The Clinton administration sent a shudder through the small-business advocacy community last week when aides passed the word that the president was "undecided" on whether to sign or let die a fix in the tax law covering installment sales.
He finally did sign it on Thursday, freeing thousands of owners to go ahead and sell their businesses, but the delay put quite a squeeze on those trying to close their deals before year's end.
The president had been expected to sign the measure, and he had until Monday to do so. Had he not, it would have fallen victim to a pocket veto, and the issue would have been left to the next Congress and the incoming Bush administration.
Congress pushed through the change just before Christmas -- the House on a voice vote, the Senate by unanimous consent. It repealed an ill-fated 1999 "loophole closer" that unexpectedly whacked owners who sold their businesses on installment contracts.
Under that law, most owners who sold on installments had to recognize all the profits from the transaction in the first year and pay tax on them, even though they might not receive much of the actual payment for years.
The administration offered no explanation for the delay, but there were suggestions earlier that it was unhappy because Congress voted a full repeal, which will also benefit larger businesses, instead of targeting the fix at smaller enterprises. Also, it will cost the Treasury $2 billion over 10 years.
Accountants and other advisers have been besieged with calls from buyers and sellers trying to get deals done before year-end.
"I've been getting calls almost every day from people waiting till this thing gets signed before they close their sale," said Lorin Luchs, partner in the national tax office of BDO Seidman, a big accounting firm.
"Because of the fact that it basically affects the purchase price of the business," which is premised on sellers getting installment treatment, they want to know what the law is before they close the deal, he said.
The National Federation of Independent Business, a small-business lobby group in Washington, figured 260,000 businesses nationwide were affected by the provision. "This is going to be a huge relief for them," said Jim Hirni, NFIB's manager of legislative affairs.
"When you look down the list of things in Congress, this is probably the biggest thing small businesses are getting this year," Hirni said.
The last-minute budget bill passed by Congress and signed by President Clinton last month contained a couple of other minor benefits for small business that owners may be able to take advantage of.
Most are narrow and of little use except in special situations, but one worth noting is an extension of a four-year-old pilot program that allows self-employed workers and small-business owners to set up special untaxed investment accounts to pay medical expenses.
The program had been scheduled to expire Dec. 31 but now will last at least two more years, during which time proponents will likely try to widen it to attract more participants.
The "medical savings accounts" allowed under the program had been highly touted by Republicans as a mechanism to extend health insurance to people who now often do not have it, while bringing market pressure to bear on health-care costs.
But the demonstration program received little attention over the years, and relatively few people signed up.
Under the program, eligible individuals or businesses buy a high-deductible insurance policy to cover medical catastrophes and then make tax-deductible contributions to the medical savings account, which can be tapped to cover routine health expenses.
Unspent funds in the account carry forward, along with any investment earnings, and are tax-free as long as they are used for medical expenses.
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