Kudos from Congress - includes information on Small Business Innovations Research grants - Small Business Report

Nation's Business, April, 1985

Kudos From Congress

Congress obviously recognizes the importance of small business to the nation's economy. Approximately 80 percent of the 83 veteran members of Congress responding to a recent survey rate small business as "critically important,' nothing that it is the major source of new "net' employment. The survey was released by Touche Ross & Company, an international accounting and consulting firm.

Respondents, who represent a geographic cross section of the country, say that small business benefits considerably from current economic gains. Changes in the business and individual tax structure would, they say, do the most to further spur the economy. Easing regulation and reporting requirements would also have major positive impact, according to many of the legislators.

Asked what areas of legislation have most hindered small business, legislators name taxation by 2 to 1 over the next most detrimental--import-export legislation.

Approximately 62 percent concede that recently passed tax laws have been far more beneficial to big business. Although there is no consesus as to how best to correct this imbalance, 38 percent of the respondents say they would favor a graduated tax rate until earnings exceed $50,000, 37 percent would support tax credits for hiring additional personnel, and 18 percent would back no tax for new businesses for the first three years if earnings are less than $100,000 annually.

Most respondents expect a decrease in the number of small business failures this year.

In keeping with this view, 83 percent say they do not support a bailout fund for small firms. On the other hand, 62 percent favor protectionist measures for some industries--namely, manufacturers of clothing and automotive products --from certain forms of foreign competition. In the nonservice category, the industry that needs the least protection, say most respondents, is high technology.

The Small Business Administration is the one government body--not excluding congress itself--that has helped small business the most, the respondents say. The agency could, in their view, further enhance its effectiveness by concentrating on lending and procurement.

Listed as least helpful are the Internal Revenue Service and the Securities and Exchange Commission.

Help on Research Grants

If science- and technology-based firms with fewer than 500 employes want to take advantage of the Small Business Innovation Research grants but are unsure how to go about it, they need wonder no longer.

Peat, Marwick, Mitchell & Company, an accounting firm, has just published a 60-page guidebook, "Small Business Innovation Research Grants: How To Obtain Them To Finance Your Ideas.'

Congress created the SBIR grant program--up to $550,000 is allocated per project--in 1982.

"Start-up financing, true "seed' capital, has always been extremely difficult for small companies to obtain,' says Peat Marwick executive S. Thomas Moser. "The magnitude of this funding presents a tremendous opportunity for entrepreneurship and technological innovation.' All told, $1.5 billion has been set aside for the program through 1987--$250 million of it this year.

Companies that obtain SBIR funds to finance their research and product development are well positioned to obtain follow-up capital and federal procurement contracts for further business development, according to Peat Marwick.

The guidebook costs $5 and can be ordered from any Peat Marwick U.S. office or by writing to: S. Thomas Moser, National Director, High Technology Practice, Peat Marwick, Box 560-20, 345 Park Avenue, New York, N.Y. 10154.

Worth Noting

The Senate Small Business Committee is holding field hearings in Tennessee, South Dakota, Illinois and possibly Montana and Arkasas to get small business reaction to the administration's tax simplification proposals.

Small business input is necessary, says committee Chairman Lowell Weicker (R-Conn.) because restructuring the nation's tax system could "significantly alter the financial course of the small business sector.' Tax measures that provide "effective economic incentives' should not be sacrificed "at the altar of simplicity,' he says.

The committee is specifically interested in provisions that would repeal the investment tax credit; replace the accelerated cost recovery system with a slower depreciation formula; provide direct expensing of all or a portion of equipment costs; and eliminate the current capital gains exclusion while indexing the basis of capital property.

An entrepreneur's Starter Kit, initially offered gratis by the accounting firm of Coopers & Lybrand, as reported here in February, is now available only in return for a $5 fee. Write to Howard Bailen at the firm, 1251 Sixth Avenue, New York, N.Y. 10020.

The International Foundation of Employee Benefit Plans will sponsor its Employee Benefits Institute for Small Businesses May 6-8 in Palm Springs, Calif. Alternatives in meeting the benefits needs of employes while complying with changing legislation and regulatory requirements, will be explored, along with the impact of current federal tax proposals. Contact IFEBP at P.O. Box 69, Brookfield, Wis. 53005; phone: (414) 786-6700.