Dear valued member,

If you would like more information on our organization, the benefits of membership, or are interested in joining to assist in our political and educational campaigns please use the links listed above. Thank you and we look forward to working with you toward our shared goals in the future.

Sincerely,

Robert J. DiCarlo
Senator Emeritus
NCE Executive Director 

Although it wasn't an official State of the Union, President Barack Obama's Tuesday night prime-time address to Congress certainly had the look and feel of one.

Small business and entrepreneurship were mentioned several times. Obama outlined a “new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small-business loans to the consumers and entrepreneurs who keep this economy running.” He went on to say, “I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers…”

In drawing parallels with the current economic crisis facing the U.S., Obama cited past times of challenge, including the Civil War, the Industrial Revolution and the Great Depression and the enduring benefits that came out of each of those times. Obama noted that, “In each case, government didn’t supplant private enterprise; it catalyzed private enterprise. It created the conditions for thousands of entrepreneurs and new businesses to adapt and to thrive.”

Obama talked in great detail about the need to enact health care reform. Echoing NCE's views, the president pushed for Congress to act on health care reform this year, stating that, “It [the rising cost of health care] is one of the major reasons why small businesses close their doors and corporations ship jobs overseas.”

Study Criticizes AHP-Type Health Proposals
A recent study by the nonpartisan New America Foundation found that allowing insurers to sell insurance across state lines would have a negative impact on the insurance market for the majority of people. The New America Foundation, a nonprofit, nonpartisan public policy institute, recently released a report, entitled, “Across State Lines Explained: Why Selling Health Insurance Across State Lines is Not the Answer.” The report found that allowing insurers to sell insurance across state lines would have a negative impact on the health insurance market for the majority of people. Click here to read the full report.

To allow for health insurance to be sold across state lines means that insurers could sell coverage to anyone in any state. Insurers would have to follow the rules and regulations of the state in which they are based, rather than those of the state in which a policyholder resides. State insurance commissioners would not have the authority to enforce their rules in their own states on plan offered by an out-of-state insurer.

The report contends that while younger and healthier individuals would benefit from cheaper premiums by buying coverage across state lines, all others would see increased premiums, particularly those who prefer comprehensive coverage. Additionally, the report argues that an across state lines proposal would likely leave more Americans without insurance over time.

The report addresses several “myths” concerning the advantages of an across state lines proposal as it relates to benefit mandates, consumer choice and access, marketplace competition, the elimination of tax preferences for employer-provided health insurance and high-risk pools. The report’s authors suggest that the only way to make an across state lines and high-risk pool proposal work would be in the framework of guaranteed issue and low-income premium subsidies or adequately funded high-risk pools coupled with federal licensure and regulatory oversight of insurers.

Len Nichols, Director of the Health Policy Program at the New America Foundation and coauthor of the report, said “selling health insurance across state lines represents a step backwards not only for the health insurance marketplace, but also and more importantly for the American people who struggle everyday to secure quality, affordable coverage.”

The report is timely as it provides some insight into many of the health care proposals that exist today. Allowing individuals to purchase health insurance across state lines is not a new idea. Similar proposals have failed to pass both chambers of Congress in the past for various reasons. However, as health care reform proponents gear up for the 111th Congress under a new administration, this proposal will likely gain more traction as lawmakers look for solutions to the broken health care system.Rep. Charles Gonzalez (D-Texas) has introduced legislation designed to reduce the complexity of the tax code and provide taxpayers with the ability to take a standard deduction for home office expenses. House Small Business Committee member Charles Gonzalez (D-Texas) introduced the Home Office Tax Deduction Simplification and Improvement Act (H.R. 7074). The bill would bring clarity to the process of claiming the tax deduction for a home office and direct the Treasury Secretary to establish an optional standard deduction.

Currently, the tax code allows a deduction for home office expenses for self-employed taxpayers and employees who must use their home for business purposes at their employer’s request. However, according to the Internal Revenue Services’ Office of Taxpayer Advocate, only 2.7 million of the nearly 20 million Schedule C filers in tax year 2003 took a home office deduction, despite the fact that nearly 8 million taxpayers use one or more rooms in their home for business purposes.

Rep. Gonzalez introduced the legislation in the wake of a July 30 hearing he chaired on the House Small Business Subcommittee on Regulations, Healthcare and Trade. Witnesses described how the complexity of the tax code has led to the underutilization of deductions available to small-business owners. Testimony implied that the home office tax deduction is too complex and cumbersome, deterring home business owners from claiming the deduction.

GAO Study on Rental Real Estate Tax Reporting
A new report, issued by the Government Accountability Office (GAO), will likely intensify the Internal Revenue Service’s efforts to ensure tax compliance for rental real estate activities.

A new Government Accountability Office (GAO) report found that more than half of all individual taxpayers with rental real estate "misreport" related activities on their tax returns.

The IRS believes this resulted in a loss of an estimated $12.4 billion in taxes in 2001, and the report recommends some changes in tax reporting requirements for rental real estate activities.

GAO found that 8.7 million individual tax returns reported rental real estate activity for 2001, and the number increased to 9.1 million by 2005. GAO said individuals owned about 83 percent of the 15.7 million rental housing properties with fewer than 50 units, and about two-thirds were managed by their owners.

The study showed individuals (or couples filing joint returns) tend to misreport their net income from rental real estate activities more frequently than other types of income. For example, only about 10 percent of taxpayers misreported their wage income in 2001, while 53 percent misreported rental real estate income. The most common type of error was misreporting related expenses, which GAO estimated for 43 percent of taxpayers with rental real estate income.
About a quarter of the tax returns with rental real estate activities were considered to have misreported expenses because owners couldn’t substantiate their expenditures. That amounts to 3.9 million taxpayers misreporting expenses and 2.1 million considered to have misreported simply because they didn’t keep proper documentation.

GAO estimated that 1.3 million tax returns misreported the amount of rental income owners received. Some taxpayers did not report any rental income, while others reported rental income on only some of their properties and some did not report the correct amount of rent received.

The agency said the main reason for misreporting is careless or confusing information reporting requirements. Some the examples cited in the report are:

• Neither payers nor receivers of mortgage interest have to report the address of the rental property, making it difficult for IRS to determine what properties a taxpayer owns.
• Taxpayers with rental real estate activities not considered a trade or business don’t have to file information returns, Forms 1099-MISC, reporting payment made to individual contractors for repair services, but a sole proprietor engaged in a trade or business does.
• The rules for calculating depreciation are not clear, and many owners are not aware that they need to depreciate some expenses over time. The IRS doesn’t provide guidance on how to determine the value of land, which is not depreciable.

Among the recommendations on how to improve compliance, GAO suggests Congress should consider making all taxpayers reporting rental real estate activity subject to the same information reporting requirements as other taxpayers with a trade or business. GAO also recommends that the IRS require the reporting of additional details on tax and information returns, provide taxpayers with additional guidance, and enhance its outreach efforts.