April 2011
New 8(a) rules effective March 14, 2011
Effective, March 14, 2011 the Small Business Administration (SBA) made the following changes to the 8(a) program:
- Retirement accounts are excluded from the determination of net worth calculations for eligibility; however, any account that may be accessed immediately without a penalty must be treated as a present asset and included within an individual’s net worth determination.
- Adds objective criteria to determine economic disadvantage based on personal income ($250,000 for initial eligibility, $350,000 for continued eligibility) and total assets ($4 million for initial eligibility, $6 million continued eligibility).
- Allows an immediate family member of a current or former 8(a) firm to own an 8(a) firm where there are no or negligible connections between the two firms and the family member can demonstrate sufficient management and technical experience to independently operate the firm
- Tightened requirements for joint ventures to ensure that non-disadvantaged firms do not unduly benefit from the 8(a) program
- Adds a rule stating compensation received by any agent or representative of an 8(a) applicant or Participant for assisting the applicant in obtaining 8(a) certification or for assisting the Participant in obtaining 8(a) contracts must be reasonable in light of the service(s) performed by the agent or representative. Compensation that is a percentage of the gross contract value will be prohibited. Additionally, compensation that is a percentage of profits may be found to be unreasonable.
- SBA is now authorized to early graduate a firm that exceeds the size standard for its primary NAICS code, as adjusted, for three successive program years.
- SBA will consider a spouse’s financial condition only when the spouse has a role in the business (e.g., an officer, employee or director) or has lent money to, provided credit support to, or guaranteed a loan of the business.
- Exempts income earned from an S Corporation from the calculation of both an individual’s 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. Treatment of S corporation income applies to both determinations of an individual’s net worth and personal income. S corporations, LLCs and partnerships should all be treated similarly since all pass income through to the individual owners/members/partners.
- It modified the definition of withdrawal to generally eliminate the inclusion of officers’ salaries from the definition of withdrawal and excluded other items currently included within such definition.
- Increased each of the current ‘‘excessive’’ withdrawal amounts by $100,000. Thus, for firms with sales of less than $1,000,000 the excessive withdrawal amount would be $250,000 instead of $150,000, for firms with sales between $1,000,000 and $2,000,000 the excessive withdrawal amount would be $300,000 instead of $200,000, and for firms with sales exceeding $2,000,000 the excessive withdrawal amount would be $400,000 instead of $300,000.
A concern meets the basic requirements for admission to the 8(a) BD program if it is a small business which is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States, and which demonstrates potential for success.
Source: http://www.sba.gov/content/revised-8a-regulations
Final rules for the Women-Owned Small Business Federal Contracting Program went into effect February 4, 2011
Contracting officers may set aside a requirement for WOSB/EDWOSBs if:
Certification is required, but it can be self-certifying through the SBA website or a third-party certifier.
To be eligible, a firm must be at least 51% owned and controlled by one or more women, and primarily managed by one or more women. The women must be U.S. citizens. The firm must be “small” in its primary industry in accordance with SBA’s size standards for that industry. In order for a WOSB to be deemed “economically disadvantaged,” its owners must demonstrate economic disadvantage in accordance with the requirements set forth in the final rule.
To be an eligible WOSB, a company must be:
- A small business that is at least 51% percent unconditionally and directly owned and controlled by one or more women who are United States citizens.
- A woman must manage the day-to-day operations, make long-term decisions for the business, hold the highest officer position in the business and work at the business full-time during normal working hours.
To be an eligible EDWOSB, a company must be:
- A WOSB that is at least 51% owned by one or more women who are “economically disadvantaged”. SBA may waive the requirement of economic disadvantage for industries in which WOSBs are “substantially underrepresented.”
-
A woman is presumed economically disadvantaged if she has a personal net worth of less than $750,000 (with some exclusions), her adjusted gross yearly income averaged over the three years preceding the certification less than $350,000, and the fair market value of all her assets is less than $6 million.
More information can be found at http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses
January 2011
Congress did not repeal new 1099 reporting requirements
The provision in the health care reform package that requires businesses to report to the IRS every purchase of $600 or more from a vendor of goods or services, beginning with purchases made in 2012 was not repealed by Congress. The new reporting requirements also include gross proceeds paid in consideration for property.
The Small Business Jobs Act, passed in September, created a new reporting requirement for individuals who receive income from rental real estate. Starting in 2012, they will have to provide 1099s to any service provider to whom they pay more than $600 during the year. This means that starting January 1, 2011, rental property owners should start keeping records of payments and collecting Form W-9 information
(Journal of Accountancy article)
IRS Mileage Rates for 2011
Beginning on Jan. 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
51 cents per mile for business miles driven
19 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The information provided here is in summary form and does not reflect the IRS tax codes, applicable state tax codes, Federal Acquisition Regulations or any other regulatory codes in their entirety. If a particular situation may be applicable to you, please consult your CPA or tax advisor.
|