This has been quite a year for small businesses in the U.S.
Much has happened, and much is anticipated in the coming year.
Let’s look back on some of the critical issues impacting small business and what we can expect in 2017.
Presidential election. The election of Donald Trump was “the” event of 2016. Whatever people think about him as an individual, there is no disputing his familiarity with business issues. Thus, small businesses should be optimistic that this portends good things for small businesses. He has nominated Linda McMahon to head the Small Business Administration. She is a business person who, along with her husband, grew a small business in Connecticut to a multinational corporation. She too, knows business. Find more details here.
Overtime rule. The U.S. Department of Labor issued a final rule changing the definition of those employees who are exempt from being paid time-and-a-half when they work more than 40 hours in a workweek. The rule had been set to go into effect on December 1, but a federal judge imposed an injunction. The status of the final rule at this point is unclear. Expect things to happen in 2017. Find more details here.
HRAs. For most of 2016, small employers that had been reimbursing employees for their individually-obtained health coverage were unsure whether the IRS was going to penalize them $100 per day per employee. Now, under the Small Business Healthcare Relief Act, which is part of the 21st Century Cures Act that was signed into law on December 31, 2016, small businesses can use qualified small employer health reimbursement arrangements (QSEHRAs) to reimburse employees for the cost of their coverage without fear of being penalized. QSEHRAs start in 2017; prior IRS relief was extended through 2016. Find more details here.
Equity crowdfunding. Regulation Crowdfunding (Reg CF) went into effect on May 16, 2016. It governs investments through equity crowdfunding portals by the general public (i.e., those who are not accredited investors). The IRS also weighed in for the first time on the tax consequences of crowdfunding, which depends on the type of crowdfunding involved—loans, equity, or gifts. It’s too early to tell how equity crowdfunding is going, but it’s sure to continue in 2017. Find more details here.
Disasters. 2016 certainly saw its share of natural disasters (I personally went through Hurricane Matthew) and other catastrophes (e.g., arson in Tennessee). Disasters can devastate businesses and the employees who work for them. If we learned anything, it’s that we must be prepared for whatever may happen. Find more details here.
Higher interest rates. For years, the federal funds rate had been at a historically low level; the first increase did not occur until December 2015. As a result, the IRS interest rates for overpayments and underpayments, which had not changed since October 2011, was increased in April 2016. In December 2016, the Federal Reserve announced another quarter of a point increase, and there is the possibility of two to three rate increases in 2017. While rates are still very low, businesses with adjustable rate loans and those wanting to borrow in the future face higher interest costs. Read more about this issue here.
New tax rules. I’d be remiss if I didn’t point out that a number of new federal income tax rules for businesses took effect at the start of 2016. Three highlights are:
- Work opportunity tax credit’s new category for long-term unemployed.
- Research credit’s new opportunity for small businesses to use the credit as an offset to the employer’s share of Social Security taxes rather than against income tax.
- De minimis safe harbor increased to $2,500 for businesses without an applicable financial statement.
In 2017, the new Administration and leaders in Congress promise major tax reform, which is something we haven’t had since 1986. I’ll be watching any developments very carefully.
As the year wraps up, there’s still time to take actions that need to be done and to prepare for what’s to come. I hope that 2016 was a good year for you and that 2017 will be even better. Happy New Year!