This was an historic step. Given the difficulty small businesses face in raising capital for investment (compared to the ready access to the capital markets enjoyed by the largest corporations), these lower tax rates made it somewhat easier for small companies to re-invest more of their earnings into expansion and improvement.

Small business still faces many tax law obstacles. Estate and gift taxes are particularly burdensome; businesses shouldn't be forced into the arms of corporate takeover or driven out of business entirely due to excessively heavy taxes at the time of transfer of assets within an estate or family business. Among the most afflicted groups of small business falling into this category are farms-truly small, family owned businesses.

Depreciation simplification is also backed by the small business community. The current ADR (Asset Depreciation Range) system is far too complex to be effectively utilized by most small businesses. The need for a simplified, straight-line depreciation system has long been recognized by the small business community, and was supported in the 96th Congress. The need persists, and small business must continue to back the needed changes, provided that small business is given its fair share of any business tax reductions.

RESOLVED

The Small Business Legislative Council continues to urge expansion and further simplification of the graduated business tax system, including investment tax credits, capital gains taxes, estate and gift taxes, and depreciation allowances. The SBLC, recognizing the gains made in the 95th Congreee in the adoption of the graduated business tax system, continues to urge further reduction of the minimum rate of corporate taxation to 12 percent, as well as a widening of the brackets to which the graduated rates apply. At a minimum the present $100,000 cut-off point should be increased as a first step to $250,000.

TRANSFER OF SMALL BUSINESS OWNERSHIP

Small business represents the key ingredient in maintaining competition and offering consumers a market place choice.

This balance can be jeopardized when a small entrepreneur is unable to sell and perpetuate his business because otherwise qualified buyers may not be able to obtain, through present commercial sources, sufficient financing to acquire the business.

P.L. 96-302 established a loan guarantee program, whereby qualified buyers, including employees of the firm, could purchase a company which otherwise might be forced to close, liquidate, transfer, or merge with a larger firm.

RESOLVED

Adequate financing is available from a seller if the seller holds a long-term note. However, in many cases this note is the primary asset of the seller and may constitute the sole retirement program of the seller. The availability of a loan guarantee to the seller of a business who is willing to hold an installment note for a long-term payout would greatly expand opportunities for small business to be sold as going enterprises to qualified buyers. Such loan guarantees protecting the seller of a business who holds the longterm contract could be at a lower level than the present 90% guarantee when banks are involved. In fact, somewhat greater exposure of a seller would provide an incentive to insure that cooperation and guidance is available to the buyer.

Congress is urged to maintain the funding vehicle
through SBA to enable small business sale agree-
ments to obtain a federal guarantee of the note held
by the seller when given by qualified buyers.

The SBLC recommends that a guarantee program be
continued under which loan packaging and loan re-
view boards, in cooperation with the banking
community, be established within each Standard
industrial Code (SIC) grouping, funded by the
respective industry and operated according to stan-
dards established by statute or regulations of an ex-
isting agency of government.

In this way a long guarantee, as part of a buy-out
transaction, would be reviewed by individuals within
the industry, packaged by a lender, and then present-
ed to the appropriate agency of government whose
primary responsibility would be to insure that all in-
formation is properly assembled and the agency's re-
quirements are met. Servicing of the loan would then
be the responsibility of the institution, operating in
much the same manner as in any loan.

Existence of a program as outlined above would:

1. Encourage transfer of existing businesses
which have a much greater potential for sur-
vival than do newly created businesses.

2. Relieve demand pressure on the money
market by having the seller carry a long-term
note.

3. Assure employees of job continuation.

4. Make careers in Small Business more attrac-
tive for younger people who would be willing to
forsake higher short-term earnings when
presented with an opportunity for ownership
without the need of amassing large amounts of
capital normally necessary for a business buy-

out.