In the face of a fiscal emergency and skyrocketing unemployment, Governor Chris Christie is taking action to stave off a devastating, automatic tax hike for New Jersey employers. Governor Christie’s proposal recognizes that with a 10.1% unemployment rate and a business climate that ranks dead last in the nation, now is not the time to further burden our small businesses.

The impending employer tax increase will impose the highest rate created under the law, forcing small business owners to pay on average an increase of 52 percent or $400 per employee. Small businesses already struggling to survive against the highest taxes in the nation are now being asked to bear the burden of a depleted Unemployment Compensation Fund, when nearly $4.6 billion of employer and employee contributions were previously diverted for other purposes.

Under the Christie Plan, small businesses will see manageable payroll tax increases that will dramatically limit the impact on employers. Instead of a 52 percent increase, averaging $400 per employee, the Christie Plan reduces the rate, allowing for a 17 percent rise of $130 per employee. While law mandates these automatic increases, this phase in gives employers room to breathe, the flexibility to prepare for them in advance, and the ability to assume the costs over time.

At a time when New Jersey is struggling to create jobs, Governor Christie’s plan will give small businesses some needed flexibility and provide critical relief during these tough economic times.

THE CHRISTIE PLAN TO PROTECT NEW JERSEY’S SMALL BUSINESSES

Reducing the Automatic Tax Increase Threatening Struggling Small Businesses. The Christie Plan reduces the employer tax increase required under current law. The impending employer tax increase will impose the highest rate created under the law (it jumps from the second lowest rate to the highest column E + 10). This change would increase the employer tax on average by 52 percent or $400 per employee. Never before has the rate increased as dramatically as it is slated to do July 1st. The Christie Plan reduces this increase to one step on the tax table. Consequently, on July 1, 2010 employers will experience a 17 percent increase or $130 per employee.

Capping the Rate Change to Allow Small Businesses to Plan for the Future. The Plan limits future legally required increases to one column per year. The practical effect of this change is to cap the rate increases expected in July 2011 through July 2013. These increases will be limited to one column per year in order to mitigate the “tax shock” that employers would experience if the legally required increase was implemented. This gives small businesses breathing room during these tough economic times and the ability to plan ahead.

Bringing New Jersey Unemployment Benefits In-line with Other States. Right now New Jersey is an outlier compared to other states when it comes to unemployment benefits. While it is important to help those New Jerseyans who are looking for work, the State’s current benefits exceed what practically every other state in thenation provides. In order to keep the Unemployment Compensation Fund solvent for the future, changes need to be made.

• Bringing New Jersey’s Weekly Benefit More In-Line with the Rest of the Country. Only six states pay weekly benefits in excess of $500, making New Jersey the state with the second highest benefits level in the country. Under this proposal, New Jersey would rank third highest, with a weekly benefit maximum of $550. Annually, this change from $600 to $550 will save $295 million.
• Implementing Practical One-Week Wait Period Like Neighboring States. Forty states have a “wait period,” including New York and Pennsylvania. This change will not shorten the maximum duration of the regular benefit period. If a claimant qualifies for the full 26 weeks, then he/she will receive benefits for that period. Annually, this change will save $67 million.
• Tougher Eligibility Standards for Dismissal as a Result of Misconduct. The Plan requires employees dismissed for misconduct to obtain other employment for a prescribed period of time before they can once again qualify for an unemployment benefit. While virtually all states have more stringent standards for individuals dismissed due to misconduct, New Jersey’s treatment of these individuals is more lenient. This change would save an estimated $189 million.
• Using Federal Dollars for Extended Benefits. The Plan will make the “extended benefit” provision dependent on the continuation of 100 percent federal funding of benefit costs. This is a provision that has been adopted in 21 other states, including three neighboring states. This would result in $1.6 billion in savings over the next two years.

Preventing Future Diversions from the Trust Fund. The Christie Plan supports a constitutional amendment (SCR-60) on the ballot this November to prevent future raids of the Unemployment Compensation Fund.

Request Federal Action to Help Avoid Job-Killing Payroll Tax Increases. The Plan would call on the federal government to continue full federal funding for extended benefits and to help states avoid job-killing payroll tax increases. Twenty-eight states have insolvent unemployment insurance funds and are now receiving federal loans. It is anticipated that 40 states will be receiving loans by the end of this calendar year.

. [Act sec. 1221 amends Code section 51(d)] Under Code section 51(d)(1), for purposes of the work opportunity credit, an individual is a member of a targeted group if such individual is-(A) a qualified IV-A recipient, (B) a qualified veteran, (C) a qualified ex-felon, (D) a designated community resident, (E) a vocational rehabilitation referral, (F) a qualified summer youth employee, (G) a qualified food stamp recipient, (H) a qualified SSI recipient, or (I) a long-term family assistance recipient.

Act sec. 1221 amends Code section 51(d) by adding at the end new paragraph (14): “(14) Credit allowed for unemployed veterans and disconnected youth hired in 2009 or 2010.”

Credit allowed for unemployed veterans and disconnected youth hired in 2009 or 2010.  Under new subparagraph (14)(A) of Code section 51(d), any unemployed veteran or disconnected youth who begins work for the employer during 2009 or 2010 shall be treated as a member of a targeted group for purposes of subpart F of part IV of subchapter A of chapter 1 of the Code.

Unemployed veteran.  Under new clause (14)(B)(i) of Code section 51(d), the term “unemployed veteran” means any veteran (as defined in Code section 51(d)(3)(B), determined without regard to Code section 51(d)(3)(B)(ii)) who is certified by the designated local agency as-(I) having been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date, and (II) being in receipt of unemployment compensation under State or Federal law for not less than 4 weeks during the 1-year period ending on the hiring date.

Disconnected youth.  Under new clause (14)(B)(ii) of Code section 51(d), the term “disconnected youth” means any individual who is certified by the designated local agency-(I) as having attained age 16 but not age 25 on the hiring date, (II) as not regularly attending any secondary, technical, or post-secondary school during the 6-month period preceding the hiring date, (III) as not regularly employed during such 6-month period, and (IV) as not readily employable by reason of lacking a sufficient number of basic skills.

Act sec. 1221 applies to individuals who begin work for the employer after December 31, 2008.

DEADLINE: JUNE 15TH

The links below explain a new NJ Tax Amnesty program running from 5/4-6/15/09.  The information is provided courtesy of IRS Stakeholder Liaison Ric Costow. 

www.njtaxation.org 

http://www.state.nj.us/treasury/taxation/amnesty2009/index.shtml

What did the Obama Administration announce today?

Why will purchasing securities on the secondary market help small business owners?

Prepared by Congressman John Adler’s Office

The small business provisions in the American Recovery and Reinvestment Act will provide immediate assistance to small businesses in need of financing and tax relief.

• The package contains over $30 billion dollars in tax relief to businesses. These tax breaks for businesses will allow them to hire more workers, purchase more equipment and smooth out losses that have occurred as a result of the economic recession.
• The legislation provides more than $13 billion for loans, lines of credit, and equity capital to small firms, resulting in the creation or retention of more than 400,000 jobs.
• In addition, there is an increase of $730 million for the Small Business Administration (SBA), and changes made to the agency’s lending and investment programs to reach more small businesses that need help.
• These important provisions will provide entrepreneurs with the financial assistance and tools they need to weather these challenging times and begin to turnaround our economy.

Tax Relief Provisions

Tax Credit for Hiring Seniors and Youth:  The bill encourages job creation by providing businesses with a $2,400 tax credit for hiring a recently-discharged unemployed veteran or a youth that has been out of work.  An individual would qualify as an unemployed veteran if they were discharged from active duty during the five-year period prior to hiring and received unemployment compensation for more than four weeks during the year before being hired. An individual qualifies as a disconnected youth if they are between the ages of 16 and 25 and have not been regularly employed or attended school in the past 6 months.

Tax Credit Bonds for Construction: The package creates tax credit bonds for the construction of schools, bridges, roads, and other infrastructure projects.  Small businesses in these industries will see increased demand for their services.

Deduction for Capital Purchases:  The bill will allow business owners to increase the amount of money they can deduct for new capital purchases in 2009.  All business owners will be allowed to claim a first-year depreciation deduction equal to 50% of the cost of depreciable property.

Small Business Expensing Deduction for Capital Purchases: The bill will allow small businesses owners to receive a 100% tax deduction for capital purchases up to $250,000 for new and used equipment purchases. 

Net Operating Loss for Small Businesses: The bill will increase the carryback period for net operating losses (NOL) from two years to five years.  During this economic recession, if a company has a net operating loss, they will be able to receive a tax credit for taxes paid over the past five years in order to make up for current losses.

Delayed Recognition of Cancellation of Debt:  Under current law, any debt forgiveness that a taxpayer/small business owner receives is considered income subject to federal income taxes.  The bill allows companies that have debt cancellation income to defer taxes on that income for five years and then pay the tax in increments over the following five years.

 Small Business Administration Provisions

 7(a) Loan Guarantee Program

The Economic Recovery package includes $375 million for a temporary fee reduction for the Small Business Administration’s 7(a) loan guarantee program.

The bill directs the SBA to collect no fee or reduce fees to the maximum extent possible for the 7(a) loan program, which are the most basic and most used type loan of SBA’s business loan programs. The SBA’s 7(a) Loan Program has a maximum loan amount of $2 million dollars. 

Website:                     http://www.sba.gov/services/financialassistance/sbaloantopics/7a/

Local Information:    SBA New Jersey District Office

                                    Two Gateway Center, 15th Floor
                                    Newark, New Jersey 07102
                                    (973)645-2434

 Email:                         answerdesk@sba.gov

504 Loan Program

The Economic Recovery package includes $375 million for the temporary fee reduction for the 504 loan program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  The SBA is directed to collect no fee or reduce fees to the maximum extent possible for the 504 loan program.  Generally, fees total approximately three percent of the debenture.

The maximum loan for small businesses is $2 million or $4 million for manufacturers.  Loans must be used for fixed asset projects such as: purchasing land and improvements; construction of new facilities, or modernizing, renovating or converting existing facilities; or purchasing long-term machinery and equipment. The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

Website:  http://www.sba.gov/services/financialassistance/sbaloantopics/cdc504/index.html

Local Information:    SBA New Jersey District Office

                                    Two Gateway Center, 15th Floor
                                    Newark, New Jersey 07102
                                    (973)645-2434

Email:                         answerdesk@sba.gov

Micro-Loan Program

The Economic Recovery package included $6 million for direct loans provided under the Small Business Administration’s Microloan program.

This program provides very small loans to start-up, newly established, or growing small businesses. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $13,000. Applications are submitted to the local intermediary and all credit decisions are made on the local level.

Website:         http://www.sba.gov/services/financialassistance/sbaloantopics/microloans/index.html

Local Information:    SBA New Jersey District Office

                                    Two Gateway Center, 15th Floor
                                    Newark, New Jersey 07102
                                    (973)645-2434

Email:                         answerdesk@sba.gov

Business Stabilization Program

The Economic Recovery Package included $225 million for loan subsidies and loan modifications for loans to small businesses that are experiencing immediate financial hardship.

This provision will provide loans on to viable small business concerns that have a qualifying small business loan and are experiencing immediate financial hardship.  The loan is to be used to make periodic payment of principal and interest, either in full or in part, on an existing small business loan for no more than 6 months

Local Information:    SBA New Jersey District Office

                                    Two Gateway Center, 15th Floor
                                    Newark, New Jersey 07102
                                    (973)645-2434

Email:                         answerdesk@sba.gov

Restoring Credit to Small Businesses

Guaranteeing SBA Loans

• Given the recent decline in the lending capacity of banks, the Economic Recovery package permits the Small Business Administration (SBA) to guarantee up to 95 percent of a small business loan, making the banks’ limited capital more accessible to small businesses.

Unfreezing Credit Markets

• In order to spur new economic activity, the SBA is given the ability to assist small business lending markets. This is accomplished by allowing the agency to provide liquidity and credit enhancements directly into the small business lending markets, which will allow them to encourage the flow of capital.
• o This will enable lenders to replenish their funds and make more loans to small firms. As a result, banks will be better able to lend, and entrepreneurs will be better able to secure financing on reasonable terms.

Making Loan Payments More Manageable for Business Owners

• The Economic Recovery package will allow the SBA to refinance existing non-SBA and SBA loans, borrowers will be able to secure more manageable repayment terms.
• o As a result, businesses will be better prepared to weather the economic downturn and be able to retain their employees. Doing so will also free up capital for lenders to make more loans to local businesses in need of financing.

Ensuring that Entrepreneurs are not Locked Out of the Capital Markets

• For borrowers unable to secure traditional financing, SBA will be able to collect applications and credit information on borrowers seeking loans. SBA will make this information available to SBA lenders and assist in approving the loan.
• If lenders do not choose to participate, the SBA can then provide the financing, providing small businesses with the funds they need for their operations and payroll. This is essential for small businesses that are unable to secure private sector financing, as they will begin to establish a loan repayment history that will increase the likelihood that traditional lenders will provide them financing. After the loan begins repayment, the SBA will then offer to sell such loans to SBA lenders.

Tuesday, January 13, 2009

Philadelphia Business Journal - by Bernard Dagenais

Most Philadelphia-area business leaders expect their 2009 salary budget to be smaller than last year. Significantly fewer expect to hire new employees and attracting customers is the top challenge.

Those were some of the highlights from the annual Sovereign Bank survey presented Tuesday at a Greater Philadelphia Chamber of Commerce economic outlook breakfast. Sovereign Executive Vice President for Commercial Banking Larry Delp presented the survey results at the Park Hyatt Philadelphia.

Only 25 percent of the 400 respondents said they expect to hire in 2009, compared with 55 percent a year ago.

The projections were supplemented by a presentation by Abby Joseph Cohen, president of the Global Markets Institute and senior investment strategist for Goldman Sachs, who predicted unemployment would peak at 9 percent later this year. Unemployment nationwide now stands at 7.2 percent.

Cohen also pointed to indicators that a rebound wasn’t far off, including low company inventories indicating potential for more production, and federal government policy to shore up financial institutions and stem job losses by shifting funds to state governments now facing budget shortfalls. The fact that some sectors, particularly residential real estate and labor, have been in a recession for quite some time could be an indication that economic cycles are heading for a rebound, she said.

The survey showed a significant shift in financial health compared to a year ago, when 62 percent of the chamber members who responded to the November survey said they were in slightly stronger or significantly stronger position. This year 65 percent said they were in about the same shape or worse.

When it comes to challenges facing the region, 49 percent ranked taxes as the greatest, following by high crime, the cost of health care, the quality of education and neighborhoods in decay.

For top strengths, they ranked institutions of higher learner at the top, followed by arts and cultural attractions, overall quality of life, quality of health care and cost of living.

An accompanying consumer survey by Sovereign found that 57 percent of respondents pegged rising unemployment as the top threat to the U.S. economy. Declining home values and foreclosures ranked second, followed by the cost of the financial bailout and stock market volatility.

The survey was followed by a panel of business leaders who offered their views of their respective industries:

• John Gattuso of developer Liberty Property Trust said capital debt markets are closed and said commercial real estate will likely continue to suffer through 2010 and 2011, lagging the rest of the economy. He pointed out that current vacancy rates in Philadelphia and the region are relatively low, although they have risen slightly in the suburbs.
• William Graham, president of the Enterprise Integration Group at defense contractor Lockheed Martin Corp., said his company would continue to grow from its present 12,500 employees in the region.
• Judith Mondre, president of Mondre Energy, said energy prices are currently a bargain and represent an investment opportunity.
• Ralph Muller, CEO of the University of Pennsylvania Health System, touted health care as one of the region’s strengths.

Sovereign also conducted a survey of 400 consumers and found that quality of life of the region was the top asset, while cost of living is the top challenge. Better than half of those respondents said their economic situation was worse than a year ago, compared to only 27 percent in the 2008 survey.

When it came to the impact of the recession and financial crisis on consumer borrowing, 68 percent said it had no impact on their borrowing. The most challenging financial issue they faced in the next two years, however, was maintaining their current standard of living, with 61 percent ranking that above meeting everyday expenses and saving for retirement. Nineteen percent put job security as their top concern.

Dear Friends,

I believe that both our state and our nation need to take proactive measures to ensure that we come out of this recession quickly and in a strong position to take advantage of the economic recovery that will follow.

In October, I presented my Economic Assistance and Recovery Plan to the Legislature, and on Tuesday I signed “Invest NJ”, a key component of this plan, into law. Invest NJ will create jobs and make it easier for businesses to make new investments and spark economic growth needed to get this economy moving again.

Please watch this video about the Invest NJ Plan:

The plan has two components. The first provides a $3,000 grant to New Jersey businesses for each new job they create. That’s significant help to a business that may be considering hiring a new worker with a $30,000 salary.

The second component provides a grant equal to seven percent of any qualified capital investment over $5,000 up and through January 1, 2011. So if a business needs to upgrade their computer system at a cost of $100,000 we will provide them with a $7,000 grant to help cover their costs.

If your business is interested in applying for one of these grants please contact the New Jersey Economic Development Authority at (609) 292-1800 or you can go to their website www.njeda.com.

I know times are tough right now, but that’s why we’re doing everything we can to make sure people and businesses get the help they need to get this economy moving again and to get our state and our nation back on track.

You can find more information about my Economic Assistance and Recovery Plan at http://nj.gov/governor/home/plan.html

Sincerely,

Will your business need a cash flow boost during the recession?

If you’re a business owner and concerned over media reports about tightening credit, you might be surprised at some of the facts that contradict the rumor.

 First, a very small number of very large banks were involved in the mortgage market melt down. Second, there are more than 8,000 banks in the United States and the vast majority have money to lend.

Why is this so?  As the stock market prices tumble, people with money to invest turn to two stable and safe havens: Treasury Bills, Bonds and Notes; and Bank CD’s and Savings.  As a result, many banks are experiencing an influx of deposit dollars.  That only helps their bottom line if they lend the money back out at higher rates than they pay for the deposits.

The ‘tightening’ issue comes in to play when the banks make decisions on your loan request. You may need more collateral, personal guarantees, or a larger spread between your real estate collateral value and the amount of the loan.  The days of financing 120% of your home value are gone, and the ‘interest only’ payment opportunities will be more difficult to obtain.

What many businesses may be less familiar with are some other options for prospective borrowers that might provide funding when a direct bank loan is unavailable.  The Small Business Administration provides loan guarantees to the bank on your behalf to supplement or replace a deficiency in collateral.  Cooperative Business Assistance Corporation lends to small businesses at very competitive rates through a variety of programs with loan pools provided by banks and other sources.  New Jersey Economic Development Authority provides loans to support diverse business projects and that includes lower rate products and longer repayment terms for certain requests.

Small business owners who need credit line products for the ups and downs of cash flow should also consider Home Equity Lines of credit.  Why?  The rates of interest are typically lower than traditional business loans and the repayment terms require much smaller monthly payments.

As a large Chamber of Commerce, most banks and the other lenders listed above, are members of our organization.  We not only know the companies, but have relationships with many of the lending officers and senior officers to help our members find the right financing resource.

Millions of dollars in financing are available for business borrowers, so don’t be afraid to ask!