Cheryl Jefferson & Associates, LLC

April 2010

SBA Proposes Rules for Women-Owned Small Businesses
The Small Business Administration (SBA) has submitted proposed rules for the Women-Owned Small Business (WOSB) Federal Contract program under Section 8(m) of the WOSB legislation.  Comments are due May 3, 2010 (www.regulations.gov).  This list is not all-inclusive, but the aspects that have the most impact on our clients are:
• Treats 83 NAICS codes as eligible for Federal contracting under the WOSB Program
• There are 45 NAICS codes in which WOSBs are underrepresented such as 5413--Architectural, Engineering, and Related Services; 5415--Computer Systems Design and Related Services; 5416--Management, Scientific, and Technical Consulting Services
• There are 38 NAICS codes in which WOSBs are substantially underrepresented such as 5182--Data Processing, Hosting, and Related Services; 5191--Other Information Services; 5417--Scientific Research and Development Services
• Proposes to treat property owned solely by one spouse as that spouse's property for economic disadvantage determinations
• Proposes exempting funds in Individual Retirement Accounts IRAs) and other official retirement accounts from the calculation of net worth, provided that the funds cannot currently be withdrawn from the account prior to retirement age without a significant penalty
• Proposes exempting income from a corporation taxed under Subchapter S of Chapter 1 of the Internal Revenue Code (S corporation) from the calculation of both income and net worth to the extent such income is reinvested in the firm or used to pay taxes arising from the normal course of operations of an S corporation
• Proposes to provide that a woman is not presumed to be economically disadvantaged if her yearly income averaged over the past two years exceeds $200,000.
• A woman generally would not be considered economically disadvantaged if the fair market value of all her assets exceeds $3 million
• WOSB must: (1) Be certified by a Federal agency, a State government, or a national certifying entity approved by the Administrator, as a small business concern owned and controlled by women; or, (2) certify to the contracting officer that it is a small business concern owned and controlled by women and provide adequate documentation, in accordance with standards established by SBA, to support such certification
The full text is available at regulations.gov under the proposed rules posted on 03/04/10.

Business Tax Credits
With the passage of several new laws, there are a number of business credits available to our small business clients.  Some tax credits that continue to be available are: 

• Credit for Small Employer Pension Plan Startup Costs - startup costs incurred in establishing or administering an eligible employer plan (Form 8881)
• Credit for Increasing Research Activities – for expenditures paid or incurred for qualified research (Form 6765)
• Work Opportunity credit – for hiring employees in a targeted group (Form 5884)
• Empowerment Zone and Renewal Community Employment Credit – for wages paid to employees residing in empowerment zones or renewal communities (Form 8844)
• Alternative Motor Vehicle Credit (Form 8910)
• Qualified Plug-in Electric and Electric Vehicle Credit (Form 8834)
The newer tax credits available with the passage of the Jobs bill (Federal HIRE Act) are:
• Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.
• For each qualified worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

Maryland has the following tax credits:
• Job Creation & Recovery Tax Credit
• Commuter Tax Credit
• Research & Development Tax Credit
• Work-Based Learning Program Tax Credit
• Maryland Disability Employment Tax Credit
• Employer-Provided Long-Term Care Insurance Tax Credit
• Biotechnology Investment Incentive Tax Credit

Virginia tax credits that affect small businesses are:
• Credit for Employers of Individuals with Disabilities
• Worker Retraining Tax Credit

District of Columbia tax credits include:
• Work Opportunity Tax Credit
• Tax credit for hiring a participant of Project Empowerment
• Relocation Expense Reimbursement for high tech companies
• Wage Tax Credit for high tech companies
• Employment Training Credits for high tech companies
• Franchise Tax Reduction for high tech companies
• Sales and Use Tax Exemption for high tech companies

Links to the full list of tax credits offered by these states is located on our Business Tax page.

Businesses should be aware that all of the business credits for “qualified” employees require that those employees are certified by the state that they meet the criteria for the tax credit, usually before or almost immediately after hire.  If a certification letter is not received by the business, the applicable tax credit will not be available come tax filing time. 

Sources: irs.gov, tax.virginia.gov, marylandtaxes.com, dcbiz.dc.gov