (SBICs) provide equity capital or
long-term financing and may assist those small companies
invested in with technical and managerial advice.
Capital for investment has been raised traditionally by
investors in a SBIC and by debentures guaranteed as to both
principal and interest by SBA (which usually are equal to two
or three times the SBICs private capital). SBICs relying upon
debenture leverage primarily invest in debt securities of small
businesses that have cash flows sufficient to service the
outstanding debentures. For FY 2005, SBA made 1,753 financings
totaling $1.084 billion for the debenture SBIC program. In FY
2006, the number of debenture financings dropped (as a result
in the reduction in one industry that typically uses debenture
SBIC financing--taxicabs) to 1,614 financings with a total
dollar value of $1.207 billion.
In 1992, legislation was enacted creating a new SBIC
participating securities program. SBA guarantees the principal
and pays the purchasers of participating securities the
interest as it comes due on behalf of a SBIC. When the SBIC
becomes profitable, the SBIC repays SBA the interest advanced
and a share of the profits. The participating securities
program permits investment in new enterprises that do not have
established records of profitability. Under the participating
security SBIC program, the SBA provided 1,930 financings in FY
2005 for a total dollar value of $1.568 billion. For FY 2006,
the SBA had 1,831 financings for a total dollar value of $1.487
billion.
The New Markets Venture Capital (NMVC) program, enacted
into law in 2000, provides capital to small enterprises located
in low-income areas. SBA can enter into participation
agreements with newly formed venture capital companies and
guarantees securities to allow them to make equity investments
in small businesses located in low-income areas. In addition,
SBA can make grants to NMVC SBICs so that they can provide
managerial assistance to small businesses in which they have
invested. In FY 2005, the SBA provided 20 financings to NMVCCs
and in FY2006, that number grew to 34 financings.
2.5 Procurement Assistance
SBA is tasked with the responsibility of helping small
businesses get their fair share of the total prime contract and
subcontracting dollars spent by federal agencies for goods,
services, property, and construction. By statute, small
business are required to receive at least 23 percent of the
total value of all prime contracts awarded for each fiscal
year. Other Government-wide minimum goals are established by
statute for small business concerns owned and controlled by
service-disabled veterans, three percent; qualified HUBZone
small business concerns, three percent; small business concerns
owned and controlled by socially and economically disadvantaged
(SDB) individuals, five percent; and, small business concerns
owned and controlled by women, five percent.
The Small Business Act establishes a goal of providing 23
percent of federal government procurement dollars to small
businesses and the following subset of small businesses: small
disadvantaged businesses, including those operating pursuant to
section 8(a) of the Small Business Act (SDBs); business located
in historically underutilized business zones (HUBZones); small
businesses owned by women; and small businesses owned by
service disabled veterans. According to the FY 2005 data from
the Federal Procurement Data System (the latest available),
small businesses were awarded 2,302,698 contract actions
totaling $79.625 billion dollars or about 25.36 percent of
total federal contracting dollars. The dollar amounts for the
subset of small businesses were: SDBs, $21.715 billion;
HUBZones businesses, $6.103 billion; women-owned businesses,
$10.494 billion; and service-disabled veteran businesses,
$1.899 billion.
SBA Procurement Center Representatives (PCRs), generally
located at federal agencies that have major procurement
activities, are tasked with the responsibilities of identifying
contacting opportunities for small businesses, attempting to
break up large requirements so that small businesses can
participate as prime contractors, and assisting small
businesses in competing for government contracts. SBA
Commercial Market Representatives (CMRs) are responsible for
assisting small businesses obtain subcontracts with prime
contractors who have signed subcontracting plans with federal
agencies. SBA certifies small businesses as eligible for the
8(a), SDB, and HUBZone programs. Also, SBA is authorized to
certify to a contracting officer that a small business is
competent to perform a particular government procurement (or
sale) contract.
In January 2004, the Procurement Marketing and Access
Network (PRONET) was integrated with the Department of
Defense's Central Contractor Registration (CCR) database. CCR
permits small businesses to list their capabilities on the
Internet and is the official database of firms certified under
the 8(a), SDB, and HUBZone programs. However, CCR does not
provide contracting opportunities directly to small businesses
listed. SBA sets size standards that define whether a business
entity is small and eligible under federal programs and
preferences reserved for small businesses. Size standards are
established for types of business activities, generally, under
the North American Industry Classification System (NAICS).
Business development assistance is provided under 7(j) of the
Small Business Act to small businesses owned and controlled by
economically and socially disadvantaged individuals.
2.6 Entrepreneurial Development
The SBA's economic assistance programs support those
seeking to start a business and those desiring to grow and
expand an existing small business by providing individual
counseling, management training, procurement and marketing
assistance with guidance materials and workshops. Assistance is
provided at service locations throughout the United States,
Puerto Rico, and the U.S. Virgin Islands, and electronically by
means of various Internet sites. The facilities that deliver
entrepreneurial development assistance include: approximately
1,100 SBDCs, 10,844 SCORE volunteers, 86 Business Information
Centers (BICs), nine Tribal Business Information Centers
(TBICs), four Veterans Business Outreach Centers, and 86
Women's Business Centers (WBCs).
SBDCs are funded by both federal and state appropriations.
SBA administers the program through grants generally to state
governments and agencies. Most SBDCs are affiliated with state
college and university systems. They assist small businesses
and aspiring entrepreneurs with business problems concerning
personnel, administration, marketing, sales, merchandizing,
finance, accounting, business management, and participation in
international markets. SBDCs may not charge a fee for
counseling services. Modest fees are charged for workshops and
business related training and courses. In FY 2005, SBDCs served
706,000 clients. In FY2006, SBDCs served an estimated 703,000
clients.
SCORE has 380 chapter locations (at least one in every
state) where volunteer counselors provide practical business
advice and training services to about 383,000 clients annually.
All counseling is provided free of charge to clients. Annual
congressional appropriations are used to reimburse counselors
for mileage and incidental expenses. E-mail counseling is
provided over the Internet.
WBCs provide assistance and one-on-one counseling to women
entrepreneurs with respect to technology, financial and
management planning, problem-solving, access to capital,
marketing, business administration, and selling to the federal
government. The on-line Women's Business Center provides
around-the-clock Internet access to business information to
help start a business, resolve business problems, or grow an
existing enterprise through federal contracting or exporting
opportunities. In FY 2005, WBCs served about 144,000 clients.
WBCs counseled and trained 126,305 clients in FY 2006.
The National Women's Business Council is a source of
independent advice to the President, federal agencies, and
Congress with regard to entrepreneurship and the impact of
federal polices and programs upon women who want to start and
grow business enterprises. The council has focused on issues
involving the award of federal prime contracts and subcontracts
to women-owned small businesses and barriers to women
entrepreneurs obtaining access to credit and investment
capital.
Veterans Business Outreach Centers counseled 5,796 veterans
and trained 5,312 veterans in the five Veterans Business
Outreach Centers in FY 2006. These veterans were provided with
assistance in gaining access to capital, resolving business and
management problems, and starting and growing small businesses.
In addition, SBA has entered into agreements with the
Association of Small Business Development Centers, the
Department of Labor, and works with the Department of Veterans
Affairs to provide outreach and needed business administration
and entrepreneurial services to veterans and service-disabled
veterans.
The current Native American Initiative is not a replacement
for other entrepreneurial development programs. Rather, it is
an initiative developed because of Congressional
appropriations. The SBA's Office of Native American Affairs
works closely with American Indian tribal governments, tribal
colleges, Indian organizations, other federal agencies and the
private sector to supplement and support the Indian nations'
plan for economic stimulus in Indian country. In, FY 2005, the
SBA's resource partners assisted 12,037 Native American
entrepreneurs and 10,507 Native American entrepreneurs in FY
2006.
2.7 Surety Bond Guarantees
Small business contractors and subcontractors who seek
public and private construction contracts are often required to
furnish surety bonds guaranteeing the completion of the
contracted work. The SBA provides assistance to such
contractors by extending guarantees of up to 90 percent to
surety insurance companies. These guarantees enable small
contractors to obtain bonding more easily. The SBA's bonding
assistance is accomplished through the Prior Approval Program
or the Preferred Surety Bond Program. Bid bonds as well as
performance and/or payment bonds may be guaranteed on contracts
up to $2,000,000.
The SBA will pay a surety participating in the Prior
Approval Program 90 percent guarantee for SDBs and HUBZones
regardless of contract size up to $2 million, and 90 percent
guarantee for all contractors with contracts $100,000 or less.
Otherwise, SBA will pay a surety in an amount not to exceed ad
administrative ceiling of 80 percent guarantee for all
contracts over $100,000 for small businesses other than SDBs
and HUBZones. Under the Preferred Surety Bond program, the
SBA's guarantee is limited to 70 percent of the bond for all
small businesses for all contracts and contractors regardless
of contract size. In FY 2005, SBA provided 1,680 final bond
guarantees. In FY 2006, SBA provided 1,706 final bond
guarantees. In both fiscal years, the total dollar value of
contracts exceeded $500,000,000.
The Small Business Reauthorization and Manufacturing
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was
added to the Consolidated Appropriations Act, 2005 (Division K
of P.L. 108-447) and signed into law on December 8, 2004, also
amended the SBA's surety bond program. First, Public Law 108-
447 clarifies that the $2 million limit on surety bonds applies
to the bond guarantee and not to the contract size. It also
made the Preferred Surety Bond program permanent.
2.8 Technology and Innovation
It is the free enterprise system, and not government
programs, that make the United States the world leader in
innovation and technology. Small businesses are at the
forefront of research and development and have been more
prolific in creating new jobs through innovation and
technology.
However, there are two government programs, the Small
Business Innovation Research (SBIR) and the Small Business
Technology Transfer (STTR) programs, which have successfully
provided innovative research and developed products for
government and commercial use.
SBA's Office of Technology provides oversight, monitoring,
evaluation, and reporting for these programs. No new
cooperative agreements have been issued under the Federal and
State Technology Partnership program because the authority for
the program ended on September 30, 2005. The grants are to
provide technical assistance to high-tech small businesses to
enhance their market competitiveness. The SBA, due to an
absence of appropriations for the program has not made any
cooperative agreements for rural states that receive few awards
under the SBIR and STTR programs.
The SBIR program has been in existence since 1982. Unlike
the STTR program, the SBIR program does not require, but
permits, a cooperative venture between a for-profit small
business and a researcher from a university, federal laboratory
or a nonprofit research institution for the purpose of
developing commercially viable products. However, the project's
principal investigator must be employed by the small business.
A small business to be eligible must be: (1) independently
owned and operated and other than the dominant firm in the
field which it is proposing to carry out SBIR projects, (2)
organized and operated for profit, with 500 employees or less,
(3) the primary source of employment for the project's
principal investigator at the time of award and during the
period when the research is conducted, and (4) at least 51-
percent owned by U.S. citizens or lawfully admitted permanent
resident aliens.
Agencies that spend more than $100 million for external
research, and research and development must set aside 2.5
percent of their R&D budget for awards under SBIR. There are no
additional moneys appropriated to support this program. At
present, there are ten agencies that qualify for the program.
The agencies are: Department of Defense, Department of Energy,
National Aeronautics and Space Administration, National Science
Foundation, Department of Agriculture, Department of Commerce,
Department of Education, Environmental Protection Agency,
Department of Health and Human Services, and Department of
Transportation.
The ten agencies listed above designate research and
development topics for which small businesses may submit
proposals for project funding. The proposals are evaluated by
the agency based on (1) the qualifications of the small
business, (2) the value of the project to the agency and the
degree of innovation, and (3) the market potential of the
product to be developed. Once funded, a project goes through
three phases. Each phase is funded separately.
Phase I is the start-up portion of the project and may be
funded up to $100,000. This phase lasts approximately six
months and is for the purpose of exploring the scientific, and
technical aspects of the project. Phase II may last up to two
years and may be funded in an amount up to $750,000. During
this period, research and development continues and the
commercial potential explored. Only projects that successfully
complete Phase I can be considered for funding in Phase II.
Phase III is the point in the project that the idea moves from
the laboratory to the production facility to the market place.
No SBIR funds may be used to pay for Phase III. The funding
must come from the private sector or non-SBIR federal funding.
In FY2005, 4,144 Phase I funding agreements were awarded
totaling $449,582,491 and 1,869 Phase II funding agreements
were awarded totaling $1,410,014,373.
The STTR program is independent of the SBIR program with
which it is frequently confused. The STTR program requires a
cooperative venture between a for-profit small business and a
researcher from a university, federal laboratory, or a non-
profit research institution for the purpose of developing
commercially viable products from ideas spawned in a laboratory
environment. For a federal agency to participate in the
program, it must have an extramural budget for research or
research and development that exceeds $1 billion for any fiscal
year. Presently, there are five federal agencies that meet the
funding requirement. They are: Department of Defense,
Department of Energy, Department of Health and Human Services,
National Aeronautics and Space Administration, and National
Science Foundation.
To be eligible for an STTR award a small business must have
no more than 500 employees, and be independently owned and
operated with its principal place of business in the United
States. In addition, the small business may not be the dominant
entity in the field in which the project is contained and must
be primarily owned by U.S. citizens. To be eligible to
participate in the program, a research entity must be a non-
profit institution as defined by the Stevenson-Wyler Act of
1980 or a federally funded research and development center as
determined by the National Science Foundation under the
provisions of section 35(c)(1) of the Office of Federal
Procurement Policy Act.
The program requires that the research and development
project be conducted jointly by a small business and a research
institution in which not less than 40 percent of the work is
performed by the small business, and that not less than 30
percent of the work is performed by the research institution.
Though the venture is cooperative in nature, the small business
is responsible for the overall management and control of each
project.
The statute mandates that each award go though three
phases. Phase I is the start-up part of a particular project
and entails, as may be possible, a determination of the
scientific, technical, and commercial merits of the concepts
underlying a particular award. Phase II provides an opportunity
to further develop the concepts to meet the objectives of the
particular award. Only projects that successfully complete
Phase I can be considered for funding under Phase II. Phase III
is the point at which the project moves from the laboratory to
commercial application or further cooperative research and
development. No STTR funds may be used to pay for Phase III.
The funding must come from the private sector or non-STTR
federal funding. For the latest data available, FY 2005, 379
Phase I funding agreements were awarded in the amount of
$41,135,227 and 111 Phase II funding agreements were awarded
totaling $50,676,227.
2.9 Export Assistance
SBA is authorized to promote increased participation of
small businesses in international trade. To assist small
businesses in exporting abroad, SBA works with the Department
of Commerce and other federal agencies to identify business
opportunities and to assist in financing the sale of U.S. made
products to foreign buyers. SBA works with the Department of
Commerce, the Export-Import Bank, Department of Agriculture, as
well as SBDCs and SCORE, in maintaining a network of 16 U.S.
Export Assistance Centers (USEACs) that provide information and
counseling with respect to export marketing and financing.
USEACs are SBA's primary outlet for delivering export services
to small businesses. Small businesses may obtain free
consultation through the Export Legal Assistance Network (ELAN)
program, which enables those interested in starting export
operations to consult with international trade attorneys from
the Federal Bar Association, and access to publications on
international trade and export marketing.
The SBA's financial assistance has several loan programs,
depending upon the purpose for which the funds are to be used.
Exporters can obtain funds for fixed asset acquisitions during
startup or expansion and for general working capital needs
through the 7(a) loan program. Export Trading Companies can
qualify for SBA's business loan guarantee program, provided
that they are for profit entities and have no bank equity
participation. The Export Working Capital program authorizes
SBA to guarantee 90 percent of a private sector loan of up to
$750,000 for working capital. Loans made under this program
generally have a 12-month maturity but two one-year extensions
may be obtained.
The loans can be for single or multiple export sales and
can be expended for pre-shipment working capital and post-
shipment exposure coverage, but the proceeds cannot be used to
obtain fixed assets. Through the 7(a) loan program, the SBA can
provide export assistance by guaranteeing international trade
loans, that provide long-term financing to small businesses
engaged in international trade, as well as those businesses
adversely impacted by import competition. In FY 2005, SBA
guaranteed 2,638 export loans worth an estimated $750,000,000.
In FY 2006, SBA guaranteed 3,082 export loans in the total
amount of approximately $900,000,000.
The Small Business Reauthorization and Manufacturing
Assistance Act of 2004 (H.R. 5108/S. 2821), most of which was
added to the Consolidated Appropriations Act, 2005 (Division K
of P.L 108-447) and signed into law on December 8, 2004, also
expanded the scope of the international trade loan programs at
the SBA. Public Law 108-447 authorizes the use of International
Trade (IT) Loans to refinance existing debt to make it
consistent with all other 7(a) loans. The provisions also allow
the findings by the International Trade Commission (ITC) or a
Trade Adjustment Assistance Center (TAAC) as proof that a small
business has been adversely affected by foreign imports.
Finally, Public Law 108-447 raises IT loan guarantee limit from
$1,250,000 to $1,750,000 and the Export Working Capital
guarantee limit from $750,000 to $1,250,000.
2.10 Office of Advocacy
The Office of Advocacy was created in 1976, pursuant to
Title II of Public Law 94-305, with various stated ``primary
functions'' and other ``continuing'' duties. The law provides
for the President to appoint a Chief Counsel of Advocacy,
subject to the advice and consent of the Senate. The mandated
mission of the Office of Advocacy is to represent and advance
small business interests before the Congress and federal
agencies for the purpose of enhancing small business
competitiveness.
The statutorily prescribed ``primary functions'' of the
Office of Advocacy include: (1) examining the role of small
business in the American economy; (2) assessing the
effectiveness of all federal subsidy and assistance programs
available to small business; (3) measuring the cost and impact
of government regulations on small business and making
legislative and non-legislative recommendations for the
elimination of unnecessary or excessive regulations; (4)
determining the impact of the tax structure on small business
and making legislative and other proposals for reform of the
tax system; (5) studying the ability of the financial markets
to meet the credit needs of small business; (6) determining
availability and delivery methods of financial and other
assistance to minority enterprises; (7) evaluating the efforts
of federal departments and agencies, business and industry to
assist minority enterprises; (8) recommending ways to assist
the development and strengthening of minority and other small
businesses; (9) recommending ways for small business to compete
effectively and to expand, while identifying common causes for
small business failures; (10) developing criteria to define
small business; and, (11) evaluating federal and private
industry efforts to assist veterans and service-disabled
veterans.
In addition, there are a number of ``continuing'' duties of
the Office of Advocacy, which include: (1) serving as a focal
point for receiving complaints and suggestions regarding
federal agency policies and activities that affect small
business; (2) counseling small businesses on problems in their
relationships with the federal government; (3) proposing
changes in policies and activities of all federal departments
and agencies to better fulfill the purposes of the Small
Business Act; (4) representing small business before other
federal departments and agencies whose policies and activities
may affect small business; and (5) enlisting the cooperation of
others in the dissemination of information about federal
programs that benefit small business.
In 1980, the Regulatory Flexibility Act (Public Law 96-354)
enlarged the responsibilities of the Office of Advocacy to
include the monitoring of federal agencies' compliance with the
Act's requirements, performing regulatory impact analyses, and
making annual reports to Congress. Also in 1980, Public Law 96-
302 required the SBA Administrator to establish and maintain a
small business economic database to provide Congress and the
Executive with information on the economic condition of the
small business sector.
The statute prescribed 12 categories of data and required
an annual report on trends. Although none of these database
functions were expressly delegated to the Office of Advocacy by
statute, the SBA Administrator has historically assigned these
functions to the Office of Advocacy. The Office of Advocacy
also has regional advocates who monitor small business and
regulatory activities at the State level and disseminate
relevant information about small small business; and, (11)
evaluating federal and private industry efforts to assist
veterans and service-disabled veterans.
In addition, there are a number of ``continuing'' duties of
the Office of Advocacy, which include: (1) serving as a focal
point for receiving complaints and suggestions regarding
federal agency policies and activities that affect small
business; (2) counseling small businesses on problems in their
relationships with the federal government; (3) proposing
changes in policies and activities of all federal departments
and agencies to better fulfill the purposes of the Small
Business Act; (4) representing small business before other
federal departments and agencies whose policies and activities
may affect small business; and (5) enlisting the cooperation of
others in the dissemination of information about federal
programs that benefit small business.
In 1980, the Regulatory Flexibility Act (Public Law 96-354)
enlarged the responsibilities of the Office of Advocacy to
include the monitoring of federal agencies' compliance with the
Act's requirements, performing regulatory impact analyses, and
making annual reports to Congress. Also in 1980, Public Law 96-
302 required the SBA Administrator to establish and maintain a
small business economic database to provide Congress and the
Executive with information on the economic condition of the
small business sector.
The statute prescribed 12 categories of data and required
an annual report on trends. Although none of these database
functions were expressly delegated to the Office of Advocacy by
statute, the SBA Administrator has historically assigned these
functions to the Office of Advocacy. The Office of Advocacy
also has regional advocates who monitor small business and
regulatory activities at the State level and disseminate
relevant information about small business issues.
The Office of Advocacy estimates that in 2005 (the latest
date for this information), their efforts saved small
businesses $6.6 billion in compliance costs by stopping or
changing potentially damaging regulations.
CHAPTER THREE
HEARINGS AND MEETINGS HELD BY THE COMMITTEE ON SMALL BUSINESS AND ITS
SUBCOMMITTEES, 109TH CONGRESS
3.1 Full Committee
------------------------------------------------------------------------
Date Subject
------------------------------------------------------------------------
February 10, 2005......................... The President's FY '06
Budget Request: What Does
it Mean for Small Business?
February 17, 2005......................... Medical Liability Reform:
Stopping the Skyrocketing
Price of Health Care
March 2, 2005............................. Prescriptions for Health
Care: Solutions to the
Problem
March 8, 2005............................. Small Business Priorities of
the 109th Congress
March 16, 2005............................ The RFA at 25: Needed
Improvements for Small
Business Regulatory Relief
April 6, 2005............................. What has Ex-Im Bank Done for
Small Business Lately?
April 13, 2005............................ Private Equity for Small
Firms: The Importance of
the Participating
Securities Program
April 27, 2005............................ Closing the Tax Gap and the
Impact on Small Businesses
May 4, 2005............................... Anticompetitive Threats from
Public Utilities: Are Small
Businesses Losing Out?
June 6, 2005.............................. Small Business Access to
Health Insurance: Lessons
from Nebraska?
June 14, 2005............................. Are Skyrocketing Medical
Liability Premiums Driving
Doctors Away from
Underserved Areas?
July 13, 2005............................. Small Business Development
Centers: New Offerings for
a New Economy
July 25, 2005............................. Freedom of Conscience for
Small Pharmacies
July 27, 2005............................. Proposed Legislative Remedy
for the Participating
Securities Program
September 21, 2005........................ Reforming the Tax Code to
Assist Small Businesses
October 7, 2005........................... Small Businesses and
Hurricane Katrina:
Rebuilding the Economy
November 1, 2005.......................... Promoting Private Sector
Emergency Preparedness
November 17, 2005......................... Building a Wall Between
Friends: Passports to and
from Canada?
March 15, 2006............................ FY '07 Budget and
Reauthorization Proposals
of the SBA
April 5, 2006............................. Hearing on the IRS Latest
Enforcement: Is the Bulls-
eye on Small Business?
April 26, 2006............................ Cutting Our Trade Deficit:
Can the U.S. Muster Its
Diverse Trade Promotion
Operations to Make an
Impact?
May 3, 2006............................... Sarbanes-Oxley Section 404:
What is the Proper Balance
Between Investor Protection
and Capital Formation for
Smaller Public Companies?
May 10, 2006.............................. Bridging the Equity Gap:
Examining the Access to
Capital for Entrepreneurs
Act of 2006
June 7, 2006.............................. Contracting the Internet:
Does ICANN Create a Barrier
to Small Business?
June 21, 2006............................. Joint hearing with the
Government Reform
Committee, Northern Lights
and Procurement Plights:
The Effect of the ANC
Program on Federal
Procurement and Alaska
Native Corporation
July 25, 2006............................. Failure to Comply with the
Regulatory Flexibility Act:
IRS Endangering Small
Businesses Yet Again
September 27, 2006........................ Advancing Security and
Commerce at Our Nation's
Ports: The Goals are not
Mutually Exclusive
November 28, 2006......................... FEMA's Response to the
Rockford Flood
------------------------------------------------------------------------
3.2 Subcommittee on Workforce, Empowerment and Government Programs
------------------------------------------------------------------------
Date Subject
------------------------------------------------------------------------
April 21, 2005............................ Removing Obstacles to Job
Creation: How Can the
Federal Government Help
Small Businesses Revitalize
the Economy?
May 24, 2005.............................. Joint Subcommittee hearing
with the Veteran's Affairs
Committee Subcommittee on
Economic Opportunities, How
Are Our Veteran-Owned Small
Business Owners Being
Served?
June 21, 2005............................. Union Salting--Organizing
Against Small Business
June 28, 2005............................. How the Clean Air Act
Affects Auto Repair
August 9, 2005............................ Small Business Expensing--
Job Growth Through the Tax
Code
September 8, 2005......................... Freedom in the Workplace--an
Examination of a National
Right to Work Law
November 8, 2005.......................... The Small Business
Innovation Research
Program--Opening Doors to
New Technology
March 2, 2006............................. Oversight of the Small
Business Administration's
Entrepreneurial Development
Programs
April 27, 2006............................ Healthcare and Small
Business: Proposals That
Will Help Lower Costs and
Cover the Uninsured
June 27, 2006............................. Immigrant Employment
Verification and Small
Business
August 10, 2006........................... Healthcare and Small
Business--Real Options for
Colorado Businesses
------------------------------------------------------------------------
3.3 Subcommittee on Regulatory Reform And Oversight
------------------------------------------------------------------------
Date Subject
------------------------------------------------------------------------
March 17, 2005............................ Roundtable on Regulatory
Reform
April 28, 2005............................ The Administration's Program
to Reduce Unnecessary
Regulatory Burden on
Manufacturers--A Promise to
be Kept?
May 19, 2005.............................. ANWR's Benefits for Small
Business
June 21, 2005............................. Veteran's Access to Capital
September 29, 2005........................ Entrepreneur Soldiers
Empowerment Act
February 8, 2006.......................... The Internet Sales Tax:
Headaches Ahead for Small
Business?
March 16, 2006............................ The State of Small Business
Security in a Cyber Economy
March 30, 2006............................ SBA's Procurement Assistance
Programs
April 6, 2006............................. Can Small Healthcare Groups
Feasibly Adopt Electronic
Medical Records Technology?
May 23, 2006.............................. Data Protection and the
Consumer: Who Loses When
Your Data Takes a Hike?
June 27, 2006............................. S Corporations--Their
History and Challenges
July 13, 2006............................. An Update on Administration
Action to Reduce
Unnecessary Regulatory
Burdens on America's Small
Manufacturers
------------------------------------------------------------------------
3.4 Subcommittee on Tax, Finance and Exports
------------------------------------------------------------------------
Date Subject
------------------------------------------------------------------------
April 7, 2005............................. Joint Subcommittee
roundtable on service-
disabled veteran-owned
small business issues with
the Tax, Finance and
Exports Subcommittee and
the Subcommittee on
Economic Opportunity of the
House Veterans' Affairs
Committee
April 14, 2005............................ The Estate Tax and the
Alternative Minimum Tax--
Inequity for America's
Small Businesses
May 26, 2005.............................. Joint Subcommittee hearing
with the Rural Enterprises,
Agriculture and Technology
Subcommittee, Does China
Enact Barriers to Fair
Trade?
February 1, 2006.......................... Joint Subcommittee hearing
with the Rural Enterprises,
Agriculture and Technology
Subcommittee, Transforming
the Tax Code: An
Examination of the
President's Tax Reform
Panel Recommendations
March 9, 2006............................. Oversight of the Small
Business Administration's
Finance Programs
June 28, 2006............................. The Effects of the High Cost
of Natural Gas on Small
Businesses and Future
Energy Technologies
July 20, 2006............................. Joint Subcommittee hearing
with the Rural Enterprises,
Agriculture and Technology
Subcommittee, Chinese
Barriers to Trade: Does
China Play Fair?
------------------------------------------------------------------------
3.5 Subcommittee on Rural Enterprises, Agriculture and Technology
------------------------------------------------------------------------
Date Subject
------------------------------------------------------------------------
March 17, 2005............................ The High Price of Natural
Gas and its Impact on Small
Businesses: Issues and
Short Term Solutions
May 26, 2005.............................. Joint Subcommittee hearing
with the Tax, Finance and
Exports Subcommittee, Does
China Enact Barriers to
Fair Trade?
June 29, 2005............................. Different Applications for
Genetically Modified Crops
July 27, 2005............................. The Importance of the
Biotechnology Industry and
Venture Capital Support in
Innovation
September 15, 2005........................ The Need for Improvements
and More Incentives in the
Endangered Species Act
February 1, 2006.......................... Joint Subcommittee hearing
with the Tax, Finance and
Exports Subcommittee,
Transforming the Tax Code:
An Examination of the
President's Tax Reform
Panel Recommendations
March 15, 2006............................ The Missouri River and its
Spring Rise: Science or
Science Fiction?
May 3, 2006............................... The Future of Rural
Telecommunications: Is
Universal Service Reform
Needed?
May 25, 2006.............................. Unlocking Charitable Giving
July 20, 2006............................. Joint Subcommittee hearing
with the Tax, Finance and
Exports Subcommittee,
Chinese Barriers to Trade:
Does China Play Fair?
------------------------------------------------------------------------
CHAPTER FOUR
PUBLICATIONS OF THE COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES,
109th CONGRESS
4.1 Reports
------------------------------------------------------------------------
House Report No. Title and date
------------------------------------------------------------------------
109-208................................... Report to accompany H.R.
230, To amend the Small
Business Act to direct the
Administrator of the Small
Business Administration to
establish a program to
provide regulatory
compliance assistance to
small business concerns,
and for other purposes;
July 28, 2005.
109-207................................... Report to accompany H.R.
527, To amend the Small
Business Act to direct the
Administrator of the Small
Business Administration to
establish a vocational and
technical entrepreneurship
development program; July
28, 2005.
109-206................................... Report to accompany H.R.
2981, To amend the Small
Business Act to expand and
improve the assistance
provided by Small Business
Development Centers to
Indian tribe members,
Native Alaskans, and Native
Hawaiians; July 28, 2005.
109-205................................... Report to accompany H.R.
3207, To direct the
Administrator of the Small
Business Administration to
establish a pilot program
to make grants to eligible
entities for the
development of peer
learning opportunities for
second-stage small business
concerns; July 28, 2005.
------------------------------------------------------------------------
4.2 Hearing Records
------------------------------------------------------------------------
Serial No. Date, title and committee
------------------------------------------------------------------------
109-1..................................... February 10, 2005, The
President's FY '06 Budget
Request: What Does it Mean
for Small Business?, Full
Committee
109-2..................................... February 17, 2005, Medical
Liability Reform: Stopping
the Skyrocketing Price of
Health Care, Full Committee
109-3..................................... March 2, 2005, Prescriptions
for Health Care: Solutions
to the Problem, Full
Committee
109-4..................................... March 8, 2005, Small
Business Priorities of the
109th Congress, Full
Committee
109-5..................................... March 16, 2005, The RFA at
25: Needed Improvements for
Small Business Regulatory
Relief, Full Committee
109-6..................................... March 17, 2005, The High
Price of Natural Gas and
its Impact on Small
Businesses: Issues and
Short Term Solutions,
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-7..................................... March 17, 2005, Roundtable
on Regulatory Issues,
Subcommittee on Regulatory
Reform and Oversight
109-8..................................... April 6, 2005, What has Ex-
Im Bank Done for Small
Business Lately?, Full
Committee
109-9..................................... Note: Errata submitted, No
hearing took place.
109-10.................................... April 13, 2005, Private
Equity for Small Firms: the
Importance of the
Participating Securities
Program, Full Committee
109-11.................................... April 14, 2005, The Estate
Tax and the Alternative
Minimum Tax--Inequity for
America's Small Businesses,
Subcommittee on Tax,
Finance and Exports
109-12.................................... April 21, 2005, Removing
Obstacles to Job Creation:
How Can the Federal
Government Help Small
Businesses Revitalize the
Economy?, Subcommittee on
Workforce, Empowerment and
Government Programs
109-13.................................... April 27, 2005, Closing the
Tax Gap and the Impact on
Small Businesses, Full
Committee
109-14.................................... April 28, 2005, The
Administration's Program to
Reduce Unnecessary
Regulatory Burden on
Manufacturers--A Promise To
Be Kept?, Subcommittee on
Regulatory Reform and
Oversight
109-15.................................... May 4, 2005, Anticompetitive
Threats from Public
Utilities: Are Small
Businesses Losing Out?,
Full Committee
109-16.................................... May 19, 2005, ANWR's
Benefits for Small
Business, Subcommittee on
Regulatory Reform and
Oversight
109-17.................................... May 24, 2005, How are Our
Veteran-Owned Small
Business Owners Being
Served?, Joint hearing of
the Subcommittee on
Workforce, Empowerment and
Government Programs and
Veteran's Affairs
Subcommittee on Economic
Opportunities
109-18.................................... May 26, 2005, Does China
Enact Barriers to Fair
Trade?, Joint Hearing of
the Subcommittee on Rural
Enterprises, Agriculture,
and Technology and the
Subcommittee on Tax,
Finance and Exports
109-19.................................... June 6, 2005, Field Hearing,
Small Businesses Access to
Health Insurance: Lessons
From Nebraska?, Full
Committee
109-20.................................... June 14, 2005, Are
Skyrocketing Medical
Liability Premiums Driving
Doctors Away from
Underserved Areas?, Full
Committee
109-21.................................... June 21, 2005, Union
Salting--Organizing Against
Small Business,
Subcommittee on Workforce,
Empowerment and Government
Programs
109-22.................................... June 21, 2005, Veteran's
Access to Capital,
Subcommittee on Regulatory
Reform and Oversight
109-23.................................... June 28, 2005, How the Clean
Air Act Affects Auto
Repair, Subcommittee on
Workforce, Empowerment and
Government Programs
109-24.................................... June 29, 2005, Different
Applications for
Genetically Modified Crops,
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-25.................................... July 13, 2005, Small
Business Development
Centers: New Offerings for
a New Economy, Full
Committee
109-26.................................... July 25, 2005, Freedom of
Conscience for Small
Pharmacies, Full Committee
109-27.................................... July 27, 2005, Proposed
Legislative Remedy for the
Participating Securities
Program, Full Committee
109-28.................................... July 27, 2005, The
Importance of the
Biotechnology Industry and
Venture Capital Support in
Innovation, Subcommittee on
Rural Enterprises,
Agriculture, and Technology
109-29.................................... August 9, 2005, Small
Business Expensing: Job
Growth through the Tax
Code, Subcommittee on
Workforce, Empowerment &
Government Programs
109-30.................................... September 8, 2005, Freedom
in the Workplace--An
Examination of the National
Right to Work Law,
Subcommittee on Workforce,
Empowerment and Government
Programs
109-31.................................... September 15, 2005, The Need
for Improvements and More
Incentives in the
Endangered Species Act,
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-32.................................... September 21, 2005,
Reforming the Tax Code to
Assist Small Businesses,
Full Committee
109-33.................................... September 29, 2005,
Entrepreneur Soldiers
Empowerment Act,
Subcommittee on Regulatory
Reform and Oversight
109-34.................................... October 7, 2005, Small
Business and Hurricane
Katrina: Rebuilding the
Economy, Full Committee
109-35.................................... November 1, 2005, Promoting
Private Sector Emergency
Preparedness, Full
Committee
109-36.................................... November 8, 2005, The Small
Business Innovation
Research Program--Opening
Doors to New Technology,
Subcommittee on Workforce,
Empowerment and Government
Programs
109-37.................................... November 17, 2005, Building
a Wall Between Friends:
Passports to and From
Canada?, Full Committee
109-38.................................... February 1, 2006,
Transforming the Tax Code:
An Examination of the
President's Tax Reform
Panel Recommendations,
Joint Subcommittee Hearing
with the Subcommittee on
Rural Enterprises,
Agriculture, and Technology
and the Subcommittee on
Tax, Finance and Exports
109-39.................................... February 8, 2006, The
Internet Sales Tax:
Headaches Ahead for Small
Business? Subcommittee on
Regulatory Reform and
Oversight
109-40.................................... March 2, 2006, Oversight of
the Small Business
Administration's
Entrepreneurial Development
Programs, Subcommittee on
Workforce, Empowerment and
Government Programs
109-41.................................... March 9, 2006, Oversight of
the Small Business
Administration's Finance
Programs, Subcommittee on
Tax, Finance and Exports
109-42.................................... March 15, 2006, The Missouri
River and its Spring Rise:
Science or Science Fiction?
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-43.................................... March 15, 2006, FY `07
Budget and Reauthorization
Proposals of the SBA, Full
Committee
109-44.................................... March 16, 2006, The State of
Small Business Security in
a Cyber Economy,
Subcommittee on Regulatory
Reform and Oversight
109-45.................................... March 30, 2006, SBA's
Procurement Assistance
Programs, Subcommittee on
Regulatory Reform and
Oversight
109-46.................................... April 5, 2006, Hearing on
the IRS Latest Enforcement:
Is the Bulls-eye on Small
Businesses?, Full Committee
109-47.................................... April 6, 2006, Can Small
Healthcare Groups Feasibly
Adopt Electronic Medical
Records Technology?,
Subcommittee on Regulatory
Reform and Oversight
109-48.................................... April 26, 2006, Cutting Our
Trade Deficit: Can the U.S.
Muster its Diverse Trade
Promotion Operations to
Make an Impact?, Full
Committee
109-49.................................... April 27, 2006, Healthcare
and Small Business:
Proposals that Will Help
Lower Costs and Cover the
Uninsured, Subcommittee on
Workforce, Empowerment and
Government Programs
109-50.................................... May 3, 2006, The Future of
Rural Telecommunications:
Is Universal Service Reform
Needed? Subcommittee on
Rural Enterprises,
Agriculture and Technology
109-51.................................... May 3, 2006, Sarbanes Oxley
Section 404: What is the
Proper Balance Between
Investor Protection and
Capital Formation for
Smaller Public Companies?
Full Committee
109-52.................................... May 10, 2006, Bridging the
Equity Gap: Examining the
Access to Capital for
Entrepreneurs Act of 2006,
Full Committee
109-53.................................... May 23, 2006, Data
Protection and the
Consumer: Who Loses When
Your Data Takes a Hike,
Subcommittee on Regulatory
Reform and Oversight
109-54.................................... May 25, 2006, Unlocking
Charitable Giving,
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-55.................................... June 7, 2006, Contracting
the Internet: Does ICANN
Create a Barrier to Small
Business?, Full Committee
109-56.................................... June 21, 2006, Northern
Lights and Procurement
Plights: The Effect of the
ANC Program on Federal
Procurement and Alaska
Native Corporation, Full
Committee--Joint hearing
with Government Reform
Committee
109-57.................................... June 27, 2006, S
Corporations--Their History
and Challenges,
Subcommittee on Regulatory
Reform and Oversight
109-58.................................... June 27, 2006, Immigrant
Employment Verification and
Small Business,
Subcommittee on Workforce,
Empowerment and Government
Programs
109-59.................................... June 28, 2006, The Effects
of the High Cost of Natural
Gas on Small Businesses and
Future Energy Technologies,
Subcommittee on Tax,
Finance and Exports
109-60.................................... July 13, 2006, An Update on
Administration Action to
Reduce Unnecessary
Regulatory Burdens on
America's Small
Manufacturers, Subcommittee
on Regulatory Reform and
Oversight
109-61.................................... July 20, 2006, Chinese
Barriers to Trade: Does
China Play Fair? Joint
hearing with the
Subcommittee on Tax,
Finance and Exports and the
Subcommittee on Rural
Enterprises, Agriculture,
and Technology
109-62.................................... July 25, 2006, Failure to
Comply with the Regulatory
Flexibility Act: IRS
Endangering Small
Businesses Yet Again, Full
Committee
109-63.................................... August 10, 2006, Field
Hearing, Healthcare and
Small Business--Real
Options for Colorado
Businesses, Subcommittee on
Workforce, Empowerment and
Government Programs
109-64.................................... September 27, 2006,
Advancing Security and
Commerce at Our Nation's
Ports: The Goals are not
Mutually Exclusive, Full
Committee
109-65.................................... November 28, 2006, Field
Hearing, FEMA's Response to
the Rockford Flood, Full
Committee
------------------------------------------------------------------------
CHAPTER FIVE
SUMMARY OF LEGISLATIVE ACTIVITIES OF THE COMMITTEE ON SMALL BUSINESS,
109TH CONGRESS
5.1 H. Res. 22--Expressing the Sense of the House of Representatives
That American Small Businesses Are Entitled to a Small Business
Bill of Rights
Legislative History
1/4/2005: Referred to the House Committee on Small Business.
3/8/2005: Committee hearings held.
4/6/2005: Committee consideration and mark-up session held.
4/6/2005: Ordered to be reported (amended) by voice vote.
4/21/2005: Reported (amended) by the Committee on Small
Business. H. Rept. 109-52.
4/21/2005: Placed on the House Calendar, Calendar No. 23.
4/26/2005: Rules Committee Resolution H. Res. 235 reported to
House. Rule provides for consideration of H. Res. 22
with 1 hour of general debate. Previous question shall
be considered as ordered without intervening motions
except motion to recommit.
4/27/2005: Rule H. Res. 235 passed House.
4/27/2005: Considered under the provisions of rule H. Res. 235.
4/27/2005: H.AMDT.100 Amendment reported by the House Committee
on Rules. Amended language made in order and considered
as adopted pursuant to the provisions of H. Res. 235.
4/27/2005: H.AMDT.100 On agreeing to the Rules amendment
(A001). Agreed to without objection.
4/27/2005: The previous question was ordered pursuant to the
rule.
4/27/2005: Ms. Velazquez moved to recommit to Small Business.
4/27/2005: The previous question on the motion to recommit was
ordered without objection.
4/27/2005: On motion to recommit failed by the yeas and nays:
188-222 (Roll no. 140).
4/27/2005: On agreeing to the resolution agreed to by voice
vote.
4/27/2005: Motion to reconsider laid on the table agreed to
without objection.
Need for Legislation
Over the years, various small businesses have approached
Congress with issues that they believe are of great importance.
It had been ten years since the last time small businesses
gathered together on a nationwide basis to prioritize the top
issues facing them as part of the 1995 White House Conference
on Small Business. This resolution was needed to highlight the
top tier policy issues that must be addressed by the House of
Representatives in the 109th Congress--health care, tax relief,
litigation reform, and regulatory/paperwork reduction. This is
not to say that other small business issues are unimportant.
However, this legislation is needed to help Congress prioritize
the key issues that affect the largest number of small
businesses in the United States.
Section-by-Section Analysis
The preamble of the resolution sets forth various facts
relating to the state of small business in America. The
resolving clause expresses the sense of the House of
Representatives that American small businesses are entitled to
a ``Small Business Bill of Rights'' in the following areas: (1)
the right to join together to purchase affordable health
insurance for small business employees; (2) the right to
simplified tax laws that allow family-owned small businesses to
survive over several generations and offer them incentives to
grow; (3) the right to be free from frivolous lawsuits; (4) the
right to be free of unnecessary, restrictive regulations and
paperwork; (5) the right to relief from high energy costs; (6)
the right to equal treatment, as compared to large businesses,
when seeking access to start-up and expansion capital and
credit; and (7) the right to open access to the Government
procurement marketplace. The main aim of the resolution was not
to have specific proscribed policy recommendations but to
outline certain key principles that have widespread agreement
among the small business community. For example, the access to
capital programs at the SBA certainly help in the effort to
equalize the treatment of small business, as compared to large
business, in their quest for loans and venture capital. But
determining which SBA loan program deserves to receive a
federal subsidy or not was beyond the scope of this resolution.
5.2 H. Res. 130--Recognizing the Contributions of Environmental
Systems and the Technicians Who Install and Maintain Them to
the Quality of Life of All Americans and Supporting the Goals
and Ideals of National Indoor Comfort Week
Legislative History
3/1/2005: Referred to the House Committee on Small Business.
4/6/2005: Committee consideration and mark-up session held.
4/6/2005: Ordered to be reported by voice vote.
4/20/2005: Mr. Manzullo moved to suspend the rules and agree to
the resolution, as amended.
4/20/2005: Considered under suspension of the rules.
4/20/2005: On motion to suspend the rules and agree to the
resolution, as amended. Agreed to by voice vote.
4/20/2005: Motion to reconsider laid on the table. Agreed to
without objection.
Need for Legislation
This resolution recognizes the contributions of indoor
environmental systems, commonly known as heating, ventilation,
and air conditioning (HVAC), and the technicians who install
and maintain these systems. Heating and air conditioning
provide a high quality of life for all Americans. This
resolution supports the goals and ideals of National Indoor
Comfort Week, which took place on April 17-23, 2005 and was
sponsored by the Air Conditioning Contractors Association.
Over 98 percent of HVAC contractors are small businesses.
This is an industry that many take for granted, until we call
upon them for service. They are responsible for ensuring that
in the winter our heating systems work and in the summer our
air conditioner hums along without interruption. Refrigeration
also takes away most of the concerns we used to have about how
our food is preserved, protects vital medicines from
contamination, and helps us conquer diseases that have plagued
mankind for generations. Children and seniors have cleaner,
safer air to breathe. The filtration systems in many HVAC units
in our homes, office buildings and factories help purify the
air that we breathe, helping to lower the effect of airborne
diseases.
This resolution simply salutes the small business men and
women who work in the HVAC industry.
Section-by-Section Analysis
The preamble of the resolution sets forth various facts
relating to the heating, ventilation, and air conditioning
industry in the United States. The resolving clause expresses
the sense of the House of Representatives that (1) recognizes
the contributions that environmental systems have made to the
quality of life of all Americans; (2) commends the technicians
who install and maintain environmental systems; (3) recognizes
that these small business contractors have benefited from the
reduced regulatory burden provided as a result of passage of
the Regulatory Flexibility Act of 1980 and the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA); (4)
commends small business air conditioning contractors for
participating in the Occupational Safety and Health
Administration (OSHA) panels required by SBREFA to better
educate regulators on the effect of federal rules on small
businesses; (5) recognizes that small business air conditioning
contractors have actively supported the Section 7(a) loan
guarantee program administered by the Small Business
Administration (SBA); and (6) supports the goals and ideals of
National Indoor Comfort Week, as proposed by the Air
Conditioning Contractors of America.
5.3 H.R. 230--National Small Business Regulatory Assistance Act of
2005
Legislative History
1/4/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small
Business. H. Rept. 109-208.
7/28/2005: Placed on the Union Calendar, Calendar No. 121.
Need for Legislation
During the past 25 years, the Federal Register--the
compendium of federal regulatory initiatives and changes--
almost doubled in size from 42,000 pages to a record 83,289
pages in 2000. Since President Bush took office in 2001, the
growth in regulation has slowed but the regulatory burden
continues to be a problem. This crush of federal dictates is
particularly troubling to small businesses that find it
increasingly difficult to meet these burgeoning regulatory
requirements while at the same time trying to successfully
operate their businesses in an expanding competitive global
environment. Often, small business owners do not learn about
their failure to comply with a regulation or that a new
regulatory requirement has been imposed until an inspector or
auditor walks through the door.
The result is neither beneficial to the small business
owner nor the federal government. Federal regulations exist to
achieve some statutory objective; noncompliance hinders the
reaching of these statutory goals. Small business owners
certainly would be more interested in complying with federal
regulations than paying penalties and fines. However, the
amount of information, including regulations and concomitant
guidance, simply overwhelms small business owners.
In 1996, Congress took action in an effort to alleviate
this problem. The Small Business Regulatory Enforcement
Fairness Act provided that federal agencies are required to
produce plain-English compliance guides for any regulation that
would have a significant economic impact on a substantial
number of small businesses. In a December 2001 study, the
General Accounting Office (now the General Accountability
Office) found that agencies did not do a particularly good job
in drafting compliance guides. Even if agencies do produce
excellent compliance guides, they are of little utility if
small business owners do not know about the regulatory changes.
Some mechanism must exist to make small businesses more aware
of their regulatory obligations.
Even more important than making small businesses aware of
the regulations is providing them with assistance needed to
understand and comply with the regulations. A regulation may
only take up fifteen pages of text, but the explanation for
what those pages mean may require sifting through a hundred or
more pages of dense, triple-columned, single-spaced pages in
the Federal Register. See, e.g., Defining and Delimiting the
Exemption for Executive, Administrative, Professional, Outside
Sales and Computer Employees, 69 Fed. Reg. 22,122 (April 23,
2004) (regulations are 14 pages but explanatory text is 138
pages). Most small business owners do not have the time to go
through this dense prolixity. And even if they did, they would
not understand it unless they were knowledgeable in the field.
Greater assistance must be provided to small business owners in
helping them comply with complex regulatory issuances.
Otherwise, a divide could develop between those businesses,
usually large, with the resources to comply and those, usually
small, without such resources. The small businesses will be at
risk for penalties, fines, and audits while large businesses
will not. Success or failure should be determined in the
marketplace; not whether the business has the internal
resources needed to comply with federal regulatory edicts. A
regulatory compliance assistance program operated through the
Small Business Development Center (SBDC) network could provide
substantial assistance in ensuring such a divide does not
occur.
The Small Business Administration (SBA) oversees a number
of mechanisms for delivering advice to small business owners.
One of the most effective is the SBDC program. Operated in
conjunction with colleges and universities, the SBDCs assist
small businesses in solving problems concerning the operations,
manufacturing, engineering, technology, exchange and
development, personnel administration, marketing, sales,
merchandising, finance, accounting, and business strategy
development. The SBDCs utilize the resources and the expertise
of colleges and universities. In addition, the SBDCs, like the
Agricultural Extension Service, also provide a focal point for
information retrieval, coordination of federal and state
government services, and referral to experts. Historically, the
SBDCs have focused on financial, management, and marketing
activities of small businesses despite the requirement that
they also provide regulatory compliance assistance.
SBDCs can also provide an effective mechanism for
dispensing regulatory compliance information and advice.
However, regulatory compliance, unlike many of the other
activities undertaken by the SBDCs, has significant legal
consequences and requires resource utilization quite different
from that usually offered at SBDCs. Therefore, a program to
examine how the regulatory compliance assistance will operate
in selected SBDCs is a preferred strategy to simply providing
an authorization of additional funding so that the SBDCs can
provide regulatory compliance assistance. By initially limiting
the number of centers, the SBA can pick the centers that will
provide the best regulatory compliance assistance and then
transfer the best practices on regulatory assistance to other
centers.
Section-by-Section Analysis
Section 1. Short title
Designates the bill as the ``National Small Business
Regulatory Assistance Act of 2005.''
Section 2. Purpose
This section expresses the purpose of the legislation--to
establish a dedicated set of resources within certain SBDCs to
provide and coordinate regulatory compliance assistance to
small businesses.
Section 3. Definitions
The definitions of the Small Business Act shall apply to
this program unless a different definition is utilized in the
new Sec. 36 created by this Act. In those cases in which the
definition is different, the definitions in new Sec. 36 shall
apply to the program created by this Act.
Section 4. Small Business Regulatory Assistance Program
This section establishes the program by creating a new
Section 36 of the Small Business Act. Since H.R. 230 amends the
Small Business Act, the Chairman's mark eliminates definitions
of terms already in the Act. Thus, the terms Administrator,
Association, Small Business Development Center, and State were
deleted as being redundant.
Section 36(a)(1) defines the term ``Selected Small Business
Development Center'' as a SBDC selected to participate in the
program established under this section. The Chairman's
substituted the term ``selected'' for the term
``participating'' because the former more accurately reflects
the nature of the involvement of the SBDC.
Section 36(a)(2) defines the term ``Program'' to mean the
program established under this section for the provision of
compliance assistance by the Small Business Administration
through the utilization of resources of SBDCs.
Section 36(a)(3) defines the term ``Regulatory Compliance
Assistance'' as assistance provided by a participating SBDC to
a small business concerning compliance with federal
regulations.
Section 36(b) authorizes the Administrator of the Small
Business Administration to establish a program for selected
SBDCs to provide small businesses with regulatory compliance
assistance.
Section 36(c)(1) authorizes the Administrator to enter into
arrangements with the SBDCs selected under this section for the
provision of regulatory compliance assistance.
The selected SBDCs are required to provide access to
information and resources on regulatory compliance, including
contact information for federal and state compliance and
technical assistance similar to those established under section
507 of the Clean Air Act Amendments of 1990. Numerous other
federal and state agencies have non-punitive compliance
assistance programs (such as the federal Occupational Safety
and Health Administration), and the Committee expects that the
SBDCs selected under this section will maintain all necessary
contact information with those federal and state agencies.
Furthermore, the Committee expects that the quality of
coordination of these assistance resources will be a
significant factor in selecting the SBDCs for the program.
Section 36(c)(1) also requires that the selected SBDCs
establish various training and educational activities. The
Committee expects that selected centers will utilize their
contacts with federal and state agencies to obtain compliance
pamphlets, videos, books, and any compliance guides issued
pursuant to the Small Business Regulatory Enforcement Fairness
Act. In addition, the Committee expects that participating
centers will hold lectures and seminars on regulatory
compliance including updates on compliance based on regulatory
changes. The Committee expects that the Administrator will
consider the quality of proposed educational programs in
determining which centers are selected to participate in the
program.
Section 36(c)(1)(C) also mandates that the selected SBDCs
provide confidential counseling on a one-on-one basis at no
charge to small businesses seeking regulatory compliance
assistance. The Committee recognizes that compliance with
regulations inculcates legal rights and responsibilities of
small business owners. Therefore, section 36(c) prohibits any
regulatory compliance counseling that would be considered the
practice of law in the jurisdiction in which the SBDC is
located or in which such counseling is conducted. Furthermore,
the Committee supports efforts in which the development centers
establish contacts with lawyers in the community willing to
provide seminars and other consultative service on regulatory
compliance matters, either for a fee or on a pro bono basis.
Section 36(c)(1) also requires the provision of technical
assistance. Such counseling may include the arrangement of
meetings with technical experts known to the participating
SBDCs as long as such counseling again is done on a one-on-one
basis at no charge to the small business.
Section 36(c)(1)(E) makes explicit the Committee's concern
that small businesses are directed to those individuals who
have appropriate credentials and certifications to provide
regulatory compliance assistance. While the Committee fully
understands that many very successful businesses, including
Microsoft, Apple, and Dell Computer, started in garages and
those businessmen are quite capable of providing advice on
starting, financing, and marketing a business, they are not
necessarily qualified to provide guidance on compliance with
OSHA, EPA, or IRS regulations. In fact, because of the
potential legal consequences resulting from a small business
owner following incorrect guidance, the Committee determined
that it is necessary to make explicit the requirement that the
participating centers only refer businesses to individuals with
appropriate expertise in the regulatory compliance matter for
which advice is sought.
Section 36(c)(1)(F) directs the SBDCs to provide access to
and training on the Internet including the use of the Internet
website where SBA has collected and organized regulatory
compliance information as described in subsection 36(d)(1)(C).
Section 36(c)(2) requires each center selected to
participate to file a quarterly report with the Administrator.
The report shall provide a summary of the compliance assistance
provided under the program. The report also must contain any
data and information obtained by the participating SBDC from a
federal agency concerning compliance that the federal agency
intends to be disseminated to small business concerns. The
Committee believes that this latter requirement will enable the
Administrator or the Chief Counsel for Advocacy to raise issues
of agency inconsistencies, to the extent that they exist, to
the appropriate decisionmakers.
Section 36(c)(2) requires that reports be filed with the
Administrator in an electronic format. The Committee expects
the Administrator to promulgate regulations that will provide
for a consistent format of the report. The Committee believes
that such consistency is necessary for the accurate compilation
of data and proper assessment of the effectiveness of the
program.
Section 36(c)(2) also permits, but does not require, SBDCs
to make interim reports if such reports are necessary or
useful. For example, a SBDC participating in the program may
receive inconsistent compliance information from a federal
agency. By alerting the Administrator prior to the issuance of
the quarterly report, the federal agency may be able to issue a
clarification that may eliminate confusion, save compliance
costs, and improve small business compliance.
Section 36(d) requires the Administrator to act as a
repository of data and information submitted by SBDCs selected
to participate in the program. Given the oversight role and
importance of the Associate Administrator for Small Business
Development Centers, section 36(d) requires that the functions
of maintaining the database be housed with the Associate
Administrator. The Committee believes that a central repository
is necessary in order to determine whether federal agencies are
providing consistent compliance information on a national
basis. However, the Committee expects that the information
received under this subsection be made available to other
offices within the Small Business Administration, particularly
the Chief Counsel for Advocacy and the Small Business and
Agriculture Regulatory Ombudsman so those offices can more
effectively carry out their mission of representing the
interests of small businesses before federal agencies.
Section 36(d) also requires that the Administrator submit
an annual report to the President and the Committees on Small
Business of the Senate and the House of Representatives. The
report will contain: (a) data on the types of information
provided by the participating SBDCs; (b) the number of small
businesses that contacted the participating SBDCs; (c) the
number of small businesses assisted by participating SBDCs; (d)
information on the outreach activities of the participating
SBDCs; (e) information regarding each case known to the
Administrator in which participating SBDCs provided conflicting
advice regarding compliance with federal regulation to one or
more small businesses; (f) and any recommendations for
improving the regulatory environment of small businesses,
including the most burdensome regulations on small businesses.
The Committee believes that this information is necessary to
evaluate the utility of the program. More importantly, the
report will reveal whether similarly situated small businesses
are receiving consistent regulatory compliance assistance. In
preparing the report, the Committee recognizes that the
Administrator should consult with the Chief Counsel for
Advocacy and the Small Business and Agriculture Regulatory
Ombudsman. The Committee supports such consultative efforts but
notes that the Administrator may not delegate the
responsibility of preparing the report required by this
subsection to any office within the Small Business
Administration except the Associate Administrator for Small
Business Development Centers.
Section 36(d)(1)(C) sets out that the website the
Administrator shall set up should provide access to federal,
state, academic and industry association Internet websites
containing industry specific regulation compliance information
and give him broad authority to determine which sites should be
included. Such a site should be arranged in an industry
specific organization so that small businesses can quickly
locate the sites that apply to their industry.
Subsection 36(e) requires the Administrator to give the
Chief Counsel for Advocacy the list as reported according to
section 36(d) for the Chief Counsel to review. The Chief
Counsel shall determine if any of the regulations are eligible
for review under section 610 of the Regulatory Flexibility Act
which would generally be a matter of seeing if the regulation
was issued more than 10 years before the date of the review and
if a final regulatory flexibility analysis was performed. The
Chief Counsel also can determine if the regulation has a
significant impact on a substantial number of small businesses
and if that impact is substantially different than was
estimated in the final regulatory flexibility analysis.
Finally, the Chief Counsel can determine if the regulation has
a significant impact on a substantial number of small business
concerns but no final regulatory flexibility analysis was ever
performed. If any of those three situations exist, the Chief
Counsel must contact the appropriate federal rulemaking agency
and the Office of Information and Regulatory Authority (OIRA)
and request a review of such regulation in accordance with
Sec. 610 of the Regulatory Flexibility Act if applicable or for
any impact the regulation has on small business. The Chief
Counsel shall add to his Annual Report on Regulatory
Flexibility Act if applicable or for any impact the regulation
has on small business. The Chief Counsel shall add to his
Annual Report on the Regulatory Flexibility Act the status of
any listed regulations. The Committee believes that, in this
way, the Chief Counsel and the agencies will receive solid,
practical data of the regulation's impact on which to base
consideration of better regulatory alternatives. As good as
agency and the Chief Counsel's estimates are, they should not
replace actual burden information reported from the field when
it is available. That was the original intention of Sec. 610.
Section 36(f) limits participation in the program only to
those SBDCs certified under Sec. 21(k)(2) of the Small Business
Act. The Committee is limiting participation in the program to
those small business centers of the highest quality. Some SBDCs
have not completed their certification programs. Nevertheless,
some of these centers may be developing or already have
exceptional regulatory compliance assistance programs. The
Committee does not believe that such centers should be
prohibited from participating in the program. Therefore,
Sec. 36(f)(2) authorizes the Administrator to waive the
requirement for certification if the center is making a good
faith effort to obtain such certification.
Section 36(g) requires the Administrator to select two
participating state programs from each of the Small Business
Administration's ten federal regions as those regions exist on
the date of enactment of this Act. The Administrator shall
consult with the Association and give the Association's
recommendations substantial weight. The Administrator is
required to complete the selection of the participating centers
within 60 days after the regulations to implement the program
have been promulgated.
Section 36(h) ensures that no matching funds currently
allocated to the operation of the SBDCs will be utilized to
fund this new regulatory assistance program. In order to ensure
proper funding, the Committee is authorizing a separate funding
authorization for the program.
Section 36(i) establishes the procedures for distributing
grants among the selected state programs. The formula is based
on the principle that a state which has a smaller population
also will have, in absolute terms, fewer small businesses than
a larger state. The formula therefore allocates funds according
to the relative size of each state. The Committee believes that
the minimum funds needed to initiate a state program will be
$200,000. Because the Committee has authorized $5,000,000, it
is making extra resources available to the larger states which
will require more resources to initiate the project.
Section 36(j) requires the Comptroller General of the
United States to provide a report evaluating the effectiveness
of the program three years after establishment. The report also
should contain any suggested modifications to the program.
Finally, the Comptroller General should provide its opinion
concerning whether the program should be continued and expanded
to include more SBDCs. The report shall be transmitted to the
Committees on Small Business of the Senate and House of
Representatives. The Committee expects that the program will be
sufficiently successful to expand the program to other SBDCs.
Section 36(k) limits the operation of the program only to
the funds appropriated in advance for the program. Section
36(j) provides an authorization of appropriations of $5,000,000
for fiscal year 2006 and each year thereafter. Section 36(j)
also prohibits the Administrator from using other funds,
including other funds made available for the operation of
SBDCs, to operate this program. The Committee authorized the
additional appropriations because it determined that funding of
the regulatory compliance program should not detract from the
available funding for the delivery of other SBDC programs.
Section 5. Promulgation of regulations
Section 5 authorizes the Administrator to promulgate
regulations to implement this program no later than 180 days
after the enactment of the Act. Such regulations only shall be
promulgated after the public has been given an opportunity for
notice and comment. The Committee believes that the
Administrator can and should accomplish the issuance of
regulations within the deadline set by statute. The Committee
considers this Act to be some other law for purposes of
Sec. 603 of Title 5 of the United States Code.
The regulations shall include the priorities for the type
of assistance to be provided, standards relating to the
educational, technical, and support services to be provided by
the Association to the participating centers, and standards for
work plans that the participating centers will provide to the
Administrator. The Committee believes that given the potential
interest in the program by SBDCs, it is appropriate for the
Administrator to have a set of standards by which it can
determine which state programs shall be chosen. More
importantly, the standards will provide an appropriate baseline
for the Comptroller General's evaluation of the project.
Section 5 also requires the Administrator to develop
appropriate standards for ensuring the technical qualifications
of experts to whom small businesses will be referred. The
Committee does not intend that someone must have a college or
advance degree to qualify. For example, a contractor licensed
in a state with 20 years experience (who is a high-school
graduate) may be as well-equipped to provide advice on
compliance with OSHA construction standards as a professor of
civil engineering. On the other hand, that same contractor
might not be an appropriate individual to provide tax
compliance advice. The Committee does not expect that this
aspect of the Administrator's regulations shall be all
encompassing, i.e., delineate every profession and the
appropriate qualifications. However, the Committee does expect
that the Administrator will recognize, as qualified, those
individuals certified by nationally-recognized accrediting
bodies (whose members must demonstrate substantial educational
and practical experience), meet educational and work standards
established by a federal agency, or are licensed to practice a
particular profession or job pursuant to state law. The
Committee expects that the regulations will provide the centers
selected with enough information that they can determine
whether the person providing the advice is competent in the
field of regulation.
5.4 H.R. 527--Vocational and Technical Entrepreneurship Development
Act of 2005
Legislative History
2/2/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small
Business. H. Rept. 109-207.
7/28/2005: Placed on the Union Calendar, Calendar No. 120.
Need For Legislation
Many persons within the United States have technical and
vocational skills and have the capability to sell their skills
as business owners. However, these same individuals may not
have the experience or training needed to start and operate a
small business. As a result, these skilled individuals often
work for other businesses, including many small businesses.
While a certain amount of knowledge on business operations may
be absorbed by luck, osmosis, or some combination thereof,
fortuity should never be the basis of education. To ensure
skilled craftspeople receive appropriate training for
entrepreneurship, a more organized system is necessary.
Historically, SBDCs provide services to any person seeking
assistance. That resulted, quite logically, in entrepreneurs
ready to start businesses or extant owners of small businesses.
Seeking out and educating individuals that have the capacity to
utilize their skills in starting a small business but who
currently work for others, fell outside the remit of the
typical SBDC. Certain centers, however, started to share their
services and information to vocational students and ``future
entrepreneurs'' while the students continued to learn and hone
their skills. Instead of working for another business, these
``graduates'' have the foundation to start their own
businesses.
SBDCs can provide an effective mechanism for dispensing
information and advice on providing entrepreneurial education
and curricula. Therefore, a program of additional grants for
selected SBDCs to provide entrepreneurial training and
educational materials is appropriate. A partnership model with
secondary schools that provide vocational training, and
postsecondary institutions, including vocational and technical
schools (whether public or private) is the best mechanism for
providing entrepreneurial education to future skilled craftsmen
and women. The Committee expects that the best practices from
the participants will be adopted by other SBDCs.
Section-by-Section Analysis
Section 1. Short title
The section establishes the short title as the ``Vocational
and Technical Entrepreneurship Development Act of 2005.''
Section 2. Vocational and Technical Entrepreneurship Development
Program
This section amends the Small Business Act by adding a new
Sec. 37 creating the vocational and technical entrepreneurship
program.
Subsection (a)(1) defines the term ``Association'' to mean
the Association of Small Business Development Centers
recognized under Sec. 21(a)(3)(A) of the Small Business Act, 15
U.S.C. Sec. 648(a)(3)(A). The Association is the organization
authorized by the Small Business Act to represent the
collective interests of SBDCs. The Association also provides
critical input and assistance to the Small Business
Administration's statutory role as manager of the Small
Business Development Center program.
Subsection (a)(2) defines the term ``program'' to mean the
program established pursuant to Sec. 37.
Subsection (a)(3) defines the term ``small business
development center'' as the centers established pursuant to
Sec. 21 of the Small Business Act.
Subsecton (a)(4) defines the term ``State small business
development center.'' These are the SBDCs selected from each
state to carry out the program on a statewide basis. In
selecting the winning grantees, the Administrator must consult
with the Association and give substantial weight to the
recommendations of that organization in selecting the winners.
Despite the consultation process, the Committee reiterates that
the ultimate responsibility is to that of the Administrator
based on the applications filed pursuant to subsection (d).
Finally, the Committee finds that the consultation process set
forth in this subsection does not create a federal advisory
committee under the Federal Advisory Committee Act, 5 U.S.C.
App. 2.
Subsection (b) requires the Administrator to make grants to
State SBDCs in order for them to provide educational materials
and curriculum development to providers of vocational and
technical education. While H.R. 527 authorizes the provision of
educational materials to any provider of vocational and
technical education, the Committee expects that winning
grantees will focus their attention on secondary schools and
postsecondary technical institutions rather than community
colleges and universities that can provide entrepreneurial
education through existing courses and programs.
To achieve the objectives of the program and recognizing
that the development and delivery of educational material is
costly, subsection (c) provides that each grant will be at
least $200,000. Although the Committee does not specify a
maximum and recognizes that the provision of educational
materials may be more costly in some states, the Committee
intends that the maximum number of qualified State SBDC
grantees should be able to utilize the additional funds
provided in H.R. 527. To ensure that the winning applicants can
commence the program without delay, subsection (c)(2)
eliminates any requirement (normally mandated under the Small
Business Development program) for matching funds.
Subsection (d) requires the Administrator to design a grant
application for State SBDCs seeking additional grant funds
(beyond the allocations provided in Sec. 21 of the Small
Business Act). The Committee would expect that the
Administrator consult with the Association and seek notice and
comment as required by its own regulations. The application
form must contain information on the applicant's goals and
objectives for providing educational assistance to secondary
and postsecondary providers of vocational and technical
assistance. The Committee expects that the Administrator will
select the applicants with the best proposals for offering
entrepreneurial education assistance to providers of vocational
and technical education.
To ensure that the Administrator and the Associate
Administrator for Small Business Development Centers can manage
the program, subsection (e) requires the recipients of funds to
report on their usage. The requirement is in addition to any
reports that are required by Sec. 21 of the Small Business Act
or reports mandated by the Office of Management and Budget for
federal grantees. The Committee intends that the report provide
detailed information on the curriculum materials developed,
their delivery to providers of vocational and technical
education, and any recommendations on best practices developed
with the grant funds.
Section 21 of the Small Business Act authorizes the Small
Business Administration to enter into grant and cooperative
agreements with SBDCs. Subsection (f) simply extends that
authority to the program established under H.R. 527. The
Administrator has the authority to attach codicils to the
existing agreements or enter into separate agreements under
this subsection.
Subsection (g) requires the Administrator to transmit a
report to Congress, no later than March 31, 2008, that
evaluates the program. The Committee took the approach of
requiring the Administrator to submit a report rather than the
Comptroller General, because of the Administrator's expertise
in providing entrepreneurial assistance to small business
owners. The Committee believes that the Administrator is better
positioned to evaluate the adequacy of the materials and their
utility better than the Comptroller General.
The Association recognized by Sec. 21 of the Small Business
Act provides a number of services to SBDCs. It frequently acts
as a conduit to provide information to the Administrator and
from the Administrator to the SBDCs. Given this role, the
Committee determined that the Association should act as a
clearinghouse and conduit of information to SBDCs. This role is
particularly vital in disseminating best practices developed
under the program established by H.R. 527 for offering
entrepreneurial education materials to providers of vocational
and technical education.
Subsection (i) authorizes $7,000,000 be appropriated for
each of the fiscal years 2006, 2007, and 2008. The funds to
remain available until expended.
The Committee was concerned that the establishment of this
directed program, even with a separate authorization, might
result in the Administrator diverting existing funds for the
Small Business Development Center program to the program
established in H.R. 527. To avoid this problem, the Committee
provides in subsection (j) that no funds already committed
elsewhere pursuant to the funding formula for the Small
Business Development Center program in paragraph (4) of
Sec. 21(a) of the Small Business Act shall be used to fund this
program. In simple terms, if no dedicated appropriation is
obtained for this program, the Administrator is prohibited from
operating the program. Nothing in this prohibition is intended
to interfere with any services that SBDC grantees provide to
the populations described in this paragraph under their current
grant agreements.
5.5 H.R. 682--The Regulatory Flexibility Improvements Act
Legislative History
2/9/2005: Referred to the Committee on the Judiciary, and in
addition to the Committee on Small Business, for a
period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned.
2/9/2005: Referred to House Judiciary.
3/2/2005: Referred to the Subcommittee on Commercial and
Administrative Law.
7/20/2006: Subcommittee hearings held.
2/9/2005: Referred to House Small Business.
3/16/2005: Committee hearings held.
Need for Legislation
The small business sector is critical to creating jobs in a
dynamic economy. Regulations designed for application to large-
scale entities have been applied uniformly to small businesses
and other small entities even though the problems sought to be
solved by such regulations are not usually caused by these
small businesses and other small entities. Uniform federal
regulatory and reporting requirements in many instances have
imposed on small businesses and other small entities
unnecessary and disproportionately burdensome demands,
including legal, accounting, and consulting costs.
Since 1980, federal agencies have been required to
recognize and take account of the differences in the scale and
resources of regulated entities but have failed to do so.
Alternative regulatory approaches that do not conflict with the
stated objectives of the statutes the regulations seek to
implement may be available and may minimize the significant
economic impact of regulations on small businesses and other
small entities. Federal agencies have failed to analyze and
uncover less costly alternative regulatory approaches, despite
the fact that the chapter 6 of title 5, United States Code
(commonly known as the Regulatory Flexibility Act), requires
them to do so.
Federal agencies continue to interpret chapter 6 of title
5, United States Code, in a manner that permits them to avoid
their analytical responsibilities. The existing oversight of
the compliance of federal agencies with the analytical
requirements to assess regulatory impacts on small businesses
and other small entities and obtain input from the Chief
Counsel for the Office of Advocacy at the Small Business
Administration (SBA) has not sufficiently modified the federal
agency regulatory culture.
Thus, significant changes are needed in the methods by
which federal agencies develop and analyze regulations, receive
input from affected entities, and develop regulatory
alternatives that will lessen the burden or maximize the
benefits of final rules to small businesses and other small
entities. It is the intention of the Congress to amend chapter
6 of title 5, United States Code, to ensure that all impacts,
including foreseeable indirect effects, of proposed and final
rules are considered by agencies during the rulemaking process
and that the agencies assess a full range of alternatives that
will limit adverse economic consequences or enhance economic
benefits. Federal agencies should be capable of assessing the
impact of proposed and final rules without delaying the
regulatory process or impinging on the ability of federal
agencies to fulfill their statutory mandates.
Section-by-Section Analysis
Section 1. Short title; table of contents
This Act may be cited as the ``Regulatory Flexibility
Improvements Act.''
Section 2. Findings
This section presents the rationale for amending the
Regulatory Flexibility Act (RFA) because of the failure of
federal agencies to comply.
Section 3. Clarification and expansion of rules covered by the RFA
This section amends the RFA to require agencies to assess
reasonably foreseeable indirect effects on small entities.
The section also requires that land management plans issued
by the United States Forest Service and the United States
Bureau of Land Management be subject to analysis under the RFA.
This section mandates IRS compliance for interpretative
rules without regard to whether the recordkeeping or reporting
burden is imposed by the IRS or by Congress.
A definition is added for the term ``not-for-profit''
organization. Native American tribal organizations are added to
the definition of small entity.
Section 4. Requirements for providing more detailed analyses
Section 4 amends the RFA to require a detailed statement
rather than simply a statement.
Section 5. Repeal of procedure for waiver and delay
This section eliminates the authority of an agency head to
waive or delay compliance with the analytical requirements of
the RFA.
Section 6. Procedures for gathering comments
This provision extends the panel process established by the
Small Business Regulatory Enforcement Fairness Act to all
federal agencies for all significant rules. In addition, the
section clarifies who may represent small entities on the
panels and how they are selected.
Section 7. Periodic review of rules
This provision amends the periodic review requirement by
requiring agencies to develop new plans for periodic review,
publishing the results of such reviews, and submitting them to
Congress for appropriate oversight.
5.6 H.R. 1148--Insular Areas Small Business Development Act--Key
Elements Were Incorporated Into Public Law 109-59
Legislative History
3/8/2005: Introductory remarks on measure.
3/8/2005: Referred to the House Committee on Small Business.
8/10/2005: Modified provisions of H.R. 1148 were incorporated
in Title X (section 10203) of H.R. 3, which became
Public Law 109-59.
Need for Legislation
Previously, only those zones in the insular areas or Alaska
and Hawaii designated by the United States Department of
Housing and Urban Development (HUD) as ``qualified census
tracts,'' are recognized by the Small Business Administration
(SBA) as HUBZones. Many additional zones particularly in the
insular areas would also be designated HUBZones under the
program's ``qualified `non-metropolitan county' '' criteria, as
is the case in the 48 continental States, the District of
Columbia, and the Commonwealth of Puerto Rico, if not for
technical issues of implementation. A principal factor of
eligibility under the ``qualified `non-metropolitan county' ''
criteria is a high level of unemployment in a given county. In
particular, the insular areas do not subdivide into counties,
nor does the Bureau of Labor Statistics collect Local Area
Unemployment Statistics for territories such as Guam.
Therefore, firms located in a number of financially distressed
areas in these jurisdictions are deprived of the opportunity to
participate in the HUBZone program, as no alternative formula
is used for the ``qualified `non-metropolitan county' ''
criteria in the insular areas.
The purpose of this legislation is to support economic
self-sufficiency in the areas outside the continental United
States by helping small businesses located in these
jurisdictions to effectively compete for federal contract work.
Over the past several years, the SBA's HUBZone program has been
one of the most successful vehicles for directing federal
contracts and subcontracting dollars to locally-owned small
businesses. Universal HUBZone designation throughout the areas
outside of the continental United States would provide
incentives for federal agencies to utilize local firms in these
remote areas. Considering the relative geographic isolation and
unique economic challenges encountered in these areas, and the
problems associated with implementing all provisions of the law
in these distant areas, it makes sense to designate the
entirety of these jurisdictions as HUBZones.
Section-by-Section Analysis
Section 10203. HUBZone program
Section 3(p)(4)(B)(ii) of the Small Business Act is amended
to enable all of Alaska, Hawaii, and the insular areas of the
United States to be considered as a HUBZone by adding at the
end ``or there is located a difficult development area, as
designated by the Secretary of Housing and Urban Developing in
accordance with section 42(d)(5)(C)(iii) of the Internal
Revenue Code of 1986, within Alaska, Hawaii, or any territory
or possession of the United States outside the 48 contiguous
states.''
5.7 H.R. 2981--To Expand and Improve the Assistance Provided by Small
Business Development Centers to Indian Tribe Members, Native
Alaskans, and Native Hawaiians
Legislative History
6/17/2005: Introductory remarks on measure.
6/17/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee Hearings Held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small
Business. H. Rept. 109-206.
7/28/2005: Placed on the Union Calendar, Calendar No. 119.
Need for Legislation
It is estimated that approximately 60 percent of the Native
American and Alaska Native population live on or adjacent to
Federal Indian reservations and lands set aside pursuant to the
Alaska Native Claims Settlement Act (43 U.S.C. Sec. Sec. 1610
and 1615), which suffer from an average unemployment rate of 45
percent. According to the 1997 Economic Census report (the data
from the 2002 economic census will not be available until
2006), Native Americans and Alaskan Natives owned over 197,000
businesses, employing almost 300,000 people and generating over
$34 billion in revenues. Five out of six Native American and
Alaska Native businesses had no paid employees. The service
industry accounted for 17 percent (40 percent of which were in
business and personal services) of these businesses and 15.1
percent of their total receipts. The next largest was the
construction industry (13.9 percent and 15.7 percent
respectively). The third largest was the retail trade industry
(7.5 percent and 13.4 percent respectively).
However, the number of Native American- and Alaska Native-
owned businesses grew 84 percent from 1992 to 1997, and their
gross receipts grew by 179 percent. This is compared to all
businesses which grew at a rate of 7 percent during the same
time period, and total gross receipts grew 40 percent. The
majority are located in 12 states: California (13.5 percent),
Texas (8 percent), Oklahoma (7.7 percent), Florida (5.3
percent), North Carolina (3.6 percent), New Mexico (3.4
percent), Alaska (3.4 percent), New York (3.2 percent),
Michigan (2.9 percent), Arizona (2.8 percent), Ohio (2.6
percent), Pennsylvania (2.6 percent), and Washington (2.4
percent).
The Small Business Administration (SBA) oversees a number
of mechanisms for delivering advice to small business owners.
One of the most effective is the Small Business Development
Center (SBDC) program. Operated in conjunction with colleges
and universities, the SBDCs assist small businesses in solving
problems concerning the operations, manufacturing, engineering,
technology, exchange and development, personnel administration,
marketing, sales, merchandising, finance, accounting, business
strategy development and regulatory assistance. The SBDCs
utilize the resources and the expertise of colleges and
universities. In addition, the SBDCs also provide a focal point
for information retrieval, coordination of federal and state
government services, and referral to experts.
SBDCs can provide an effective mechanism for assisting
Native Americans in building and sustaining businesses in their
communities. Unlike the SBDC's proven track record, the U.S.
SBA's other program to assist Native Americans, the Tribal
Business Information Centers, has had minimal success. In
addition, no Administration since the program's inception has
requested funding for the program. Minimal funding has been
provided year-to-year from the SBA's salaries and expenses
budget. Therefore, the Committee believes that a pilot program
through an established and proven federal assistance program is
a preferred strategy.
Section-by-Section Analysis
Section 1. Findings and purposes
This section lists the finding of Congress and the purposes
for H.R. 2981.
Section 2. Small Business Development Center assistance to Indian tribe
members, Alaska Natives, and Native Hawaiians
This section establishes a program by adding a new
paragraph (8) to Sec. 21(a) for additional grant funds to SBDC
grantees for providing outreach services to startups and
businesses owned by Indian tribe members, Alaska Natives, and
Native Hawaiians. Paragraph (A) is designed to provide outreach
to businesses on Indian lands. The Committee recognizes that
Indian lands do not include lands set aside pursuant to the
Alaska Native Claims Settlement Act, see Alaska v. Native
Village of Venetie Tribal Government, 522 U.S. 520, 532 (1998).
Since the Committee wants to serve Alaska Natives, the
Committee expects that, should the SBDC grantee in Alaska will
site service pursuant to this program by locating centers on or
near those lands described in the Alaska Native Claims
Settlement Act.
Subparagraph (B) specifies the criterion for states in
which grantees are eligible to apply. The Committee selected
the one percent minimum to ensure that the limited funds are
made available to those states with the largest populations of
members of Indian Tribes, Alaskan Natives, and Native
Hawaiians.
Subparagraph (C) mandates that grant applications must be
submitted in a form established by the Administrator. The
Committee expects that the responsibility for developing the
form will be delegated to the Associate Administrator for
SBDCs. Any such form must contain the contents specified in
this subparagraph including: the capability of the applicant to
provide training and services to Indian tribe members, Alaska
Natives, and Native Hawaiians; the sites at which the grantee
will provide the services; the amount of grant funding
requested; and the extent of consultation with local tribal
councils. The Committee expects that the Administrator will
select, after review and consultation with the Associate
Administrator for SBDCs, those applicants that have the best
plan for providing services to members of Indian tribes, Alaska
Natives, and Native Hawaiians.
Subparagraph (D) requires that the applicants and grantees
must comply with all the provisions of Sec. 21 of the Small
Business Act except the matching funds requirements of
paragraph (4)(A) shall not apply. The Committee opted not to
require matching because the ability to obtain additional non-
federal funds undermines the purpose of providing assistance to
underserved Indian tribe members, Alaska Natives, and Native
Hawaiians.
To maximize the limited funds authorized by H.R. 2981, the
Committee determined to limit the size of each grant to
$300,000 in any one fiscal year. Discussions with SBDC grantees
suggested that the limitation was adequate to provide the
services set forth in Sec. 21. In fact, the Committee expects
that some grants may be for less than the statutory maximum.
Subparagraph (F) mandates that the Administrator shall
write regulations governing the operation of the program
established by H.R. 2981. Under the Administrative Procedure
Act, the Administrator is not required to promulgate
regulations pursuant to notice and comment because the Small
Business Development Center program relates to a government
grant. The Administrator, by regulation, waives the right to
forgo notice and comment rulemaking. See 13 C.F.R.
Sec. 101.108. This requirement is subject to change by
administrative fiat. Given the fact that the program
established by H.R. 2981 involves members of an underserved
population, the Committee decided to mandate notice and comment
so that the program and subsequent changes will have input from
all affected parties, particularly those served by the winning
grantees.
Clause (i) of subparagraph (F) requires that the
regulations include standards relating to the services provided
by winning applicants. The Committee fully expects that the
regulations will provide for the full panoply of services
already mandated by Sec. 21. In addition, the rules also should
contain specific outreach, consulting, and advisory services
that will be of most utility to the populations to be served
under the program. Clause (ii) of subparagraph (F) requires
regulations governing any work plan for grants awarded under
this paragraph. The Committee is of the opinion that the
quality of the work plans will be of the key component by which
the Administrator determines applicants to receive grants under
this paragraph.
Clause (i) of subparagraph (G) defines Indian lands in a
fairly broad manner in order to offer the widest assistance to
businesses owned by members of Indian tribes without regard to
whether the business is located specifically on a reservation
or an area that used to be a reservation but whose population
is predominantly that of Indian tribe members. Section 1151 of
title 18, United States Code defines Indian lands by reference
to Indian reservations. Section 4 of the Indian Child Welfare
Act, 25 U.S.C. Sec. 1903 defines the term Indian reservation.
To incorporate those lands upon which a reservation has been
disestablished or diminished but still includes a substantial
Indian tribal population, the Committee also includes in the
definition of Indian land, the definition of reservation set
forth in 25 C.F.R. Sec. 151.2 and, in particular, subsection
(f) (defining reservations to include lands formerly designated
as reservations but no longer reserved).
Clause (ii) of subparagraph (G) adopts the broadest
definition of the term ``Indian tribe'' used by the Secretary
of Interior.
Clause (iii) of subparagraph (G) states that an ``Indian
tribe member'' is the member of an Indian tribe. While this
definition appears circular, it is used in the Indian Child
Welfare Act and has a well-understood meaning under federal
Indian law.
Clause (iii) would incorporate Alaska Natives into its
definition, but the Committee determined that a more
appropriate definition of Alaska Native is the one used in
Sec. 3(b) of the Alaska Native Claims Settlement Act, 43 U.S.C.
Sec. 1602(b), and adopts that definition in clause (iv) of
subparagraph (G).
Clause (v) of subparagraph (G) defines the term ``Native
Hawaiian by cross-reference to the definition established in 42
U.S.C. Sec. 11711 but excludes from that definition specific
requirements of genealogical evidence. Since the program is
designed to provide grants to SBDCs rather than individuals,
the Committee determined that it only need describe the target
populations of the applicants seeking grants.
Clause (vi) of subparagraph (G) defines the term ``tribal
organization'' to have the meaning that term is given in
section 4(l) of the Indian Self-Determination and Education Act
Assistance Act, 25 U.S.C. Sec. 450b(l). Since one of the key
elements of this program is input from members of Indian
tribes, Alaska Natives (or their representative corporations
should the SBDC grantee and the Administrator find that
appropriate), and Native Hawaiians, the Committee determined
that use of the definition of tribal organization was
appropriate.
Paragraph (H) authorizes $7 million for the program for
each fiscal year, 2006, 2007, and 2008. The Committee believes
that this represents sufficient funds to provide targeted grant
assistance to SBDC grantees wishing to serve members of Indian
tribes, Alaska Natives, and Native Hawaiians.
The Committee was concerned that the establishment of this
directed program, even with a separate authorization, might
result in the Administrator diverting existing funds for the
Small Business Development Center program to the program
established in paragraph (8). To avoid this problem, the
Committee provides in paragraph (I) that no funds already
committed elsewhere pursuant to the funding formula for the
Small Business Development Center program in paragraph (4) of
Sec. 21(a) of the Small Business Act shall be used to fund this
program. In simple terms, if no dedicated appropriation is
obtained for this program, the Administrator is prohibited from
operating the program. Nothing in this prohibition is intended
to interfere with any services that SBDC grantees provide to
the populations described in this paragraph under their current
grant agreements.
Section 3. State consultation with local tribal organizations
This section requires SBDCs participating in the grant
program established under this paragraph to request the advice
of local tribal organizations on how best to provide assistance
to Indian tribe members, Alaska Natives, and Native Hawaiians
and where to locate satellite centers to provide such
assistance. Since tribal organizations will have a superior
knowledge of the types of assistance that is required, the
Committee believes such consultation will provide the maximum
benefit to members of Indian tribes, Alaska Natives, and Native
Hawaiians. Nothing in this legislation is intended to prevent
either grant winners or the Administrator from also designating
appropriate Native Alaska village or regional corporations or
Native Hawaiian organization as additional consultative
sources. The Committee expects that the applicants will supply
information on the procedures for carrying out the tribal
consultations mandated by this section. Since the consultation
is between a private organization and a federal grantee, the
Committee does not believe such consultation falls within the
parameters of the Federal Advisory Committee Act.
5.8 H.R. 3207--Second-Stage Small Business Development Act of 2005
Legislative History
7/12/2005: Referred to the House Committee on Small Business.
7/13/2005: Committee hearings held.
7/14/2005: Committee consideration and mark-up session held.
7/14/2005: Ordered to be reported (amended) by voice vote.
7/28/2005: Reported (amended) by the Committee on Small
Business. H. Rept. 109-205.
7/28/2005: Placed on the Union Calendar, Calendar No. 118.
Need for Legislation
Scholars classify various stages of small business
development. For purposes of H.R. 3207, the four stages of
small business are: new venture, expansion,
professionalization, and consolidation. Y. Randle & E.
Flamholtz, Growing Pains 32-43 (1990). The expansion phase is
frequently referred to as ``second-stage entrepreneurship.''
Second-stage business concerns are growing rapidly and changing
their focus from that of the founders to an identifiable
culture apart from the founders. These second-stage concerns
may be ready for even more rapid expansion, including the
hiring of additional personnel. Given their readiness to grow,
other scholars refer to them as entrepreneurial growth
companies or gazelles. Gazelles are critical to the American
economy. According to Dr. David Birch, gazelles represent about
three to four percent of all American businesses but are
responsible for the vast majority of new employment in the
United States (gazelles created net employment of 4 million new
jobs from 1990-94). Furthermore, gazelles typically are not
found in high-tech industries but rather are spread throughout
the American economy, including a surprising number in
manufacturing.
Despite the fact that such businesses have overcome
significant problems associated with the start-up phase of
business, they still face operational obstacles to maximize
their potential. Absent taking the right steps with respect to
the role of the founders, upgrades to accounting systems, and
sales efforts, the gazelles could stumble. Other problems that
gazelles may face are capital markets not designed to assist
gazelles, the need for appropriate intellectual property
protection, proper workforce education and investment in human
capital, and development of market opportunities.
The Small Business Administration (SBA) runs a number of
programs in which small businesses can learn from other
businesses. In the government procurement arena, a mentor-
protege program exists to help small businesses by linking them
with large prime contractors. An extension of the program,
BusinessLINC, was designed to facilitate meetings among various
mentor-protege participants. While somewhat effective, the
mentor-protege programs have a narrow remit. Learning from
peers who have had or are having the same or similar
experiences provides useful assistance to small business
concerns.
Small Business Development Centers (SBDCs) can provide an
effective mechanism for arranging and helping facilitate peer-
to-peer learning among gazelles. The Committee believes that a
pilot program to demonstrate the effectiveness of small
business development center involvement is appropriate. The
Committee fully expects that the best practices will be adopted
by other small business development centers and the program may
be made permanent.
Section-by-Section Analysis
Section 1. Short title
The section establishes the short title as the ``Second-
Stage Small Business Development Act of 2005.''
Section 2. Purpose
This section states the Congressional rationale for
enactment of the program.
Section 3. Pilot program
Subsection (a) mandates that the Administrator establish
the program of peer learning opportunities through SBDCs.
Subsection (b) requires that the Administrator to select
eligible entities (SBDCs) that apply pursuant to the pilot
program. Eligible entities are defined as those institutions or
governmental organizations that currently receive funding
pursuant to Sec. 21 of the Small Business Act. The term
``eligible entities'' does not refer to the situs at which
locations of services are delivered by entities that receive
funds pursuant to Sec. 21 of the Small Business Act. Subsection
(b) limits the pilot program to twenty grantees, two selected
from each of the ten federal regions as delineated in paragraph
(4). The Committee recognizes that some states may have more
than one SBDC eligible to receive funding pursuant to the
funding formula in Sec. 21 of the Small Business Act. For those
states, the Committee intends that the Administrator select
only one SBDC program from those states with more than one
grantee under Sec. 21. Eligible grantees may submit an
application to the Administrator with a plan for offering peer
learning opportunities and a plan to ensure that these peer
learning opportunities will become self-sustaining by the end
of the pilot program. The Administrator is required to select
the applicants with the best plans for providing the
opportunities and ensuring that the peer learning opportunities
shall be self-sustaining. Nothing in the bill restricts the
Administrator from weighting the factors in favor of the self-
sustaining aspects or the quality of the peer learning
opportunities. Paragraph (5) of subsection (b) requires the
Administrator to consult with the Association recognized
pursuant to Sec. 21(a)(3)(A) of the Small Business Act and give
the Association's recommendations substantial weight. The
Committee intends that the term ``substantial weight'' not give
the Association controlling weight; rather the term
``substantial'' is used in its administrative law context of
more than a scintilla but less than a preponderance. It is not
the Committee's intention that this consultation process not
fall within the requirements of the Federal Advisory Committee
Act. Paragraph (6) of subsection (b) requires completion of the
selection process within 60 days after the regulations to
implement the pilot program have been promulgated.
Subsection (c) requires that a grantee selected in the
pilot program to use the funds solely for purposes of
conducting peer learning opportunities. Funds may not be used
by the selected grantees for any other purpose, including
provision of any other service mandated by Sec. 21 of the Small
Business Act or the grantees contract or cooperative agreement
with the SBA.
Subsection (d) establishes the procedures for distributing
grants among the selected state programs. The formula is based
on the principle that a state, which has a smaller population,
also will have, in absolute terms, fewer small businesses than
a larger state. The formula, therefore, allocates funds
according to the relative size of each state. The Committee
believes that the minimum funds needed to initiate a state
program will be $50,000 and grants the Administrator the
authority to modify the grant size calculated by the formula in
this subsection to ensure that each SBDC selected under the
pilot program will receive a minimum of $50,000.
Subsection (e) requires the applicants to satisfy the
matching funds requirements of subparagraphs (A) and (B) of
Sec. 21(a)(4) of the Small Business Act. The Committee decided
that since these peer learning opportunities would be of
sufficient value to the small business community, the selected
programs should be able to obtain matching funds, including the
payment of attendance fees by the participants. Furthermore,
the matching requirement will expand the total resources
devoted to the program. Subsection (e) provides an exception
for lead centers located at community colleges, historically
Black college, Hispanic-serving institutions, and minority
institutions in meeting these matching requirements. Where the
lead center in a state is housed in any of these centers, such
center must only obtain only 50 percent of the matching fund
requirements of subparagraphs (A) and (B) of Sec. 21(a)(4) of
the Small Business Act. The matching funds requirement shall be
calculated based on the amount of the grant made under this
pilot program.
Subsection (f) requires each SBDC selected to operate peer
learning opportunities must provide a quarterly report to the
Administrator with the information set forth in paragraphs (A)-
(C). Nothing in this requirement alters any other reporting
requirement mandated by the Administrator. The Administrator,
for the sake of reductions in paperwork burdens, may combine
the report required by this subsection with other quarterly
reports. Because the reports mandated by this subsection must
be filed electronically, the Administrator should establish an
overall electronic reporting system for SBDCs to the extent
such a system has not been developed.
The Association recognized by Sec. 21 of the Small Business
Act provides a number of services to SBDCs. It frequently acts
as a conduit to provide information to the Administrator and
from the Administrator to the SBDCs. Given this role, the
Committee determined that the Association should act as a
clearinghouse and conduit of information to SBDCs under the
terms set forth in subsection (g).
The Committee believes that peer learning will be
sufficiently valuable addition to the services provided by
SBDCs that they would be able to recoup, after an initial
period, the entire cost of providing this service. Thus, the
Committee mandates in subsection (h) that the reports required
by H.R. 3207 provide the Administrator with progress on making
the peer learning opportunities self-sustaining. Such reports
shall be filed on annual basis. To ensure that the
Administrator has sufficient information to conduct audits and
reviews of the program, subsection (h) also requires the
grantees to submit, on an annual basis, descriptions of the
peer learning opportunities and the number of ``second-stage''
small business concerns assisted by the pilot program. Finally,
the Committee included a requirement that the grantees assess
the economic impact of the program but delayed that requirement
until one year after the program was established.
Subsection (i) provides the same privacy protections to
grantees in the pilot program that currently exist for SBDC
clients pursuant to Sec. 21 as added by Division K of H.R.
4818, the Consolidated Appropriations Act of 2005, Pub. L. No.
108-447. This subsection prohibits the disclosure of client
information (including the name, address, telephone and
facsimile numbers, and e-mail address) of any concern or
individual receiving assistance from a SBDC grantee or its
subcontractors (who operate service centers that business
owners can utilize to obtain advice) unless the Administrator
is ordered to make such disclosure pursuant to a court order or
civil or criminal enforcement action commenced by a federal or
state agency. The Committee expects that SBDC grantees will
only respond to formal agency requests, such as civil
investigative demands, and subpoenas. The Committee also
recognizes that the Administrator has significant management
responsibilities to ensure that federal taxpayer dollars are
wisely used by grantees and are in compliance with the law,
regulations, and the cooperative agreements signed by SBDC
grantees. Thus, the Committee authorizes the SBDC grantees to
provide client names for the purposes of financial audits
conducted by the Administrator or Inspector General and for
client surveys to ensure that the SBDC grantees are satisfying
certain aspects of their grant agreements. The Committee
recognizes that client surveys may be misused and impose
restrictions on their use. The Committee expects that the
regulations promulgated pursuant to the amendments made to
Sec. 21 pursuant to Pub. L. No. 108-447 shall apply to this
pilot program, including the regulations about the use of
client surveys.
Subsection (j) requires the Comptroller General of the
United States to provide a report evaluating the effectiveness
of the program three years after establishment. The report also
should contain any suggested modifications to the program.
Finally, the Comptroller General should provide its opinion
concerning whether the program should be continued and expanded
to include more SBDCs on self-funding basis. The report shall
be transmitted to the Committees on Small Business of the
Senate and House of Representatives. The Committee expects that
the program will be sufficiently successful to expand the
program to other SBDCs without the need for additional federal
funds.
Subsection (k) provides for termination of the pilot
program on September 30, 2009. The Committee decided not to
provide for any authorization contingency if the program does
not receive appropriations for the entire authorized length of
the pilot program.
Section 4. Promulgation of regulations
Section 4 authorizes the Administrator to promulgate
regulations to implement this program no later than 180 days
after the enactment of the Act. Such regulations only shall be
promulgated after the public has been given an opportunity for
notice and comment. The Committee believes that the
Administrator can and should accomplish the issuance of
regulations within the deadline set by statute. The Committee
considers this Act to be some other law for purposes of section
603 of Title 5 of the United States Code.
The regulations shall include the standards relating to
conduct of peer learning opportunities, the number of
individuals that may participate in a group, determining
whether or not a participant constitutes a competitor, various
requirements for the facilitators of these peer learning
opportunities, and requirements for transitioning these peer
learning opportunities to full self-sustaining basis. The
Committee expects that the regulations will lay out milestones
and other requirements to ensure that this program will become
self-funding once the pilot program's authority lapses.
Section 5. Definitions
Paragraph (1) defines the term ``Administrator'' to be the
Administrator of the SBA.
Paragraph (2) defines the term ``peer learning
opportunities'' as formally organized groups, overseen by
professional facilitators, of presidents, owners, and chief
executive officers of second-stage small business concerns.
These groups meet regularly to discuss strategies and tactics
and share ideas about operating their businesses. Meetings
among business executives may lead to the perception of
collusion in violation of the antitrust laws. While the
Committee does not believe that second-stage entrepreneurs have
sufficient market power to collude, the Committee took the
safer approach by prohibiting peer learning among competitors.
Thus, peer learning opportunities will be limited to non-
competitors. The Committee believes that valuable information,
such as capital markets or handling certain workforce issues,
will be shared among non-competitors. Furthermore, by
eliminating competitors, members of the peer learning groups
may be more willing to speak freely without concern about
revealing important information to a competitor.
Paragraph (3) establishes the criteria for determining
whether a business concern qualifies as a second-stage
entrepreneur and, thus, eligible for inclusion in the peer
learning opportunities. Any small business that has survived
the start-up, or new venture, phase may be considered a second-
stage business. However, the Committee's impetus for passing
H.R. 3207 is to assist not all second-stage entrepreneurs but
those that have shown the potential for accelerated growth,
i.e., a gazelle. Additionally, the Committee wished to ensure
maximum participation of women, service-disabled, and minority
entrepreneurs who were in the ``gazelle'' category; as such,
the legislation provides such ownership as meeting one of the
three necessary requirements for qualification under clause
(ii). Therefore, the Committee determined that parameters were
necessary for circumscribing those second-stage entrepreneurs
that are or have the potential for being gazelles. This
paragraph establishes those standards and small business
concerns must be both a small business as defined by the
Administrator's regulations set forth in 13 C.F.R. Sec. 121.201
and meet the criteria set forth in clauses (i) or (ii).
Paragraph (4) defines a small business concern by cross-
reference to Sec. 3 of the Small Business Act. The Committee
intends that the Administrator shall construe the terms in H.R.
3207 and the Small Business Act in pari materia.
Paragraph (5) defines the term ``state'' to include all the
states, the District of Columbia and the territories of the
United States Virgin Islands, Guam, the Commonwealth of Puerto
Rico, and American Samoa. Puerto Rico, the Virgin Islands, and
Guam all have SBDCs that receive funding pursuant to subsection
(a)(4) of Sec. 21. Guam provides the services mandated by
Sec. 21 to American Samoa.
Paragraphs (6)-(9) set forth the definitions of those
institutions of higher learning that are eligible for the
reduced matching requirement pursuant to Sec. 3(e).
Section 6. Authorization of appropriations
Section (6) limits the operation of the program only to the
funds appropriated in advance for the program. The Committee
provides an authorization of $1.5 million for each four fiscal
years starting with the first fiscal year after enactment.
Section (6) also prohibits the Administrator from using other
funds, including other funds made available for the operation
of SBDCs, to conduct this pilot program. The Committee
authorized the additional appropriations because it determined
that funding of the peer learning opportunities program should
not detract from the available funding for the delivery of
other services by SBDCs.
5.9 H.R. 6159--To Extend Temporarily Certain Authorities of the Small
Business Administration, Public Law 109-316
Legislative History
9/25/2006: Referred to the House Committee on Small Business.
9/26/2006: Mr. Manzullo moved to suspend the rules and pass the
bill.
9/26/2006: Considered under suspension of the rules.
9/26/2006: On motion to suspend the rules and pass the bill.
Agreed to by voice vote.
9/26/2006: Motion to reconsider laid on the table. Agreed to
without objection.
9/27/2006: Received in the Senate, read twice.
9/30/2006: Passed Senate without amendment by Unanimous
Consent.
9/30/2006: Message on Senate action sent to the House.
9/30/2006: Cleared for White House.
10/4/2006: Presented to President.
10/10/2006: Signed by President.
10/10/2006: Became Public Law No: 109-316.
Need for Legislation
H.R. 6159 simply extends all the programs, including pilot
programs, the authorities or provisions of the Small Business
Act and the Small Business Investment Act until February 2,
2007. The programs and authorities of the Small Business
Administration (SBA) were set to expire on September 30, 2006.
Many of the programs of the SBA do not operate under a
direct appropriation. This includes the 7(a) general business
loan guarantee program; the Certified Development Company (CDC)
program; and the Small Business Investment Company (SBIC)
program. H.R. 6159 made it absolutely certain that there is no
legal ambiguity as to whether or not the federal government can
continue to guarantee these critical loan and debenture
programs during the time period covered by a Continuing
Resolution.
In addition, this bill extended the authority of the SBA to
operate several smaller programs including grants to Small
Business Development Centers (SBDCs) to participate in the
Drug-Free Workplace program; sustainability funding for Women
Business Centers (WBCs); the pre-disaster mitigation pilot
program; the New Markets Venture Capital program; and
BusinessLinc. It also extended SBA's co-sponsorship and gift
authority, which enables the SBA to accept private donations to
help put on events or print publications, thus saving the
taxpayer precious dollars. Finally, H.R. 6159 also allowed the
SBA's Advisory Committee on Veterans Business Affairs to
continue to operate.
Section-by-Section Analysis
Section 1.--Temporary extension
Any program, authority, or provision, including any pilot
program, authorized under the Small Business Act or the Small
Business Investment Act of 1958 as of September 30, 2006, that
was scheduled to expire on or after September 30, 2006 and
before February 2, 2007, remained authorized through February
2, 2007, under the same terms and conditions in effect on
September 30, 2006.
CHAPTER SIX
SUMMARY OF OTHER LEGISLATIVE ACTIVITIES OF THE COMMITTEE ON SMALL
BUSINESS
6.1 Committee Meetings
6.1.1 organizational meetings
On February 10, 2005 the Committee on Small Business held
an organization meeting. The purpose of this meeting was
threefold: (1) to consider and adopt the Committee rules for
the 109th Congress, (2) to consider and adopt the Committee's
oversight plan for the 109th Congress, and (3) approve the
subcommittee assignments for Members of the Committee. The
Committee rules, oversight plan, and organization of
subcommittees were adopted by voice vote. The text of the
Committee's oversight plan follows:
6.1.2 oversight plan for the committee on small business
109th congress
U.S. HOUSE OF REPRESENTATIVES
DONALD A. MANZULLO, CHAIRMAN
Rule X, clause 2(d)(1), of the Rules of the House requires
each standing Committee to adopt an oversight plan for the two-
year period of the Congress and to submit the plan to the
Committees on Government Reform and House Administration not
later than February 15 of the first session of the Congress.
The oversight plan of the Committee on Small Business
includes areas in which the Committee expects to conduct
oversight activity during the 109th Congress. However, this
plan does not preclude oversight or investigation of additional
matters as the need arises.
OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION
The Committee will conduct hearings on all the major
programs of the Small Business Administration (SBA) to
determine their effectiveness and possible options for
improvements, as a prelude to reauthorization of the entire SBA
to be completed by September 30, 2006.
The Committee will oversee the SBA's performance in
carrying out its statutorily mandated roles, including its
internal financial management, and will work to ensure that the
SBA eliminates any improper payments and receives a green score
card under the Administration's Programs Assessment Rating Tool
(PART).
The Committee will also monitor the reporting requirements
on gifts, co-sponsorships and co-operative agreements received
or entered into by the SBA with the private sector.
FINANCIAL AND MANAGEMENT/TECHNICAL ASSISTANCE PROGRAMS
The Committee will conduct hearings on the effectiveness
and efficiency of the SBA's major programs. These include: 7(a)
General Business Loan Program, the Certified Development
Company Program, the Small Business Investment Company (SBIC)
Program, the Microloan Program, the Disaster Loan Program,
Small Business Development Centers (SBDCs), and New Markets
Venture Capital Program. In particular, the Committee will
closely examine the participating securities component of the
SBIC program with the intention to move legislation to
resuscitate the program (April 2005). In addition, the
Committee will oversee the Office of Government Contracting to
ensure that other Federal agencies meet the minimum threshold
of various small business goals in Federal government
procurement.
The Committee will also examine on the ability of small
businesses to gain access to capital, focusing particularly on
interest rates and bank regulations.
ADVOCACY
The Office of Advocacy was created to provide small
business with an effective voice inside the Federal government.
The Committee will conduct hearings on how to strengthen this
voice and make sure that the Office of Advocacy continues to
effectively represent the interests of small business. As part
of this process, the Committee will also monitor the
implementation of Executive Order 13272 regarding the ``Proper
Consideration of Small Entities in Agency Rulemaking.'' (Spring
2003)
VETERANS
In the 106th Congress, Congress created a new office of
Veterans Business Development at the SBA and the National
Veterans Business Development Corporation to enhance and
improve small business services to our nation's veterans. The
Committee will continue to conduct hearings on the
implementation of the Veterans Entrepreneurship and Small
Business Development Act, including a review of the progress on
achieving the service-disabled veterans goal in procurement and
the implementation of Executive Order 13360 to ``Providing
Opportunities for Service-Disabled Veteran Businesses to
Increase their Federal Contracting and Subcontracting.'' (May
2005)
TECHNOLOGY AND RESEARCH ASSISTANCE
Small Business Innovation Research program
The Small Business Innovation Research (SBIR) program aids
small businesses in obtaining federal research and development
funding for new technologies. In 2000, Congress reauthorized
the SBIR program for eight years. The Committee will
investigate the implementation of the changes to the SBIR
program and, more particularly, the outreach effort of the SBIR
program to make sure that all areas of the country benefit from
the program and to insure that the program assists in the
development of new research and development for small
manufacturers critical to the defense industrial base.
Small Business Technology Transfer (STTR) program
Committee oversight will focus on the program's success at
helping small business access technologies developed at federal
laboratories and put that knowledge to work. In 2001, Congress
reauthorized the STTR program for eight years. The Committee
will monitor agency implementation of PL 107-50.
FEDERAL PROCUREMENT
The Committee will examine needed changes in federal
procurement. The Committee will continue to monitor and
highlight the practice of creating bundled or consolidated
mega-contracts that are too large for small business
participation. Additionally, the implementation of
Administration's strategy for increasing Federal-contracting
opportunities for small business as released by the Office of
Federal Procurement Policy at the Office of Management and
Budget in October 2002 will be closely scrutinized.
Because there is a direct correlation between the ability
of an agency to achieve its goals and contract bundling, the
success of Federal agencies in meeting all their small business
goals will also be assessed. The Committee will also work to
protect the integrity in calculating small business
participation in Federal contracting by ensuring that big
businesses are not credited as small businesses.
The Committee recognizes that the Federal Procurement Data
System (FPDS)--the existing system used by the SBA to evaluate
small business participation in government contracts--is not
capturing accurate information on small business achievement.
The Committee will work to ensure that agencies, including the
SBA, are held accountable for any false numbers being used to
portray a positive small business environment in the federal
marketplace.
With the continued practice of contract bundling, more
small businesses will become subcontractors. In light of this,
the Committee will work to ensure fair treatment for
subcontractors on Federal contracts.
The Committee will also work to jump-start the women's
contracting program to make sure the program is serving the
needs of women-owned businesses.
GOVERNMENT COMPETITION
The Committee will examine the extent to which the Federal
government itself directly or indirectly competes with small
business. Our focus will include activities in both government
practices and in certain status given by the Federal government
to non-governmental entities. (On-going)
REGULATORY FLEXIBILITY
The Committee will continue its oversight of agency
compliance with the Regulatory Flexibility Act, as amended by
the Small Business Regulatory Enforcement Fairness Act. (On-
going)
The Committee will oversee the implementation of the Truth
in Regulating Act.
SBREFA
The Committee will be conducting oversight hearings on
agency implementation of the Small Business Regulatory
Enforcement Fairness Act (SBREFA), which was enacted during the
104th Congress. The Committee will also examine the need to
further amend and strengthen SBREFA. (April 2005)
PAPERWORK REDUCTION
The Committee will hold hearings and work to strengthen the
Paperwork Reduction Act. (2005)
GOVERNMENT REGULATION
The Committee will continue to examine the regulatory
activities of various Federal agencies and assess the impact of
regulations on the small business community. (On-going)
In addition, the Committee will work toward amending the
Equal Access to Justice Act to enable small businesses to
challenge unfair government actions against them (Summer 2005).
TAXATION
The Committee will continue to conduct oversight hearings
into ways to reduce the tax burden on small business. These
hearings will include not only the monetary but also the
paperwork burden of the Federal tax system and Federal
enforcement efforts on small business. (On-going)
ENERGY
The Committee will conduct oversight hearings on the
potential effects of any legislative changes in energy policy,
including examining the possible effects of deregulation of
electricity on small business. (Summer, 2005)
GOVERNMENT PERFORMANCE AND RESULTS ACT
The Committee will continue consultations with the SBA
regarding the preparation and implementation of strategic plans
and performance plans as required by the Government Performance
and Results Act.
EMPOWERMENT
The Committee will conduct oversight hearings on
regulations and licensing policies that impact small businesses
located in high risk communities. The Committee will also
examine the promotion of business growth and opportunities in
economically depressed areas, and will examine programs
targeted towards relief for low-income communities. The
challenges facing minority-owned businesses will continue to be
evaluated. (On-going)
WORKFORCE
The Committee will examine issues related to the problems
faced by small businesses in attracting and retaining a high
quality workforce. Specifically, the Committee will investigate
vocational education programs, worker retraining programs, and
wage and benefit issues. (On-going)
HEALTH CARE
The Committee will examine ways on how to improve access
and increase affordability of high quality medical care for
small business owners and their employees. (On-going)
PENSION REFORM
The Committee will examine ways on how to enhance
retirement security for small business owners and their
employees. (On-going)
E-COMMERCE AND TECHNOLOGY
The Committee will continue to conduct oversight hearings
into ways to reduce the ``digital divide'' in order to promote
business growth and opportunities in economically depressed
areas. These hearings will also examine ways to help the
average small businessperson exploit the vast potential of
Internet commerce. (On-going)
TELECOMMUNICATIONS
The Committee will examine the impact of Telecommunications
Act of 1996 on small business. First, the Committee will
investigate whether or not the broadest range of small
businesses have benefited from more competition in the
telecommunications market through lower prices and better
service. Second, the Committee will investigate whether or not
small business telecommunication companies have benefited from
the Act. The Committee will explore alternatives to enhance the
benefits of the changes in telecommunications technology for
small business. (On-going)
INTERNATIONAL TRADE
The Committee will continue to examine ways to expand
export opportunities for small business. The Committee will
conduct oversight hearings on Federal trade policy and export
promotion programs to insure that they serve the needs of small
business exporters. (On-going)
SELF-EMPLOYED
The Committee will hold oversight hearings on how to reduce
the regulatory and tax burden on the self-employed,
particularly those in home-based businesses. (On-going)
MANUFACTURING
The Committee is gravely concerned that nearly 3 million
jobs have been lost in manufacturing over the past two years,
much of which were in small manufacturing businesses. The
Committee will continue to hold hearings to examine the causes
of these problems and propose a series of recommendations for
both legislative and administrative changes. (On-going)
Specifically, the Committee will examine the costs of the
loss of small manufacturers and suppliers critical to our
national security and our defense industrial base (Spring
2005).
AGRICULTURAL/RURAL/FARM ISSUES
The Committee will examine ways to promote business growth
and opportunities in rural areas. The Committee will hold
oversight hearings on agricultural issues that impact small
business. (On-going)
The Committee will hold oversight hearings on the impact of
Federal lands policy on small business. (On-going)
REVIEW OF SPECIFIC REGULATIONS
Pursuant to Rule X, clause 2(d)(1)(B), the Committee on
Small Business is required to submit to the Committee on
Government Reform and the Committee on House Administration an
oversight plan that ``reviews specific problems with Federal
rules, regulations, statutes, and court decisions that are
ambiguous, arbitrary, or nonsensical, or that impose severe
financial burdens on individuals.'' The following is a summary
of regulations that the Committee has so far identified for
review but should not be interpreted as limiting the
Committee's review of regulations issued by federal agencies
that continue to impose unnecessary burdens on small business.
In part, this review is based on the Committee's legislative
jurisdiction to provide continuing oversight of the Regulatory
Flexibility Act pursuant to Rule X, cl. 1(o)(1).
------------------------------------------------------------------------
High regulatory reform
Agency priorities for small
business
------------------------------------------------------------------------
All....................................... Small Business Liaisons
Commerce/BIS.............................. Revised ``Knowledge''
Definition, Revision of
``Red Flags'' Guidance and
Safe Harbor
DOT/FMCSA................................. Hours of Service
DOT/RSPA.................................. Hazardous Materials Rules
(HM-223)
EPA....................................... ``Whole Effluent Toxicity''
(WET) Methods
EPA....................................... Chemical Inventory Update
Rule
EPA....................................... Hazardous Waste Rules Should
Be Amended to Encourage
Recycling
EPA....................................... Lead Reporting Burdens Under
the Toxic Release Inventory
Program
EPA....................................... Pretreatment Streamlining
Rule Under the Clean Water
Act
EPA....................................... Provide More Flexibility in
the Management of
Wastewater Treatment Sludge
to Encourage Recycling
EPA....................................... Regulation of Air Toxics
from Area Sources
EPA....................................... Reporting and Paperwork
Burden in the Toxic Release
Inventory Program
EPA....................................... Spill Prevention Control and
Countermeasures (SPCC) Rule
EPA....................................... Method of Detection Limit/
Minimum Level (MDL/ML)
Procedure under the Clean
Water Act
EPA....................................... Reportable Quantity (RQ)
Threshold for Nitrogen
Oxide and Dioxide at
Combustion Sources
EPA....................................... Deferral of Duplicative
Federal Permitting
EPA....................................... Reporting of Coincidental
Manufactured Compounds
under the Toxic Release
Inventory Program
EPA....................................... SARA Title III Reporting
Requirements
FCC....................................... ``Do Not Fax'' Rule
HHS....................................... Privacy of Individually
Identifiable Health
Information
HHS/CMS................................... HIPAA
HHS/FDA................................... Use of Term ``Fresh'' for
Baked Goods
Justice................................... Administration of Federal
Prison Industries (FPI)--
Guidance
Labor..................................... FMLA/Intermittent Leave
Labor..................................... FMLA/Perfect Attendance
Awards
Labor..................................... FMLA/Request for Leave
Labor..................................... FMLA/Serious Health
Condition
Labor..................................... FMLA/Health Care Provider
Certification
Labor..................................... FMLA/Penalty Provisions
Labor..................................... FMLA/Substitution of Paid
Leave
Labor..................................... FMLA/Unable to Perform
Labor/MSHA................................ Diesel PM Exposure
Labor/OSHA................................ Hazard Communication
Labor/OSHA................................ Hexavalent Chromium
Labor/OSHA................................ Sling Standard
Labor/OSHA................................ Threshold Limit Values
OMB....................................... Administration of Federal
Prison Industries (FPI)--
Guidance
Treasury/IRS.............................. ``Statutory Employees''--
Bakery Drivers
Treasury/IRS.............................. Communications Distance
Sensitivity
Treasury/IRS.............................. Election to Expense Certain
Depreciable Business Assets
Treasury/IRS.............................. ``Statutory Employees''--
Bakery Drivers
Treasury/IRS.............................. Bonus Depreciation
Treasury/IRS.............................. Mobile Machinery Exemption
USDA/FSIS................................. Ready to Eat Meat
Establishments to Control
for Listeria Monocytogenes
USDA/RUS.................................. Guarantees for Bonds and
Notes Issued for
Electrification or
Telephone Purposes
(Proposal)
------------------------------------------------------------------------
REVIEW OF DUPLICATIVE FEDERAL PROGRAMS
Pursuant to Rule X, clause 2(d)(1)(E), the Committee on
Small Business is required to submit to the Committee on
Government Reform and the Committee on House Administration an
oversight plan that ``have a view toward insuring against
duplication of Federal programs.'' The following is an example
of Federal programs under the Committee's legislative
jurisdiction that the Committee has so far identified for
review but should not be considered as an exhaustive list. In
part, this review is based on the Committee's legislative
jurisdiction to authorize the programs of the SBA.
While the Rural Business Investment (RBI) program, which
was created as part of the Farm Security and Rural Investment
Act of 2002 (P.L. 107-171) to help provide venture capital to
small businesses in struggling rural areas, falls technically
within the legislative jurisdiction of the Agriculture
Committee and is technically housed at the U.S. Department of
Agriculture (USDA), the program mirrors almost word for word
sections of the Small Business Investment Act of 1958. The RBI
program currently operates as a partnership between the USDA
and the SBA and the USDA continues to rely upon the expertise
of SBA personnel for advice and help on launching and operating
the program.
The RBI program is duplicative of both the SBIC program and
the New Markets Venture Capital program (NMVC) since they both
invest in low- to moderate-income (LMI) areas, including those
located in rural America. The SBIC or the NMVC programs could
have been augmented to accomplish the same goals as the RBI
program and housed in the agency with the expertise in manage
this type of program (i.e., the negative experience of the USDA
in managing a similar initiative in the 1990's--the Alternative
Agricultural Research and Commercialization Corporation or
AARCC--should serve as a warning flag) without having to create
a duplicative program at the USDA. However, to legislatively
change the RBI program would require an action by the Committee
on Agriculture.
6.2 Budget Views and Estimates
Pursuant to Section 301(c) of the Congressional Budget Act
of 1974, the Committee prepared and submitted to the Committee
on the Budget its views and estimates on the fiscal year 2006
and 2007 budgets with respect to matters under the Committee's
jurisdiction.
6.2.1 fiscal year 2006 budget proposal
The views and estimates of the Committee on Small Business
on the President's Fiscal Year 2006 budget proposal are
outlined in the following paragraphs. In short, the President's
proposal budget for the coming year sets forth a sound plan to
help small employers continue to create jobs for Americans.
The Committee again applauds the President for endorsing
further tax relief proposals that benefit small businesses such
as:
(1) Making permanent the tax cuts previously passed
by Congress (85 percent of small businesses pay taxes
on an individual, not corporate, basis);
(2) Killing the estate or ``death tax'' for good;
(3) Providing a refundable tax credit for
contributions of small employers to employee Health
Savings Accounts (HSAs); and 4) Making permanent the
research and experimentation tax credit.
We would further encourage the Budget Committee to add more
targeted tax relief to small business owners in the budget
resolution to include:
(1) Increasing the business meal deduction;
(2) Establishing a standard home office deduction;
and 3) Incorporating the deduction for the health
insurance costs of self-employed individuals into the
calculation of the self-employment tax.
The President's FY '06 budget request for the Small
Business Administration (SBA) of $592.9 million represents
about a 2.8 percent decrease over last year's level of $610
million. If Congressional earmarks are discounted, the SBA's FY
'06 budget request is essentially flat. In this tight fiscal
environment, where average non-defense, non-homeland security
discretionary spending decreased by one percent, the
President's FY '06 budget proposal for the SBA is generally
sound and reasonable, with a few exceptions. It is important to
also remember that the SBA leads by example on how to do more
with less and is not the cause of the growing federal deficit.
In FY '01, Congress appropriated $900 million for the SBA and
four years later, Congress provided $610 million for the agency
in FY '05. During this same time, SBA has served more small
businesses than ever in its history.
One major reason for the decrease in spending is due to the
fact that Congress agreed with the Administration to eliminate
the subsidy for the 7(a) business loan guarantee program of the
SBA. In FY '05, this will save the taxpayer somewhere between
$70 and $100 million by bringing the 7(a) program to a zero
subsidy and requiring the users of the 7(a) program pay
sufficient fees to cover the costs of the program. The fee
increase has not dampened demand for 7(a) loans. The number of
7(a) loans approved is currently 27 percent higher than during
a comparable time in FY '04. There is still some concern about
the subsidy rate calculation that was used to further increase
fees on lenders in the 7(a) program in the President's FY '06
budget request and the Committee will follow-up with the SBA to
seek clarification. With this caveat, the Committee supports
the President's FY '06 request for zero funding of the 7(a)
program and a robust $16.5 billion program level.
The Committee is pleased that the fees have gone down again
in the 504 Certified Development Company (CDC) program and
still remains at a zero subsidy rate. However, the Committee
remains concerned that the overall program level request of
$5.5 billion will not be sufficient to fulfill expected demand
for the 504 program in FY '06 and supports a $6 billion program
level.
The Committee was disappointed to learn that while an
adequate program authority level was requested for the Small
Business Investment Company (SBIC) debenture program, the
Administration effectively supports shutting down the
participating securities portion of the SBIC program. The
Committee believes that there can be a middle ground that still
supports a zero subsidy for the program while making some
structural changes to keep the program alive as a viable source
of venture capital for small companies that most private
venture firms simply disregard because of their size. The SBIC
debenture program also cannot meet the need for ``patient''
capital required by budding entrepreneurs because the debt
service associated with the debenture program drains precious
capital from more critical investment needs.
The Committee also remains concerned about the SBA's
proposal to eliminate the Microloan program and the
accompanying technical assistance. This program reaches various
demographic groups that would otherwise not be served by the
private sector and even the 7(a) loan program. Combined with
the technical assistance, the Microloan program achieves a
default rate of less than one percent. Unless the SBA devises
some other means to reach this unique market, the Committee
opposes eliminating of the Microloan program. However, the
Committee supports the SBA's proposal to eliminate the Program
for Investment in Microentrepreneurs (PRIME), which is
duplicative of existing SBA efforts to reach disadvantaged
entrepreneurs.
Many of the previous line-items in the SBA budget were
eliminated and folded into the overall increased request for
the operating budget of the SBA (i.e., 7(j) and HUBZones into
the Government Contracting and Business Development division;
Native American Outreach into the Entrepreneurial Development
division; SBA's contribution to the U.S. Export Assistance
Center network into the Capital Access division; the Office of
the Ombudsman; and the Advocacy database into the Office of
Advocacy). In the President's FY '05 request, numerous line
items were eliminated without increasing the overall operating
budget of the SBA. This year's request fortunately avoids that
mistake. However, the Committee still has concerns that these
programs that were previously highlighted with a line item may
still get lost in the shuffle. Thus, the Committee will work to
insure that these programs get the full support from SBA that
they deserve.
While recognizing the tough budgetary times, the Committee
believes that some of these programs at SBA deserve an
inflationary increase after years of not receiving much if any
increase at all. The Small Business Development Center (SBDC)
program, the Women's Business Center (WBC) program, and the
SCORE program are cases in point.
Finally, the Committee supports the adequate funding levels
for the disaster assistance programs at the SBA, the Office of
Inspector General, and the overall salaries and expenses
account of the SBA as contained in the President's FY '06
budget request.
In conclusion, the President's FY `06 budget request for
small business can be supported, with some exceptions, both in
terms of his tax relief proposals and the SBA budget.
6.2.2 fiscal year 2007 budget proposal
The views and estimates of the Committee on Small Business
on the President's Fiscal Year 2007 budget proposal are
outlined in the following paragraphs. In short, the President's
proposed budget request for the coming year will help small
employers grow our economy and create jobs.
The Committee again applauds the President for endorsing
further tax relief proposals that benefit small businesses such
as:
(1) Making permanent the tax cuts previously passed
by Congress, including estate or ``death'' tax repeal,
in which the average tax savings in 2005 was $3,235 per
small business;
(2) Making contributions to Health Savings Accounts
(HSAs) tax deductible and increasing the amount that
can be set aside for HSAs;
(3) Enacting an even higher and permanent small
business (Section 179) expensing limit by increasing
the deduction for qualifying property from $100,000 to
$200,000 and increasing the phase-out of the deduction
from $400,000 to $800,000 and indexing both levels for
inflation thereafter;
(4) Making permanent the research and experimentation
tax credit;
(5) Combining and making permanent the Work
Opportunity and Welfare to Work Tax Credit; and
(6) Extending for one-year individual Alternative
Minimum Tax (AMT) relief.
We would further encourage the Budget Committee to add more
tax relief for small business owners in the budget resolution
to include:
(1) Increasing the business meal deduction;
(2) Establishing a standard home office deduction;
(3) Incorporating the deduction for the health
insurance costs of self-employed individuals into the
calculation of the self-employment tax; and
(4) Permanently repealing individual AMT.
These and other high priority consensus small business tax
reforms are contained in the Small Employer Tax Relief Act of
2005 (HR 3841). This legislation also includes the repeal of
the Federal Unemployment Tax Act (FUTA) temporary surcharge of
0.2 percent on employers. This ``temporary'' surcharge has been
in place since 1976. Unfortunately, the President's FY '07
revenue proposal includes yet another extension of this tax.
Because the unemployment level has dropped to a low rate of 4.7
percent and the unemployment trust fund has an adequate
surplus, it is now time to finally let the ``temporary''
surcharge or tax expire.
While there are many agencies, programs, and initiatives
within the federal government that directly or indirectly
benefit or assist small business, the House Small Business
Committee has primary legislative responsibility for the Small
Business Administration (SBA). The rest of this letter will
focus on the President's FY '07 budget request for the SBA,
which falls within the broader confines of the 370 Commerce and
Housing Credit budget account.
The President requests $624.2 million in spending for the
SBA in FY '07. This is about 37 percent less than what was
spent on the SBA in FY '01 while, during the same time, the SBA
served more small businesses than ever in its history. The SBA
certainly knows how to do more with less and it ought to be
commended. While the Committee believes the President's FY '07
budget proposal for the SBA is generally sound and reasonable,
particularly in context of the overall 2007 budget request that
cuts non-security discretionary spending to below last year's
level, and should not be cut further, there are a few notable
exceptions.
First, the request contains a new proposal to increase fees
on all small business loans of over $1 million guaranteed by
the SBA over and above what is necessary to keep these programs
operating at a zero subsidy rate. The Committee continues to
support a zero subsidy rate (no taxpayer financing) for the
7(a), the Certified Development Company (CDC) or 504, and the
Small Business Investment Company (SBIC) programs. This
proposed fee increase, however, would go beyond what is needed
to cover the loan subsidy to apply to some of the
administrative expenses associated with providing federal
government guarantees on these loans. While relatively modest
now, if approved, this $7 million fee increase would set a
negative precedent for future budget requests. Subsequent
budget proposals could continue to lower the dollar threshold
until small business borrowers and/or lenders would eventually
have to pay the entire administrative cost of issuing these
loans. This has the potential of dampening demand for the
various SBA loan guarantee programs.
Plus, the proposal unfairly and disproportionately hits the
SBIC program, with a higher fee of 0.64 percent, versus 0.04
percent fee for the 7(a) program and a 0.11 percent fee for the
504 program. It is also not clear who exactly will pay these
new fees--small businesses, lenders (banks or individual SBICs)
or a combination thereof because the proposal incorrectly gives
too much discretion to the SBA Administrator to impose these
fees.
Second, the request proposes to amend the interest rate
charged on SBA disaster loans. Current law provides a four
percent interest rate to disaster loan borrowers who do not
have credit elsewhere. Under this proposal, a disaster loan
borrower would receive this rate for only the first five years
of a disaster loan. After the fifth year, the interest rate
would adjust to the Treasury bill rate, which has increased in
recent months. The SBA estimates that $41 million can be raised
from disaster loan borrowers with this policy change. However,
the vast majority of SBA disaster loans have terms greater than
five years. This proposal would undoubtedly add a great deal of
uncertainty to disaster loan borrowers because they would not
know exactly what they will pay over the lifetime of a loan at
precisely the worst time, financially, in their life. The
Committee strongly opposes this proposal to impose an
adjustable interest rate on SBA disaster loans.
Third, the Committee also remains concerned about the SBA's
renewed effort to eliminate the $1 million loan subsidy for the
Microloan program and the accompanying $13 million in technical
assistance. This program reaches various demographic groups
that would otherwise not be served by the private sector and
even the SBA's 7(a) program. Combined with the technical
assistance, the Microloan program achieves a default rate of
less than one percent. Unless the SBA devises some other means
to reach this unique market, which without the program would
not have access to capital, the Committee will continue to
oppose the elimination of the modest appropriation for the
Microloan program.
Finally, while recognizing the tough budgetary environment,
the Committee believes that the programs at SBA deserve an
inflationary increase after years of not receiving much, if
any, increase at all. The Small Business Development Center
(SBDC) program, the Women's Business Center (WBC) program, and
the SCORE program, which serve their small business clients
very well, are cases in point. This would require about an
additional $4 million to the SBA's FY '07 budget request.
In conclusion, the President's FY '07 budget request for
small business can be supported, with the above exceptions
noted, both in terms of his tax relief proposals and the SBA
budget request.
CHAPTER SEVEN
SUMMARY OF OVERSIGHT, INVESTIGATIONS AND OTHER ACTIVITIES OF THE
COMMITTEE ON SMALL BUSINESS AND ITS SUBCOMMITTEES
7.1 Summary of Committee Oversight Plan and Implementation
Pursuant to Rule X, clause 2(d)(1), of the Rules of the
House of Representatives, the Committee on Small Business
adopted, on February 10, 2005, an oversight agenda for the
109th Congress. (For a discussion of the Committee's
consideration of the oversight agenda refer to section 6.1.1 of
this report.) The House rule also requires that each Committee
summarize its activities undertaken in furtherance of the
oversight agenda as well as any additional oversight actions
taken by the Committee.
In the following portions of Chapter Seven, the provisions
of the oversight agenda are addressed in the hearing summaries
of the Committee and its subcommittees. A summary of each
hearing conducted by the full Committee appears in section 7.2
of this report and summaries of each subcommittee hearing
appear in sections 7.3 through 7.6 of this report. An overview
of the Committee's legislative activities appears in Chapter
Five of this report.
7.2 Summaries of the Hearings Held by the Full Committee on Small
Business
7.2.1 the president's fiscal year 2006 budget
Background
On Thursday, February 10, 2005, the Committee on Small
Business held a hearing that focused on the President's Fiscal
Year 2006 Budget request, including the funding level for the
Small Business Administration (SBA). The SBA provides a variety
of services for small businesses--financial assistance,
technical assistance, federal government contracting
assistance, and disaster relief. The budget request was
designed to help the SBA achieve the goals of improving
delivery of its services to small business owners and
prospective entrepreneurs.
Summary
The participants in the one panel were: The Hon. Hector
Barreto, Administrator United States Small Business
Administration, Washington, DC; Mr. Tony Wilkinson, President/
CEO for the National Association of Government Guaranteed
Lenders, Stillwater, OK; Mr. Donald Wilson, President,
Association of Small Business Development Centers, Burke, VA;
Mr. Christopher Crawford, Executive Director, National
Association of Development Companies, McLean, VA; Mr. Stephen
Vivian, Partner, Prism Capital, Chicago, IL; and Mr. Daniel
Betancourt, President/CEO, Community First Fund, Harrisburg,
PA.
Administrator Barreto started his testimony by laying out
the success of the SBA loan programs. For example, when the
7(a) loan demand exceeded its budget authority, SBA and the
Committee were able to come together with the lending industry
partners to provide an additional $3 billion in lending for
7(a) program all at no direct expense to the taxpayer. This
allowed the SBA to lift the loan caps and guarantee a record
$12.7 billion in small business loans in 2005. Furthermore, the
SBA has continued to support the federal government's statutory
commitment to provide a fair share of contracting dollars to
small businesses and implementing a new policy to accurately
monitor contracts when a small business is purchased or merged
with a larger business. Consequently, the SBA requested for
Fiscal Year 2006 a grand total $592.9 million and $16.5 billion
in lending authority for the 7(a) loan program. According to
the Administrator, this will ensure an active SBA that can
effectively and efficiently meet the demands of its customers,
America's entrepreneurs, while minimizing the cost to the
taxpayer.
Mr. Wilson encouraged the Committee to work towards
increasing the SBDC line-item in the SBA budget for Fiscal Year
2006 in order for them to hire more counselors for the SBDC
program.
Mr. Wilkinson stressed the need for the Committee to
support a $17 billion 7(a) loan program authority level for FY
2006 from the current $16 billion level to match the
authorization amount set in the FY 2005 Omnibus Appropriation
bill signed into law last December. Furthermore, Mr. Wilkinson
encouraged the Committee to once again review the subsidy
calculation for the 7(a) program to prevent fees from going
even higher.
Mr. Crawford stated the Fiscal Year 2006 budget authority
level for the 504 program should be at $6.5 billion to meet the
growth of the program. Since 1997, the 504 program has been at
zero subsidy; therefore, there is no cost to the taxpayer.
Furthermore, the 504 program needs to address the concern that
the Sacramento Loan Processing Center may need to hire
additional staff to keep up with the demand for 504 loans.
Mr. Vivian testified that the Participating Securities
component of the SBIC program should be continued because it
serves overlooked industries and geographic regions of the
country, such as small, Midwestern manufacturing businesses.
However, the program must be restructured to stem losses the
program has experienced.
Finally, Mr. Betancourt stated that the funding for the SBA
Microloan program should remain at $17 million, the PRIME
program at $5 million, and the Women's Business Centers program
at $16.5 million.
In summary, the Committee took the Fiscal Year 2006 SBA
budget increase requests under advisement and made its
recommendation as part of its budget views and estimates letter
to the Committee on the Budget on February 18, 2005.
Furthermore, the Committee explored restructuring the
Participating Securities program. For further information about
this hearing, please refer to Committee publication #109-1.
7.2.2 medical liability reform: stopping the skyrocketing
price of healthcare
Background
On February 17, 2005, the Committee held a hearing to look
at the effect medical malpractice litigation has on health care
costs. Small businesses cite the skyrocketing cost of health
care insurance as the biggest cost to their business. The ever-
escalating cost of medical malpractice has a direct impact on
the cost of health care in this country. Also, medical
malpractice premiums have dramatically jumped in price,
resulting in doctors leaving the practice or medicine.
Thirty years ago, California passed comprehensive medical
liability reform. According to the Department of Health and
Human Services (HHS), states that have limited non-economic
damages have seen premium increases by less than 20 percent.
States without limits on non-economic damages have seen
premiums increase on average of 45 percent. The President has
proposed reforms in our medical liability law that would (1)
improve the ability of patients to collect compensation for
their economic losses; (2) ensure that recoveries of non-
economic damages would not exceed $250,000; and (3) limit
punitive damages to $250,000. The House passed this proposal as
part of the HEALTH Act of 2005 (H.R. 5) on July 28, 2005 by a
vote of 230 to 194.
Summary
The hearing was comprised of one panel of the following
witnesses: Donald Palmisano, M.D., New Orleans, LA; Thomas F.
Gleason, M.D., Morton Grove, IL; Chad Rubin, M.D., Columbia,
SC; Ms. Hilda Heady, President, National Rural Health
Association, Kansas City, MO; Mr. Lawrence E. Smarr, President,
Physician Insurers Association of America, Rockville, MD; and
Ms. Joanne Doroshow, Executive Director, Center for Justice and
Democracy, New York, NY.
Dr. Palmisano started the hearing discussions by stating
that most physicians operate their practices as small
businesses. Dr. Palmisano listed several state in a health care
access ``crisis'' because of the rising cost of medical
malpractice insurance. These ``crisis states'' are losing ob/
gyn's, neurosurgeons, and other obstetrics at an alarming rate
and cannot recruit any new practitioners to the area because of
rapidly rising malpractice insurance premiums.
Dr. Gleason cited the current litigation climate of
malpractice suits as the leading cause of the higher insurance
rates. He states that doctors have to practice more defensive
medicine, and are either no longer performing high-risk
procedures or are retiring from practice altogether.
Dr. Rubin testified on how increasing insurance premiums
are affecting patient's access to care in South Carolina. Many
areas have no ob/gyn coverage, and other physicians limit the
scope of their practice so drastically as to necessitate the
patient seeking care in other states.
Ms. Heady testified to the crisis situation in health care
access in rural and underserved areas. She cited an example of
one doctor in rural Mississippi who pays $70,000 in malpractice
premiums while his average yearly physician salary is only
$72,000. Ms. Heady suggested that the medical, legal,
insurance, and consumer interests all need to take
responsibility for their part in this crisis.
Mr. Smarr testified about the efforts among medical
professionals to independently provide medical malpractice
insurance for members of the medical community. Mr. Smarr
believes that the source of crisis lies with rising liability
cost, not with the insurance companies. The medical insurance
liability agencies operate at a loss, and thus must continually
increase premiums to offset expenses.
Finally, as the minority's witness, Ms. Doroshow voiced
objections to the President's medical malpractice reform
proposals. Her main objections were against a ``cap'' on non-
economic losses in malpractice litigation. In addition, she
believes the President's proposal would undermine an injured
patient's right to a jury trial. She believes the insurance
underwriting cycle is responsible for the increasing premium
rates, not the legal system.
In sum, the committee concluded that some reform to medical
liability laws is needed in order to stem the flow of medical
professionals, the vast majority of whom are small business
owners, leaving their field of expertise, particularly in
underserved areas of our nation. For further information,
please refer to Committee publication #109-2.
7.2.3 prescriptions for health care: solutions to the
problem
Background
On March 2, 2005 the Committee on Small Business held a
hearing on health care solutions. This hearing served as a
forum to discuss and promote innovative solutions to help small
businesses meet their health care needs. Roughly 60 percent of
the uninsured are small business owners, their employees, and
their families. Small business owners face double-digit
increases each year to their health care premiums, making it
difficult to provide health care to their employees. The
ability to offer health care to employees is a competitiveness
issue for many small businesses as they seek to attract and
retain the best employees to their business.
Several of the ideas that were discussed in this hearing
included: (1) enactment of Association Health Plans (AHPs); (2)
support for expanding access to Health Savings Accounts (HSAs);
and (3) various health care tax incentives, including the
deduction of health insurance costs of the self-employed into
the calculation of the self-employment tax.
Summary
The hearing consisted of one panel: The Hon. Michael
O'Grady, Assistant Secretary for Planning and Evaluation,
United States Department of Health and Human Services,
Washington, DC; Mr. Thomas Haynes, Executive Director, Coca-
Cola Bottlers' Association, Atlanta, GA; Ms. Holly Stephen
Roberts, Madison Insurance Agency, Madison, IN; Robert Hughes,
CPA, Hall & Hughes, LLP, Grapevine, TX; Ms. Karen Kerrigan,
Chairwoman, Small Business & Entrepreneurship Council,
Washington, DC; Mr. Scott Shalek, Owner, Shalek Financial
Services, Ringwood, IL; and Maria Welch, Founder and CEO,
Respira Medical, Inc., Baltimore, MD.
Assistant Secretary O'Grady testified on the increasing
problem faced by small businesses in terms of escalating
healthcare costs and rising insurance premiums. Mr. O'Grady
described a proposal by the Bush Administration to offer
employers incentives to provide health savings accounts (HSAs)
to their employees. Mr. O'Grady explained further that the
Administration is pushing Congress to pass H.R. 525, which
would create federal association health plans (AHPs) that
allows small employers to band together to build purchasing
power to offer their employees more affordable coverage.
Mr. Haynes also testified in support of H.R. 525. Mr.
Haynes explained that the Coca-Cola Bottlers' Association
(CCBA) had administered two separate AHP plans: a fully-pooled
program for small bottlers under 100 employees and another
experience-rated program for those bottlers with over 100
employees. Until recently, CCBA's AHP was able to significantly
reduce the cost of insurance by combining over 60 small
employers who participated in our fully pooled program with
administrative costs of approximately seven percent. This fully
pooled program for small employers (under 100 employees) was
disbanded at the end of 2000 because of the overwhelming
complexity of state small group reform laws and regulations.
Since then, health insurance premiums for the smaller member
bottlers have increased at about 20 percent to 25 percent
annually.
Mr. Roberts testified in favor of HSAs and spoke of his
positive personal experience with them, particularly in
contrast to the health insurance policy offered to him by a
large employer.
Mr. Hughes testified in strong opposition to current
inequities in the tax code that against the self-employed.
First, the current tax code requires the self-employed to pay
the full 15.3 percent Social Security or FICA tax for their
business. In addition, C-corporations receive a deduction for
health insurance premiums and are not subject to FICA taxes for
either the employee or the employer portion of the FICA tax. On
the other hand, the self-employed do not receive a business
deduction benefit for the same health insurance premiums,
causing healthcare plans to become even more expensive for the
self-employed. Mr. Hughes spoke in favor of the need to
reintroduce and pass legislation to fix this problem.
Ms. Kerrigan testified in support of all proposed solutions
to help provide more affordable health care coverage for small
businesses, including AHPs, HSAs, tax credits, and the FICA
deduction for the self-employed.
In addition to HSAs and Health Reimbursement Accounts
(HRAs), Mr. Shalek testified regarding alternatives to high-
priced health insurance plans, including GAP plans, flexible-
spending accounts, and state-grants funded through state
appropriations. Mr. Shalek further added that there is not a
one-size-fit-all answer to providing cost-effective health
care. Finally, Ms. Welch testified in favor of tax equity for
the self-employed and AHPs.
In sum, the committee concluded that there are a variety of
legislative solutions that can help mitigate the rising cost of
health care insurance premiums and encouraged Congress to act
on them expeditiously. For more information, please refer to
Committee publication #109-3.
7.2.4 small business priorities for the 109th congress--h.
res. 22
Background
On March 8, 2005, the Committee on Small Business held a
hearing on H. Res. 22. Over the years, various small businesses
have approached Congress with issues that they believe are of
great importance. It has been ten years since the last time
small businesses gathered together on a nationwide basis to
prioritize the top issues facing them as part of the 1995 White
House Conference on Small Business. This resolution is needed
to highlight the top tier policy issues that must be addressed
by the House of Representatives in the 109th Congress--health
care, tax relief, litigation reform, and regulatory/paperwork
reduction. This is not to say that other small business issues
are unimportant. However, this legislation is needed to help
Congress prioritize the key issues that affect the largest
number of small businesses in the United States.
Summary
The Committee received the testimony of six witnesses on
one panel: Mr. Jerry Pierce, Owner, Restaurant Equipment World,
Orlando, FL; Mr. Giovanni Coratolo, Director, Small Business
Policy, United States Chamber of Commerce, Washington, DC; Mr.
Todd McCracken, President, National Small Business Association;
Ms. Barbara Kasoff, Vice President, Women Impacting Public
Policy, Oklahoma City, OK; Ms. Karen Kerrigan, President/CEO of
the Small Business & Entrepreneurship Council, Washington, DC;
and Ms. Sheila Brooks, President, SRB Productions, Washington,
DC.
Mssrs. Pierce and Coratolo, and Ms. Kerrigan testified as
to the accuracy of H. Res. 22 in terms of the top nationwide
issues facing the small business members as part of their
respective organizations. They urged its adoption by the
Committee. Each one of these associations recently surveyed
their membership and the issues outlined in H. Res. 22--health
care, tax relief, litigation reform, and regulatory/paperwork
reduction--came back from their rank-and-file members as their
top recommendations for change. Mr. McCracken disagreed with
the concept of association health plans but agreed that health
care, tax relief, and regulatory reform remained the top
concerns of small business. He also added that small business
access to capital was a top tier issue. Ms. Kasoff listed the
priorities of women business owners: health care, energy,
Social Security reform, tax reform, and tort reform. Finally,
Ms. Brooks testified from her perspective of the importance of
open access to procurement opportunities for small businesses
and the efficacy of the 8(a) minority business development and
set-aside program in particular.
The hearing concluded that H. Res. 22 did have merit by
focusing the attention of the top issues facing the vast
majority of small business owners nationwide but could be
improved to take into account some of the suggestions of the
other witnesses dealing with access to capital, energy, and
procurement. Eventually, the Committee passed H. Res. 22 by a
unanimous voice vote, after further modifications to the
resolution based on the input from the hearing, and before the
full House of Representatives. For further information, please
refer to Committee publication #109-4.
7.2.5 the rfa at 25: needed improvements for small
business regulatory relief
Background
On Wednesday, March 16, 2005, the Committee on Small
Business held a hearing to examine H.R. 682, the Regulatory
Flexibility Improvements Act. The Regulatory Flexibility Act
(RFA) requires federal agencies to examine the economic impact
of their proposed and final rules on small entities. If they
impact is significant on a substantial number of such
businesses, the agency is required to assess less burdensome
alternatives. When it was first enacted in 1980, the RFA had a
number of pitfalls that detracted from full agency compliance.
The RFA was amended in 1996 to address some of those pitfalls.
While some problems were eliminated, such as boilerplate
certification statements, agencies found new interpretations of
the RFA to reduce its effectiveness. H.R. 682 was introduced to
eliminate, to the extent possible in legislation, all of the
interpretive legerdemain practiced by federal agencies in order
to avoid their obligations under the RFA.
Summary
The panelists were: The Hon. Thomas Sullivan, Chief Counsel
for Advocacy, United States Small Business Administration,
Washington, DC; Cecelia McCloy, President, Integrated Science
Solutions, Inc, Walnut Creek, CA; Mr. Blair Haas, President,
Bud Industries, Willoughby, OH; Mr. Jay Lancaster, President,
B.E.S.T., Inc., Galena, MD; Marc Freedman, Esq., Director,
Labor Policy, United States Chamber of Commerce, Washington,
DC; and Jere Glover, Esq., Of Counsel, Brand Law Group,
Washington, DC.
All of the witnesses endorsed the need for strengthening
the RFA. Increased regulatory burdens made it harder for small
businesses to operate. The RFA, while not the silver bullet
solution, was an important step in reducing regulatory burdens
on small businesses.
Mr. Sullivan noted that H.R. 682 was a comprehensive bill
but believes that certain items within H.R. 682 are of higher
priority. Mr. Sullivan cited the need to address indirect
effects, improvements to the Sec. 610 review process, and
agency response to advocacy comments. Mr. Sullivan suggested
that H.R. 682 be amended in committee to incorporate responses
to the Chief Counsel's comments on certifications, require
panel reports be prepared by both the agency and the Chief
Counsel, and require the Chief Counsel's consent to size
standard modifications rather than have the Chief Counsel
approve the size standards.
Ms. McCloy testified about the failure of agencies to
consider the indirect costs of their regulatory decisions. She
cited to a recent rule by the General Services Administration
(GSA) requiring a $2500 connection charge to the Federal
Procurement Data System and found that the non-fee site was
inadequate to obtain necessary information. Contrary to GSA's
conclusion, the fee actually will have a serious impact on any
business trying to obtain federal government contracts.
Mr. Haas cited a number of regulatory matters that created
difficulty for his small manufacturing company. There are: the
complexity of calculating the alternative minimum tax;
additional recordkeeping requirements associated with company-
sponsored individual retirement accounts; the disparate impact
on small businesses of OSHA's method for determining its
inspection schedule; exemptions under the Fair Labor Standards
Act; and Superfund liability.
Mr. Lancaster noted that when he started his construction
business he only had to worry about construction. Now he pays
someone in California to update him on regulatory changes and
pays an accountant to deal with tax issues. Mr. Lancaster
specifically cited problems associated with EPA regulations in
which neither EPA nor the states assess the economic
consequences of a regulatory action on small businesses.
Mr. Freedman noted that the biggest problem with the RFA
was the vagueness of the terminology. He strongly endorsed
efforts in the bill to obtain definitions of two key terms
``significant economic impact'' and ``substantial number of
small entities.'' Mr. Freedman concluded that requiring the
Chief Counsel to write regulations solves the problem
concerning various interpretations of key portions of the RFA.
Mr. Glover requested that the small business community
support Advocacy having a line item in the President's budget.
Mr. Glover then moved on to suggest that courts defer to
Advocacy's interpretation of the RFA. Finally, Mr. Glover
recommended that the RFA be amended to require agencies provide
greater specificity and detail in their final certifications
and regulatory flexibility analyses.
The Committee concluded that changes to the RFA were
necessary and worked with the Committee on the Judiciary to
move the legislation. A hearing was held in the Committee on
the Judiciary's Subcommittee on Commercial and Administrative
Law in the spring of 2006.
For further information, please refer to Committee
publication #109-5.
7.2.6 what has ex-im bank done for small business lately?
Background
On Wednesday, April 6, 2005, the Committee held a hearing
to determine if the Export Import Bank of the United States
(Ex-Im) was meeting its obligations to support small
businesses. Ex-Im's primary mission is to ``aid in financing
and to facilitate exports of goods and services, . . . and in
so doing to contribute to the employment of United States
workers.'' In carrying out its mission, Congress directed Ex-Im
to encourage participation of small business in international
commerce as part of a broader federal government effort to
protect the interests of small business. To ensure full
participation by small businesses, Congress mandated that Ex-Im
undertake the following:
(1) Cooperate with Commerce Department and Small
Business Administration in order to make small
businesses aware of medium-term financing for exports;
(2) Set rates, terms, and conditions of its loans for
its small business programs to be fully competitive
with those made by foreign countries;
(3) Develop mechanisms to ensure fair consideration
is given to applications by small businesses;
(4) Designate an officer answerable to the President
of Ex-Im whose responsibility is to address all Bank
matters concerning small businesses;
(5) Have at least one Director of the Bank's Board be
from the small business community and represent the
interests of small business;
(6) Appoint an advisory committee that shall have at
least three members who are representatives of the
small business community; and
(7) Utilize not less than 20 percent of its annual
loan authority to finance exports of small businesses.
Summary
The Committee heard from one panel of witnesses: The Hon.
Phillip Merrill, President and Chairman, Export-Import Bank of
the United States, Washington, DC; Mr. Michael Vaden, CEO,
Rutland Plastics Technologies, Inc., Pineville, NC; and Ms.
Victoria Hadfield, President, SEMI North America, Washington,
DC.
Chairman Merrill claimed throughout the hearing that Ex-Im
was properly and adequately meeting its obligations to small
business. His testimony was belied by the other witnesses and
by questioning by Members of Congress. Mr. Vaden testified that
his company, a small manufacturer in North Carolina, had been
denied insurance coverage on a commercial claim from an
unscrupulous dealer in China due to a highly restrictive and
unfair interpretation of Ex-Im's export loan contract. Ms.
Vaden testified in regards to the refusal, by Chairman Merrill,
to allow a loan application to be taken to the Board of
Directors regarding a $660 million dollar loan guarantee for
semiconductor capital equipment to be sold into China.
Testimony was also heard from Ex-Im officials regarding the
lack of progress for the Ex-Im's ``Fast Track'' loan guarantee
program and other small business initiatives to assist in the
development of foreign dealer distribution networks. Both
initiatives were approved by the Board of Directors of Ex-Im
Bank but were never implemented in any meaningful way.
Based on its investigation and hearing, the Committee
determined that Ex-Im violated its statutory obligation to
support American small business. Equally troubling is the
Committee's conclusion that Ex-Im's current management
structure violates various federal statutes by enabling the
Chairman to control the Ex-Im Board's agenda and thus giving
that person de facto control over approval applications that
Ex-Im will approve.
For further information about this hearing, please refer to
committee publication #109-8.
7.2.7 private equity for small firms: the importance of
the participating securities program
Background
On Wednesday, April 13, 2005, the Committee on Small
Business held a hearing to examine the need the participating
securities portion of the Small Business Investment Company
(SBIC) program. For many years, the Small Business
Administration licensed SBICs to issue long-term debt to
entrepreneurial enterprises. This program was called the
debenture SBIC program. Companies such as Dell, Federal
Express, Callaway Golf, Nike, and Outback Steakhouse were
beneficiaries of the debenture SBIC program. The structure of
the debenture SBIC program does not accommodate the capital
needs of startup small businesses. They require greater patient
capital than the debenture program provides. In the early
1990s, Congress created the participating security SBIC program
to address the needs of startup small businesses. For the first
seven years of the program, it was highly successful but, like
the rest of the venture capital market, suffered losses during
the ``dotcom'' bust in the stock market. Nevertheless, there
remains a strong need for patient venture capital for startup
small businesses. To avoid significant losses to the federal
taxpayer, the Committee examined changes needed to satisfy the
needs of small businesses while reducing the risk to the
federal government.
Summary
The panelists were: Mr. Jaime Guzman, Associate
Administrator for Investment, United States Small Business
Administration, Washington, DC; Colin Blaydon, Ph.D., Director,
Center for Private Equity and Entrepreneurship, Tuck School of
Business, Hanover, NH; Susan Preston, Esq., Of Counsel, Davis,
Wright & Tremaine, Seattle, WA; Mr. Mark Redding, President/
CEO, Banner Service Corp., Carol Stream, IL; Redmond Clark,
Ph.D., President, Metalforming Controls Corp., Cary, IL; and
Mr. Daniel O'Connell, Director, Golder Center on Private
Equity, University of Illinois, Champaign, IL.
Mr. Guzman first noted that the participating security SBIC
program had projected losses at the end of FY 2004 of $2.7
billion. The number of participating security SBICs that failed
to meet their obligations to the federal government rose to 29
percent of those licensed prior to FY 2001. Mr. Guzman then
delineated a number of flaws with the participating security
program: SBA only receives funds if the SBIC is profitable; SBA
defers interest on the money it borrows which cumulates to more
than the original investment fund; and the profit share to the
SBA is inadequate given the risk. Mr. Guzman concluded by
noting that the SBA was implementing improved oversight of
participating security SBICs and continued to support the
debenture SBIC program.
Dr. Blaydon started by noting that private equity capital
markets are very inefficient. Dr. Blaydon went on to testify
that private venture capital invests very little in seed
capital for startups. Most venture capital is concentrated in a
few geographic areas, especially Silicon Valley and the suburbs
of Boston, MA. Finally, private venture capital rarely invests
in any business other than software or biotechnology.
Ms. Preston focused her testimony on so-called angel
investing (friends or relatives of business owners seeking
capital). Ms. Preston testified that in calendar year 2004,
there were 48,000 angel investment deals with an average size
investment of $500,000. Angel investors are very early stage
investors willing to wait from 5 to 7 years for a return--a
significantly longer period than most venture capital equity
funds. Ms. Preston emphasized the need for such patient capital
and that the participating security SBIC program provides
another critical vehicle for patient capital.
Mr. Redding related his story about the purchase of an
office equipment manufacturer that would not have succeeded
without the equity investment from a participating security
SBIC. Mr. Redding noted that before contacting the SBIC 8 other
venture firms turned down his requests for funding. Mr. Redding
noted that Banner Service Corp. regrew its revenue, refocused
its business, and hired new workers all because of the
investment from a participating security SBIC.
Dr. Clark concurred with Dr. Blaydon's conclusion about the
lack of seed capital for startup businesses. He noted that
while private venture capital investment increased 250 percent
over the last decade, seed capital investment dropped by 75
percent. Dr. Clark noted that his company and its business
triumphs would not have occurred without the involvement of
participating security SBICs. Dr. Clark concluded that the
participating security SBIC program is vital to the continued
development of small businesses in the American economy.
Mr. O'Connell noted that private venture capital firms,
including participating security SBICs continue to specialize
in various product niches in which their partners feel
comfortable. From Mr. O'Connell's experience, participating
security SBICs tend to focus on geographic regions that they
understand and those regions tend to be underrepresented by
large venture capital or private equity funds. Mr. O'Connell
suggested that if participating security SBICs are to make
high-risk, low liquidity investments, the capital must be long-
term, patient, and tolerate risk.
The hearing showed that private venture firms were not
fulfilling the need for seed capital especially in areas
outside of certain areas and the participating security SBIC
was vital to the equity capital needs of small businesses.
For further information about this hearing, please refer to
committee publication #109-10.
7.2.8 closing the tax gap and the impact on small business
Background
On April 27, 2005, the Committee on Small Business held a
hearing to examine the implications of the announcements by the
Internal Revenue Service (IRS) that a greater emphasis will be
placed on enforcement to close the so-called ``tax gap,'' i.e.,
the difference between what taxpayers owe and what they pay.
Through its National Research Project, the IRS has attributed a
good deal of the estimated $300 billion ``tax gap'' to small
businesses and self-employed individuals. The hearing explored
the specific activities the IRS intends to take to close the
``tax gap'' and how these activities may impact the millions of
small businesses and self-employed individuals in the United
States.
Summary
The hearing was comprised of two panels. The first panel
consisted of: The Hon. Thomas M. Sullivan, Chief Counsel for
Advocacy, United States Small Business Administration,
Washington, DC; The Hon. Mark Everson, Commissioner, Internal
Revenue, Washington, DC. The second panel included John
Satagaj, Esq., President and General Counsel, Small Business
Legislative Council, Washington, DC; Keith Hall, CPA, Partner,
Hall and Hughes, Dallas, TX; Mr. Abraham Schneier, Principal,
Abraham Schneier & Associates, Washington, DC; Leonard
Steinberg, EA, CMC, The Steinberg Group, Somerville, NJ; and
Ronald Hegt, CPA, Hays & Co., LLP, New York, NY.
Chief Counsel Sullivan testified about the need to have a
balanced approach to addressing the tax gap. In particular, he
emphasized that much of the tax gap can be attributed to
complexity in the tax code. He also testified that this
complexity adds to the burdens placed on small businesses
because it costs small firms more than two times the amount to
comply with the tax code as compared to large firms. Rather
than increasing IRS enforcement activities, the Chief Counsel
testified that the best way to ensure small business compliance
is to simplify the tax code, thereby removing the ambiguity
taxpayers face when determining what to report, and to increase
education and assistance programs aimed at informing small
business owners what the IRS expects them to do when preparing
their tax returns.
Commissioner Everson testified that preliminary IRS
estimates of the tax gap are approximately $300 billion on an
annual basis. Of this amount, he testified that individual
underreporting makes up about two-thirds of the overall gross
tax gap. To address this issue, Mr. Everson testified that a
greater emphasis must be placed on enforcement activities,
particularly for self-employed individuals and other small
businesses. According to Commissioner Everson, the IRS collects
more than four dollars in direct revenue for every dollar
invested in its total enforcement budget. In addition, he
stated that enforcement efforts, such as audits, collection and
criminal investigations, have a deterrent effect on those who
might be tempted to skirt their tax obligations.
Mr. Satagaj believes that the IRS needs to find the proper
balance of enforcement and taxpayer education as it attempts to
address the tax gap. According to Mr. Satagaj, no amount of
enforcement will ever produce 100 percent compliance with the
tax code, and over aggressive enforcement or unfair burdens
placed on small businesses will stifle innovation and growth in
the small business community.
Mr. Hall said that the complexity of the tax code is
particularly troublesome for the self-employed business owner
and is a snare for unintentional noncompliance. Further, he
testified that efforts to address the tax gap must focus on
overall simplification, eliminating issues of inequity within
the tax code, and enhancing taxpayer education and outreach.
Mr. Schneier articulated that IRS efforts to decrease the
tax gap must be measured against the costs imposed on small
businesses. Mr. Schneier stated that too often the IRS uses a
one size fits all approach to compliance activities that places
an unfair burden on small business owners. Further, he
testified that applying common sense rules to limit the burdens
placed on small business owners is the only sensible way for
the IRS to ensure increased compliance by this segment of
taxpayers.
Mr. Steinberg agreed that the tax gap is a multi-faceted
problem, which is exacerbated by the complexity of the tax
code. To ensure greater compliance by small business owners,
Mr. Steinberg stated that the IRS must perform aggressive
educational and outreach efforts that build a culture of
compliance and help individuals understand the personal
consequences of non-compliance.
Finally, Mr. Hegt stated that the IRS could help taxpayers
and its own enforcement efforts through administrative
simplification. He also emphasized that the IRS should leverage
external stakeholders, such as the AICPA, to achieve a more
highly compliant taxpayer population.
In sum, the committee concluded that a more balanced
approach, which respects the interest of small business, needs
to be implemented by the IRS in order to close the ``tax gap.''
For more information about this hearing, please refer to
Committee publication #109-13.
7.2.9 anticompetitive threats from public utilities: are
small businesses losing out?
Background
On Wednesday, May 4, 2005, the Committee on Small Business
held a hearing that focused on growing competition from service
companies owned and controlled by Investor Owned Utilities and
some Municipal Owned Utilities. The utility companies in most
every state have their rates fixed by public utility rate
commissions and they are essentially guaranteed a profit each
year. Their costs are a public record and their rates are fixed
with a reasonable profit in mind. Increasingly, the utility
companies are creating subsidiaries and affiliate companies
that provide other kinds of services apart from the basic power
supply delivery such as plumbing services, electrical services,
home remodeling and subscription service contracts, appliance
sales and rentals. The Committee is concerned that these new
companies enjoy unique advantages because of their special
status as instruments of a public utility. While direct subsidy
from ratepayers is prohibited, there are many ways that these
new entrants could get an unfair advantage.
Summary
The one panel consisted of the following witnesses: Mr.
Mike Martin, President, F.K. Everest, Inc., Fairmont, WV; Mr.
Brian Harvey, President, H & C Heating and Cooling, Laurel, MD;
Mr. Hugh Kelleher, Executive Director, Plumbing-Heating-Cooling
Contractors Association of Greater Boston, Danvers, MA; Adam
Peters, Esq., Research Fellow and Regulatory Counsel, The
Progress & Freedom Foundation, Washington, DC; and Ms. Lynn
Hargis, Public Citizen, Washington, DC.
Mr. Martin started his testimony by laying out the ways by
which public utilities use the same equipment and logos for
their unregulated subsidiaries. Thus, the unregulated
subsidiary has in essence subsidized equipment and adverting
expensed, which undercuts private small business in that
particular industry. For example, the unregulated electric
utility subsidiary, using the same equipment or manpower
provided from its utility operations, is billed only the
incremental cost for rental of equipment instead of the fair
market price. This constitutes a major unfair advantage for the
utility's unregulated venture. Utilities argue that such
billing at an incremental cost rate is not cross-subsidization
because they bill for all costs incurred for the additional use
of the manpower or equipment by the non-regulated entity.
Mr. Harvey stated that his company H & C Heating and
Cooling, was greatly harmed by BGE Home, which is a unregulated
subsidiary of Baltimore Gas and Electric's (BGE), which focuses
on the air conditioning contracting field. BGE Home used BGE
trucks, trucks that were paid for with ratepayers' money. These
trucks that were originally purchased by Baltimore Gas and
Electric to provide the Maryland ratepayers with gas and
electric service were now being used by BGE Home to install
heating and air conditioning systems.
Mr. Kelleher position reinforced the idea that public
utilities use regulated business to unfairly enter new markets.
For example KeySpan, which is based in New York, has for years
been authorized by the energy regulatory agency in
Massachusetts to include in its rate structure a ``promotional
budget'' line item, which costs natural gas customers millions
of dollars each year. The revenue generated by the
``promotional budget'' were used to promote KeySpan's
unregulated affiliated businesses, which included a large
heating and air conditioning company that competes directly
against the small mom-and-pop contractors.
Furthermore, Ms. Hargis argues that public utilities cross-
subsidize non-regulated subsidiaries that have more risk than
the utility business. Therefore, this cross-subsidization of
affiliates by utilities results in great potential harm to
electric and natural gas consumers, who have to pay for such
subsidies and for lower credit ratings from non-utility
business failures, through higher utility bills. Such cross-
subsidization also may provide an unfair business advantage to
utility owners of such non-regulated businesses over non-
regulated competitors, particularly small businesses.
Therefore, Ms. Hargis argues for strict federal enforcement pf
the Public Utility Holding Company Act of 1935 that effectively
ended such affiliate cross-subsidization and other abuses by
confining utility owners to the utility business.
Finally, Mr. Peters stated that public utilities that
create unregulated subsidiaries, such as broadband providers,
may indeed use their regulated public utility business to
unfairly compete with private concerns. However, Mr. Peters
argues that public utilities can create new competition in the
broadband field, especially in rural areas but public utilities
need careful oversight by states to ensure a level playing
field between these entities and small businesses.
In summary, the Committee did find that there is a very
real danger that some large public utilities use their
regulated business and their market power to grow unregulated
business subsidiaries to unfairly compete directly against
small business. Continued House and Senate oversight is
certainly necessary to help ensure that this issue is not
overlooked by federal regulators.
For further information, please refer to committee
publication #109-15.
7.2.10 small business access to health insurance: lessons
from nebraska?
Background
On Monday, June 6, 2005, the Committee on Small Business
held a field hearing that focused on the affordability of
health insurance for small business. Noting that 60 percent of
the estimated 45 million Americans without health care
insurance either own or work for a small business, this hearing
brought in lessons from the heartland of America directly to
Washington's doors through a field hearing in Lincoln,
Nebraska.
Summary
The hearing was divided into two panels. The first panel
was comprised of: Mr. Charlie Janssen, Chairman and CEO, RTG
Medical Co., Fremont, NE; Mr. Bob Lanik, President, St.
Elizabeth's Hospital System, Lincoln, NE; and Ms. Peggy Green,
President/CEO, Green Furnance and Plumbing, Lincoln, NE. The
participants in the second panel were: Mr. Robert Moline,
President/CEO, HomeServices of Nebraska, Lincoln, NE; Ms. Debi
Durham, President, Siouxland Chamber of Commerce, Sioux, City,
IA; and Mr. John Miller, President, Oxbow Hay Company, Murdock,
NE.
Mr. Janssen's primary concern for small business is
affordable heath care for it employees. Furthermore, the issue
of affordable health care limits the pool of workers and
discourages the creation of small businesses. He suggested that
the federal government should provide tax relief for small
business, such as expanding the tax advantage status of health
savings accounts.
Mr. Lanik then stated that health care costs are increasing
due to the following factors: labor, supplies, pharmaceuticals,
technology, regulation, defensive medicine, and cost shifting
by insurance companies which directly impact the premiums paid
by employers. For instance, the primary expense for hospital is
wages for its employees, which comprise 42 percent. The
American Hospital Association states that there is an 8.1
percent vacancy rate for registered nurses. This shortage has
forces hospitals to provide higher wages.
Ms. Green started gave a first-hand account of the health
care crisis by explaining the background in which her company,
Green's Plumbing, Heating, Cooling, and Remodeling, once
offered family medical insurance but because of increased
insurance premiums, currently provides only single employee
insurance coverage. She testified as to the potential value of
association health plans (AHPs), which would enable her to fund
other employee benefits.
Mr. Moline also agreed with Ms. Green's suggestion to
create AHPs, which would provide small businesses and the self-
employed access to the same health benefits that labor unions
and large corporations enjoy under federal law. For example,
small business businesses could band together through their
professional or trade organizations to either purchase coverage
from established insurance companies or if they cover enough
participates, they could self-insure.
Ms. Durham further reinforced this point by testifying that
the business that provides employee health insurance coverage
enhances their recruiting efforts and maintains a more stable
work force. She urged the Congress to allow for the creation of
purchasing pools for small business to band together through
AHPs as a purchasing block to lower premium cost.
Finally, Mr. Miller's primary concern is that double-digit
growth in health insurance premiums will force him to either
eliminate health insurance coverage for his employees or force
him to close his 40-employee business. He also suggested
Congress look at various tax incentives, particularly those
aimed to help the very smallest of companies purchase health
care insurance.
In summary, the Committee found that innovative legislative
solutions--most particularly AHPs--are needed to address the
need for affordable health care insurance for small business
owners and employees in the heartland of America.
For further information about this hearing, please refer to
Committee publication #109-19.
7.2.11 are skyrocketing medical liability premiums driving
doctors away from underserved areas?
Background
On Tuesday, June 14, 2005, the Small Business Committee
held a hearing to exam the skyrocketing rates in medical
liability premiums and its impact on doctors, particularly in
underserved areas. The ever-escalating cost of medical
malpractice insurance has a direct impact on the cost of health
care in this country. Medical malpractice premiums have
doubled, tripled and even quadrupled yearly. As a result,
doctors are no longer practicing medicine; they are retiring.
The remaining doctors practice defensive medicine.
Thirty years ago, California passed comprehensive medical
liability reform. According to the Department of Health and
Human Services (HHS), states that have limited non-economic
damages have seen premium increases by less then 20 percent.
States without limits on non-economic damages have seen
premiums increase on average of 45 percent. The purpose of the
hearing was to examine the efficacy of enacting the medical
liability reforms supported by the President. Major elements of
this reform proposal include: improving the ability of patients
to collect compensation for their economic losses; ensuring
that recoveries of non-economic damages would not exceed
$250,000; and limiting punitive damages to $250,000.
Summary
The hearing was comprised of one panel of five witnesses:
Delorise Brown, M.D., Cleveland Medical Center, Cleveland, OH;
Larry S. Fields, President, American Academy of Family
Physicians, Ashland, KY; Winston Price, M.D., President,
National Medical Association, Brooklyn, NY; Elena Rios, M.D.,
President/CEO, National Hispanic Medical Association,
Washington, DC; and Wilbur (Will) O. Colom, Esq., Senior
Partner, The Colom Law Firm, Columbus, MS.
Dr. Brown spoke of her practice of internal medicine in
East Cleveland, Ohio. She explains that many of her patients
are from underserved areas and that many of them live below the
poverty line. She stated further that more and more, she is
forced to practice defensive medicine and limit her patient
load, which includes cutting back on ``high-risk'' patients and
patients within nursing homes. Still, she has seen her medical
liability insurance skyrocket from $5,266 in 2001 to over
$100,000 in 2004.
Dr. Fields is a family practitioner in rural, Eastern
Kentucky. He explained that his malpractice carrier dropped his
coverage after 22 years, even when they had never had to pay
out any money in claims against him. He faced the possibility
that he would have to close his practice and his 18,000
patients would be forced to find a new doctor in the rural and
underserved part of the state that he resides. He told of a
colleague, Dr. Julie Wood, who after six years of practice in
rural Missouri as an OB/GYN, her medical liability insurance
increased from $19,000 to $71,000 in six years. She
subsequently was forced to close her practice and move two
hours away to a larger city where she is part of a large
practice. Half of her practice was Medicaid patients.
Dr. Price stated that many of his members work in poor and
minority areas and cannot pay the escalating rates of medical
liability insurance, which forces them to close their doors.
When this happens, there are frequently no other doctors to
take their place. He told of Dr. Ronald V. Myers who practiced
medicine in the Mississippi Delta for close to two decades and
who still made house calls. Dr. Myers had five clinics that he
ran and he was forced to close all five when he had a dispute
with his insurance provider. Dr. Myers never had a single
malpractice suit filed against him.
Dr. Rios focused on three major points regarding medical
liability and its impact on Hispanics: (1) Hispanic physicians
are unique to the medical delivery system and need to be
protected from the malpractice crisis; (2) Hispanic patients
suffer from increased disparities in health and require
increased access to care; and (3) there is a need to increase
research on Hispanics and disparities in health.
Mr. Colom stated that limiting the rights of the
underserved will not help America's small businesses thrive and
will not help underserved communities get access to quality
healthcare. He explained that in Mississippi, his home state
recently adopted a $500,000 cap on non-economic damages in
medical malpractice cases. His firm already has turned away
many cases because expert and other expenses make the case
economically unfeasible with such a cap. In his opinion, caps
on non-economic damages--which are designed to compensate
people for their injuries--hurt people who are not in the
workforce, such as children and senior citizens, and those who
do not have high lost wages or salary (economic loss).
In sum, the Committee concluded that the medical liability
insurance premiums are skyrocketing out of sight and something
needs to be done before more doctors close their small business
and retire, which disproportionately harms the underserved
areas of our nation.
For more information on this hearing, please refer to
Committee publication #109-20.
7.2.12 small business development centers: new offerings
for a new economy
Background
On Wednesday, July 13, 2005, the Committee on Small
Business held a hearing to examine four bills that will
authorize new services to be provided by grantees that operate
small business development centers (SBDCs). Over 1,100 SBDCs
operate throughout the United States, mostly co-located in an
institution of higher education, to provide management and
technical assistance and educational programs to prospective
and existing small business concerns.
Four bills were introduced in the House to authorize SBDCs
to provide targeted assistance to small business owners and
entrepreneurs interested in starting a business. H.R. 230, the
National Small Business Regulatory Assistance Act, establishes
a program to provide small business concerns regulatory
compliance assistance by awarding competitive grants to 20 SBDC
grantees (two in each of the ten federal regions). H.R. 527,
the Vocational and Technical Entrepreneurship Development Act,
creates a program to provide technical assistance to secondary,
postsecondary vocational and technical schools for the
development and implementation of curricula to teach
entrepreneurship skills by awarding competitive grants to
SBDCs. H.R. 2981 targets, through the use of competitive
grants, the provision of additional managerial and technical
assistance on Indian lands to small business concerns owned by
Indian tribe members, Alaska Natives or Native Hawaiians. H.R.
3207, the Second-Stage Small Business Development Act,
establishes a pilot program for selected SBDC grantees in the
ten federal regions to offer peer learning opportunities to
those small business concerns, variously called second-stage
small businesses or gazelles, that are poised to grow rapidly.
Summary
The hearing was comprised of one panel, which included: Mr.
Rich Gangi, President, American Trim, Durham, NY; Ms. Norma
Naranjo, Owner, The Feasting Place, Fairview, NM; Mr. Christian
Conroy, Associate State Director, Pennsylvania Small Business
Development Center, Philadelphia, PA; Ms. Erica Kauten, State
Director, Wisconsin Small Business Development Center, Madison,
WI; and James Chrisman, Ph.D., Professor of Management,
Mississippi State University, Mississippi State, Mississippi.
Mr. Durham testified about the services that the New York
SBDC provided to his business. While noting that he has
substantial experience in dealing with inspectors from the New
York Department of Environmental Management and the federal
Occupational Safety and Health Administration (OSHA), many
other businesses do not. Increased resources for regulatory
assistance at SBDCs would prove invaluable in helping these
businesses survive federal and state regulatory oversight. Mr.
Durham concluded that H.R. 230 should be enacted into law.
Ms. Naranjo started her testimony with a description of her
business providing meals and demonstrations of Native American
cooking. She then noted that her business would never have
gotten off the ground without the assistance of the SBDC.
However, she noted her good fortune in being located about five
miles from a SBDC. Many Native Americans are very isolated from
these types of resources and H.R. 2981 would go a long way in
providing assistance to Native American business owners that
are isolated from SBDCs. She concluded by urging Congress to
enact H.R. 2981.
Mr. Conroy noted that small businesses play a vital role in
the American economy. Level funding of SBDCs has occurred and
makes it difficult for SBDCs to offer new services. Mr. Conroy
noted that one center operated at Kutztown University cannot
meet the demand for its educational program services from
graduates of technical schools and community colleges.
Counselors at the University of Scranton SBDC are frequent
speakers to graduates of technical colleges in the area about
self-employment. According to Mr. Conroy, H.R. 527 would give
the SBDCs sufficient additional resources to develop teaching
curriculum that maximizes the limited resources available to
SBDCs. Mr. Conroy urged favorable action on H.R. 527.
Ms. Kauten began her testimony by revealing that most of
the growth in the small business sector comes not from all
small firms but only from a small percentage of companies
commonly known as ``gazelles.'' Ms. Kauten noted that the
Wisconsin SBDC worked closely with the Lowe Foundation on
issues related to ``gazelles'' (second-stage small business
concerns that have been in existence for a certain number of
years and are primed to grow rapidly). Ms. Kauten related how
learning from one's peers constituted an extremely effective
mechanism for many of these ``gazelles.'' However, the
Wisconsin SBDC did not have the resources to market or
otherwise expand these peer learning opportunities. Ms. Kauten
concluded by asking Congress to pass H.R. 3207.
Dr. Chrisman, a noted expert on the economic return
associated with investment in SBDCs, testified that his
research reveals that the overall benefits of the SBDC program
substantially outweigh the costs of the program. The benefits
come from increases in employment and sales revenue that would
not have occurred but for the timely intervention and advice
received from a SBDC. Dr. Chrisman supported the various
programs. He concluded by noting that SBDCs provide the
following benefits: assist minorities and women-owned small
businesses; give the appropriate mix of strategic,
administrative, and operating assistance to small business
concerns; and increase the survivability of small businesses.
In sum, all the witnesses supported the enactment of the
four bills being considered by the Committee. For further
information, please refer to Committee publication #109-25.
7.2.13 freedom of conscience for small pharmacies
Background
On Monday, July 25, 2005, the Small Business Committee held
a hearing on the implications of the emergency rule issued by
Illinois Governor Rod Blagojevich last April to require
pharmacies in Illinois that sell contraceptives to accept and
fill prescriptions for all FDA approved contraceptives
``without delay.'' Luke Vander Bleek, a pharmacy owner located
in Morrison, Illinois, filed a lawsuit challenging the
Governor's rule. Although he does fill prescriptions for
traditional birth control, he is morally opposed to filling
prescriptions for the morning-after pill because of his
understanding of how the drug can affect an embryo.
The purpose of the hearing was to explore the effects that
``duty-to-fill'' legislation such as the Illinois rule will
have on small pharmacies. The hearing also discussed
alternatives to ensure that women have access to the medicine
they desire while also preserving the beliefs of the
pharmacist.
Summary
The hearing consisted of one panel with five witnesses:
Luke Vander Bleek, R.Ph., Morrison, IL; Ms. Shelia Nix, Senior
Policy Advisor to the Governor of Illinois, The Hon. Rod
Blagojevich, Springfield, IL; Mr. J. Michael Patton, M.S., CAE,
Executive Director, Illinois Pharmacists Association,
Springfield, IL; Linda Garrelts MacLean, R.Ph., CDE, Clinical
Assistant Professor, Pharmacotherapy, Washington State
University, Pullman, WA; and Ms. Megan Kelly, Geneva, IL.
Mr. Vander Bleek explained his moral and professional
reasons for opposing the Illinois rule. He also described the
effects that this rule will have not only on his pharmacies but
also on the surrounding communities and under served markets.
Mr. Vander Bleek stated that he would be forced to close his
pharmacies if the rule becomes permanent because he could not
operate a business against his moral beliefs. If his pharmacies
in rural Illinois are forced to close, residents in those towns
will have to find another pharmacist in another town to fill
their prescriptions. If a resident leaves his town to find
another pharmacist, he may also purchase goods and services
from other vendors in the neighboring community. This will
cause the businesses located in the resident's community to
suffer and eventually close as well.
Ms. Nix stated that the Illinois Department of Financial
and Professional Regulation received two complaints regarding
pharmacists who refused to fill a prescription for emergency
contraception, which prompted the Illinois rule. She testified
that the rule applies only to those pharmacies who stock
contraceptives, and the pharmacy must order the drug if it is
not in stock. She also stated that although pharmacies are
required to dispense emergency contraception, physicians are
not required to prescribe it.
Mr. Patton testified that the reference to ``health care
personnel,'' as cited in the Illinois Health Right of
Conscience Act, must be amended to specifically include
``pharmacist'' to protect a conscientious objection. He also
stated that many of the Illinois pharmacies do not stock
emergency contraception simply because there is no demand for
it. Mr. Patton testified that most of the pharmacies that do
not carry emergency contraception have some method of referral
for the drug. He also explained that individuals are testing
select pharmacies to discern the willingness of a pharmacy to
fill their prescription. This has caused concern and fear for
many rural pharmacies because they believe they maybe targeted
in this effort to coerce pharmacies into compliance; thereby
creating the need for many pharmacies to carry emergency
contraception in case they are tested.
Ms. MacLean testified that the vast majority of pharmacists
dispense the vast majority of prescriptions. Much of her
testimony focused on alternative systems that could be
developed that would balance a pharmacist's moral or religious
objections and a patient's needs. One possible alternative
would be to develop a list of pharmacies that will dispense the
morning-after pill similar to the websites and organizations
that allow patients to find a provider of emergency
contraception. Ms. MacLean suggested granting pharmacists
prescriptive authority for emergency contraceptives. In order
to accommodate women in rural communities who do not have a
choice of pharmacies, it may be the prescriber who chooses to
dispense the product. Ms. MacLean stressed the importance of
creating a system that would address any concerns a pharmacist
may have before a pharmacist is presented with a prescription
to which he or she objects.
Ms. Kelly testified regarding her negative experience in a
suburban community where the pharmacist objected to filling her
prescription for emergency contraception. The pharmacist told
her that she would have her prescription transferred to another
pharmacy, which caused her to drive 20 minutes across town to
have the prescription filled. Ms. Kelly testified that the drug
store where her prescription was refused was in violation of
the Illinois rule.
In summary, the hearing exposed serious problems with the
Illinois ``duty to fill'' rule. The Committee concluded that
these concerns should be communicated with the state
legislators as they consider making the rule permanent.
For further information about this hearing, please refer to
Committee publication #109-26.
7.2.14 proposed legislative remedy for the participating
securities program
Background
On Wednesday, July 27, 2005, the Committee on Small
Business conducted a hearing to explore legislation, H.R. 3429,
amending the Small Business Investment Act of 1958 to establish
a Small Business Investment Company (SBIC) Participating
Debentures program to assist small businesses in gaining access
to capital. The hearing examined structural flaws identified in
the original Participating Securities program, including an
estimated loss of over $2 billion since the inception of the
program, and considered the framework and manner in which the
revised participating debentures program would facilitate small
business equity investment and operate within the overall
venture capital marketplace. This hearing, in part, was a
follow-up to a previous committee hearing held in April 2005,
where the existing equity gap between angel investors and
venture capitalists was identified.
Summary
The hearing was comprised of one panel with two witnesses
present: Mr. Jaime A. Guzman-Fournier, Associate Administrator
for Investment, U.S. Small Business Administration and Lee
Mercer; President; National Association of Small Business
Investment Companies. The final witness, Josh Lerner, Ph.D.,
Jacob A. Schiff, Professor of Investment Banking, Harvard
Business School, Cambridge, MA had his testimony read into the
record.
Mr. Mercer testified that the current Participating
Security program did not meet the requirements of the Credit
Reform Act, was structurally flawed, and placed significant
risk of loss on the government. Mr. Mercer applauded the
committee for taking steps to remedy the program by introducing
HR 3429. He believes that the participating debentures
legislation meets the requirements of credit reform and
responsibly addresses the flaws found in the participating
securities program.
Mr. Guzman-Fournier also bore witness that the current
Participating Securities program was riddled with serious
flaws. He stated a willingness to work with this committee and
industry to develop a workable solution, starting with HR 3429.
Professor Lerner noted the need for risk capital, but was
unsure of whether the participating securities or participating
debentures program was the better option.
Mssrs. Guzman-Fournier and Mercer agreed that the
legislative proposal to create an SBIC Participating Debentures
program to replace the current Participating Security program
could prove to remedy the current program's structural problems
and may very well stimulate equity investments in U.S. small
businesses, particularly in regions underserved by other
resources.
Each testified to the need for a federal program that
stimulates equity investment; however both witnesses also
agreed that since the structure of the current program produced
so much risk, careful consideration of all aspects of the
proposed program is warranted. Mr. Guzman-Fournier very
specifically asked that all aspects of the new SBIC
Participating Debentures program be examined, to include
program structure, funding mechanism, distribution framework,
and other features of the proposed participating debentures
initiative, to ensure that the failures and losses of the
current program are not repeated.
The hearing concluded with witnesses essentially agreeing
that small business investment is a valuable tool to strengthen
the foundation of the economy and that a new SBIC Participating
Debentures program could ensure that early stage small
businesses across the country and across various industry
sectors have access to much needed capital to ensure their
place in and contributions to the economy. Witnesses expressed
interest and commitment to collaboratively work with the
Committee to address the proposed Participating Debentures
program details and mechanics to ensure benefits to small
business, investors, and the taxpayer.
For further information about this hearing, please refer to
Committee publication #109-27.
7.2.15 reforming the tax code to assist small businesses
Background
On Wednesday, September 21, 2005, the Committee on Small
Business held a hearing to examine provisions of the current
tax code that are detrimental to small businesses. The hearing
focused on HR 3841, the Small Employer Tax Relief Act of 2005,
authored by the Hon. Donald Manzullo, Chairman of the Committee
on Small Business which provides several, targeted reforms to
the current tax code for small businesses.
Summary
The hearing was comprised of two panels. The first panel
consisted of The Hon. Jeff Fortenberry, United States House of
Representatives (R-NE). The second panel included The Hon.
Thomas M. Sullivan, Chief Counsel for Advocacy, United States
Small Business Administration, Washington, DC; Nina E. Olson,
National Taxpayer Advocate, Internal Revenue Service,
Washington, DC; Ms. Thala Rolnick, Senior Accountant, Price,
Kong & Company, CPAs of Phoenix, AZ; Ms. Marilyn Landis,
President, Basic Business Concepts, Pittsburgh, PA; Ms. Kristie
Darien, Executive Director, Legislative Offices, National
Association for the Self-Employed; and Mr. John Irons,
Director--Tax and Budget Policy, Center for American Progress,
Washington, DC.
Representative Fortenberry talked about two legislative
proposals he planned to introduce to assist small businesses.
His first proposal would allow individuals to roll over
portions of their retirement accounts into health savings
accounts. His second legislation proposal would allow small
business investors to take loans from traditional Individual
Retirement Accounts. Congressman Fortenberry explained that
these legislative proposals addressed two key areas of concern
for small businesses: (1) providing increased access to
insurance coverage and (2) gaining access to capital.
Chief Counsel Tom Sullivan testified that decreasing the
complexity of the tax code and lowering marginal tax rates are
the best methods to drive entrepreneurship in our nation. Mr.
Sullivan also testified that several of the provisions in HR
3841 would materially assist the success of small businesses,
particularly, the permanent extension of small business
expensing under section 179, the deductibility of health
insurance premiums for self employment taxes, and the temporary
elimination of the alternative minimum tax for individuals.
Taxpayer Advocate Olson testified that many common sense
proposals can help lessen the regulatory burdens faced by small
businesses through the tax code. She stressed that many of the
provisions in HR 3841 would materially lessen the regulatory
burdens on small businesses, including the elimination of the
need for married co-owners of unincorporated businesses to file
partnership returns and the liberalization of the election and
revocation rules for S corporations. She also testified that
one of the most serious problems facing small business
taxpayers is the individual alternative minimum tax, and she
encouraged Congress to repeal the individual AMT as soon as
possible. Ms. Olson concluded her testimony by encouraging
Congress to enact one time penalty abatement for taxpayers that
historically have been in compliance but failed for whatever
reason to meet their tax compliance obligations.
Ms. Rolnick explained that small business taxpayers face
new challenges from the IRS in the form of increased audits. In
particular, she explained that the IRS has embarked on a
nationwide program to audit the first and second tax years of S
corporations. Ms. Rolnick testified further that this increased
enforcement activity only adds to the overwhelming
administrative burdens faced by small business taxpayers. Ms.
Rolnick also emphasized the need for tax reform to stimulate
and enhance small businesses, including the repeal of the
individual and corporate alternative minimum tax.
Ms. Landis complained that small business owners spend a
disproportionate amount of time and money complying with the
tax code. She explained that several of these inequities in the
tax code were addressed by HR 3841, particularly, the
deductibility of health insurance premiums for self employment
taxes and changes that enable small business owners to place
more funds in tax-deferred pension plans. Finally, to address
inequities in the long term, Ms. Landis testified that the
elimination and replacement of the income tax code with a
national sales tax should be a legislative priority for
Congress.
Ms. Darien believes that the complexities and inequities in
the tax code place a significant burden on self-employed
individuals and micro-business owners. She explained that
certain provisions in HR 3841 would materially lessen this
burden, including the deductibility of health insurance
premiums for self employment taxes and the allowance of an
annual standard home office deduction of $2,500.
Mr. Irons agreed that the goal of tax policy should be to
get out of the way of private activity while still raising
adequate revenues for government programs. He explained that
three goals should drive tax reform: (1) simplicity, (2)
fairness, and (3) economic growth. Mr. Irons testified that
keeping a progressive rate structure and preserving incentives
for taxpayers to add value to the economy can best meet these
goals.
In sum, the Committee concluded that further work needs to
be done to amend the tax code to help small businesses, which
can be accomplished by passing into law the provisions
contained in Chairman Manzullo's small business tax relief and
reform bill (HR 3841). For more information about this hearing,
please refer to Committee publication #109-32.
7.2.16 small business and hurricane katrina: rebuilding
the economy
Background
On Friday, October 7, 2005, the Committee on Small Business
held a hearing to assess the needs of small businesses in the
aftermath of Hurricanes Katrina and Rita. Early Monday, August
29, 2005, Hurricane Katrina made landfall in the Gulf Coast
region of Mississippi. The strength of the Hurricane devastated
the Gulfport and Biloxi areas. The storm caused substantial
breeches to levees protecting New Orleans. Nearly 80 percent of
the city was flooded, forcing the greatest mass migration in
this country since the dust storms of the Great Depression, and
washing away thousands of small businesses that formed the
backbone of the Louisiana and Mississippi's deltas economy.
Making matters even worse was the landfall of Hurricane Rita in
Southwest Louisiana and eastern Texas less than three weeks
after Katrina. The Small Business Administration (SBA) issues
physical disaster loans to homeowners and small businesses when
structures are destroyed by a disaster. The SBA also offers
small businesses economic injury disaster loans when their
businesses are affected by a disaster but the structures
themselves were not destroyed.
Summary
The panelists were: The Hon. Hector V. Barreto,
Administrator, United States Small Business Administration,
Washington, DC; Mr. Ralph Brennan, Owner, Brennan Restaurant
Group, New Orleans, LA; Ms. Rae Ann Ryan, President, Travel
Affiliates, Gulfport, MS; Mr. Randy Perkins, Owner, Perkins
Productions, Covington, LA; and Mr. Guy T. Williams, President,
Gulf Coast Bank and Trust, New Orleans, LA.
Administrator Barreto provided details on the SBA's
response to Hurricanes Katrina and Rita by noting that the
agency hired 2,000 temporary employees immediately after
Katrina and rented an additional 40,000 square feet of office
space in Fort Worth, TX. The Administrator noted that this was
the most extensive disaster in SBA's history. The processing
center was working 22 hours a day, received 61,000 applications
for assistance in two weeks, and received over 700,000 requests
for disaster loan information. Administrator Barreto also
explained the SBA's new Gulf Opportunity Zone loan program
proposal, which increases disaster loan size from $1.5 million
to $10 million. The Administrator also noted that it was
increasing the size of disaster mitigation loans, surety bonds,
and authorizing deferment of principal and interest payments
for 12 months on disaster loans.
Mr. Brennan testified that two of his three restaurants
were open but had limited staffs, needed to boil water, lacked
natural gas supplies, and worked with the Louisiana Department
of Health to modify regulations concerning restaurants. Mr.
Brennan noted that his biggest problems were staffing the
restaurants and finding adequate housing for his employees.
Other problems cited by Mr. Brennan included difficulty dealing
with insurance carriers and uncertainty over whether there will
ever be an adequate customer base. He concluded that the entire
Gulf region needed rebuilding to ensure the revival of the key
tourism industry.
Ms. Ryan testified that, five weeks after Katrina, Gulfport
remained a highly troubled area. Many of the roads remained
impassable, bridges were out, and there was a complete absence
of telephone service which is vital to a travel agency
business. She noted that while her business survived relatively
unscathed, the same could not be said for many other businesses
in the Mississippi Gulf Coast. Ms. Ryan also mentioned that
infrastructure needs to be rebuilt quickly because without it
the area's economy, heavily reliant on tourism, will not
rebound. She concluded with support for increasing the size of
SBA disaster loans.
Mr. Perkins testified that he ran a video production
company from his home in Covington, LA. His company provided
services to filmmakers using New Orleans for their films.
Absent a reconstructed New Orleans, his business could not
survive. He then recounted his story of trying to obtain a
small business loan from the SBA and the frustration that he
faced. He concluded that time was critical in getting
assistance and it was time that was running out.
Mr. Williams began his testimony by relating the fact that
more than 25 percent of his employees lost their homes in
Katrina but the one bright spot was that the bank's main
offices were not heavily damaged. Mr. Williams noted that small
businesses were the fulcrum of the New Orleans economy and
those businesses needed immediate help. Mr. Williams suggested
that private banks be authorized to originate SBA disaster
loans because the agency simply did not have the resources
needed to respond to a disaster of this magnitude. He also
suggested that various loan conditions be eased, including
collateral requirements.
In sum, the hearing demonstrated that SBA, like all federal
agencies, needed better preparation and resources to respond to
major catastrophic events.
For more information about this hearing, refer to Committee
publication #109-34.
7.2.17 promoting private sector emergency preparedness
Background
On Tuesday, November 1, 2005, the Committee on Small
Business held a hearing that focused on the significance of
emergency preparedness for the business community. Businesses
today, both large and small, are increasingly connected to
broader networks of economic activity, meaning greater
potential for vulnerability resulting from disruptions in these
networks. From the terrorist attacks of September 11, 2001 to
the devastating hurricanes of the summer and fall of 2005,
emergency preparedness has become an elevated priority for many
sectors of society. For businesses, however, this priority has
not resonated to a great extent. It is the position of many
crisis management and emergency preparedness experts, as well
as academics, that businesses are not taking the necessary
measures that would substantially alleviate the costs that
arise in the wake of an emergency. This hearing was held to
provide a platform for this discussion.
Summary
The panel of witnesses consisted of: Michael Czinkota,
Ph.D., Associate Professor, McDonough School of Business,
Georgetown University, Washington, DC; Gary Knight, Ph.D.,
Associate Professor of Marketing, College of Business, Florida
State University, Tallahassee, FL; Neil Livingstone, Ph.D.,
Chief Executive Officer, GlobalOptions, Inc., Washington, DC;
Mr. Barry Scanlon, Senior Vice President, Witt Associates, LLC,
Washington, DC.
Dr. Czinkota focused his testimony on business preparedness
for the direct and indirect consequences of terrorism. Dr.
Czinkota, along with Dr. Knight and others, conducted extensive
research to get a sense of the top concerns in the business
community. Energy costs, exchange rates, and terrorism, in this
order, were issues at the top of the list. In addition, their
research sought information about the measures being taken by
these firms to deal with their concerns. Dr. Czinkota advocated
for more public/private coordination in terms of education and
training.
Dr. Knight spoke to a broader perspective, conveying the
implications of their research for all disasters. He also
focused on the different challenges faced by small and medium
enterprises (SMEs), in contrast to larger firms. He asserted
that private consulting firms are well capable of providing
proper counsel for SMEs in terms of disaster avoidance/
recovery, crisis management, etc., but SMEs will often find
these firms' services cost prohibitive. He added that the
public information and education that is offered by federal
agencies has little to say regarding the business dimensions of
emergency preparedness, and thus does not address some of the
most important aspects of private sector emergency
preparedness. Dr. Knight called for better marketing and
expansion of the Small Business Administration (SBA) disaster
loan program and more federal government engagement in
strengthening the information and communication infrastructure
through private sector research and development initiatives.
Dr. Livingstone echoed the aforesaid witnesses by
testifying that although businesses have an incentive to
protect their assets and employees, small businesses often lack
the resources to take the necessary preparedness measures to
act on these incentives. He believes government has a role in
bridging this gap but is falling short. The SBA's preparedness
literature, for instance, is not very helpful for a small
business in acquiring useful suggestions for disaster
preparation, crisis management, and business continuity plans.
Beyond his advocacy for public/private cooperation in compiling
and disseminating information, Dr. Livingstone specified some
cost-effective measures he believes are relevant for small
businesses. He said that every firm should perform some kind of
risk assessment and then develop plans consistent with the
identified risks. Dr. Livingstone mentioned the Department of
Homeland Security's www.ready.gov to be helpful in this regard.
In addition, he suggested developing systems for contacting
employees in the wake of a crisis, storing copies of all
pertinent files offsite, purchasing a satellite phone,
purchasing an electric generator, and developing survival kits.
He provided examples of survival kits at the hearing for
Members and staff to peruse.
Mr. Scanlon outlined a broader level of engagement on the
side of the federal government. First, he said that all
disasters should be addressed together because from a
business's perspective, the effects are generally the same.
Second, the federal government should provide grants and other
incentives to businesses to prepare more effectively for
emergencies because the costs to society are so high when they
do not. In Mr. Scanlon's opinion, small investments in targeted
programs that encourage and facilitate business emergency
preparedness can have a major impact. Third, he outlined an
administrative restructuring that included adding economic and
business recovery as a category in the federal government's
Emergency Support Functions (ESF). Fourth, Mr. Scanlon said
that the SBA disaster loan program should be strengthened and
improved and included officially as part of the federal
government's ESF.
In sum, the Committee concluded that private sector
emergency preparedness, particularly on the part of small
businesses, is severely lacking and that lack of available
resources is a major contributor to this deficiency.
For further information about this hearing, please to
Committee publication #109-35.
7.2.18 building a wall between friends: passports to and
from canada?
Background
On Thursday, November 17, 2005, the Committee on Small
Business held a hearing regarding the border-crossing plan
entitled the Western Hemisphere Travel Initiative (WHTI).
Specific focus was given to the impact of the WHTI on small
businesses along the U.S.-Canadian border. Additionally, the
impact upon supply chain management for small and medium
manufacturers was detailed.
As recommended by the 9/11 Commission, the federal
government set national standards for the issuance of
identification documents per the Intelligence Reform and
Terrorism Prevention Act of 2004 (IRTPA). A provision of the
IRTPA mandated the Secretaries of State and Homeland Security
to implement a plan ``to require a passport or other document,
or combination of documents . . . for all travel into the
United States . . .'' The response to this mandate was the
WHTI, announced in April 2005.
WHTI will affect all U.S. citizens and certain foreign
nationals, specifically, ``most Canadian citizens, citizens of
the British Overseas Territory of Bermuda and Mexican
citizens.'' Currently, the implementation of the Initiative is
scheduled to begin on December 31, 2006, applying the
requirements to all air and sea travel to or from Canada,
Mexico, Central and South America, the Caribbean and Bermuda.
The second phase of implementation is to be December 31, 2007,
applying the requirements to all land border crossings as well
as air and sea travel. Both the Department of State and
Homeland Security (DHS) are working to create and determine
acceptable alternative documents other than a passport.
Summary
The witnesses present at this hearing included: The Hon.
Louise Slaughter, United States House of Representatives (D-
NY); The Hon. John Engler, President/CEO, National Association
of Manufacturers, Washington, DC; Mr. Ken Staub, Vice
President, Riverside Service Corporation, Buffalo, NY; Mr.
William Cook, Senior Manager, Worldwide Transport Design &
Procurement, DaimlerChrysler Corp., Detroit, MI; Mr. H. Thomas
Chestnut, CEO, AAA of Western and Central New York,
Williamsville, NY; Janice L. Kephart, Esq., Former Counsel to
the 9/11 Commission, Alexandria, VA; and Mr. Howard Zemsky,
Managing Partner, Taurus Partners, LLC, Buffalo, NY.
Representative Slaughter acknowledged the importance of
this review process of the implementation of the WHTI and its
potential economic affects on tourism and small businesses. She
noted five recommendations necessary to consider when
evaluating the proposal: DHS and State must conduct a complete
economic analysis of the WHTI; DHS must expand existing pre-
enrollment programs like NEXUS, FAST and SENTRI; the Border
Crossing Card (BCC) must be inexpensive, easy to obtain, and
marketed across the United States, DHS and State should also
consider additional alternative documents; Merge the two
provisions for implementing sea/air and land crossings; and
finally, form a Northern and Southern border strategy team to
advise DHS and State on implementation.
Governor Engler testified to the extreme detriment the WHTI
will have on small and medium manufacturers in border towns and
beyond unless a more simplified and uniform system be put in
place. He noted the identification requirements should be more
accommodating for frequent travelers crossing borders like that
of airports, where it is clearly established what documentation
airport security requires of travelers, and people can provide
it.
Mr. Staub indicated the costs of the current identification
requirements could be quite significant, especially for small
businesses, where the truck drivers themselves must shoulder
the costs of documentation. He further urged State and DHS to
consider the needs of frequent travelers, in the guise of
tourists and commercial travelers, when developing alternative,
acceptable substitutes to passports.
Mr. Cook testified to the far-reaching affects of the
proposed requirements in the WHTI on the supply chain in
manufacturing, and all businesses. He drew on the Just-in-Time
(JIT) manufacturing process employed at DaimlerChrysler, a
management technique implemented to reduce waste and increase
efficiency. Mr. Cook noted that such a philosophy would be even
more difficult were the stringent requirements of the WHTI
imposed on the supply chain. DaimlerChrysler alone is
responsible for over 700 truckloads and 50 railcars of
production material per day between Windsor, Ontario and
Detroit. He testified that programs that establish
relationships for consistent and predictable customs processes
are imperative for an efficient and functional supply chain.
Mr. Chestnut illustrated the importance of tourism on the
US/Canadian border town economies and the ramifications
strictly scrutinized identification processes would have on
this industry. He emphasized the example of casual travel in
the region by noting 12 to 18 percent of attendance at a home
game of the NFL's Buffalo Bills, and 18 to 22 percent of fans
of the National Hockey League's Buffalo Sabers, are Canadian.
He urged the agencies to work with existing forms of
identification that are identified by the REAL ID Act.
Ms. Kephart stressed the importance of border security and
the ongoing threat of future terrorist attacks so long as our
borders remain unprotected. She testified that the WHTI is an
essential step to fulfilling the first and foremost requirement
of border security--to provide security at our borders against
terrorist entry and embedding and cross-border terrorist travel
traffic. Ms. Kephart noted that the WHTI allows for the
creation of frequent traveler programs, similar to the ones in
existence, and emphasized that these programs help facilitate
commerce in the border towns and beyond.
Mr. Zemsky sought to impress upon the Committee the
seamless integration of the Canadian and US economies and
compared the need for commercial crossing of the Niagara River
to D.C. residents crossing the Potomac River to enter Virginia.
In sum, the committee concluded that at a minimum, the
Departments of State and DHS must conduct a proper regulatory
flexibility economic analysis to determine the effect this
proposal would have on small business and to propose a rule
that would limit the negative impact upon small business.
For further information on this hearing, refer to Committee
publication #109-37.
7.2.19 fiscal year '07 budget and reauthorization
proposals of the sba
Background
On Wednesday, March 15, 2006, the Committee on Small
Business held a hearing on the President's proposed FY 2007
budget as it affected small business. The Congressional Budget
Act of 1974 requires the Committee to recommend budget levels
and report legislative plans within the Committee's
jurisdiction to the Committee on Budget.
The hearing focused on whether the proposed budget
adequately addressed the needs of small businesses of this
nation. The Committee was interested in determining if the
Administration's proposed budget adequately addressed the needs
of the small business community, while taking into account real
budgetary constraints. In addition, the Committee wanted to
hear about any suggested legislative changes needed in the
Small Business Act or Small Business Investment Act of 1958.
Overall, the Committee was seeking views concerning the past
performance of the Small Business Administration (SBA) and the
its plans for future service to America's small business
community.
Summary
The hearing consisted of two panels. The first panel was
The Hon. Hector Barreto, Administrator, United States Small
Business Administration, Washington, DC. The second panel
consisted of one private sector witness--Ms. Patricia Smith,
Co-owner, PEMBA Lighting and Automation, New Orleans, LA.
Administrator Barreto started off his testimony by noting
that the primary goal of the FY 2007 budget was to continue
efficient delivery of services to small businesses. Among the
examples of this efficiency was the record growth in the small
business loan program despite a 37 percent reduction in the
SBA's budget since FY 2001. Other efficiencies cited by the
Administrator include increased returns on liquidations of
loans, office consolidations, and improved oversight functions.
The Administrator also reviewed the response by the agency to
Hurricane Katrina and detailed plans for increasing the
disaster loan funds available without a concomitant rise in the
subsidy rate for the program. The Administrator concluded that
the budget was adequate for serving America's small businesses.
Ms. Smith noted that her business prior to Hurricane
Katrina was successful and growing. After Katrina, the building
in which her business was located suffered severe flood damage
and lacked electricity for a month. Communication services were
disrupted for months. Ms. Smith then detailed the travails she
faced in trying to obtain a disaster loan from the SBA which
ultimately decided that she had insufficient collateral to
obtain a loan. She ended her testimony with a request that the
SBA provide assistance to the thousands of small businesses in
the Gulf Coast region that need it.
In sum, the Committee needed to further examine the
resources and procedures used by the SBA in providing disaster
assistance.
For more information, refer to Committee publication #109-
43.
7.2.20 hearing on irs latest enforcement: is the bulls-eye
on small businesses?
Background
On Wednesday, April 5, 2006, the Committee on Small
Business held a hearing to examine the activities of the
Internal Revenue Service (IRS) to close the so-called ``tax
gap.'' Through its National Research Project, the IRS has
attributed a good deal of the estimated $300 billion ``tax
gap'' (i.e., the difference between what taxpayers owe and what
they pay) to small businesses and self-employed individuals.
This hearing explored the specific activities the IRS is taking
to close the ``tax gap'' and how these activities impact the
millions of small businesses and self-employed individuals in
the United States. In addition, the Committee examined the
impact on small businesses of the new proposals in the FY 2007
budget to close the ``tax gap.''
Summary
The hearing consisted of two witness panels. The first
panel included: The Hon. Mark W. Everson, Commissioner,
Internal Revenue Service, Washington, DC; and The Honorable
Thomas Sullivan, Chief Counsel for Advocacy, United States
Small Business Administration, Washington, DC. The second panel
was comprised of: Mr. Kevin Brown, Commissioner, Small
Business/Self-Employed Division, Internal Revenue Service,
Washington, DC; Ms. Nina Olson, National Taxpayer Advocate,
Washington, DC; John Satagaj, Esq., President and General
Counsel, Small Business Legislative Council, Washington, DC;
Keith Hall, CPA, Partner, Hall and Hughes, PLLC, Dallas, TX;
Mr. Michael Fredrich, President, Manitowoc Custom Molding, LLC,
Manitowoc, WI; and Max Sawicky, Ph.D., Economist, Economic
Policy Institute, Washington, DC.
Commissioner Everson testified that the best way to address
the ``tax gap'' is to increase funding for IRS enforcement
efforts and to enact the targeted ``tax gap'' proposals in the
President's FY2007 budget request. Chief Counsel Sullivan
testified that a balanced approach of service and enforcement
is necessary to reduce the ``tax gap.'' He also stated that the
information and withholding proposals in the FY2007 budget may
result in many unintended consequences for small businesses.
Mr. Brown testified that more must be done by the IRS to
enforce compliance among small businesses while ensuring that a
high level of service is provided. Ms. Olson testified that a
balanced approach of education and enforcement is necessary to
reduce the ``tax gap''. She also testified that one approach to
greater compliance could be enactment of a voluntary
withholding regime for payments made to independent
contractors.
Mr. Satagaj testified that the ``tax gap'' has not changed
significantly over the past three decades. Further, he
testified that the ``tax gap'' proposals in the FY2007 budget
are unclear proposals targeted at small businesses. Mr. Hall
testified that, short of major simplification of the tax code,
IRS education efforts are the best way to obtain greater small
business tax compliance. Mr. Fredrich testified that small
businesses face a high burden as they attempt to comply with
current federal, state, and local tax obligations. He further
testified that enactment of new withholding proposals and/or
greater IRS enforcement activities would only add to these
burdens. Mr. Sawicky testified that part of the solution to
reducing the ``tax gap'' is simplification of the current tax
system.
The Committee concluded that many of the current proposals
to close the ``tax gap'' would have a detrimental effect on
small businesses and that future proposals to close the ``tax
gap'' must be examined closely.
For further information on this hearing, refer to the
Committee publication #109-46.
7.2.21 cutting our trade deficit: can the u.s. muster its
diverse trade promotion operations to make an
impact?
Background
On Wednesday, April 26, 2006, the Committee on Small
Business held a hearing to examine U.S. trade promotion
operations and the effectiveness of the Trade Promotion
Coordinating Committee (TPCC), housed within the United States
Department of Commerce. The purpose of this hearing was to
conduct a general oversight on the effectiveness of the TPCC in
discharging its legislated objectives with particular attention
to:
--Assessing the adequacy of the institutional
placement of the TPCC to insure its most efficient
operation;
--Reviewing the adequacy of the assigned TPCC
authorities to achieve its objectives; and
--Appraising the extent to which oversight activities
are carried out of the annual National Export Strategy
to facilitate small business trade expansion.
Summary
The hearing was comprised of one panel: The Hon. John L.
Mica, United States House of Representatives (R-FL); The Hon.
Franklin L. Lavin, Under Secretary for International Trade,
United States Department of Commerce, Washington, DC; Loren
Yager, Ph.D., Director, International Affairs and Trade,
Government Accountability Office, Washington, DC; Ms. Kathy M.
Hill, President, State International Development Organizations,
Washington, DC; the Hon. Amb. J. Anthony Holmes, President,
American Foreign Service Association (AFSA), Washington, DC;
James Morrison, Ph.D., President, Small Business Exporters
Association, Washington, DC; and Mr. Robert E. Scott, Director
of International Programs, Economic Policy Institute (EPI),
Washington, DC.
Representative Mica began by making reference to his
private business experience in dealing with U.S. trade
development and promotion assistance and labeled both national
and international efforts as dysfunctional at the very best. He
further observed that the TPCC had no teeth and in reviewing
the National Export Strategy report it prepared, he found it to
be just a compilation of a few things the 19 member
organizations have going on, at the time. The document has no
strategic business plan or plan to promote American business in
a coordinated fashion.
Undersecretary Lavin stated that the overriding priority
for the Commerce Department and TPCC is simply reaching out to
a wider community of American small and potential exporters
through private partnership with United States firms in such
industries as logistics and banking.
Dr. Yager noted the TPCC strategies do not identify or
measure progress toward member agency goals in relation to
federal trade promotion priorities and agencies have not
articulated measurable goals in support of these priorities. He
observed that TPCC has little influence over agencies'
allocation of resources to support TPCC goals or priorities. He
questioned whether the TPCC, in its current structure, could
achieve the fundamental objectives associated with defining
goals and aligning resources and if the TPCC move within the
Commerce Department will help it achieve those goals.
Ms. Hill commented that ironically various state trade
programs provide export promotion grants to small businesses
that helps cover a lot of the program fees that are charged by
federal programs. She endorsed the needed for greater
coordination and a strengthened role for the White House in
these coordination efforts.
Ambassador Holmes recommended that the Administration and
Congress work together to raise the priority of commercial
diplomacy. Ambassador Holmes believes that a more unified,
authoritative TPCC would be both desirable and logical.
Dr. Morrison observed that the assigned TPCC
responsibilities for trade coordination were not being matched
by adequate authorities. The Office of International Trade at
the Small Business Administration also needed reform and he
endorsed reform legislation introduced by Chairman Manzullo,
the Small Business Trade Promotion Enhancement Act of 2006,
H.R. 5196.
Mr. Scott questioned the assertion that simply approving
free trade agreements will improve export performance. He
recommended the value of the dollar be reduced, increases in
non-defense research and development funding, and reduced
health care costs for businesses.
In conclusion, the Committee received expert testimony
documenting the shortfalls in the operations of the TPCC and
establishing the need for corrective legislation, such as that
set forth in H.R. 5196.
For further information about this hearing, refer to
Committee publication #109-48.
7.2.22 sarbanes-oxley section 404: what is the proper
balance between investor protection and capital
formation for smaller public companies
Background
On Wednesday, May 3, 2006, the Small Business Committee
held a hearing to review the impact of the Public Company
Accounting Reform and Investor Protection Act of 2002, Pub. L.
No. 107-204, commonly referred to as the Sarbanes-Oxley Act (or
SOX), on small businesses. SOX was passed in July 2002 in
response to several high profile large corporate scandals.
Section 404 of SOX requires the management of all publicly-
traded companies to assess the strength of their companies'
internal controls and also requires that each public company's
external auditor attest to the accuracy of that assessment. In
March 2005, the Securities and Exchange Commission (SEC)
established the Advisory Committee on Smaller Public Companies
(Advisory Committee) to examine the impact of SOX on smaller
public companies and to make recommendations to the SEC. On
April 23, 2006, the Advisory Committee recommended that the SEC
implement full and partial exemptions from section 404 for
certain small public companies. This hearing analyzed the
recommendations of the Advisory Committee and explored
generally the impact of section 404 on our nation's smaller
public companies.
Summary
The hearing consisted of one panel of six witnesses:
Herbert S. Wander, Esq. Partner, Katten, Muchin, Chicago, IL
and Chairman, SEC Advisory Committee on Smaller Public
Companies; Mr. Bill Broderick, CFO, Analytical Graphics, Inc.,
Exton, PA; Mr. Keith Crandell, Managing Director, ARCH Venture
Partners, Chicago, IL; Mr. Woodie Neiss, CFO, FLAVORx, Inc.,
Bethesda, MD; Mr. Mark A. Schroeder, President/CEO, German
American Bancorp, Jasper, IN; and Mr. James Burns, President/
CEO, EntreMed, Inc., Rockville, MD.
Mr. Wander testified that small public companies face
tremendous burdens when attempting to comply with section 404
of SOX. He further stated that, based on his work as Chairman
of the Advisory Committee, a revised framework should be put in
place for assessing whether small public companies have
complied with section 404. Mr. Broderick testified that section
404 disproportionately affects smaller companies and that
smaller companies need a new system of scaled or proportional
securities regulations that reflects the Advisory Committee's
recommendations. Mr. Crandell testified that section 404 has
stifled the emerging growth companies in our nation by draining
capital and resources from these companies. Mr. Neiss testified
that section 404 is a deterrent to smaller companies accessing
the public markets and that section 404 should be scaled to the
complexity of an organization. Mr. Schroeder testified that
section 404 creates extremely onerous burdens on companies that
must currently comply with the law. In addition, he testified
that it is important for the SEC and PCAOB to scale regulations
to address the disproportionate costs and burdens of section
404 on small companies by adopting the Advisory Committee's
recommendations. Mr. Burns testified that the implementation of
section 404 has imposed tremendous costs on smaller companies
and urged the SEC and PCAOB to adopt the reform framework in
the Advisory Committee's recommendations.
The Committee concluded that the recommendations made by
the Advisory Committee would materially assist small public
companies comply with section 404.
For further information on this hearing, refer to the
Committee publication #109-51.
7.2.23 bridging the equity gap: examining the access to
capital for entrepreneurs act of 2006
Background
On Wednesday, May 10, 2006, the Committee on Small Business
held a hearing to analyze H.R. 5198, the Access to Capital for
Entrepreneurs Act of 2006. The bill provides a mechanism for
our nation's small businesses to obtain equity funding by
establishing a tax credit for angel investment in these
businesses. Currently, more than 20 states have similar tax
credit programs for investment in small businesses. The hearing
examined the angel investor market and the effect H.R. 5198
would have on this market. In addition, the hearing examined
the success of state tax programs in generating additional
equity funding for small businesses.
Summary
The hearing consisted of one panel of witnesses: The Hon.
Earl Pomeroy, United States House of Representatives (D-ND);
Susan Preston, Esq., Partner, Davis Wright Tremaine LLP,
Seattle, WA; Ian Sobieski, Ph.D., Founder & Managing Director,
Band of Angels, Menlo Park, CA; Ms. Lorrie Keating-Heinemann,
Secretary, Wisconsin Department of Financial Institutions,
Madison, WI; Mr. Dan Loague, Executive Director, Capital
Formation Institute, Reston, VA; Mr. Luis Villalobos, Founder
and Board Member of Tech Coast Angels, Orange County, CA.
Mr. Pomeroy testified that the tax incentive in H.R. 5198
will address the equity funding gap for small companies by
promoting greater investment in our nation's small businesses.
Ms. Preston testified that H.R. 5198 is a simplistic, self-
executing federal income tax credit that will provide
critically needed growth funds to young companies. Mr. Sobieski
testified that, if enacted, H.R. 5198 would generate more angel
investment into startup companies, generating more jobs and
opportunities for small companies in the marketplace. Ms.
Keating-Heinneman explained that, based on her experience in
Wisconsin, tax credits are an important way to generate
additional angel investment in new and emerging companies. Mr.
Loague testified that H.R. 5198 would greatly expand seed stage
capital for start-up and growing U.S. companies. Mr. Villalobos
testified that it is important to narrowly tailor tax
incentives for the angel marketplace and to also provide
support to existing angel networks.
The Committee concluded that the tax incentive in H.R. 5198
would encourage angel investors to provide additional equity
funding to our nation's small businesses.
For further information on this hearing, refer to the
Committee publication #109-52.
7.2.24 contracting the internet: does icann create a
barrier to small business?
Background
On Wednesday, June 7, 2006, the Committee on Small Business
held a hearing to explore and review the proposed settlement of
private litigation between the Internet Corporation for
Assigned Names and Numbers (ICANN) and VeriSign. While the
agreement is between two private corporations, the aim of the
hearing was to let all sides in this debate air their views and
to examine the potential affect of this agreement on small
businesses that have websites on the Internet.
In 2004, VeriSign and ICANN entered litigation related to
their mutual obligations under the terms of the current .com
registry agreement. In 2005, a settlement between the two
parties was negotiated. ICANN cannot execute the new .com
registry agreement without the Commerce Department's prior
approval. Any other agreements that are contained within the
settlement of the litigation between VeriSign and ICANN are not
the responsibility of the Department of Commerce and the
Department has no legal authority to review those other
sections.
Summary
The hearing was comprised of one panel of six witnesses:
Beckwith Burr, Esq., Partner, Wilmer Hale, Washington, DC; John
Jeffrey, Esq., General Counsel & Secretary, ICANN, Marina Del
Ray, CA; The Hon. Richard White, United States House of
Representatives (Ret.), Member, VeriSign's Internet Advisory
Board, Poulsbo, WA; Mr. W.G. Champion Mitchell, Chairman and
CEO, Network Solutions LLC, Herndon, VA; Mr. Steven DelBianco,
Executive Director, NetChoice, Washington, DC; and Mr. Craig
Goren, CEO, Clarity Consulting, Chicago, IL.
Ms. Burr summarized the Department of Commerce process that
created ICANN and transfer of ``control'' of the Internet. Ms.
Burr further described her role during the Clinton
Administration when she was integral in the establishment of
the Department of Commerce as the ``honest broker'' between
ICANN and VeriSign.
Mr. Jeffrey gave a history of the contract between ICANN
and VeriSign as well as a brief summary of the October 25, 2005
settlement between the two groups part of which the contract in
question emerged. Former Representative White focused the
discussion from a historical review to the present public issue
of the renewed the agreement between ICANN and VeriSign and the
suitability of that agreement for the continued good of the
Internet and America's small businesses.
Mr. Mitchell attempted to assign negative implications and
antitrust concerns to the contract between ICANN and VeriSign.
Mr. DelBianco pointed out the Network Solutions is not a small
business and merely is attempting to disrupt a legitimate
contract in an effort to maximize his own companies profit
margins. Mr. Goren described the minimal impact to real small
businesses and their effort to utilize the Internet as part of
their business.
In sum, the Committee concluded that that there was more to
this settlement that originally thought and encouraged other
committees of legislation jurisdiction to delve into this
matter more.
For more information about this hearing, please refer to
Committee publication #109-55.
7.2.25 the award of contracts by federal agencies to
alaska native corporations
Background
On Wednesday, June 21, 2006, the Committees on Government
Reform and Small Business held a joint hearing to review the
award of contracts by federal agencies to Alaska Native
Corporations (ANCs) participating in the Small Business
Administration's (SBA) 8(a) program. ANCs have been permitted
since 1986 to participate in the SBA 8(a) program. Under the
8(a) program, federal agencies are allowed to award contracts
without competition to small businesses that are certified by
the SBA as 8(a) firms. For most 8(a) firms, these sole-source
awards are limited to $5 million for manufacturing and to $3
million for other goods and services. Acquisitions above these
thresholds must be competed among eligible 8(a) certified small
businesses. These limitations do not apply to ANC firms
participating in the 8(a) program. ANCs are subject to
different requirements than other 8(a) firms in a number of
different respects. For example, ANCs are not subject to the
``affiliation rule'' which requires other 8(a) small businesses
to count affiliates or subsidiaries of the business to
determine whether the business concern is ``small.''
Summary
The hearing was comprised of three panels. The first panel
had one member, the Hon. Don Young (R-AK), Chairman of the
Committee on Transportation and Infrastructure, United States
House of Representatives. The second panel consisted of: Mr.
David Cooper, Director, Acquisition and Sourcing Management,
Government Accountability Office, Boston, MA; Mr. Calvin
Jenkins, Deputy Associate Deputy Administrator, Office of
Contracting and Business Development, United States Small
Business Administration, Washington, DC; Mr. Frank Ramos,
Director, Office of Small Business Programs, United States
Department of Defense, The Pentagon, Arlington, VA; Ms. Melodee
Stith, Associate Director, Acquisition and Financial
Assistance, United States Department of the Interior,
Washington, DC. The last panel had the following members: Mr.
Harry Alford, President/CEO, National Black Chamber of
Commerce, Washington, DC; Ms. Ann Sullivan, President, Madison
Services Group, Inc., Washington, DC; Mr. Chris E. McNeil, Jr.,
President/CEO, Sealaska Corporation, Juneau, AK; Ms. Helvi
Sandvik, President, NANA Development Corp., Anchorage, AK; Mr.
Bart Garber, President, Tyonek Native Corporation, Tyonek, AK;
Ms. Julie Kitka, President, Alaska Federation of Natives,
Washington, DC; and Mr. Charles Totemoff, President/CEO,
Chenega Corporation, Anchorage, AK.
Representative Young expressed support for the award of
contracts to ANCs and that they were doing right by the federal
government, the U.S. taxpayers, and communities within Alaska
that need economic support. Mr. Jenkins provided the history of
the 8(a) program that was started in the 1960s to assist small
business owners that were socially and economically
disadvantaged and to provide economic benefits to their
communities. While ANCs benefited from the 8(a) program in
increasing federal contract dollars so did other small business
groups. Mr. Cooper stated that in 2004, ANCs accounted for
approximately 13 percent of the 8(a) federal contract dollars.
The revenues from these contracts benefited villages in Alaska
through such means as dividend payments, educational
scholarships, assistance for the elderly, and cultural
preservation. Mr. Ramos stated small businesses should be
accorded every privilege that they are entitled to under the
laws that Congress has passed. Ms. Stith expressed the opinion
that the Department of Interior has a distinct interest in
providing economic opportunities for Alaska natives in the form
of federal contacts to ANCs.
Mr. Alford expressed the view that ANCs that are not small
businesses should not be in the 8(a) program. He doubted that
the revenues generated by ANCs were ultimately finding their
way back home to benefit Native Alaskans. Ms. Sullivan stated
that the federal government had only awarded three percent of
contracts to women-owned businesses rather than the required
five percent. Further, the set-aside program for women-owned
businesses had never been implemented, even though mandated by
law. Mr. McNeil stated that Congress intended to benefit Native
Alaskans no matter where they lived. Ms. Helvi stated that
economic conditions in remote parts of Alaska were severe and
that the NANA Corporation had distributed almost 100 percent of
its profits to shareholders and had been successful in
providing employment to its shareholders. Mr. Garber stated
that the Tyonek Native Corporation had grown from three
employees in 1995 to revenues of almost $50 million and profit
before taxes of between $1.5 and $2 million. The corporation
had about 300 employees located in seven states and it provided
manufacturing, engineering, and aircraft maintenance services
to the federal government. Mr. Totemoff was of the opinion that
the present criticism of ANCs came from their success in
obtaining federal contracts and in expertise that has been
acquired. Ms. Kitka stated that the size of Alaska and the lack
of infrastructure makes it hard to create sustainable
economies.
In sum, the Committee concluded that exemptions in the 8(a)
program that allow ANC participation regardless of size
provided unique challenges in addressing reforms that satisfy
the small business community and also insured continued
economic development for Native Alaskans.
For further information on this hearing, refer to Committee
publication #109-56.
7.2.26 failure to comply with the regulatory flexibility act: irs
endangering small businesses yet again
Background
On Tuesday, July 25, 2006, the Small Business Committee
held a hearing to examine proposed regulations released by the
Internal Revenue Service (IRS) and the Department of Treasury
(Treasury) that would change the rules governing taxation of
escrow accounts, trusts, and other funds used during deferred
exchanges of like-kind property under section 1031 of the
Internal Revenue Code. Recognizing that these proposed
regulations would affect small businesses in the qualified
intermediary industry, the IRS and Treasury included an Initial
Regulatory Flexibility Analysis (IRFA) under the Regulatory
Flexibility Act (RFA) as part of the regulations. This hearing
explored the adequacy of the IRFA and the effect of the
proposed regulations on small qualified intermediaries.
Summary
The hearing consisted of one panel of witnesses: Mr. Eric
Solomon, Acting Deputy Assistant Secretary for Tax Policy and
Deputy Assistant Secretary for Regulatory Affairs, Department
of the Treasury, Washington, DC; The Hon. Donald Korb, Chief
Counsel, Internal Revenue Service, Washington, DC; The
Honorable Thomas M. Sullivan, Chief Counsel for Advocacy,
United States Small Business Administration, Washington, DC;
Mr. Louis Weller, Principal, National Director for Like-Kind
Exchange Planning, Deloitte Tax LLP, San Francisco, CA; Mr.
Michael Halloran, President/CEO, Nationwide Exchange Services,
Cupertino, CA; and Mr. Howard Levine, Partner, Roberts &
Holland LLP, Washington, DC.
Mr. Solomon did not testify at the hearing. Mr. Korb
testified that the IRFA in the proposed regulations was not
sufficient and agreed that a revised IRFA should be completed
by the IRS. Mr. Sullivan testified that the IRFA in the
proposed regulations was not adequate because it fails to
detail the complete economic impact on small businesses in the
qualified intermediary industry. Mr. Weller testified that the
proposed regulations favor large, qualified intermediaries
owned by financial institutions. Mr. Halloran testified that
the proposed regulations would have a detrimental effect on
small businesses to the advantage of a few, large bank-owned
qualified intermediaries. Mr. Levine testified that the
proposed rules are valid from a substantive tax perspective.
The Committee determined that the IRFA included in the
proposed regulations did not meet the requirements of the RFA
and should be revised by the IRS and Treasury.
For further information on this hearing, refer to the
Committee publication #109-62.
7.2.27 advancing security and commerce at our nation's ports: the
goals are not mutually exclusive
Background
On Wednesday, September 27, 2006, the Committee on Small
Business held a hearing to discuss the proposed Maritime
Transportation Worker Security Credential (Maritime TWIC) rule
and its affect on small business. In 2002, Congress passed the
Maritime Transportation Security Act (MTSA) which mandated the
Maritime TWIC for all workers employed in the maritime
industry. The law, if properly implemented, will provide for an
additional layer of safety and security while at the same time
improve the flow of people and goods at our nation's ports.
However, small businesses assert that the Maritime TWIC rule is
not being properly implemented by the Transportation Security
Administration (TSA) and the Untied States Coast Guard. They
believe it creates unnecessary redundancies, is too costly,
requires onerous recordkeeping requirements, will impede labor
flows in the transportation sector, and is not in keeping with
Department of Homeland Security Secretary (DHS) Chertoff's goal
of a risk based strategy to secure our homeland.
Summary
The hearing was comprised of one panel. Admiral Brian
Salerno, Assistant Commandant for Inspection and Compliance,
United States Coast Guard, Washington, DC; Mr. Steve Sadler,
Director, Maritime and Surface Credentialing, Transportation
Security Administration, United States Department of Homeland
Security, Washington, DC; Mr. Philip L. Byrd, Sr., President/
CEO, Bulldog Hiway Express, Charleston, SC; Ms. Debbie
Gosselin, President, Chesapeake Marine Tours, Annapolis, MD;
Mr. George Leavell, Executive Vice President, Wepfer Marine,
Inc., Memphis, TN; and Mr. Danny R. Schnautz, Operations
Manager, Clark Freight Lines, Pasadena, TX.
Mr. Sadler and Admiral Salerno discussed the joint
rulemaking by the Coast Guard and TSA to implement the MTSA
while strengthening security and facilitating commerce. Mr.
Sadler discussed the feedback that TSA and the Coast Guard
received from small businesses through comments addressed to
the docket and through the four public meetings that were held.
Admiral Salerno said that Coast Guard and TSA greatly value
industry's input and that Coast Guard and TSA will continue to
work closely with industry to provide a safe and secure
maritime transportation system.
Mr. Byrd described the detrimental effects of the proposed
TWIC rule on his small trucking company and the minimal
security benefits that will be provided through its
implementation. Mr. Byrd discussed the unnecessary duplicative
costs and requirements of the Hazardous Materials Endorsement
(HAZMAT) and TWIC background checks. He discussed the TWIC's
failure to preempt state and local transportation security
background checks and programs. Mr. Byrd said that there was
already a shortage of truck drivers and that the TWIC
regulation would exacerbate this current labor shortage to a
much greater degree.
Ms. Gosselin outlined the costs that small companies such
as hers are shouldering to secure the maritime sector. She
stated that her small business has paid approximately $55,000
over the past two years to implement the MTSA alone. Ms.
Gosselin said that TWIC will not provide any additional
security measures for small companies such as hers and that it
will only increase her overall regulatory burden.
Mr. Leavell discussed the importance of a good security
program for barge operators around the country and the
industry's willingness to work collaboratively with the DHS to
facilitate safety and security in the transportation of
maritime cargo. He discussed his grave concerns with the TWIC
program outlining its detrimental effects on hiring new
crewmembers. Mr. Leavell also discussed the importance of a
risk based approach for any regulatory regime implemented in
the maritime transportation security sector.
Mr. Schnautz discussed the impact of the TWIC regulation on
truckers who derive their earnings through the use of a single
truck. He went on to describe the process and entities involved
in moving a load at a port and the potential for supply chain
disruption if the TWIC regulation is not properly promulgated.
In sum, the Committee concluded that TSA and Coast Guard
need to execute a comprehensive Economic Impact Analysis that
contains a proper Final Regulatory Flexibility Analysis that
adequately considers the adverse impact of the proposed
regulations on small entities prior to the implementation of
the final rule.
For further information about this hearing, please refer to
Committee publication #109-64.
7.2.28 fema's response to the rockford flood
Background
On Tuesday, November 28, 2006, the Committee on Small
Business held a field hearing the response by the Federal
Emergency Management Agency (FEMA) to the Rockford flood that
occurred on September 4, 2006. On that day, the City of
Rockford, Illinois and parts of Winnebago County, Illinois were
beset by catastrophic flash flooding. More than 700 homes and
small businesses were damaged, initially displacing 1,400
residents, many of which are poor and elderly. More than two
months later, 213 damaged homes were still not repaired and
recovery was well beyond the City's means. Illinois claimed
that there was no individual assistance available for recovery
and requested a federal declaration to help repair and rebuild
the devastated areas. FEMA, State, and City officials conducted
a joint preliminary damage assessment and City officials
declared that FEMA rushed through the assessment and were not
inclined to make a declaration from the outset. The Committee
scheduled the hearing to investigate the process by which FEMA
makes disaster declarations and determine whether declarations
are made in an arbitrary manner.
Summary
The hearing was comprised of one panel of official witness
and an open microphone whereby affected residents were invited
to tell their individual story. The official witness panel was
comprised of the following witnesses: The Hon. Lawrence J.
Morrissey, Mayor, City of Rockford, Rockford, IL; Ms. Jennifer
Jaeger, Community Services Director, Human Services Department,
City of Rockford, Rockford, IL; Mr. Dave Smith, Chief, Bureau
of Planning, Illinois Emergency Management Agency, Springfield,
IL; Major General John R. D'Araujo, Jr., Director, Recovery
Division, Federal Emergency Management Agency, United States
Department of Homeland Security, Washington, D.C.; and Mr.
Edward Buikema, Director, Region V, Federal Emergency
Management Agency, United States Department of Homeland
Security, Chicago, IL.
Mayor Morrissey discussed the events immediately preceding
the Labor Day Flood. He described what the City and local
community were doing to assist the affected individuals. Mayor
Morrissey explained that despite all of the combined recovery
assistance efforts, many of the affected individuals are still
without safe and permanent housing. Mayor Morrissey went on to
discuss the corrected facts contained in the appeal that
justify a major disaster declaration.
Ms. Jaeger discussed the role the Department of Human
Service plays following a disaster. Ms. Jaeger described the
personal contact her department had with the flood victims and
the challenges the victims faced immediately following the
flood. Ms. Jaeger went on to say that the damage was vastly
underestimated by FEMA and that the recovery was well beyond
the resources of the City and volunteers assisting in the
recovery effort.
Mr. Smith explained the Illinois Emergency Management
Agency's (IEMA) responsibility in conducting a joint
preliminary damage assessment of the flood affected areas with
FEMA. Mr. Smith said that the State Disaster Relief Fund cannot
be used to provide individual assistance.
General D'Araujo summarized FEMA's emergency response
process and provided an overview of FEMA's efforts in relation
to the Labor Day Flood in Rockford. General D'Araujo said that
FEMA would consider all of the information submitted by the
Governor in the appeal but that FEMA must operate within the
parameters imposed by the Stafford Act.
In sum, the Committee concluded that FEMA's declaration
process could be arbitrary and lacked transparency.
For further information about this hearing, please refer to
Committee publication #109-65.
7.3 Summaries of the Hearings Held by the Subcommittee on Workforce,
Empowerment and Government Programs
7.3.1 removing obstacles to job creation: how can the
federal government help small businesses revitalize
the economy?
Background
On April 21, 2005 the Subcommittee on Workforce,
Empowerment, and Government Programs held a hearing on removing
obstacles to job creation. Small businesses are the driving
force behind our economy. They represent 99 percent of all
employers; more than half of all U.S. employees work for small
firms; and they generate between 60 and 80 percent of all new
jobs America.
Running a small business is not easy, and what Congress
must do is relieve some of the burden that comes directly from
Washington, DC. Unfortunately, Congress and the federal
government have been fond of passing new laws and imposing
mandates and regulations on business. Congress has been working
in recent years to diminish that burden--legislation such as
the Small Business Paperwork Relief Act, the Small Business
Regulatory Enforcement Fairness Act, and more recently, the
Jobs and Growth Tax Relief Reconciliation Act of 2003. However,
even with the passage of these bills, federal regulatory, tax,
and compliance burdens continue to be cited by many owners as
the most significant problems facing their businesses. The
Subcommittee aimed to examine what obstacles to job creation
still remain, and explore policy options designed to alleviate
them.
Summary
The hearing was comprised of one panel: John McClelland,
Ph.D., Vice President, Government Affairs, American Rental
Association, Moline, IL; Mr. Richard Dean, Principal,
Environmental Systems Assocs., Columbia, MD; Mr. David Pressly,
President, Pressly Development Co., Inc., Statesville, NC; and,
Mr. Donald Wilson, President, Association of Small Business
Development Centers, Burke,VA.
Dr. McClelland began the testimony highlighting three
specific examples of barriers that impede the growth of the
rental industry in the United States. First, he highlighted the
high cost of health care. Large companies have the advantage of
greater economies of scale, which lowers the costs associated
with providing health insurance. Small employers simply cannot
compete with large ones in this regard. Dr. McClelland
suggested association health plans (AHPs) as a way to expand
health coverage among small businesses. The second point he
touched on was the abolishment of the federal estate or
``death'' tax. This is particularly burdensome on a capital-
intensive industry such as the rental business. When owners
pass away, heirs often must sell assets of the business simply
to pay the tax. Finally, Dr. McClelland stated the American
Rental Association supports caps for non-economic damages
(except in particularly egregious cases) in liability cases.
Mr. Dean, testifying on behalf of the Air Conditioning
Contractors of American stated that the most pressing issue
facing his industry is the lack of qualified technicians. Mr.
Dean suggested that the federal government, through the
Departments of Education and Labor, work with his industry to
remove the negative stigma that training to be a heating,
ventilating, and air conditioning (HVAC) technician seems to
have acquired. He also believes that the Departments of Labor
and Education could do a much better job of educating school
guidance counselors on the benefits of becoming and HVAC
technician. Finally, Mr. Dean suggested an additional
government-sponsored program to train displaced workers from
the manufacturing sector.
Mr. Pressly, testifying on behalf of the National
Association of Home Builders, stated that Environmental
Protection Agency (EPA) regulations concerning stormwater
runoff are particularly onerous on his industry. On average,
EPA stormwater regulations add an additional six percent cost
in developing land. The regulations require building managers
to prepare a stormwater pollution prevention plan and file a
notice of intent, and the EPA's guidance for preparing this
document is over 40 pages long. To make matters worse, many
states and local municipalities have similar regulations,
requiring two or three permits to comply with essentially the
same regulations from various jurisdictions.
Mr. Wilson commented on the high regulatory burden, and
despite the significant progress made by the Administration
(most notably Dr. John Graham at the Office of Information and
Regulatory Affairs and Tom Sullivan at the Small Business
Administration's Office of Advocacy) and Congress, the Federal
Register still contains about 70,000 pages each and every year.
Mr. Wilson supports H.R. 230, the ``National Small Business
Regulatory Assistance Act of 2005'' as a way to help ease this
burden. Introduced by Representative John Sweeney of New York,
H.R. 230 would establish a program to provide regulatory
compliance assistance, through the nation's Small Business
Development Centers (SBDCs), to small businesses. Mr. Wilson
also testified that additionally funding for SBDCs would
increase their ability to reach out to new and established
businesses, and create new jobs.
In summary, the Subcommittee concluded that much more work
needed to be done to (1) amend or abolish unneeded or
counterproductive regulations and taxes and (2) deal with the
problem of lack of a qualified workforce, particularly among
the small business trades. Also, some in the small business
community believe that there needs to be a greater contribution
to federal programs could help spur small business job
creation.
For further information about this roundtable, please refer
to Committee publication #109-12.
7.3.2 how are veteran-owned small business owners being
served?
Background
The Subcommittee on Workforce, Empowerment, and Government
Programs of the Committee on Small Business and the
Subcommittee on Economic Opportunity of the Committee on
Veterans' Affairs held a joint hearing on Tuesday, May 24, 2005
focusing on recent legislation enacted into law to assist
veterans. In August 1999, the President signed into law the
Veterans Entrepreneurship and Small Business Development Act,
Pub. L. No. 106-50. This Act created the National Veterans
Business Development Corporation (more commonly known as the
``Veterans Corporation'') ``to assist veterans, including
service-disabled veterans, with the formation and expansion of
small business concerns by working with and organizing public
and private resources.'' However, on September 30, 2005,
federal funding for the Veterans Corporation ends and the
corporation must become self-sustaining.
Section 308 of the Veterans Benefits Act of 2003, Pub. L.
No. 108-83, established a procurement program for small
business concerns owned and controlled by service-disabled
veterans. The procurement program permits federal agencies to
sole source contracts and restrict competition to service-
disabled veterans. One of the reasons that the program was
established was because buyers for federal agencies expressed
the view that they needed a set-aside program to meet the three
percent statutory contracting goal contained in the Small
Business Act. As of the date of the hearing, no major
department or agency of the federal government had met the
goal.
Summary
The hearing was comprised of one panel, as follows: Mr.
Walter G. Blackwell, President/CEO, National Veterans Business
Development Corporation, Washington, DC; Mr. Arthur Salus,
President, Duluth Travel, Inc., Atlanta, GA; Mr. John K. Lopez,
Chairman, Association for Service Disabled Veterans,
Washington, DC; Mr. Frank M. Ramos, Director, Office of Small
and Disadvantaged Business Utilization, United States
Department of Defense, The Pentagon, Arlington, VA; Mr. Scott
F. Denniston, Director, Office and Small and Disadvantaged
Business Utilization, United States Department of Veterans
Affairs, Washington, DC; Mr. Paul Murphy, President, Eagle Eye
Publishers, Inc., Fairfax, VA; and Mr. Richard Weidman,
Director, Government Relations, Vietnam Veterans of America,
Silver Spring, MD.
Mr. Blackwell stated that the Veterans Corporation was
providing the services required by law, but that it could not
continue to exist without federal funding. To sustain the
corporation, he reported that requests for foundation grants in
the amount of $30 million had been submitted and that $20
million in grant applications were being prepared. To cut costs
the overhead was being reduced.
Mr. Salus was of the view that federal agencies were
reluctant to contract with small business concerns, but favored
large companies. He called upon Congress to ensure that the
small business goals with respect to federal procurement be
met.
Mr. Lopez emphasized the frustration that service-disabled
veterans were experiencing with respect to the federal
agencies' failure to provide sole source opportunities and set
aside contract opportunities for service-disabled veterans. The
contracting initiatives for service-disabled veterans are moral
and ethically commensurate with the sacrifice made for the
country by service-disabled veterans.
Mr. Ramos stated that there were 7,000 service-disabled
firms listed in the Central Contractor Registry (CCR) database.
He outlined a five-point program for increasing contacting
opportunities for service-disabled veterans.
Mr. Denniston stated that in FY 2004 1.25 percent of the
Department of Veterans' Affairs total procurement dollars went
to service-disabled veterans, and that this was unacceptable
since it was below the 3 percent goal. He referred to a
cooperative venture with the Defense Contract Management Agency
(DCMA) to develop a model to increase contract opportunities
for veterans.
Mr. Murphy stated that federal agencies missed the
statutory goal for service-disabled veterans by $8.5 billion.
Five federal agencies accounted for 80 percent of the spending
with service-disabled companies, i.e.: Departments of Defense,
Veterans Affairs, and State; National Aeronautics and Space
Administration (NASA) and General Services Administration
(GSA).
Mr. Weidman pointed out that the only option for a
profoundly disabled veteran maybe self-employment. He suggested
that there be a mechanism for reaching out to returning
veterans to provide employment and entrepreneurial assistance.
In summary, the Subcommittees concluded that while progress
was being made to assist veteran-owned small business owners,
much more work needed to be done, particularly to help service-
disabled veterans obtain federal contracts.
For further information, please refer to Committee
publication #109-17.
7.3.3 union salting--organizing against small business
Background
On Tuesday, June 21, 2005, the Subcommittee on Workforce,
Empowerment, and Government Programs held a hearing on union
``salting.'' The term ``salting'' is used for the act of
deliberately inserting a union member into a non-union company
(of which the vast majority are small businesses) with the goal
of eventually unionizing that non-union company. This paid
union organizer or ``salt'' aims to establish a wellspring of
support for the union effort within the company. Fellow
employees often do not know that their new co-worker is also a
paid union organizer. In an effort to curb this practice,
Representative Steve King of Iowa, a member of the Small
Business Committee, introduced H.R. 1816 the Truth in
Employment Act of 2005. This legislation, as well as the
detrimental effects salting can have on small businesses, was
discussed thoroughly at the hearing.
Summary
The hearing consisted of two panels. The first panel was
comprised of The Hon. Steve King (R-IA). The second panel was
made up of: Mr. Mark Mix, President, National Right to Work
Committee, Springfield, VA; Mr. Ray Issac, Chief Operating
Officer, Owner of Isaac Heating and Air Conditioning, Inc.,
Rochester, NY; Laurence J. Cohen, Esq., Sherman, Dunn, Cohen,
Leifer, and Yellig, Washington, DC; Mr. Michael Aldi, Owner,
Aldi Electric, Niskayuna, NY; Ms. Anita Drummond, Director of
Legal and Regulatory Affairs, Associated Builders and
Contractors, Arlington, VA; and Michael Avakian, Esq., General
Counsel, Center on National Labor Policy, Inc., Springfield,
VA.
Representative King began the hearing defining salting as a
union tactic designed to put unfair economic pressure on non-
union employers. H.R. 1816, the Truth in Employment Act of
2005, provides an employer a level of reassurance that someone
coming to work for them is truly motivated to be an employee,
and not someone primarily seeking to destroy or work against
the interests of the employer. Under this bill, if a job
applicant's primary purpose in seeking a job is to further the
interests of another, then they are not a bona fide applicant
and it would not be an unfair labor practice for the employer
not to hire them.
Mr. Mix began his testimony examining the plight of
employers faced with a salting campaign. Calling it a catch-22,
Mr. Mix explained that if the employer hires the ``salt,''
union officials instigate a quick snap National Labor Relations
Board representation election. If they fail at that, they begin
to sabotage their employer's business and manufacture a
blizzard of unfair labor practice charges to bury the employer
with the legal fees until he signs over his employees. If the
employer does not hire the union-planted applicants, the union
plants go straight to unfair labor practice charges and again
the employer is faced with huge legal fees. Mr. Mix expressed
his unyielding support for H.R. 1816.
Both Mr. Isaac, testifying on behalf of the Air
Conditioning Contractors of America, and Mr. Aldi, speaking for
himself and other businesses killed by the practice, told
similar stories of salting abuse. Both encountered a campaign
by the local union to put them out of business. Unfortunately,
Mr. Aldi lost his business due the campaign against him. Both
Mr. Isaac and Mr. Aldi expressed support for H.R. 1816.
The dissenting view came from Mr. Cohen believes that H.R.
1816 would deprive union organizers of the protection of the
National Labor Relations Act (NLRA) and permit employers to
engage in what has been deemed unlawful discrimination. Mr.
Cohen maintained that salting is a legitimate organizing tool
and that ``salts'' understand that when they apply for work
that they will be expected to fulfill the employer's legitimate
employment expectations.
Ms. Drummond supported H.R. 1816 in her testimony. Going
through the various court cases that have, in fact, legitimized
salting as a legal recruitment tool, Ms. Drummond criticized
the NLRB whom she believes has placed a heavy burden on
contractors to defend even the most neutral hiring policies
that union salts can routinely force contractors to spend
thousands of dollars to defend completely innocent activity.
As General Counsel for the Center on National Labor Policy,
Inc., Mr. Avakian brought 30 years of experience in labor
relations activity to the panel. Mr. Avakian surmised that
federal labor law should attempt to ensure the identification
and expression of employee rights while protecting the ability
of labor organizations and employers to present their messages
to employees. He states that salting is a process that serves
no useful purpose. It promotes litigation and disharmony in the
workplace. For these reasons, legislation, such as H.R. 1816,
which places the focus on the process of employee
organizational rights versus union agent access to gather the
cloak of employee rights, should be enacted.
In sum, the Subcommittee found deplorable acts of salting
has cost many small business owners their livelihoods. H.R.
1816 must be enacted in order to restore sanity and
accountability in employer-employee relations.
For further information about this hearing, please refer to
Committee publication #109-21.
7.3.4 how the clean air act affects auto repair
Background
On Tuesday, June 28, 2005, the Workforce, Empowerment and
Government Programs Subcommittee held a hearing on the effect
of the Clean Air Act on the automobile repair industry. Passage
of the Clean Air Act Amendments in 1990 inadvertently created
hurdles for consumers by mandating that all vehicles
manufactured after the 1994 model year utilize an on-board
computer diagnostic system to monitor emissions. As a result,
it is much more difficult for consumers and independent repair
shops to get the information necessary for safe vehicle
repairs. As cars have become more technologically advanced, the
amount of information and expertise needed to diagnose and
repair them has increased dramatically. Today, automobiles have
numerous computer systems that control braking, ignition,
security, steering, emissions, safety, and climate-control
systems. This hearing focused on H.R. 2048, The Motor Vehicle's
Owner Right to Repair bill introduced by the Chairman of the
Committee on Energy and Commerce, the Hon. Joe Barton (R-TX).
This bill would protect the rights of consumers to diagnose,
service, and repair motor vehicles.
Summary
The hearing was comprised of two panels. The first panel
consisted of The Hon. Joe Barton, Chairman, Committee on Energy
and Commerce, United States House of Representatives. The
second panel was: Mr. Dennis Houska, President, Houska
Automotive Service, Fort Collins, CO; Mr. Fred Bordoff, Owner,
New York Center for Automotive Technology, Long Island City,
NY; Mr. Eddie Ehlert, Owner of MazdOnly, Chamblee, GA; Mr.
Aaron Lowe, Vice President, Government Affairs, Automotive
Aftermarket Industry Association, Bethesda, MD; Mr. John M.
Cabaniss, Jr., Director, Environment and Energy, Association of
International Automobile Manufacturers, Inc., Arlington, VA;
and Ms. Kathleen Marvaso, Managing Director, Government
Affairs, American Automobile Association, Washington, DC.
Chairman Barton introduced the Motor Vehicle's Owner Right
to Repair because he feels that consumers need to have choice
in auto repair and that they should be able to choose where
they have the vehicle repaired. According to Chairman Barton,
the legislation has one main purpose: put vehicle owners in the
driver's seat when it comes to choosing where to have their car
repaired. It is not about gaining proprietary information or
trade secrets, as some suggest.
Mr. Houska testified for The Coalition for Auto Repair
Equity (CARE). Mr. Houska runs a family automotive repair shop
and he explains that he has a problem getting timely
information to repair his customer's cars. He explains that
there are many challenges to running his business but an
unnecessary one is the problem of accessing all the information
in all the model lines of all the different manufacturers. This
challenge he explained can be overcome by the passage of the
Motor Vehicle Owner's Right to Repair Act.
Mr. Bordoff also represents the Service Station Dealers
Association. He explains that because his facility is engaged
to perform repairs for a major dealership in New York, he is
granted some access to information that allows his shop to
perform repairs but in general the average independent
technician often cannot tend to a customer's repair needs.
Manufacturers have two information systems, and for a fee, they
will allow independent repair shops to access the technician
information system. The other system is the dealer information
system, which is not the same. According to Mr. Bordoff, the
dealer system is much more informative and timely to use.
Mr. Ehlert represented the Automotive Service Association
and owns an independent auto repair shop. He explains that
there is a viable industry solution already in place for
service information. In September 2002, the ASA and the
automakers were successful in signing a voluntary industry
service information agreement that assures independent
repairers the same service, tool, tool information and training
provided franchised new car dealers, including both emissions
and non-emissions information. He further states that of the
451 million repairs in 2004, the National Automotive Service
Task Force (NASTF) only had 48 complaints, less than a fraction
of 1 percent of all repairs. Of these complaints, all were
resolved in 2004.
Mr. Lowe testified on behalf of the Automotive Aftermarket
Industry Association. Mr. Lowe believes that passage of H.R.
2048 is critical not only to the thousands of small businesses
that comprise the automotive repair industry but also their
customers who depend on local repair shops to keep their
vehicle operating safely, cleanly and dependably. He further
stated that the goal of the ``right to repair'' legislation is
not to unfairly advantage independents over dealers, but to
preserve competition and thus ensure that car owners continue
to have a choice in where they bring their second largest
investment for maintenance and repair.
Mr. Cabaniss runs the National Auto Service Task Force for
the Association of International Automobile Manufacturers, Inc.
He says that automakers are doing all that they reasonably can
to make the same service information, training materials, and
factory tools available to independent shops as to dealers. All
automakers have established service websites that contain
service and training information, available 24 hours per day/7
days per week.
Ms. Kathleen Marvaso testified that AAA has a strong
interest in Mr. Barton's legislation because it is necessary to
ensure the safety of their members, and their access to high
quality, convenient, and competitively priced auto repair. She
stated that AAA strongly supports the ``Right to Repair'' bill
for three important reasons: consumer choice, vehicle safety,
and the right of car owners to access the data generated by
their vehicle.
In summary, the Subcommittee concluded that on balance,
passage of H.R. 2048 is important for small independent
automobile repair shops.
For more information about this hearing, please refer to
Committee publication #109-23.
7.3.5 small business expensing--job growth through the tax
code
Background
On Tuesday, August 9, 2005, the Subcommittee on Workforce,
Empowerment, and Government Programs held a field hearing in
Fort Collins, Colorado on small business' use of the increased
expensing limits contained in Section 179 of the Internal
Revenue Code. Section 179 allows small businesses to expense
the full value of their new capital equipment purchased in the
year it is put into service. This results in higher demand,
benefiting manufacturers and equipment sellers. It also means
small business owners have extra money in their hands to hire
more employees and put the new equipment to use immediately.
Current law, as signed by President Bush in 2003,
establishes the Section 179 expensing limits at $100,000 and an
investment of $400,000. Unfortunately these limits will return
to $25,000 and $200,000 respectively when the expensing limits
expire in 2007. This increase in expensing limits provides two
primary benefits: it reduces the high cost of the newest
capital equipment and provides up-front additional cash flow to
help finance the purchase.
Summary
The hearing consisted on one panel: Mr. Jim Henderson,
Regional Advocate, Office of Advocacy, United States Small
Business Administration, Denver, CO; Ms. Linda Jones, Owner,
Area Rent-Alls, Westminster, CO; Mr. Craig Hau, Commercial
Broker, The Group, Inc., Fort Collins, CO; Mr. Ron
Lautzenheuser, Owner, Big O Tires, Fort Collins, CO; and Mr.
Rob Pehkonen, Owner, Appliance Solutions, Inc., Fort Collins,
CO.
Mr. Henderson began the hearing expressing the Office of
Advocacy's strong support for extending the increased expensing
limits beyond the mandated 2007 expiration date. He recounted a
conversation he recently had with Mark Patterson, a tax
accountant with the firm Stockman Kast Ryan and Company in
Colorado Springs, when he was told that he has many clients
that have taken advantage of increased expensing. Specifically,
he cited a new medical clinic that started in 2003. The clinic
used the higher expensing limits in Section 179, which
increased its working capital allowing it to hire two key
employees, and increased its chances of success because it was
able to have the latest equipment and technology from the first
day of operation.
Ms. Jones, testifying on behalf of herself and the American
Rental Association (ARA), echoed Mr. Henderson's support for
extending the current expensing limits. She stated that
approximately 90 percent of ARA's membership reinvests less
than the $400,000 annually allowed under Section 179, thereby
giving each of those small businesses the opportunity to fully
utilize the provision. In 2003, Ms. Jones was able to use
$57,000 of the allowable expensing for purchased equipment
permitted within Section 179, which equaled a tax savings
$7,360. That same year Ms. Jones incurred a 30 percent increase
in health insurance premium rates. Tax savings meant that her
employees maintained health coverage. In 2004, Ms. Jones was
able to use $64,000 of the allowable Section 179 expensing.
Again, these savings were immediately reinvested into her
employees' healthcare benefits, and replacement equipment in my
rental inventory.
Mr. Hau explained that due to Section 179, one of his
client partners was able to develop a parcel of land that they
otherwise would not have been financially possible.
Approximately $14 million worth of construction was completed
on the land, providing construction jobs, and close to 100 new
jobs in the building after it opens.
Mr. Lautzenheiser credited Section 179 as a mitigating
factor in his decision to open two new automotive centers in
2003 and 2005. Additionally, Mr. Lautzenheiser credited Section
179 for his decision to acquire new capital equipment for use
in his existing centers in 2004 and 2005. The new equipment
allows Mr. Lautzenheiser to produce a higher quality product or
service, usually with less repair and maintenance cost. As with
all previous witnesses, Mr. Lautzenheiser expressed strong
support for extending the increased limits beyond 2007.
Mr. Pehkonen echoed all of the previous testimony, citing
the increased expensing limit as a major factor in his decision
to open three new appliance stores in northern Colorado. These
three new stores created 13 new jobs, with five more jobs on
the way. Opening a new store costs roughly $150,000. The
revision of the tax code allowed him to expense more of these
expenses in the year he incurred them versus over the next five
to 37 years under various depreciation schedules.
In summary, the Subcommittee found that the many small
businesses across the nation took advantage of the increased
expensing limits contained in Section 179 of the Internal
Revenue Code and support extending these limits past their
current 2007 expiration date in order to provide a boost to the
economy and provide more jobs in the thriving and dynamic small
business sector.
For further information about this hearing, please refer to
Committee publication #109-29.
7.3.6 freedom in the workplace--an examination of a
national right to work law
Background
On Thursday, September 8, 2005, the Subcommittee on
Workforce, Empowerment and Government Programs convened a
hearing to discuss the benefits of H.R. 500, the National Right
to Work Act. Introduced by the Hon. Joe Wilson (R-SC), H.R. 500
would repeal provisions in the National Labor Relations Act
(NLRA) that authorize the firing of a worker for failure to pay
fees to a union as a condition of employment. Forced unionism
is an action, currently allowed by certain provisions of
federal law, that require workingmen and women to pay union
dues in order to keep their job, which many believe is
unconstitutional.
Summary
The hearing consisted of two panels. The Hon. Joe Wilson,
United States House of Representatives (R-SC) participated in
the first panel. The second panel was comprised of Mr. Mark
Mix, President of the National Right to Work Committee,
Springfield, VA; Charles Baird, Ph.D., Professor of Economics,
California State University--East Bay, Hayward, CA; Fred
Feinstein, Esq., Senior Fellow, University of Maryland School
of Public Policy, College Park, MD; Mr. George Galley, Electro-
Mechanical Technician Colt Manufacturing, Manchester CT; Mr.
Michael Butcher, Engineer, Boeing Corp., Issaquah, WA; Mr. John
McNicholas, CEO, Penloyd LLC, Tulsa, OK; and Mr. George Leef,
Executive Director, John William Pope Center for Higher
Education Policy, Raleigh, NC.
Representative Wilson began the hearing outlining the
reasoning behind H.R. 500. Congressman Wilson believes
compulsory unionism violates the fundamental principle of
individual liberty. HR 500 simply repeals those sections of the
NLRA and the Railway Labor Act that authorize the imposition of
forced-dues contracts on working Americans.
Mr. Mix expressed strong support for H.R. 500. Mr. Mix
argued that ending compulsory unionism would be beneficial not
only to our economy and individuals who do not want to join a
union but are forced to, but also the rank-and-file union
members themselves. With the end of compulsory unionism, it
would create an environment where labor leaders would have to
compete for membership, be held accountable for their
decisions, and better represent the interests of its members.
Dr. Baird testified that one of the common defenses for
forced unionism (i.e., prevents ``free riders'') is false. Free
riders are defined as individuals who choose not to pay union
dues, yet would still reap the benefits of representation. The
issue itself creates the problem of free riders because under
the NLRA, a union cannot bargain just for its voluntary
members, it must bargain for all workers in the bargaining
unit. Individual workers are forbidden to represent themselves.
Passing H.R. 500 would eliminate these problems.
Mr. Galley is an electrician and was a member of the United
Auto Workers from 1961 to 1985. He renounced his membership
during a four-year strike of his place of employment that began
in 1985. He continually refused to pay dues, was never informed
of his Beck rights, and was fired because of his refusal to pay
dues. Following seven years and a successful appeal later, Mr.
Galley got his job back and is now a Beck objector. He still
must pay 72 percent of his dues. He expressed strong support
for H.R. 500.
Mr. Butcher endured a process similar to Mr. Galley. When
he was hired, he was not forced to join the Society of
Professional Engineering Employees in Aerospace (SPEEA). Mr.
Butcher testified that in August 2000, SPEEA aligned with the
AFL-CIO and the chief negotiator stated that regardless of the
wage and benefit package put together by Boeing, no agreement
would be reached unless Boeing agreed to force all employees to
pay union dues. He pursued his case under his Beck rights, but
his case languished several years and due to immense paperwork
and schemes put forward by the union. He gave up on the process
and is now on the job as a religious objector.
Mr. McNicholas invested in a fixture company in Tulsa
Oklahoma in 2003. He stated that if Oklahoma were not a right
to work state, he probably would not have invested in the
company. Since 2003, 250 new jobs have been added to his
growing company.
While expressing his support for H.R. 500, Mr. Leef
recounted the history of labor law in the United States,
including the NLRA that he believes takes freedoms away from
both workers and employers in order to assist union officials
in organizing and maintaining their unions.
Mr. Feinstein represented the only dissenting view on the
panel, stating that nobody is ever forced to join a union. He
also argued that unions are the ones under stress because they
are forced to represent everyone, even if a worker does not
vote for that union. He opposed H.R. 500 because he feels it
would restrict unions from representing their membership in a
manner they are accustomed to.
In summary, the Committee found that although 79 percent of
Americans support the establishment of a National Right to Work
Act, passing the bill would be a difficult challenge. It
appeared clear, however, that the passage of H.R. 500 would
benefit the American economy, restore freedom of association
among individual workers, and establish accountability for the
nation's unions. For further information about this hearing,
please refer to Committee publication #109-30.
7.3.7 the small business innovation research program--
opening doors to new technology
Background
On Tuesday, November 8, 2005, the Subcommittee on
Workforce, Empowerment, and Government Programs held a hearing
examining the Small Business Innovation Research (SBIR)
program. Established in 1982, the SBIR program was established
within the major federal research and development (R&D)
agencies. The intent of this effort was to increase government
funding of small, high technology companies for the performance
of R&D with commercial potential. Federal departments with an
R&D budget of $100 million or more are required to set aside
2.5 percent of this amount to finance SBIR activity.
From its inception, over $15.2 billion in awards have been
made for more than 76,000 projects. The Small Business
Administration (SBA) established broad policy and guidelines
under which the current 12 individual Federal agency
departments operate their SBIR programs.
Summary
The hearing consisted of one panel of public sector
witnesses: Mr. Calvin Jenkins, Acting Associate Deputy
Administrator for Government Contracting and Business
Development, United States Small Business Administration,
Washington, DC; Mr. Frank Ramos, Director, Office of Small and
Disadvantaged Business, United States Department of Defense,
The Pentagon, Arlington, VA; James Decker, Ph.D., Principal
Deputy Director, Office of Science, United States Department of
Energy, Washington, DC; Norka Ruiz Bravo, Ph.D., Deputy
Director, Extramural Research, National Institutes of Health,
Bethesda, MD; Colien Hefferan, Ph.D., Cooperative State
Research, Education & Extension Service, U.S. Department of
Agriculture, Washington, DC; and Joseph Hennessey, Ph.D.,
Senior Advisor, Industrial Innovation Program, National Science
Foundation, Arlington, VA.
Mr. Jenkins began by providing the history and structural
framework of the SBIR Program. He testified that while each
participating agency is responsible for administering and
management of its SBIR Program, each agency must provide a
detailed annual report to the Small Business Administration
containing complete records of their awards. Currently, the
agencies evaluate over 30,000 proposals, and make over 6,000
awards to about 3,000 small companies each year.
Mr. Ramos stated that the broad mission of the DOD SBIR
program is to advance technology development for the warfighter
and the nation. The DOD represents over 50 percent of the total
federal SBIR budget, which exceeds $2 billion. Mr. Ramos
emphasized that many of their awardees are start-up firms, with
39 percent of all awards going to first-time DOD contractors,
and 19 percent of all awardees were minority or women-owned
firms. Dr. Decker testified that the DOE provides over $100
million each year to small businesses to small businesses to
help entrepreneurs take their ideas from conception to reality.
Of the Phase I, or initial awards, about 12 percent are awarded
to socially and economically disadvantaged small businesses,
and about of third are first-time awardees with DOE. In return,
these companies have earned more than $3 billion in sales and
additional development funding.
Dr. Ruiz Bravo focused her testimony on two areas: (1) the
role the SBIR program plays in the NIH research agenda and (2)
several of the benefits of the program within NIH and the
country. Through a competitive phased award system, the SBIR
program supports a wide array of innovative biomedical and
public health projects that are designed to encourage
commercialization of promising technologies.
Dr. Hefferan began her testimony with a brief overview of
the USDA process for determining awards. She then focused her
testimony on the USDA's post-award management. Most of the
effort is directed toward Phase II projects that have
demonstrated technical feasibility in their first phase,
including a commercialization assistance program for first-time
Phase II winners, and outreach and site visits to ensure the
USDA and its small business partners work closely.
Dr. Hennessey spent the majority of his allotted time to
the NSF's Phase IIB Program by telling the story of Investics,
a small company in Georgia. Investics developed software
through the SBIR program that was later used by Bristol-Myers
Squibb, a large pharmaceutical company to improve performance
at a plant they were originally going to close.
In sum, the Subcommittee found that the SBIR program is an
integral part of each of these agencies R&D strategies, and
that it is an excellent example of a highly successful federal
initiative to encourage economic growth and innovation within
the small business community by assisting in the funding of
critical startup and development stages of a company.
For further information about this hearing, refer to
Committee publication #109-36.
7.3.8 entrepreneurial development programs of the sba
Background
On Thursday, March 2, 2006, the Subcommittee on Workforce,
Empowerment, and Government Programs held an oversight hearing
of the Small Business Administration's (SBA) entrepreneurial
development programs. The purpose of this hearing was to
conduct general oversight of the SBA entrepreneurial
development programs, with particular emphasis on improvements
made to the programs over the past two years. Additionally,
because the SBA will need to be reauthorized before Fiscal Year
2007 begins, the Subcommittee received testimony on legislative
changes the witnesses would recommend being included in the SBA
reauthorization legislation.
Summary
The hearing consisted of one panel witnesses: Ms. Cheryl
Mills, Associate Deputy Administrator of Entrepreneurial
Development, United States Small Business Administration,
Washington, DC; Mr. Donald Wilson, President, Association of
Small Business Development Centers, Burke, VA; Ms. Amanda Zinn,
President/CEO of ECubed (Essential Entrepreneurial Expertise),
Owings Mills, MD; Mr. Jim Pyles, Chairman SCORE, Elkhart, IN;
Ms. Elizabeth Maneval, Owner & Publisher of We Magazine, Inc.,
Lancaster, PA; and Carol Law, Ph.D, President of Drug Free
Workplaces, Inc., Pensacola, FL.
Ms. Mills outlined the responsibilities of the Office of
Entrepreneurial Development (OED), which manages a distribution
channel of service centers for small businesses through the
country, including assistance in preparing business plans, loan
applications', responding to procurement inquires, and
providing export advice. OED serves these clients primarily
through their three resource partners: Small Business
Development Centers (SBDCs), Women's Business Centers (WBC),
and SCORE.
Mr. Wilson stated that SBDCs are the largest resource
partners and are a network of state lead centers primarily
located on university and community college campuses and local
chambers of commerce. SBDCs served 707,000 clients in Fiscal
Year 2005. Mr. Wilson stressed the vital role that SBDCs can
play in disaster relief efforts.
Ms. Zinn testified that there are 125 WBCs who provide
long-term in-depth training and counseling to their clients and
target socially and economically disadvantaged women. WBCs
counseled and trained over 144,000 clients in Fiscal Year 2005.
Mr. Pyles confirmed that since its inception in 1964, SCORE
has helped more than seven million clients from idea to start
up to success. SCORE relies on both public and private money to
fund their services, which also include disaster relief
efforts.
Ms. Maneval focused her testimony on the SBAs Microloan
program. Ms. Maneval expressed concerns regarding the
Administrations plan to restructure the SBA loan programs by
assimilating it into the existing 7(a) program.
Dr. Law testified that the Paul D. Coverdell Drug-Free
Workplace grants that were instituted in 1999 have helped 709
small businesses implement a drug-free workplace program.
In sum, the committee found that the OED is an integral
part of the success for millions of American small business
that have used its vast network of services and took into
consideration the recommendations of these industry
representatives during the development of the committee's SBA
reauthorization proposal.
For further information about this hearing, refer to
Committee publication #109-40.
7.3.9 health care proposals to help lower the cost to
small business
Background
On Thursday, April 27, 2006 the Subcommittee on Workforce,
Empowerment, and Government Programs held a hearing examining
various proposals aimed at lowering the cost of health care for
small business employers and employees alike that would help
lower the number of uninsured Americans.
More than 45 million Americans are uninsured, with nearly
60 percent of those employed by small businesses. In order to
reduce the number of uninsured, Congress and the President have
proposed a series of reforms designed to reduce health care
costs, expand health care coverage, and improve the quality of
care, specifically, the establishment of Association Health
Plans (AHPs), the introduction of Health Savings Accounts
(HSAs), and medical liability reform.
Additionally, the Subcommittee examined the Health Care
Choice Act of 2005, H.R. 2355, introduced by Representative
John Shadegg (R-AZ). This bill would allow individuals to
purchase health insurance coverage over state lines.
Summary
The hearing consisted of two panels. Witnesses on the first
panel were: the Hon. John Shadegg, United States House of
Representatives (R-AZ); and Mr. Robert J. Carroll, Deputy
Assistant Secretary for Tax Analysis, United States Department
of Treasury, Washington, DC. Panel two consisted of: Mr. Ed
Lawler, Realtor, ReMax Alliance, Fort Collins, CO; Mr. Cecil B.
Wilson, M.D., Chair-Elect of the Board of Trustees, American
Medical Association, Chicago, IL; Merrill Matthews, Ph.D.,
Director, Council for Affordable Health Insurance, Alexandria,
VA; Mr. Paul Hense, President, Hense and Assocs., Grand Rapids,
MI; and Mr. Dan Perrin, President, HSA Coalition, Washington,
DC.
Representative Shadegg began his testimony detailing the
provisions of H.R. 2355. Under this legislation, consumers
would no longer be limited to purchasing policies dictated by
their state's regulations and mandated benefits. Instead,
consumers could decide among a variety of insurance policies
qualified in one state but offered for sale in multiple states.
On average, Mr. Shadegg testified that should this bill become
law, the cost of health insurance could drop as much as 12
percent.
Mr. Carroll outlined President Bush's Health Care
Initiative. At the core of this initiative is a set of tax
proposals that puts the health care consumer more in control of
his or her health care and places health care purchased
directly by individuals with high deductible plans on equal
footing with employer-provided health insurance. The initiative
also includes a refundable tax credit to cover the cost of high
deductible health plan insurance premiums that is targeted to
the lowest income Americans.
Mr. Lawler testified that because the vast majority of real
estate agents are independent contractors and therefore, must
purchase their own health insurance. Mr. Lawler vigorously
supports legislation that would create association health
plans, or small business health plans.
Dr. Wilson focused his testimony on the dire need for
medical liability reform. He testified that the Department of
Health and Human Services estimates that runaway medical
liability costs, primarily physicians practicing defensive
medicine (ordering tests and procedures that may not be
necessary to protect themselves from liability down the road),
adds $70 billion to $126 billion each year in extra medical
costs. Dr. Wilson stated that 21 states are currently in
crisis, with physicians leaving or limiting their practice to
avoid high-risk procedures.
Dr. Matthews testified in support of expanding health
savings accounts (HSAs). He pointed out that roughly 3.2
million Americans are now covered by HSAs and that 31 percent
of those in the individual market purchasing HSAs were
previously uninsured. In the small group market, one-third of
the HSA plans where to previously uninsured companies. Dr.
Matthews also expressed strong support for H.R. 2355.
Mr. Hense centered his testimony in support of H.R. 4961,
the Self Employed Health Care Affordability Act of 2006,
legislation introduced by Representative Hart (R-PA) and
Chairman Manzullo. The bill would not subject payments make to
purchase health insurance to the 15.3 percent Social Security
or Medicare tax.
Mr. Perrin detailed several statistics showing the
continued growth and popularity of HSAs. Perhaps the most
telling argument presented is that HSAs not only offer a way
out of the current health insurance problems, but they also
give people the opportunity to build up funds during their
working years.
In sum, the Subcommittee found that by expanding the use
and ease of HSAs, the establishing AHPs, reforming America's
medical liability system, and passing reforms like H.R. 2355
and H.R. 4961, Congress can make health care more affordable,
more reliable, and easier to use for small business.
For further information about this hearing, refer to
Committee publication #109-49.
7.3.10 immigrant employment verification and small
business
Background
On Tuesday, June 27, 2006, the Subcommittee on Workforce,
Empowerment, and Government Programs held a hearing on the
issue of immigrant employment verification. Because of the
growing problem of illegal immigration, the House of
Representatives passed H.R. 4437, the Border Protection,
Antiterrorism, and Illegal Immigration Control Act in December
2005. Additionally, the Senate passed S. 2611, the
Comprehensive Immigration Reform Act of 2006 in May, 2006. Both
bills make numerous significant changes to our immigration law
and border security efforts. Contained in H.R. 4437 is a
provision that would establish an employment eligibility
verification system within 18 months that builds on the current
voluntary pilot program, known as the Basic Pilot Program. The
purpose of this hearing was to focus on those provisions
establishing the employment eligibility verification system,
specifically examining how these reforms would have affect our
nation's small business community.
Summary
The hearing consisted of two panels. The first panel
consisted of: The Hon. Ken Calvert, United States House of
Representatives (R-CA); Mr. Robert Divine, Acting Deputy
Director, U.S. Citizenship and Immigration Services, Department
of Homeland Security, Washington, DC. The second panel's
members were: Mr. Jack Shandley, Senior Vice President, Swift &
Co., Greeley, CO; Mr. Angelo Amador, Director, Immigration
Policy, United States Chamber of Commerce, Washington, DC; Mr.
Mark Krikorian, Executive Director, Center for Immigration
Studies, Washington DC; Mr. Toby Malara, Government Affairs
Counsel, American Staffing Association, Alexandria, VA; and
Monte Lake, Esq., Partner, McGuiness, Norris, & Williams, LLP,
Washington, DC.
Congressman Calvert testified that businesses need to use
this program in order to regain confidence in their workforce.
Because most small business owners are not document experts,
Representative Calvert proposed to make the Basic Pilot Program
mandatory for all businesses but phased in over time.
Mr. Divine stated that although neither H.R. 4437 nor S.
2611 has yet become law, the USCIS is already planning for the
expansion on the program, explaining that the President's
Fiscal Year 2007 budget requests $110 million to expand and
improve the Basic Pilot.
Mr. Shandley stated that Swift and Co. supports balanced
and comprehensive immigration reform and has voluntarily
participated in the Basic Pilot since 1999. Although the
program has been effective in helping maintain a legal
workforce at Swift, Mr. Shandley suggested that significant
policy tension exists between the Department of Homeland
Security's Immigration and Customs Enforcement branch, which is
charged with enforcing verification provisions, and the
Department of Justice's Office of Special Counsel, which
enforces anti-discrimination provisions. Mr. Shandley suggested
that this dichotomy must be eliminated for this program to work
correctly.
Mr. Amador stated that the Chamber supports a new
employment verification system, but only in the context of
comprehensive immigration reform. Any verification system must
be fast, accurate, and reliable in practical real-work
conditions. Of the two versions, the Chamber supports the
Senate bill, S. 2611 over the House bill, H.R. 4437.
Mr. Krikorian expressed enthusiastic support for making the
Basic Pilot Program mandatory. He testified that last year,
approximately 56 million hiring decisions were made in the
United States, an average of 200,000 per day. To put that in
perspective, VISA processes 500 times that many credit card
transactions each day. Mr. Krikorian stated that with adequate
support from the Congress and the Executive Branch, there
should be no reason this program would not work practically,
accurately, and efficiently.
Mr. Malara also stated the American Staffing Association
supports Congressional efforts on comprehensive immigration
reform. He also stated that two provisions are critical to the
staffing industry's survival. First, staffing firms should have
the flexibility in using any new electronic employment
verification system. Second, Mr. Malara expressed concerns
regarding provisions in the House bill that could force
staffing firms to comply.
Finally, Mr. Lake stated that American agriculture would
support electronic verification of employment eligibility, as
long as the process is simple, manageable, and provides clear-
cut compliance responsibilities.
In summary, the Subcommittee found that the vast majority
of American small businesses are in favor of implementing
commonsense immigration reform, including implementation of a
new employee verification system, as long as the process is
free, easy to use, understand, phased-in over time, and
provides quick, accurate results.
For further information about this hearing, please refer to
Committee publication #109-58.
7.3.11 health care and small business: real options for
colorado businesses
Background
On Thursday, August 10, 2006, the Subcommittee on
Workforce, Empowerment, and Government Programs held a field
hearing in Loveland, Colorado examining various proposals aimed
at lowering the cost of health care for small business
employers and employees to reduce the number of uninsured
Americans. The Honorable John Shadegg (R-AZ) joined the hearing
with Subcommittee Chairman Marilyn Musgrave (R-CO).
More than 45 million Americans are uninsured, with nearly
60 percent of those employed by small businesses. In order to
reduce the number of uninsured, Congress and the President have
proposed a series of reforms designed to reduce health care
costs, expand health care coverage, and improve the quality of
care, specifically, the establishment of association health
plans (AHPs), the introduction of health savings accounts
(HSAs), medical liability reform, H.R. 2355, the Health Care
Choice Act of 2005, and H.R. 4961, the Self-Employed Health
Care Affordability Act of 2006.
Summary
The hearing consisted of one panel: Mr. Matt Fries,
President/CEO of Professional Document Management, Fort
Collins, CO; Mr. Dale Roberts, Chairman, Loveland Chamber of
Commerce, Loveland, CO; Ms. Chris Boesch, Exodus Moving and
Storage, Fort Collins, CO; Mr. Fred Liske, General Manager,
American Eagle Distributing Company, Loveland, CO; Mr. Mark
Hillman, former Colorado State Senator, Burlington, CO; Jack
Cletcher, M.D., Berthoud, CO; Ms. Deb Tamlin, Real Estate
Broker, ZTI Group, Fort Collins, CO; Mr. Allen Jensen, Colorado
Association of Health Underwriters, Englewood, CO; and, Ms.
Gail Snyder, Agent, Snyder Insurance Agency, Loveland, CO.
Nearly all of the witnesses expressed some manner of
support for each of the topics on the agenda. Mr. Fries
believes that allowing individuals shopping in a more
competitive insurance market is the best way to contain costs
and lower the number of uninsured. Mr. Roberts stated that the
Loveland Chamber is currently trying to become a bona-fide
association because, under Colorado law, they are allowed to
participate in AHPs. Ms. Boesch stated that her moving company
is unable to provide health insurance for their 60 employees
because the quotes they have received for coverage are right
around $50 per person per month. Ms. Boesch suggested
abolishing insurance companies and instead, working directly
with the hospitals and doctors as a way to lower costs. Mr.
Liske had just renewed his policy for his 120 employees, and he
saw a 9.7 percent increase over his 2002 health care
expenditures. He stated that increasing the options for
employers, such as in H.R. 2355, and the potential of larger
pooling through association health plans, would be ``absolutely
phenomenal for us.'' Mr. Hillman expressed sincere reservations
about the federal government's ability to fix to the current
problems in the health care marketplace because of the problem
of mandated coverage. Mr. Hillman suggested allowing health
insurance premiums to be fully tax deductible for everyone. Dr.
Cletcher focused his testimony on the need for medical
liability reform. Ms. Tamblin, speaking on behalf of the
National Association of Realtors (NAR), stated that both she
and the NAR are in strong support of AHPs. Mr. Jensen stated
that he opposed the establishment of unregulated association
health plans because these plans would have a pricing advantage
over the fully insured small group markets already operating in
the states, thus, creating a distorted playing field. Mr.
Jensen did support, however, HSAs and medical liability reform.
In rounding out the panel, Ms. Snyder expressed support for
HSAs as she has seen numerous clients purchasing the qualifying
high-deductible plans along with HSAs, with many employers
providing this as a way of saving both themselves and their
employees money.
In sum, the Subcommittee found that by expanding the use
and ease of HSAs, the establishing AHPs, reforming America's
medical liability system, and passing reforms like H.R. 2355
and H.R. 4961, Congress can make health care more affordable,
more reliable, and easier to use for small business.
For further information about this hearing, refer to
Committee publication #109-63.
7.4 Summaries of the Hearings Held by the Subcommittee on Regulatory
Reform and Oversight
7.4.1 the administration's program to reduce unnecessary
regulatory burden on manufacturers--a promise to be
kept
Background
The Regulatory Reform and Oversight Subcommittee held a
hearing on Thursday, April 28, 2005 that focused on the
Administration's announced program to curb the regulatory
burden on businesses, especially small businesses, in the
manufacturing sector. The promise to help free manufacturers in
the United States from the burden of needless regulations is
much anticipated, and it is a promise that needs to be kept.
In March of 2005, the Administration announced that federal
agencies will take practical steps to reduce the cost burden on
manufacturing firms operating in the United States by acting on
76 public nominations to reform federal regulations. It was
further announced that the Office of Management and Budget
(OMB) directed agencies to take the most appropriate action to
ease the excessive burden for the manufacturing industry while
maintaining, health, safety, and environmental protections for
the public. The hearing examined the Administration's
commitment, both on the part of the OMB and the agencies, to
reduce the regulatory burden on the manufacturing sector as
promised.
Summary
There was one panel comprised of: The Honorable John D.
Graham, Ph.D., Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget,
Washington, DC; The Hon. Veronica Vargas Stidvent, Assistant
Secretary for Policy, United States Department of Labor,
Washington, DC; The Hon. Thomas M. Sullivan, Chief Counsel for
Advocacy, United States Small Business Administration,
Washington, DC; Ms. Stephanie Daigle, Acting Associate
Administrator, Policy, Economics and Innovation, United States
Environmental Protection Agency, Washington, DC; Mr. Howard
Will, President, Caldwell Group, Inc., Rockford, IL; Mr. Drew
Greenblatt, President, Owner, Marlin Steel Wire Products,
Baltimore, MD; and Mr. Robert Schull, Director of Regulatory
Policy, OMB Watch, Washington, DC.
Dr. Graham announced that the Administration had reduced
the growth of regulations by 70 percent, but since 1981 there
were 115,000 new regulations adopted. He pointed out that the
European Union was employing an aggressive campaign to reduce
red tape and unnecessary laws. Reducing the regulatory burden
on U.S. manufacturers was essential to maintaining
competitiveness. Mr. Will pointed out that Associated Wire Rope
Fabricators has the testing capability and technical expertise
to develop industry wide standards for such items as web slings
and that the American Society of Mechanical Engineers (ASME) is
the recognized safety standard for slings. Despite this fact,
the Occupational Safety and Health Administration (OSHA)
standard was outmoded and had not been changed for 30 years.
Ms. Stidvent expressed the view that advances in science and
technology had made a number of agency regulations outdated.
She underscored the approach taken by OSHA to reform
regulations, provide compliance assistance, and to enforce
regulations to maintain health standards and prevent accidents.
Mr. Greenblatt stated that the cost per employee of
regulations have a greater impact on small manufacturers as
compared to large manufacturers. The cost for firms with fewer
than 20 employees was $17,000 per employee as compared with
$7,000 for manufacturers with more that 500 employees. Ms.
Daigle pointed out that EPA had a new strategy to help small
businesses by making regulations understandable and practical
to implement. She provided an example of how the panel process
under the Regulatory Flexibility Act (RFA) had resulted in the
final rule being less burdensome to small businesses. Mr.
Sullivan indicated that nearly 99 percent of all manufacturers
were small businesses and that they were more innovative than
large businesses, i.e., producing 13 to 14 more patents for
each employee. He was in agreement that the U.S. must maintain
its competitiveness and not burden small manufacturers with
needless regulations. Mr. Schull was of the view that the
emphasis should be on providing small manufacturers with
compliance assistance rather than reducing the regulatory
burden.
In summary, the Subcommittee concluded that the
Administration is to be commended for embarking on this
regulatory reform initiative and encourages quicker progress on
making these 76 regulatory changes become reality in the effort
to help in the recovery of our nation's manufacturing sector.
For further information, please refer to committee
publication #109-14.
7.4.2 anwr's benefits for small business
Background
On Thursday, May 19, 2005, the Subcommittee on Regulatory
Reform and Oversight held a hearing to discuss the benefits of
drilling for oil and natural gas in Alaska's National Wildlife
Reserve (ANWR). Congress set a very small part of ANWR, labeled
as area ``1002,'' aside for natural energy exploration in the
Alaska National Interest Claims Act of 1980. The subcommittee's
hearing explored the various sectors of small business that
would benefit from proceeding with drilling in area ``1002.''
Summary
The hearing consisted of two panels. The lone witness on
the first panel was: The Hon. Steve King (R-IA). The witnesses
on the second panel were: Mr. Gerald Hood, Government Affairs
Consultant, Arctic Power, Anchorage, AK; Ms. Karen Wright,
President/CEO, Ariel Corp., Mt. Vernon, OH; Eban Goodstein,
Ph.D., Professor of Economics, Lewis and Clark College,
Portland, OR.
Representative King spoke in support of drilling in ANWR,
sighting how Iowa's ``Corn Belt'' is being strangled by rising
fuel, oil, and natural gas prices. He went on to point out that
drilling in Alaska will yield enough to supplant nearly 30
years of imports from the Organization of the Petroleum
Exporting Countries (OPEC). This drilling, he felt, would
alleviate a good deal of the financial burden placed upon the
nation's farmers, as well as create opportunity for our
nation's manufacturers building and maintaining the critical
pipeline.
Mr. Hood represented the energy industry, as well as native
Alaskans, and testified to the benefits of drilling in area
1002 of ANWR for small businesses both in Alaska and throughout
the nation. Mr. Hood testified that oil exploration and
extraction in area 1002 of ANWR could create 735,000 jobs
throughout the United States, according to a study conducted by
the Wharton Econometrics Institute at the University of
Pennsylvania. Ms. Wright testified that small manufacturers
that supply the oil industry would benefit from the opening of
ANWR--small business manufacturers who supply the energy
industry with critical parts and services. Professor Goodstein
opposed drilling in ANWR because the economics of drilling and
the potential supply from ANWR would not outweigh the
environmental costs.
In summary, the members of the Subcommittee concluded that
drilling in area 1002 of ANWR would have significant direct and
indirect benefits for small businesses not only in Alaska but
also in every state of the union.
For any further information, please refer to Committee
publication #109-16.
7.4.3 veteran's access to capital
Background
On Tuesday, June 21, 2005, the Small Business Subcommittee
on Regulatory Reform and Oversight held a hearing to focus on
the needs of veteran entrepreneurs, particularly those called
up for service in the National Guard or Reserves. The
subcommittee explored the primary barriers self-employed
reservists face in maintaining financially solvent businesses
back home during deployment and discussed what, if any,
legislative changes may be made to ensure that these veterans
have a business to come back to after their tour of duty.
Summary
The hearing consisted of one panel with four witnesses: Mr.
Bill Elmore, Associate Administrator for Veterans Business
Development, United States Small Business Administration,
Washington, DC; Mr. Donald Wilson, President, Association of
Small Business Development Centers, Burke, VA; Ms. Patricia
Kerr, Missouri State Veterans Ombudsman, Jefferson City, MO;
Mr. Harry Alford, President/CEO, National Black Chamber of
Commerce, Washington, DC.
Mr. Elmore the programs the Small Business Administration
presently has in place to assist those deployed overseas. He
stated that there are several loan and assistance programs in
place but they are not fully utilized.
Mr. Wilson explained that the association recognizes that
the Department of Defense relies more and more upon reservists
and is concerned about addressing the needs of small business
owners who also serve as soldiers upon their return home.
Reserve call-ups have increased sharply since the terrorist
attacks of September 11, 2001. One-third of the troops deployed
in Iraq and Afghanistan in November 2004 were reservists.
Ms. Kerr believes Congress needs to assist with federal
funds for a Veterans Ombudsman in each state's veterans'
commission with sufficient support staff to provide a single
point of contact; eliminate federal business taxes for Global
War veteran entrepreneurs during their mobilization and
deployment; provide more federal support for community based
organizations such as the St. Louis Veterans Business Resource
Center; and keep deployments in the Army at a shorter duration,
similar to the Marines, Air Force, and Navy.
Finally, Mr. Alford elaborated on how, although, programs
may be in place, they do not reach all those who need them.
Many loyal and patriotic soldiers come back from deployment and
have no idea of the resources available to them.
In summary, the Subcommittee concluded that further
legislation is needed to address the present and unique needs
of these small business owners who also choose to serve our
nation in times of need.
For any further information on this hearing, please refer
to Committee publication #109-22.
7.4.4 entrepreneur soldiers empowerment act
Background
On Thursday, September 29, 2005, the Subcommittee on
Regulatory Reform and Oversight held a hearing to review the
need for legislation to assist those in uniform, principally
members of the National Guard and the Reserves, who were small
business owners and who had been called to active duty. This
was a follow-on hearing to the one held by the Subcommittee in
June concerning veteran's access to capital and the challenge
that members of the National Guard and Reserve face in keeping
their businesses solvent when they are called to active duty.
It is estimated that of the 860,000 reservist 18 percent are
employed by small businesses and approximately 9 percent are
self-employed.
H.R. 3898, the Entrepreneur Soldiers Empowerment Act, was
introduced by Subcommittee Chairman Todd Akin (R-MO) for the
purpose of providing some solutions to this problem. H.R. 3898
would establish a Veterans Outreach Centers in each regional
office of the Small Business Administration (SBA) and establish
Technical Mentoring Assistance Committees in each SBA regional
districts.
Summary
The hearing had one panel comprised of Mr. William Elmore,
Associate Administrator, Veterans Business Development, United
States Small Business Administration, Washington, DC; John
Winkler, Ph.D., Deputy Assistant Secretary of Defense for
Reserve Affairs, United States Department of Defense, The
Pentagon, Arlington, VA; and. Douglas Holtz-Eakin, Ph.D.,
Director, Congressional Budget Office, Washington, DC.
Mr. Elmore stated that the Small Business Administration
(SBA) had opened four Veterans Business Outreach Centers in
1999. The four centers are located in California, Florida,
Texas, and New York. A fifth center was scheduled to be opened
soon in Pennsylvania. It was SBA's position that opening new
centers beyond these five would not be cost effective. Also,
SBA did not support the provisions in H.R. 3898 that would
establish technical and mentoring assistance committees that
would recruit volunteers to be business mentors to veterans,
preferring to work instead through existing SBA technical
assistance partners such as Small Business Development Centers
(SBDCs) and SCORE.
Dr. Winkler stated that the Department of Defense (DOD)
tries to mitigate the impact of call-ups on reservists by (1)
using reservist only when needed, (2) limiting the period of
call-ups to 24 consecutive months, and (3) providing as much
advanced notice as possible. DOD is cooperating with SBA and
developing a closer working relationship with SBA to determine
what is needed to assist reservist that are small business
owners and encounter business hardships when called to active
duty.
Dr. Holtz-Eakin stated that call-up of reservists do not
have a significant impact on the economy generally but do have
a material effect on those who are required to serve on active
duty. There are 50,00 persons in the reserves that are self-
employed and 120,000 who are employed by small businesses. In
the past four years, approximately 455,000 reservist have been
mobilized and about 36 percent of the troops in Afghanistan and
Iraq are reservist. Dr. Holtz-Eakin suggested that the economic
hardship encountered by reservist when called to active duty
might be compensated through tax credits, loans, or insurance.
The Subcommittee concluded that SBA and the Defense
Department needed to focus on providing some additional
remedies to this growing problem, particularly as more and more
Reservists and Guardsmen serve for longer tours of duty abroad.
For further information on this hearing, refer to the
Committee publication #109-33.
7.4.5 the internet sales tax: headaches ahead for small
business?
Background
On Wednesday, February 8, 2006, the Subcommittee on
Regulatory Reform and Oversight held a hearing that focused on
recent federal and state efforts to impose a responsibility to
collect state sales and use taxes on out-of-state Internet
vendors.
Currently, 45 states and the District of Columbia have a
sales tax. Each of these states also has a use tax, which is a
tax on use, storage, or consumption of a taxable item in which
a sales tax was not collected. States claim a substantial loss
of revenue ($4 billion to $20 billion annually, depending on
the study) because use tax remittance is based on the honor
system and many people do not comply with the law. States have
been looking for ways to lay claim to this lost revenue for
many years. In Quill v. North Dakota, the Supreme Court ruled
in 1992 that a state could not impose the burden of use tax
collection on businesses that do not have substantial presence
in their state. In March 2000, 40 states began to work on the
Streamlines Sales and Use Tax Agreement (SSUTA). The SSUTA
seeks to make the task of paying state sales and use taxes
across borders sufficiently easy enough to win the favor of
Congress and the courts. The SSUTA is a voluntary system for
businesses unless federal legislation is enacted. There are
currently two Senate bills under consideration that are nearly
identical in language. The bills differ only in how they
determine the size of business that would be exempt from
collecting this use tax.
Summary
The hearing consisted of one panel comprised of the
following five witnesses: Walter Hellerstein, Distinguished
Professor of Law, University of Georgia, Athens, GA; Mr. Brian
Bieron, Senior Director of Federal Government Relations, eBay,
Inc., Washington, DC; Mr. Paul Misener, Vice President, Office
of Global Public Policy, Amazon.com, Washington, DC; Mr. Ernest
Perry, Owner, Perry's at Southpark, Charlotte, NC; and Mr. Rory
Rawlings, Founder and Chief Tax Automation Officer, Avalara,
Inc., Seattle, WA.
Mr. Hellerstein gave a legal summary of state and federal
taxation law. He discussed the roles that Congress and the
courts play regarding this issue.
Mr. Bieron stated that complying with the tax law for every
local jurisdiction could be very challenging for small
businesses and requires the use of a third party. Mr. Misener
discussed the importance of companies operating on a level
playing field. He stated that third party service providers
could easily help small businesses comply with interstate sales
tax law. He said that the Streamlined Sales and Use Tax Program
(SSTP) has simplified sales tax law but the states still had
quite a distance to go. Mr. Bieron and Mr. Misener both
discussed the small business exception found in both Senate
bills, S. 2152 and S. 2153. Although they differed wildly in
their opinion of the size of business that should qualify for
the small business exception, both were favorable to the
language of Senator Byron Dorgan's bill, S. 2153.
Mr. Perry talked about how the internet has helped to
expand his retail business. Mr. Perry went on to discuss the
danger of the SSTP for small businesses and the possibility
that not all costs would be covered in the future.
Mr. Rawlings discussed the ease of using a Certified
Service Provider (CSP). He went on to say that CSPs assumed all
liability and states paid for the cost of their service.
In sum, the Subcommittee concluded that while there is
disagreement on the benefits or detriments of the SSTP and the
pending Senate legislation, there is agreement that more needs
to be done to streamline the sales and use tax laws to reduce
the regulatory compliance burden for small businesses.
For further information about this hearing, refer to
Committee publication #109-39.
7.4.6 the state of small business security in a cyber
economy
Background
On March 16, 2006, the Subcommittee on Regulatory Reform
and Oversight held a hearing that focused on the cyber threats
that affect small business and the economy as a whole. There is
a growing economic risk associated with information technology
security lapses for the U.S. economy as small businesses become
more dependent on emerging technologies. Criminals realize that
small businesses do not employ adequate security measures and
have shifted their focus to small and medium sized businesses.
As this threat landscape has changed, small businesses have
been slow to adapt to the changing environment. Because the
Internet creates a complex web that connects critical
infrastructure to home users to large businesses to the
federal, state and local governments to small businesses, all
stakeholders agree that more must be done to insure the
security of this important medium. Industry and government have
collaborated to form many public/private partnerships to train
and increase awareness among businesses and consumers.
Summary
There were two panels of witnesses that testified at the
March 16, 2006 hearing. The first panel consisted of: Ms. Cita
M. Furlani, Acting Director, Information Technology Laboratory,
National Institute of Standards and Technology, United States
Department of Commerce, Gaithersburg, MD; Ms. Lydia Parnes,
Director of Bureau of Consumer Protection, Federal Trade
Commission, Washington, DC; Mr. Larry D. Johnson, Special Agent
in Charge, Criminal Investigative Division, United States
Secret Service, Department of Treasury, Washington, DC; and Mr.
Steven M. Martinez, Deputy Assistant Director, Cyber Division,
Federal Bureau of Investigation, Washington DC. The second
panel was comprised of: Mr. Ari Schwartz, Deputy Director,
Center for Democracy and Technology, Washington, DC; Mr.
Enrique Salem, Senior Vice President, Security Products &
Solutions, Symantec Corporation, Cupertino, CA; Burton S.
Kaliski, Jr., Ph.D., Vice President of Research, RSA Security,
Bedford, MA; Mr. Roger Cochetti, Group Director--U.S. Public
Policy, Computing Technology Industry Association, Arlington,
VA; and Mr. Howard Schmidt, President/CEO, R & H Security
Consulting LLC, Issaquah, WA.
Both panels of witnesses agreed that the key to creating a
more secure cyber environment was by educating and raising
awareness among technology users. The government witnesses
began by describing their agencies/departments roles in
combating cyber crime. Ms. Furlani discussed the National
Institute of Standards and Technology's role in setting cyber
security standards and the various programs that are designed
to educate Internet users. Ms. Furlani stated the importance of
small businesses protecting their information technology (IT)
infrastructure from not only an economic viewpoint but a
national security perspective as well. Ms. Parnes focused her
testimony on the Federal Trade Commission's efforts to foster a
culture of security for Internet users through its OnGuard
Online program and Safeguards Rule. She explained that by
following best practices, businesses can keep consumers
sensitive information safe. Mr. Johnson discussed the three
statutes that authorize the Secret Service to investigate
technology crimes. He discussed the Secret Service's
collaborative efforts with the Computer Emergency Response Team
located in Pittsburgh, PA at Carnegie Mellon University. Mr.
Martinez discussed the importance of e-commerce in our society.
He explained that small businesses are an important link in the
security of the internet not only because they sell products
online but because many small businesses provide support for
the Internet and IT operations for large businesses. Mr.
Martinez concluded by explaining the partnership building
efforts the FBI is currently engaged in and the importance of
education in combating cyber crime.
The second panel focused their testimony on current cyber
security threats and the industry oriented solutions that are
available for small businesses with limited resources. Ari
Schwartz described the Internet as a powerful force for good
and that electronic criminal activity can undermine user
confidence in the Internet, which can ultimately have a
negative impact on the spread of democracy and capitalism. Mr.
Salem discussed the findings in Symantec's latest Internet
threat assessment. He spoke of how small businesses are the
third most targeted group on the internet for criminal activity
and how attacks are targeted to a greater degree. Mr. Kaliski
discussed ways small businesses can protect themselves from
attacks. Not all businesses need to employ the same level of
security measures. Companies that hold a great deal of
sensitive data should utilize greater security measures than
those that do not handle as much sensitive information. Mr.
Cochetti focused his testimony on the ability of Value-Added
Resellers (VARs) to meet the security needs of small
businesses. Finally, Mr. Schmidt described some of the steps
that have been taken by the government and industry to create a
more secure electronic infrastructure. He divided small
businesses into three categories: (1) those that use their home
system, (2) those with a dedicated computer system for their
business, but limited staff to oversee it; and (3) those that
have an IT department dedicated to maintaining the security of
their information technology infrastructure.
In sum, the Subcommittee concluded that the most important
step in creating a secure cyber environment was raising the
level of awareness among technology users. Furthermore, more
focus was needed on the small business sector of our economy
and that the Small Business Administration was not doing enough
to aid small businesses in creating a secure cyber environment.
For further information about this hearing, refer to
Committee publication #109-44.
7.4.7 the small business administration's procurement
programs
Background
On Thursday, March 30, 2006 the Subcommittee on Regulatory
Reform and Oversight held a hearing to conduct oversight of
Small Business Administration's (SBA's) procurement programs,
with particular emphasis on improvements made to the programs
over the past two years. The SBA is responsible for working
with federal agencies in setting small business procurement
goals for individual agencies and with assisting each agency in
meeting these goals. The SBA is also tasked with providing
procurement assistance to small businesses in order to maximize
their participation in the federal marketplace. Federal
agencies are responsible for setting-aside procurement
opportunities to ensure that a fair share of their contracts is
awarded to small firms and that contracting goals are achieved.
In the past, small businesses have expressed concern that SBA
and other federal agencies were providing neither sufficient
nor effective procurement assistance. In addition, in
preparation for reauthorizing certain SBA programs before the
beginning of fiscal year 2007, the hearing served as a forum
for proposed program changes that might be included in SBA
reauthorization legislation.
Summary
The hearing was comprised of one panel of six witnesses:
Mr. Anthony Martoccia, Associate Deputy Administrator, Office
of Government Contracting and Business Development, United
States Small Business Administration, Washington, DC; Mr.
Rafael Collado, Chairman & CEO, Phacil Inc., Camden, NJ; Mr.
Kurt Heckman, President, Sycamore.US, Inc., Frederick, MD; Mr.
John Lopez, Chairman, Association for Service Disabled
Veterans, Washington, DC; Ms. Catherine Giordano, CEO,
Knowledge Information Solutions, Inc., Virginia Beach, VA; and
Ms. Christina Schneider, CFO, Purcell Contracting Corporation,
Watertown, NY.
Mr. Martoccia first discussed the President's Fiscal Year
2007 budget request for the SBA. He was of the view that SBA
has become more efficient through the use of technology and has
been able to operate on a leaner budget while being able to
offer more services with greater results. He noted that the
amount of procurement dollars going to small businesses had
significantly increased by $20 billion since FY 2000 and
subcontracting opportunities going to small businesses also
increased by $10 billion. In Fiscal Year 2004, small businesses
received approximately $69 billion in prime contract awards or
about 23 percent out of a total of $300 billion prime contract
awards.
Mr. Collado expressed concern over the lack of progress in
the 8(a) and Historically Underutilized Business Zone (HUBZone)
programs. He advocated Congress play an active role in seeing
that small businesses deal with the federal procurement arena
on a level playing field and are treated fairly in acquiring
contracts in the federal marketplace.
Mr. Heckman commented on the experience of his company that
small businesses that are subcontractors do not get proper
credit for their success. As a participant in the HUBZone
program, Mr. Heckman stated that his company had grown three-
fold.
Mr. Lopez was of the view that bureaucratic bungling had
led to unsuccessful attainment of the three percent government-
wide procurement goal for service-disabled veteran-owned small
businesses. The President's Executive Order No. 13360 calls for
vigorous and immediate implementation of actions leading to
meeting or exceeding the statutory goal. He advocated passage
of H.R. 3082, The Veterans Owned Small Business Promotion Act,
to clarify and strengthen the present law.
Ms. Giordano recommended various improvements including
implementation of the law providing for set-asides for women-
owned small businesses, clarification of the criteria for 8(a)
certification, and a continuing Administration support for
unbundling contracts.
Ms. Schneider made various recommendations for changes in
the HUBZone program, including limiting construction projects
to within 150 miles of the HUBZone in which the HUBZone small
business contractor is located. Also, she recommended a smaller
price preference to HUBZone small businesses in bidding on
construction projects.
In sum, the subcommittee concluded that the SBA needed to
improve the implementation of their procurement assistance
programs.
For further information about this hearing, please refer to
Committee report #109-45.
7.4.8 electronic medical records
Background
On Thursday, April 6, 2006 the Subcommittee on Regulatory
Reform and Oversight held a hearing on electronic medical
records technology. The purpose of this hearing was to discuss
the feasibility of the adoption of electronic medical records
(EMR) technology by small medical practitioners. The
subcommittee explored the challenges small healthcare clinics
face in adopting such technology, including, but not limited
to, economic costs in light of increasing liability costs and
subsequent Medicare payment reductions. In addition, the
Subcommittee wanted to determine the benefits of adopting this
technology, such as paperwork reduction and the lessening of
medical errors.
Summary
The hearing was comprised of two panels of witnesses. The
first panel was: Mr. Jack Price, Vice President, Services,
HIMSS Analytics, Milford, DE; Christopher Normile, M.D., St.
Charles, MO; and Ms. Joan Magruder, Vice President, Development
and Planning, BJC Healthcare, St Louis, MO. The second panel
consisted of The Hon. Phil Gingrey, United States House of
Representatives (R-GA).
Ms. Magruder began by describing what BJC is doing to help
local healthcare facilities adopt EMR technology. She discussed
the importance of a holistic approach to the adoption of this
technology throughout the health care community, not only as a
matter of aggregate cost savings but also to insure better
health care for the consumer.
Dr. Normile discussed his experiences in adopting EMR and
the implications for his small two doctor practice. He
discussed some of the hidden costs of adopting EMR technology,
predominantly in the additional time necessary to run his
practice that is not billable because it is not covered by
insurance or Medicare payments. He explained that the economic
costs of adoption have been steep totaling an initial payment
of $50,000 and an additional $10,000 per year.
Mr. Price discussed a survey he is conducting regarding the
quality and cost of patient care. He found that only 26 percent
of the facilities surveyed had an EMR system and the remaining
facilities did not plan on purchasing an EMR system in the next
two years. To explain why so few practices were adopting EMR
technology while the benefits seemed obvious, Mr. Price stated
that startup costs were high and because many physician
practices do not have IT support staff, there can be tremendous
fear in adopting new technology.
Representative Gingrey talked about the adoption of health
information technology (HIT) as a way to offset sky rocketing
healthcare costs. According to a RAND study, if HIT is
implemented correctly and widely adopted, the American
healthcare system could save over $162 billion annually. He
then stated that in order to realize these savings the
government would need to incentivize physicians to adopt HIT
because of the high initial cost of adoption. Representative
Gingrey concluded by urging Congress to pass HR 4641, which
would provide tax credits to medical care providers to adopt
HIT.
In sum, the subcommittee concluded that although the
adoption of EMR could eventually result in healthcare savings
for consumers, the initial adoption costs for small practices
can currently be prohibitive for small healthcare practices.
Because the economic benefits of adoption increase on an
individual basis and society as a whole as more medical
practitioners adopt EMR, there may be a role for government to
play in helping practitioners adopt this technology.
For further information about this hearing, please refer to
Committee report #109-47.
7.4.9 data protection regulations and small business
Background
On Tuesday, May 23, 2006, the Subcommittee on Regulatory
Reform and Oversight held a hearing on the regulatory burdens
associated with state and federal data protection laws. As
notices of data breaches pervade the media, states are quickly
enacting data breach notification and data protection laws. As
of May 23, 2006, 30 states had enacted various data breach
notification laws to protect the interests of their
constituents. While privacy and consumer groups applaud the
efforts of the states, businesses are clamoring for uniformity
and protection from burdensome regulation. Businesses asked
Congress to preempt existing state law to create uniform
standards for what is essentially a component of interstate
commerce. Three major data security bills were introduced in
the United States House of Representatives in the 109th
Congress. As the House seeks to address the need for additional
consumer data protection practices with the enactment of a
singular data security law, the purpose of the hearing was to
determine the effect, if any, data security regulation has on
small business.
Summary
The hearing was comprised of two panels. The first panel of
witnesses was comprised of: Mr. Paul Kurtz, Executive Director,
Cyber Security Industry Alliance, Arlington, VA; Lisa J. Sotto,
Esq., Partner, Hunton & Williams LLP, New York, NY; and Mr.
Mark MacCarthy, Senior Vice President, Public Policy, Visa USA,
Inc., Washington, DC. The second panel was: Mr. Tomas M.
Lenard, Vice President, Research, Progress & Freedom
Foundation, Washington, DC; Mr. Steve DelBianco, Vice
President, Public Policy, Association for Competitive
Technology, Washington, DC; and Mr. Harry Dinham, President-
elect, National Association of Mortgage Brokers, McLean, VA.
Mr. Kurtz discussed the additional challenges small
businesses face because of increased cyber threats. He went on
to recommend ways for the government to mitigate this amplified
risk. His first recommendation was the enactment of a national
data security bill that pre-empts state law. His second
recommendation was an increased role for the Small Business
Administration in cyber-security matters on behalf of small
businesses.
Ms. Sotto discussed the disparate nature of state
notification laws, current information security laws that apply
to businesses, and recommendations for a federal data breach
and security law. She discussed the importance of enacting a
federal law that preempts existing state law.
Mr. MacCarthy discussed Visa's role in creating a more
secure cyber environment through its participation in the
payment card industry security standard. He explained Visa's
zero liability policy and the many fraud protection procedures
that Visa provides for its customers. He advocates a national
data security standard that is risk based and that allows
sufficient flexibility for the needs of small businesses.
Dr. Lenard discussed the need to evaluate data security and
data breach notification laws, like any other regulatory
program, by weighing their intended benefits against their
projected costs. He also said that in any form of breach
notification regulation, the costs are likely to outweigh the
benefits for consumers. He advocated a targeted approach to the
notification requirement.
Mr. DelBianco focused his testimony on the detrimental
affects of regulation on small businesses. He stressed that new
regulations should be flexible but at the same time provide
best practice standards for small business.
Mr. Dinham stated that identity theft is one of the fastest
growing crimes in America and efforts to protect against this
threat are necessary and commendable. He articulated the need
for a national standard to protect interstate commerce. Mr.
Dinham then focused on the credit freeze provision found in
many state laws. He said that this was particularly onerous for
mortgage brokers because it inhibits the access of consumers'
credit reports in time sensitive transactions.
In sum, the subcommittee concluded that data security
legislation should be carefully crafted to minimize any adverse
affects of the implementation by small businesses of new data
security standards. Small businesses could be forced to cope
with significant and increased costs that would be incurred to
comply with proposed data security legislation. Imposition of
these additional costs will place small businesses in a
competitive disadvantage because their per unit cost of
compliance will be greater than those for large business.
For further information about this hearing, please refer to
Committee publication #109-53.
7.4.10 s corporations--their history and challenges
Background
On Tuesday, June 27, 2006, the Subcommittee on Regulatory
Reform and Oversight held a hearing to review the history of
subchapter S corporations, their impact on the American
economy, and the challenges they face in the 21st Century.
The S corporation allows for limited liability and a single
layer of taxation for small closely held businesses. Today, S
corporations are the most popular corporate entity. The IRS
estimates that there were 3.2 million S corporation owners in
the United States in 2003. But while the S corporation
community has grown and matured, the rules governing S
corporations have remained largely the same. The number of
shareholders is still limited, an S Corporation may have only a
single class of stock, and the rules still limit who or what
may own shares in an S corporation.
Summary
The hearing consisted of one panel comprised of the
following four witnesses: The Honorable Thomas M. Sullivan,
Chief Counsel for Advocacy, United States Small Business
Administration, Washington, DC; Donald C. Alexander, Esq.
Partner, Akin, Gump, Strauss, Howard, & Feld, Washington, DC;
James Redpath, CPA, Partner, HLB Tautges Redpath, Ltd., White
Bear Lake, MN; and Gregory Porcaro, CPA, American Institute of
Certified Public Accountants, Warwick, RI.
Mr. Sullivan described the important role small business
plays in the U.S. economy. Mr. Sullivan then said that S
corporations are the cornerstone of the small business economy.
The SBA Office of Advocacy supports legislation that will
enhance the growth of S corporations. Mr. Sullivan is concerned
about the close scrutiny of S corporations by the IRS that many
small businesses claim is unfair. He stated that the IRS audits
faced by S corporations can be incredibly burdensome and should
only be done with great care.
Mr. Alexander discussed the history of the subchapter S
corporation and the reasoning behind their creation in 1958. He
said that most of the changes to the S corporation have been
positive, but a more recent focus to simplify the S corporation
would entail the creation of a more ridged structure. Mr.
Alexander said that S corporations are now competing against
other more favorable entities like the Limited Liability
Corporation (LLC). Newer entities like the LLC do not have many
of the restrictions that limit the S corporation.
Mr. Redpath expounded upon the outdated rules governing S
corporations that are in great need to be updated. He discussed
his experience in creating business entities and described how
very few newly created business entities are S corporations.
Mr. Redpath affirmed his support for H.R. 4421 and H.R. 2239,
two S corporation reform bills that were authored by
Representatives Clay Shaw (R-FL) and Jim Ramstad (R-MN)
respectively, stating that they would help to put S
corporations on a more even footing compared to other types of
entities favored by small businesses.
Mr. Porcoro described the importance of modernizing the
rules that govern the S corporate structure. He made specific
recommendations regarding needed statutory changes for
subchapter S. Mr. Porcoro also expounded on the threats that
are facing S corporations that were proposed by the Joint
Committee on Taxation.
In sum, the Subcommittee concluded that S corporations play
a vital role in the growth and development of small business.
Any adverse change in the rules governing the subchapter S
corporation ultimately equates to an adverse effect on small
business.
For further information about this hearing, please refer to
Committee publication #109-57.
7.4.11 an update on administration action to reduce
unnecessary regulatory burdens on america's small
manufacturers
Background
On July 13, 2006 the Subcommittee on Regulatory Reform and
Oversight held a hearing on the Administration's promise to
reduce regulatory burdens on America's manufacturers. This
promise was made in 2004 when the Office of Management and
Budget (OMB) asked for public nominations of regulatory reforms
with particular emphasis on easing regulatory burden for small
and medium enterprises in the manufacturing sector. Industry
answered by delivering 189 nominations to the federal
government for the reduction of unnecessary regulation through
rulemaking. Ultimately, 76 nominations were selected to reform
unnecessary regulatory burden. On April 28, 2005, this
Subcommittee held its first hearing on this subject. Nearly 15
months had passed since the initial hearing and the
Subcommittee sought an update regarding the progress the
Administration has made in implementing the 76 regulatory
reform nominations.
Summary
The hearing consisted of one panel comprised of the
following five witnesses: The Hon. Veronica Vargas Stidvent,
Assistant Secretary for Policy, United States Department of
Labor, Washington, DC; Mr. Steve Aitken, Acting Administrator,
Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, DC; Mr. Richard D. Otis,
Jr., Deputy Associate Administrator, Policy, Economics, and
Innovation, United States Environmental Protection Agency,
Washington, DC; Mr. Lawrence A. Fineran, Vice President Legal
and Regulatory Reform Policy, National Association of
Manufacturers, Washington, DC; and Mr. William Kovacs, Vice
President, Environment, Technology, and Regulatory Affairs,
United States Chamber of Commerce, Washington, DC.
Mr. Aitken outlined the role the Office of Information and
Regulatory Affairs (OIRA) plays in the regulatory reform
process. He went on to say that the most recent information
available states that 36 of the 76 nominations selected for
reform have been completed. Mr. Aitken ended by saying that
OIRA remains dedicated to seeing this process to a successful
conclusion by the end of 2008.
Mr. Otis stated that the Environmental Protection Agency
(EPA) has made significant strides by completing more than half
of their nominations for reform. He discussed the EPA's
internal management and tracking system of the reform
nominations and the EPA's commitment to completing their 42
nominations selected for reform.
Mr. Fineran discussed the National Association of
Manufacturers' (NAM) initial hope in seeing a time table and
action plan for the 2005 manufacturing nominations selected for
reform. He stated that NAM entered this process with some
skepticism based upon OIRA's track record surrounding the
nominations solicited in 2002. But while NAM had hoped for
accountability in the 2005 nominations they have been sorely
disappointed with an opaque process.
Ms. Stidvent discussed the Department of Labor's progress
in reforming the 11 nominations assigned to them from OMB. She
stated that the Department had fulfilled most of its
obligations, most of the time by filing a report or doing a
study.
Mr. Kovacs discussed the importance of the regulatory laws
Congress has passed and the efforts of the federal government
in complying with those laws. He went on to say that there were
major problems with the processes the federal government uses,
principally a lack of transparency and accountability.
In sum, the Subcommittee concluded that many of the
nominations to reduce the regulatory burden on manufacturers
have not been completed. The Office of Management and Budget
must do more to insure transparency and do a better job of
keeping the regulatory agencies accountable for agreed upon
regulatory reform.
For further information about this hearing, please refer to
Committee report #109-60.
7.5 Summaries of Hearings Held by the Subcommittee on Tax, Finance and
Exports
7.5.1 the estate tax and the alternative minimum tax-
inequity for america's small businesses
Background
On Thursday, April 14, 2005, the Subcommittee on Tax,
Finance, and Exports held a hearing on the subject of the
estate tax and the Alternative Minimum Tax (AMT). The federal
estate or ``death'' tax affects all Americans, especially
small-business owners, who have consistently identified
permanent repeal of the estate tax as one of their most
pressing concerns. Working with President Bush in 2001,
Congress enacted bipartisan legislation to provide immediate
relief through rate reduction and an expanded exemption, with
complete repeal occurring in 2010. Unfortunately, the bill's
provisions expire in 2011, requiring Congress to pass
additional legislation to make death tax elimination permanent.
Similarly, the AMT is a complex provision in the tax code
that requires taxpayers to calculate their taxes twice, and
then pay the larger amount. Initially a method to ensure the
wealthiest Americans paid their ``fair'' share of taxes, the
combined effects of inflation and individual rate cuts has
resulted in the AMT reaching into the checking and savings
accounts of many middle-income taxpayers. The AMT also unfairly
penalizes businesses that invest heavily in capital assets by
significantly increasing the cost of capital and discourages
investment in productivity-enhancing assets by negating many of
the capital formation incentives provided under the ``regular''
tax system.
Summary
The hearing was comprised of one panel: Mr. Jeff Vukelic,
Executive Vice President, Try-It Distributing, Lancaster, NY;
Mr. Thomas C. Pitrone, Principal, Integrity Group, Willoughby,
OH; Paula Calimafde, Esq., Principal, Paley Rothman, Bethesda,
MD; Ms. Jenell Ross, Dealer/Principal, Ross Motor Cars,
Centerville, OH; Mr. Paul Zittel, VP, Linholm Dairy, LLC, Eden,
NY; and Mr. William W. Beach, Director, Center for Data
Analysis, Heritage Foundation, Washington, DC.
Mr. Vukelic began the testimony by stating that because of
uncertainty in the tax code, particularly within the estate tax
statue, small businesses are forced to pay estate planners,
lawyers, and accountants to navigate them through the
uncertainties of the current tax structure. Permanent repeal of
the estate tax would free up that time, money and energy. Both
he and the National Beer Wholesalers Association supports full
estate tax repeal.
Mr. Pitrone, and estate tax practitioner, stated that for
the vast majority of small businesses, the estate tax is a tax
on capital. For the majority of small business owners, their
major asset is their business, and it is hard to get cash out
of a company. The estate tax often forces dependents to sell a
portion or all of the business just to pay the tax bill.
Ms. Calimafde was opposed to permanent repeal. Instead, she
favored an increase in the exemption level to $3.5 million next
year instead of 2009, as is the current law.
Ms. Ross and her family became the principal owner of Ross
Motor Cars following her father's death. Shortly thereafter,
she was sent a tax bill for more than half the total value of
the business. The shock of the bill was compounded by the fact
that nearly 90 of the dealership's net worth was tied up in
land, building, equipment, inventory and parts--assets that
could not be easily liquidated without seriously damaging their
ability to function. Both she and the AIADA support full repeal
of the estate tax.
Mr. Zittel testified that both he and the American Farm
Bureau favor total repeal because roughly twice the number of
farmers paid the federal estate tax in the late 1990's compared
to other estates. Moreover, the average estate tax is also
larger than the tax paid by most other estates, and because
farms are capital-intensive businesses their assets cannot be
easily converted to cash.
Mr. Beach concentrated his testimony on the AMT, whose
filers generally pay higher taxes than regular income tax
filers. Another problem the AMT causes is that it is not
indexed to inflation, unlike the regular tax brackets. This
essentially raises the taxes each year on taxpayers who must
pay the tax just from the effects of inflation. Yet another
problem encountered by AMT filers is that tax payments to state
and local governments are not deducted. Currently, 1.9 million
Americans pay the AMT. If nothing is done to fix this problem,
up to 6.4 million Americans will pay the AMT next year.
In summary, the Subcommittee concluded that the vast
majority of small business owners are in favor of permanent
repeal of the estate tax and of significant reform to the AMT
in order to bring certainty and fairness to the tax code.
For further information about this hearing, please refer to
Committee publication #109-11.
7.5.2 does china enact barriers to free trade?
Background
On Thursday, May 26, 2005, the Subcommittee on Rural
Enterprises, Agriculture and Technology and the Subcommittee on
Tax, Finance, and Exports held a joint oversight hearing on
Chinese trade practices. Over the past two decades China has
emerged as a strong international competitor in a wide range of
products and has proven to be a critical market for U.S
exports. China's emergence as a leading world economy has
provided significant new opportunities for American exporters
and U.S. exports to China have risen sharply in recent years.
Unfortunately, there has been a downside to the
unprecedented growth in China's economy as well. The deficit
for trade in goods with China stands was $176 billion in 2004.
Having increased rapidly in recent years, it now is the single
largest bilateral deficit America has with any nation in the
world. The purpose of this hearing was to examine whether or
not China is playing fair with international trade laws and
what remedies, if any, could be proffered to alleviate the
trade deficit.
Summary
The hearing consisted of two panels. The first panel was:
Stephen Pinkos, Esq., Deputy Undersecretary for Intellectual
Property and Deputy Director, United States Patent and
Trademark Office, United States Department of Commerce,
Alexandria, VA. The second panel was comprised of: Mr. Tom
Goodpasture, President, Pride Manufacturing Co., Inc., Liberty,
MO; Mr. Bruce Iglauer, President/CEO, Alligator Records,
Chicago, IL; Mr. Al Lubrano, President, Technical Materials,
Inc., Lincoln, RI; Mr. Dave Blackburn, President/CEO, Thomas G.
Faria Corp., Uncasville, CT; and Mr. Thomas Stallings, owner of
Funston Gin Co., Funston, GA.
Mr. Pinkos' testimony focused on intellectual property (IP)
protection. Mr. Pinkos began by stating that all U.S.
companies, large and small, have a difficult time protecting
their IP overseas, particularly in China. He stated that while
the both the U.S. and China both have strong laws on IP
protection, China does not enforce them as rigidly as we do in
the United States. Some progress has been made in recent years,
but China must do better to comply with trade agreements and
with World Trade Organization (WTO) obligations.
Mr. Goodpasture stated that in addition to sever IP
protection concerns with China, his company faces an automatic
35 percent cost differential versus Chinese firms due to the
lack of enforcement of labor, environmental and safety laws.
Mr. Goodpasture hypothesized that if the Chinese currency was
correctly valued, China would no longer be a competitive in the
world market of manufacturing.
Mr. Iglauer recounted his problems with piracy of
copyrighted materials; namely, music. In rough terms, he
estimates that Alligator Records has lost 35 percent of its
sales because of global physical piracy, Internet piracy, and
illegal CD burning. Mr. Iglauer requested that the U.S.
government to press China harder to strengthen their anti-
piracy enforcement regimes.
Mr. Lubrano testified that many of his peers, customers,
and supply chain companies have adopted one of two policies:
either buy solely from Chinese manufacturers because of the
lower cost, or pick up and shift their own production to China.
Some of his customers have told him that they will only pay the
``Chinese price,'' which puts unreachable demands on his
company and his American suppliers. Mr. Lubrano stated that the
U.S. government must continue to work with China to end the
manipulation of their currency.
To show the extent of Chinese piracy, Mr. Blackburn
displayed photos of his product, and the Chinese counterfeit--
they appeared identical. Mr. Blackburn stated that the visual
quality of Chinese counterfeits are so good that even he had
trouble telling them apart from the real thing. However, when
the item was tested, it was grossly inaccurate. Mr. Blackburn
stressed not only the economic impact of this theft, but also
the public safety aspect. His company is the sole supplier of
every instrument panel installed in 100 percent of the combat
ready Humvees now serving in Iraq and around the world.
Although he touched less on IP protection, Mr. Stallings
echoed much of what had previously been said. As a cotton
grower, he is excited to see exports of cotton to China almost
double. At the same time, however, he is concerned that the
U.S. cotton growers' largest customers, U.S. textile
manufacturers, are facing an uphill battle when trying to
compete with Chinese imports of finished textile goods. He
emphasized the cotton industries concerns over the Chinese
government's use of tax rebates for exports, widespread use of
subsidized or forgiven loans, and the continued existence of
the undervalued Chinese currency as significant problems that
must be addressed in order to ensure free and fair trade exists
between our two nations.
In summary, the subcommittees concluded that the U.S.
government must continue to put pressure on China to let its'
currency float, stop direct and indirect subsidization on its
businesses, and enforce labor, safety, and environmental laws
in accordance with WTO standards. Progress has been made in
recent years, however, much still needs to be done in order to
ensure free and fair trade between the U.S. and China. For
further information about this hearing, please refer to
Committee publication #109-18.
7.5.3 examining the president's tax reform panel
recommendations
Background
On Wednesday, February 1, 2006, the Subcommittee on Tax,
Finance and Exports and the Subcommittee on Rural Enterprises,
Agriculture and Technology held a joint hearing to examine the
President's Tax Reform Panel Recommendations. On January 7,
2005, President George W. Bush established the Tax Advisory
Panel on Federal Tax Reform (the Panel) via Executive Order.
The Panel published its report on November 1, 2005.
In general, the Panel offered two alternatives to the
present tax code: (1) streamline the current income tax and (2)
replace the tax code with a progressive tax on consumption.
Both plans would require Congress to institute broad and
sweeping statutory changes to current federal tax law. The
purpose of the hearing was to discuss the recommendations of
the Panel with a particular emphasis on small business
concerns.
Summary
The hearing was comprised of two panels of witnesses. The
first panel consisted of: The Hon. John Breaux, United States
Senate (Ret.), Vice-Chairman, President's Advisory Panel on
Federal Tax Reform, Washington, DC; The Hon. Michael Castle,
United States House of Representatives (R-DE); and The Hon.
Scott Garrett, United States House of Representatives (R-NJ).
The second panel consisted of Mr. Todd McCracken, President,
National Small Business Association, Washington, DC; Daniel
Mitchell, Ph.D., McKenna Senior Fellow in Political Economy,
The Heritage Foundation, Washington, DC; Mr. David Burton,
Americans for Fair Taxation, Lorton, VA; Mr. Jim Hausman,
Hausman Metal Works and Roofing, Inc., St. Joseph, MO; Mr. Andy
Loftis, Owner, Keller-Williams Realty, Athens, GA; and Leonard
Burman, Ph.D., Senior Fellow, Urban Institute, Washington, DC.
Senator Breaux described the challenges put before the
Advisory Panel in attempting to formulate recommendations for
simplifying the tax code. He further noted the general
unanimity on the issue of tax reform among all taxpayers and
politicians.
Representative Castle remarked on the tremendous cost,
especially to small businesses, of tax code compliance,
indicating that for every $7 of federal income taxes, $1 is
spent on complying with the tax system.
Representative Garrett expressed his dismay that there were
not more sweeping changes to the tax code proposed in the
Panel's recommendations. He specifically noted that ideas such
as the Fair Tax and the Flat Tax are concepts which should be
considered before this Congress.
Mr. McCracken supported some of the Panel's recommendations
but advocated more sweeping reform--a national sales tax.
Dr. Mitchell suggested that tax policy be based on some
form of low single-rate consumption tax.
Mr. Burton furthered the proposition of a national sales
tax in the guise of the FairTax legislation, deeming it as
extraordinarily pro-growth.
Mr. Hausman spoke of his personal experience and grievances
with the estate or ``death'' tax, arguing that it is a major
detriment to small business and family farms continuing into
the second generation.
Mr. Loftis submitted that if one of the Panel's
recommendations dealing with limiting the home mortgage
deduction were enacted, it would be disastrous to the real
estate industry.
Dr. Burman supported the Panel's rejection of a national
sales tax, or FairTax, pointing out that such a tax system
would, among other things, undermine state tax systems.
In conclusion, the Subcommittees recognized the
contributions and the significance of the recommendations of
the President's Advisory Panel on Federal Tax Reform, noting
there is much to be done to help simplify the current tax code
for small businesses.
For further information about this hearing, refer to
Committee publication #109-38.
7.5.4 small business administration finance programs
Background
On Thursday, March 9, 2006 the Subcommittee on Tax, Finance
and Exports held an oversight hearing on the Small Business
Administration's (SBA) finance programs in preparation for
reauthorization.
The hearing focused on the various changes made to the
programs over the past two years. Additionally, because the SBA
needed to be reauthorized before fiscal year 2007 begins, the
hearing presented an opportunity for witnesses to provide any
legislative suggestions to be included in the SBA
reauthorization legislation. Furthermore, comments on President
Bush's Fiscal Year 2007 budget request were discussed.
Summary
The hearing was comprised of six witnesses on one panel:
Mr. Michael Hager, Associate Deputy Administrator for Capital
Access, United States Small Business Administration,
Washington, DC; Mr. Lee Mercer, President, National Association
of Small Business Investment Companies, Washington, DC; Mr.
Anthony Wilkinson, President/CEO, National Association of
Government Guaranteed Lenders, Stillwater, OK; Mr. Kurt
Chilcott, Chairman of the Board, National Association of
Development Companies, McLean, VA; Mrs. Lynn Schubert,
President, Surety Association of America, Washington, DC; and
Ms. Grace Y. Mayo, President/CEO, Telesis Community Credit
Union, Northridge, CA.
Mr. Hager described the continued growth in the SBA loan
programs over the last two years, all accomplished at zero
additional cost to subsidy rates to taxpayers. Mr. Mercer spoke
of his dissatisfaction with the Administration's desire to
eliminate the Participating Security component of the Small
Business Investment Companies (SBIC) program. Mr. Wilkinson
detailed a proposal to increase the maximum 7(a) loan size from
$2 million up to $3 million and an increase in the maximum
guaranty amount up to $2.25 million. Mr. Chilcott expressed
concern over the authorization ceiling of the SBA budget for
the 2007 fiscal year set at $7.5 billion. Mrs. Schubert sought
to raise awareness of the SBA's surety bond program and spoke
of its critical importance to small businesses. Ms. Mayo
conveyed the support of credit unions to reduce fees for the
7(a) lending program.
In sum, the Subcommittee acknowledged the growth in the
SBA's finance programs and took into consideration the
recommendations of those industry representatives during the
development of the Committee's SBA reauthorization proposal.
For further information about this hearing, refer to
Committee publication #109-41.
7.5.5 the effects of the high cost of natural gas on small
business and future energy technologies
Background
On Wednesday, June 28, 2006, the Subcommittee on Tax,
Finance and Exports held a hearing to examine the effects of
the high cost of natural gas on small businesses and other
future energy technologies. The hearing focused not only on the
high cost of natural gas to small businesses and manufacturers
but also illustrated the importance of natural gas to the
research and development of alternative fuels, such as hydrogen
fuel cells, which store hydrogen chemically separated from its
existing forms using natural gas.
Summary
The hearing was comprised of two panels. Panel one
consisted of: Mr. James Kendell, Director, Natural Gas
Division, Energy Information Administration, United States
Department of Energy, Washington, DC; Mr. Walter Cruickshank,
Deputy Director, Minerals Management Service, United States
Department of the Interior, Washington, DC; and Mr. Thomas
Lonnie, Assistant Director, Minerals Management Service, United
States Department of the Interior, Washington, DC. Panel two
consisted of Mr. Richard Goodstein, Washington Representative,
Air Products and Chemicals, Inc., Allentown, PA; Mr. Jeff
Uhlenburg, President, Donovan Heat Treating Company,
Philadelphia, PA; Mr. Paul Wilkinson, Vice-President, Policy
Analysis, American Gas Association, Washington, DC; and Mr.
Lowell Ungar, Senior Analyst, Alliance to Save Energy,
Washington, DC.
Mr. Kendell discussed the major forces affecting current
high natural gas prices and the outlook for 2007. Mr.
Cruickshank spoke of off-shore production of natural gas and
its expected continued growth in the Outer Continental Shelf.
Mr. Lonnie testified about domestic production of natural gas
on-shore and its increase over the past three years, focusing
on expectations of increased demand through 2007.
Mr. Goodstein detailed the promise of hydrogen as a fuel of
the future, the importance of natural gas in pursuit of a
hydrogen economy, and the challenges posed by high and volatile
prices for natural gas. Mr. Uhlenburg shared his personal
experiences as an owner of a small manufacturing company and
the effects of the high cost of natural gas on his business.
Mr. Wilkinson urged the ending of the absolute moratorium on
off-shore drilling for natural gas as a solution to natural gas
price volatility. Mr. Ungar advocated energy conservation and
efficiency as the quickest, cheapest, and cleanest way to help
small businesses manage natural gas prices.
In sum, the Subcommittee concluded that more needed to be
done to keep down the rising cost of natural gas by increasing
production and conservation.
For further information about this hearing, refer to
Committee publication #109-59.
7.5.6 chinese barriers to trade
Background
On Thursday, July 20, 2006, the Subcommittees on Rural
Enterprises, Agriculture and Technology Subcommittee and Tax,
Finance and Exports held a joint hearing on Chinese barriers to
trade. The hearing discussed the affect of unfair trade
practices by China, specifically currency manipulation and
theft of intellectual property rights, has on small businesses
in the United States.
Summary
There was one panel that consisted of: Mr. Tom Goodpasture,
President, Pride Manufacturing Co., Inc, Liberty, MO; Mr.
George E. Russell, Corporate Legal Administrator, Auto Meter
Products, Inc., Sycamore, IL; Mr. Brian Duggan, Director of
Trade and Commercial Policy, Motor & Equipment Manufacturers
Association, Washington, DC; Tom Duesterberg, Ph.D., President/
CEO, Manufacturers Alliance/MAPI, Washington, DC; and Mr. James
W. ``Will'' Coley, Savannah Warehouse Services, Garden City,
GA.
Mr. Goodpasture believes that the United States must find a
way to make its relationship with China as non-adversarial as
possible in order to not miss out on significant export
opportunities. He stated that he believes China competes
unfairly through currency manipulation and other strategies,
but that China also offers tremendous market potential.
Mr. Russell explained the problems his company faces in
term of intellectual property theft from Taiwan and China. Auto
Meter's products are used in automotive racing as well as in
certain marine and other high performance applications. Auto
Meter has spent well over a million dollars protecting itself
against imports that infringe upon Auto Meter's trademark
through the federal courts, Executive Branch agencies, and
trade associations. Yet these products continue to enter the
U.S. market, and every year Auto Meter loses tens of thousands
of dollars in sales to these illegal products.
Mr. Duggan explained the dangers posed by trafficking of
counterfeit auto parts. He further stated that the damage done
is disproportionately serious for small businesses because they
can least afford the lost sales on a limited number of brands
and product lines and have fewer if any resources to protect
their trademarks and patents, especially in China.
Dr. Duesterberg projected China will soon overtake the
United States as the leading exporting nation for
manufacturers, both low-value as well as high-tech products. He
went on to detail the many reasons for this phenomenon,
including an undervalued Chinese currency.
Mr. Coley, representing the National Cotton Council,
discussed his concerns with specific unfair Chinese trade
practices in cotton. The primary objection has been China's
allocation of a significant portion of the cotton Tariff Rate
Quota (TRQ) to the ``processing trade.'' By allocating cotton
quotas to the processing trade, China requires apparel made
from U.S. cotton be re-exported. Thus, the processing trade
category by China is not true market access as required by the
terms of the United States-China World Trade Organization (WTO)
accession agreement.
In sum, the Subcommittees concluded that there are still a
wide ranging set of Chinese trade barriers, which
disproportionately impacts American small businesses, and
encourages our government officials to press China for reform.
For more information, refer to Committee publication #109-
61.
7.6 Summaries of the Hearings Held by the Subcommittee on Rural
Enterprises, Agriculture and Technology
7.6.1 the high price of natural gas and its impact on
small businesses: issues and short term solutions
Background
On March 17, 2005, the Rural Enterprises, Agriculture, and
Technology Subcommittee held a hearing on the high price of
natural gas. The purpose of this hearing was to discuss the
affect of rising natural gas prices on the 60 million homes,
farms, businesses, and industries that are dependent on energy
source. While supplies are abundant, America's access and
distribution has been limited, causing prices to be two to
three times above historic averages. Shortages began in mid-
2000 and, by some estimates, prices have increased over 80
percent.
In addition, natural gas accounts for more than 37 percent
of industrial energy consumption. The federal government
encouraged many industries to turn to natural gas to comply
with clean air laws and pitched the energy as an inexpensive
source of power, but now they are being squeezed by high costs.
The manufacturing sector has been hard hit by the recession
and, while it is slowly turning around, soaring energy prices
threaten its recovery. High natural gas prices have even
increased the cost of producing fertilizers, which is passed
along to the farmer who relies on it for their crops.
Summary
The first panel consisted of: The Hon. Lee Terry (R-NE).
The second panel was comprised of seven witnesses: Mr. Charles
Kruse, President, Missouri Farm Bureau Federation, Jefferson
City, MO; Mr. Terry Hilgedick, Chairman, Missouri Corn
Merchandising Council, Jefferson City, MO; Mr. J. Billy Pirkle,
Managing Director, Environmental Health and Safety, Royster-
Clark, Inc., Norfolk, VA; Thomas J. Duesterberg, Ph.D.,
President/CEO, Manufacturers Alliance/MAPI, Washington, DC; Mr.
Paul Cicio, Executive Director, Industrial Energy Consumers of
America, Washington, DC; Mr. Peter Jones, President, Wexco
Corp., Lynchburg, VA; and Mr. Ben Boyd, a farmer from Sylvania,
GA.
Representative Terry testified as to the benefits to small
business owners in their need of natural gas and the increased
usage of Liquefied Natural Gas (LNG). He and Representative
Gene Green introduced legislation called the LNG Act (H.R.
359), which would eliminate state and federal conflicts by
explicitly giving the Federal Energy Regulatory Commission
jurisdiction over the location, construction, expansion and
operation of onshore LNG import terminals.
Mssrs. Kruse, Pirkle, and Hilgedick focused the
Subcommittee's attention as to the causes of the rising cost of
natural gas and its affect on farmers. The American Farm Bureau
estimated that increased energy input prices during the 2003
and 2004 growing seasons cost U.S. agriculture over $6 billion
in added expenses. Natural gas is especially important to
agriculture because it is used to produce nitrogen fertilizers
and farm chemicals as well as electricity for lighting,
heating, irrigation, and grain drying.
Dr. Duesterberg expressed support for building more LNG
terminals to increase gas reserves domestically. While
extending the Alaskan pipeline should be the goal to maximize
natural resources, it is a longer-term solution. Manufacturers
need effective short-term policy changes now so they will not
continue to be hampered with rising natural gas prices while
trying to fulfill increasing demand.
Mr. Cicio stated that the United States is the only country
not fully utilizing its supply of natural gas. One solution to
rising natural gas prices is to increase U.S. supply, coupled
with improved demand policies. One specific recommendation he
had is for Congress to treat the energy and natural gas crisis
with the same priority given to the agricultural market in
limiting futures prices to reduce volatility.
Mr. Jones pointed out the contradiction between the
government's encouragement of the use of natural gas as the
cleaner fuel alternative and at the same time, restricting
access to domestic resources of natural gas. While the use of
natural gas is a cleaner-fuel alternative, the depleting supply
of natural gas will be a major factor in the manufacturing
industry's ability to comply with environmental regulations.
The last witness put a human face behind the statements and
statistics cited by the previous witnesses. Mr. Boyd, a farmer
from Georgia, calculated that because of higher natural gas
prices, the price of his nitrogen fertilizer rose extra $54,000
last year alone. Mr. Boyd testified to the crucial need for
nitrogen fertilizer for small and large production farmers
alike, and how increasing costs for natural gas are driving
some small farmers off their farms.
In summary, the Subcommittee concluded that the high price
of natural gas would impose an unsustainable burden on
America's farmers and manufacturers unless policies were
enacted to increase supply and conservation. For further
information, please refer to Committee publication #109-6.
7.6.2 does china enact barriers to free trade?
Please refer to the hearing summary set forth in part
7.5.2, supra.
For further information on this hearing, refer to Committee
publication 109-18.
7.6.3 different applications for genetically modified
crops
Background
On Wednesday, June 29, 2005, the Rural Enterprises,
Agriculture and Technology Subcommittee held a hearing on
genetically modified crops (GMOs). Farmers have always modified
plants and animals to improve growth rates and yields, create
varieties resistant to pests and diseases, and infuse special
nutritional or handling characteristics. Now, using DNA
techniques, scientists can genetically modify plants by
selecting individual desirable traits. Currently, thirteen
different plants are approved for commercial use in the United
States and at least 60 percent of all U.S. foods contain some
genetically engineered material.The growth of biotech has
become pervasive within this country for several crops. In
2004, 85 percent of the soybean acres were planted with biotech
seeds, followed by 75 percent of cotton and half of all corn.
The United States leads all other countries in the development
of biotech crops with 59 percent of the global acreage. The use
of genetically modified crops continues to grow and their
different applications are growing fasters. This hearing
explored the expanding GMO industry and all of its benefits.
Summary
The hearing was comprised of one panel of five witnesses:
Ms. Dawn W. Parks, Manager, Public, Industry and Government
Affairs, ArborGen, Public, Industry, and Government Affairs
Manager of Arborgen, Summerville, SC; Mr. Delan Perry,
President, Hawaii Papaya Industry Association, Hilo, HI; Mr.
Scott Deeter, President/CEO, Ventria Bioscience, Sacramento,
CA; Mr. Samuel Huttenbauer, CEO, Agragen, Cincinnati, OH; and
Mr. Thomas H. Dollar, II, President, Decatur Gin Co. and Dollar
Farm Products, Bainbridge, GA.
Ms. Parks explained that ArborGen uses breeding techniques,
including biotechnology, to improve the sustainability of
forestry. As the worldwide population increases, so does the
demand for wood and paper products. Rather than expanding the
forested acreage under management to meet the wood and paper
requirements in the future, ArborGen develops faster-growing
trees that will improve the productivity of plantations.
ArborGen also develops trees with modified lignin. Lignin is a
component of wood fibers that is removed during the pulping
process to obtain the cellulose needed to make quality paper.
Mr. Perrytold the ``Papaya Story.'' In 1992, a virus
decimated Hawaii's papaya industry and the livelihood of those
who farm that fruit. For decades, papayas have been grown in
Hawaii. Papayas, in contrast with pineapples, are primarily
grown on hundreds of family farms. There is no doubt that the
transgenic papaya saved the papaya industry in Hawaii and now
constitutes about 60 percent of all papayas grown in Hawaii.
Currently, the transgenic papaya can be marketed to Canada and
the mainland U.S.A. However, it cannot be marketed to Japan,
which is a major market for the Hawaiian papaya.
Mr. Deeter explained that his company is a plant-based
pharmaceutical company that utilizes rice and barley as a
``factory'' to make biological products. One product has been
developed for children suffering from acute diarrhea. The World
Health Organization (WHO) estimates that 1.9 million children
under the age of five die annually because of diarrhea. To
address this crisis, Ventria added Lactiva and Lysomin to an
oral rehydration solution, which is a common first line therapy
given to children suffering from diarrhea. Ventria is also
exploring the use of Lactiva and Lysomin for the prevention of
diarrhea in the military. During Operation Iraqi Freedom, 70
percent of deployed troops suffered a diarrhea attack and 43
percent reported decreased job performance as a result of this
attack.
Mr. Huttenbauer explained that Agragen is a biotech company
working on the development of plant made pharmaceuticals
(PMPs). Agragen was started three years ago with the express
purpose of manufacturing pharmaceuticals utilizing the natural
protein manufacturing capability of plants. The overall thrust
of this technology is to insert genes into the plant to permit
it to make and store the protein of interest in the seed, where
it can be stored indefinitely until it is purified. Plant-made
pharmaceuticals (PMPs) are the result of a breakthrough
application of biotechnology to plants to enable them to
produce therapeutic proteins that will be used by the medical
community to combat life-threatening illnesses. In this
process, plants themselves become ``factories'' that
manufacture therapeutic proteins.
Mr. Dollar spoke of how he now grows genetically modified
cotton with the Roundup Ready and Bt genes. Roundup Ready
cotton has been genetically enhanced to provide herbicide
tolerance that allows Roundup herbicide to be applied directly
over the top of the crop in the field. Only the weeds are
killed while the cotton plants live. Because of this
technology, Roundup has replaced the multiple herbicides that
were previously used. The result is four to six total
applications of pesticide on any given field, versus the 20 to
25 applications required on other cotton. Farming with
genetically modified crops has significant cost reductions.
In summary, the Subcommittee concluded that GMOs offers
promising benefits not just to small businesses but also for
human health and safety.
For more information about this hearing, please refer to
Committee publication #109-24.
7.6.4 the importance of the biotechnology industry and
venture capital support in innovation
Background
On Wednesday, July 27, 2005, the Rural Enterprises,
Agriculture and Technology Subcommittee held a hearing on the
importance of the biotechnology industry and venture capital
(VC) support in innovation. The Small Business Administration
(SBA) helps struggling small high-technology firms through the
Small Business Innovation Research (SBIR) program, which
allocates 2.5 percent of all federal research and development
grants from 12 federal agencies to qualified small business
applicants. The SBIR program allows for cutting-edge research
that may not, in its earliest stages, attract funding from
other sources. SBA eligibility regulations require that a small
company must be at least 51 percent owned by one or more
individuals. The SBA recently clarified the definition of
``individuals'' to include only actual human beings, and
excludes other forms of investment such as VC. This hearing
examined this new SBA clarification and legislation that was
written to attempt to address this issue (H.R. 2943, the Save
America's Biotechnology Innovation Research Act (SABIR),
authored by the Hon. Sam Graves (R-MO) who also is the Chairman
of the Subcommittee on Rural Enterprises, Agriculture and
Technology.
Summary
The hearing consisted of one panel: Mr. Barry Michael,
President, B.A. Michael Consulting, Clifton, VA; Mr. Douglas A.
Doerfler, President/CEO, MaxCyte, Inc., Gaithersburg, Maryland;
Jere W. Glover, Esq., Executive Director, Small Business
Technology Council, Washington, DC; Mr. Daniel J. Broderick,
Managing Director, Mason Wells, Milwaukee, WI; and Mr. Anthony
P. Cruz, Senior Vice President, Finance & Administration,
AviGenics, Inc., Athens, GA.
Mr. Michael testified that from his personal experience, he
was against expanding the SBIR program to include VC companies.
He believed that allowing VC firms to invest in SBIR companies
would divert needed money from truly needy companies.
Douglas A. Doerfler spoke against a recent interpretation
by the SBA regarding the eligibility requirements for the SBIR
program that he claims has prevented the majority of BIO
members from participating in the program. He believed that
both SBIR and VC funding is necessary to support the lengthy
and costly clinical development process for biotech products.
Mr. Glover testified against H.R. 2943 because it would
bring about a fundamental shift, in his view, of the SBIR
program to potentially have large VC firms benefit from the
SBIR program.
Mr. Broderick testified on behalf of the National Venture
Capital Association in support of HR 2943. He explained the
role of VC firms in biotech companies. He stated that VC
investors do not participate in setting the strategic direction
of the biotech firm, and they take no role in making day-to-day
decisions.
Mr. Cruz testified that the SBIR program allows development
of early-stage technologies that can lead to novel human drugs
to fight diseases. SBIR funding combined with VC funding can
lead to creation of new biotechnology clusters and high-
skilled, high-pay jobs within geographic areas not
traditionally associated with the pharmaceutical or
biotechnology industries.
In sum, the Subcommittee concluded that the role of VC in
biotech companies interested in participating in the SBIR
program is complex and more work needs to be done prior to HR
2943 becoming law because this is an issue that divides the
small business high-tech community.
For more information, please refer Committee publication
#109-28.
7.6.5 the need for improvements and more incentives in the
endangered species act
Background
On Thursday, September 15, 2005, the Rural Enterprises,
Agriculture and Technology Subcommittee held a hearing on the
need to improve the Endangered Species Act (ESA). The purpose
of this hearing was to discuss the concerns of landowners as
they struggle comply with provisions of the ESA. Since its
enactment in 1972, the ESA has pitted private landowners
against the federal government. If an endangered or threatened
species is identified on their property, the landowner could
lose all rights to their privately held lands. With farmers and
ranchers owning and operating nearly 80 percent of the land on
which these species dwell, incentives for landowners to
participate in species protection will lead to much higher
recovery rates of our endangered and threatened species. The
hearing focused on H.R. 3300, the Endangered Species
Improvement Act, which was introduced by the Hon. Sam Graves
(R-MO) who also serves as the Chairman of the Rural
Enterprises, Agriculture, and Technology Subcommittee. The bill
would clarify the responsibilities of both the landowner and
the government and allow for compensation of landowners.
Summary
The hearing consisted of two panels. The Hon. Richard Pombo
(R-CA), Chairman, Committee on Resources, United States House
of Representatives testified on the first panel. The second
panel was comprised of: Mr. Mike Wells, Deputy Director,
Missouri Department of Natural Resources, Jefferson City, MO;
Ms. Nancy Macan McNally, Executive Director, National
Endangered Species Act Reform Coalition, Washington, DC; Mr.
Bob Peterson, President, Ohio Farm Bureau Federation, Columbus,
OH; Mr. Laurence Wiseman, President/CEO, American Forest
Foundation, Washington, DC; and John Kostyack, Esq., Senior
Counsel, National Wildlife Federation, Reston, VA.
Chairman Pombo explained that he was moving a package of
reform measures to add such incentive components to the current
ESA. Research shows that the ESA has created perverse
incentives that prompt landowners to actually destroy species
habitat to rid their property of the liability that comes with
endangered species. This package, entitled the Threatened and
Endangered Species Recovery Act of 2005 (H.R. 3824) eventually
passed the House on September 29, 2005 by a bipartisan vote of
229 to 193, with 36 Democrats in support.
Mr. Wells gave firsthand knowledge of the prescriptive
mandates that the ESA can bring as it applied to the pallid
sturgeon. In 2003, the Fish and Wildlife Service (FWS) mandated
a summer low flow and a spring rise on the Missouri River even
though scientists showed that this would produce minimal
benefits for the species.
Ms. McNally testified that a new approach is needed to
change the focus of the debate from a clash over existing terms
and programs to the development of new tools that improve the
ESA. The ESA should also encourage recovery of listed species
through voluntary species conservation efforts and the active
involvement of States.
Mr. Peterson testified that cooperation of private
landowners is essential if the ESA is to succeed. Speaking on
behalf of the American Farm Bureau, Mr. Peterson emphasized
that many landowners would like to protect listed species, but
the ESA, as currently written, makes that task difficult.
Mr. Wiseman testified on behalf of forest landowners who
have each pledged to practice environmentally sound,
sustainable and productive forestry. Families are the
``majority'' owners of our nation's forests--not the federal
government, not the States, nor industry. According to Mr.
Wiseman, more than $4 billion in applications for conservation
incentives went unfunded last year, further complicating the
problem.
Finally, Mr. Kostyack testified that the ESA had been a
success. The longer species enjoy the protection of the ESA,
the more likely the condition of the species will stabilize or
improve. While the National Wildlife Federation was supportive
of adding incentives to the ESA, he offered suggestions to
improve H.R. 3330.
In sum, the Subcommittee concluded that the ESA was in
fundamental need of reform and that efforts of Chairman Pombo
and Subcommittee Chairman Graves, through his introduction of
H.R. 3300, go a long way in that direction. Many of the key
concepts and principles contained in H.R. 3300 were folded into
Chairman Pombo's ESA reform bill (H.R. 3824), which passed the
House on September 29, 2005.
For more information, please refer to the Committee
publication #109-31.
7.6.6 examining the president's tax reform panel
recommendations
Please refer to the hearing summary set forth in part
7.5.3, supra.
For further information on this hearing, refer to Committee
publication #109-38.
7.6.7 the missouri river and its spring rise: science or
science fiction
Background
On Wednesday, March 15, 2006, the Rural Enterprises,
Agriculture and Technology Subcommittee held a hearing to
examine the effect of the mandated ``spring rise'' along the
Missouri River and its impact on those who live along the river
and on small businesses. The U.S. Fish and Wildlife Service
(USFWS) mandated a ``spring rise and summer draw down'' in
order to protect the endangered interior least tern, threatened
piping plover and threatened pallid sturgeon. The USFWS has
asserted that this will mimic the natural hydrology of the
river and return it to its natural flow.
Farmers and others who live along the river already face
the prospect of natural floods and that risk only increases
with an artificial spring rise. Additionally, many dispute the
science used to formulate the spring rise. The Missouri
Department of Natural Resources has itself called the science
behind these assertions into question and suggested less
draconian methods to preserve these threatened species.
Summary
The hearing consisted of three panels. The first panel was:
The Hon. James M. Talent, United States Senate (R-MO). The
second panel was comprised of: Brig. Gen. Gregg F. Martin,
Commander and Division Engineer, Northwestern Division, United
States Army Corps of Engineers, Department of Army, Portland,
OR; Mr. Mitch King, Regional Director, Mountain-Prairie Region,
Fish and Wildlife Service, United States Department of the
Interior, Lakewood, CO; and Mr. Mike Wells, Deputy Director,
Missouri Department of Natural Resources, Jefferson City, MO.
The third panel was comprised of: Mr. Charlie Kruse, President,
Missouri Farm Bureau Federation, Jefferson City, MO; Mr. Steve
Taylor, Chairman, Coalition to Protect the Missouri River,
Jefferson City, MO; Mr. Tom Waters, Waters Farms, Orrick, MO;
Ms. Lynn M. Muench, Vice President, The American Waterways
Operators, St. Louis, MO; and Mr. David Sieck, Past President,
Iowa Corn Growers Association, Johnston, IA.
Senator Talent testified his complete opposition to the
planned spring rises by the Fish and Wildlife Service. He said
that that needs of Missourians should not place second fiddle
to a fish.
Brigadier General Martin explained that the Corps operates
the Missouri River Mainstem Reservoir System as directed by the
Congressionally authorized purposes of flood damage reduction,
commercial navigation, hydropower, irrigation, recreation,
water supply, water quality, and fish and wildlife. The
Missouri River basin is currently experiencing an extended
drought, and system storage is at unusually low levels and
therefore the spring pulse has been rescinded.
Mr. King explained the history of the river, saying that
the construction of dams and the regulation of the river for
flood control had altered the natural rhythms of the river,
which have been the key contributing factors to the decline of
the pallid sturgeon.
Mr. Wells of the Missouri Department of Natural Resources
testified that his department was extremely disappointed to see
the federal government move forward with a man-made spring rise
on the Missouri River that would intentionally increases the
risk of flooding.
Mr. Kruse of the Missouri Farm Bureau testified that there
are many who do not believe the science behind the government's
decision and are worried about the consequences on farmers and
ranchers. This was amplified by Mr. Taylor of the Missouri Corn
Growers when he reminded the Subcommittee that the U.S.
Institute for Environmental Conflict Resolution discovered a
lack of science regarding pallid sturgeon recovery and
therefore the group could not make any informed
recommendations.
Mr. Waters believes that these man-made spring rises are in
direct conflict with the Corps mission of flood control.
Building on that theme, Ms. Muench testified barge owners
oppose the spring rise because it will decrease the
navigational reliability of the Missouri and Mississippi rivers
and it will harm a key customer of the barge and towing
industry--the Midwest farmer.
Mr. Sieck of the Iowa Corn Growers explained that he was
representing individual farmers who may be negatively impacted
by the federal government's plan to implement a forced flooding
of the Missouri River. Mr. Sieck reminded the Subcommittee that
few years ago, there was discussion about the need for a spring
rise for two birds, the piping plover and the least tern, but
these populations have increased without a spring rise.
In sum, the Subcommittee concluded that the federal
government should not proceed with the spring rise of the
Missouri River.
For more information, refer to Committee publication #109-
42.
7.6.8 the future of rural telecommunications: is universal
service reform needed?
Background
On Wednesday, May 3, 2006, the Subcommittee on Rural
Enterprises, Agriculture and Technology held a hearing on the
future of telecommunication services in rural America, with a
particular focus on universal service.
A decade after the passage of the Telecommunications Act of
1996, the Universal Service Fund (USF) has experienced
spiraling growth that threatens its long term sustainability
and the continuity of rural service. Universal service has
afforded rural America the same technology and service as urban
centers. This hearing specifically looked at H.R. 5072, the
Universal Service Reform Act of 2006 introduced by
Representatives Lee Terry (R-NE) and Mr. Rick Boucher (D-VA).
Summary
The hearing was comprised of two panels. The first panel
consisted of: The Hon. Lee Terry, United States House of
Representatives (R-NE). The second panel was comprised of Mr.
Robert Williams, President, Oregon Farmers Mutual Telephone
Company, Oregon, MO; Mr. Johnie Johnson, Chief Executive
Officer/GM, Nex-Tech Wireless, Hays, KS; Mr. Raymond Henagan,
CEO/Manager, Rock Port Telephone, Rock Port, MO; Mr. Don
Schulte, Teacher, Pattonville High School, Maryland Heights,
MO; Mr. Edward Merlis, Government and Regulatory Affairs,
United States Telecom Association, Washington, DC; and Mr. Ed
Black, President/CEO, Computer and Communications Industry
Association, Washington, DC.
Representative Terry described the importance of H.R. 5072
because it would continue ensuring service to rural America
while allowing for the spread of broadband in these same areas.
Mr. Williams, on behalf of the Organization for the
Promotion and Advancement of Small Telecommunications
Companies, and Mr. Henagan, on behalf of the National
Telecommunications Cooperative Association, testified in favor
of the Terry/Boucher bill, particularly on the expansion of the
pool of providers and services that pay into the fund. However,
Mr. Williams disagreed with the cap on the USF because it will
inhibit the bill's goal of 100 percent broadband deployment.
Mr. Johnson testified on behalf of CTIA--The Wireless
Association and the Rural Cellular Association that under the
current system, rural wireless consumers who contribute to the
fund are not seeing the benefits that they deserve. Any
legislation drafted on this topic should rectify this problem.
Mr. Schulte, speaking on behalf of the Missouri National
Education Association, supports the E-Rate Fund within the
current USF. He explained that his school district receives
roughly $71,000 per year in E-Rate funds which helps to pay for
various advanced technologies.
Mr. Merliss of the US Telecom Association testified that
current funding system for the USF is broken and needs to be
fixed. Mr. Merliss supports the comprehensive approach in H.R.
5072, as well as imposing greater accountability for use of the
funds.
Finally, Mr. Black, President/CEO of the Computer and
Communications Industry Association, supports the Terry/Boucher
bill, saying it is the most comprehensive bill designed at
reforming the USF. He concluded that as the House moves forward
in crafting Universal Service reform legislation, H.R. 5072
should serve as the framework for more extensive reform.
In sum, the Subcommittee concluded that H.R. 5072 merits
the support of Congress. For further information about this
hearing, refer to Committee publication #109-50.
7.6.9 unlocking charitable giving
Background
On Thursday, May 25, 2006, the Subcommittee on Rural
Enterprises, Agriculture and Technology held a hearing on
charitable giving. This hearing specifically looked at H.R.
3908, the Charitable Giving Act of 2005 introduced by
Representatives Roy Blunt (R-MO) and Harold Ford (D-KY). The
bill would provide tax incentives and other measures to
encourage charitable giving by individuals and corporations.
Summary
The hearing was comprised of two panels. The first panel
consisted of: The Hon. Roy Blunt, United States House of
Representatives (R-MO). The second panel included Mr. Benny
Lee, CEO, Top Innovations, Inc., Kansas City, MO; Mr. Michael
W. Halterman, CEO, Catholic Charities of Kansas City, Kansas
City, MO; Ms. Diana L. Aviv, President/CEO, Independent Sector,
Washington, DC; and Ms. Paulette Maehara, President/CEO,
Association of Fundraising Professionals, Washington, DC.
Representative Blunt explained that three years ago,
similar bills passed Congress by near unanimous votes in the
House and the Senate on separate tracks. Unfortunately, these
bills were not reconciled to be enacted. It was hoped that in
this Congress, H.R. 3908 could cross the finish line.
Mr. Lee testified that H.R. 3908 would be particularly
helpful to the approximately 86 million Americans who file for
the standard deduction on their federal income tax returns.
While many of these 86 million non-itemizers donate to charity,
Mr. Lee believes they should receive a deduction for their
contributions.
Mr. Halterman used research data from the United Way to
show the Subcommittee that allowing taxpayers who do not
itemize to deduct their charitable contributions under $250
could raise an additional $1 billion for the non-profit sector.
Ms. Aviv spoke favorably of the provision in H.R. 3908 to
permit tax-free distributions from individual retirement
accounts for charitable contributions, thus removing a barrier
that prevents many older Americans from making substantial
charitable gifts during their lifetime from retirement
holdings.
Ms. Maehara also testified in support of all the provisions
of H.R. 3908 because it would create powerful new charitable
giving incentives that would greatly assist the altruistic
endeavors of charities throughout the country. He particularly
focused on provisions dealing with the rollover of IRAs and the
enhanced deductions for contributions of food inventories and
books.
In sum, the Subcommittee concluded that H.R. 3908 was an
important piece of legislation to help all charities,
particularly for smaller non-profits.
For more information, refer to Committee publication #109-
54.
7.6.10 chinese barriers to trade
Please refer to the hearing summary set forth in part
7.5.6, supra.
For further information on this hearing, refer to Committee
publication #109-61.