Layoffs, Benefit Cuts Coming Soon Due to Obama Overtime Rule
WASHINGTON – As the December 1, 2016 compliance deadline for the Department of Labor’s new overtime rule rapidly approaches, traditional small businesses, technology start-ups, and other small employers told the House Small Business Committee today that they may soon be forced to layoff workers, reduce benefits and lower wages to cover the costs of the new federally-mandated requirements.
“The DOL has heralded this rule as a long-overdue action that will provide tremendous benefits to workers,” said House Small Business Committee Chairman Steve Chabot (R-OH). “However, like so many of this Administration’s policies, this one-size-fits-all mandate will do far more harm than good.”
“Numerous small employers weighed in on this proposal and told the Department of Labor that the unprecedented salary level increase would have very negative repercussions,” Chairman Chabot noted. “They asked for a common sense rule that recognized that not all employers have the same resources or utilize the same compensation structures. Unfortunately, their pleas fell on deaf ears.”
“I want to assure the small employers here today, and those tuning in from across this great country, that while DOL didn’t listen to you, we are,” Chairman Chabot added.
Painful Choices Looming for Small Businesses
“From a personal perspective, this rule is likely to have negative consequences - not only to my company, but to my employees as well,” testified Albert F. Macre, a general partner at Payroll+ Services in Steubenville, OH.
“In addition to these negative impacts, the implementation window is very short. This rule will become effective on December 1, 2016, just over five months from now. Given that many small businesses are still struggling with the implementation of the Affordable Care Act five years after the enactment, this window of compliance seems barely cracked open,” Macre explained.
“As a small business owner with several salaried employees positioned between the current exempt overtime earnings threshold and that created by the Department of Labor’s new rule, I now find myself standing with countless other small business owners forced to swallow more government 'medication' prescribed before an accurate attempt at diagnosis has been completed,”Macre added.
Stunting the Growth of Tech Start-ups
“Looking back on when I started my company in 2010, I can tell you with 100% certainty that I would have not been able to hire my first employee had this rule been in place,” said Adam Robinson, the Co-founder of Hireology, a human resources technology business, in Chicago, IL.
“My company now has 100 employees with a median annual compensation that exceeds $70,000 a year - well above the US average. How many “Hireology’s” won’t get started as a result of this rule making that 1st employee unaffordable for an entrepreneur? Are fewer good-paying jobs created and fewer businesses launched the outcomes that are desired here?” asked Robinson.
“Like most federal regulations, the overtime rule is a one-size-fits-all policy that doesn’t distinguish among firm size, sector, location, or compensation structure. This means that companies that don’t fit the Department of Labor’s outdated model will be disproportionately hurt by the rule,” explained Robinson.
“At a time when the middle-class in this country is already being squeezed, the tech sector, sales jobs, and middle-management positions are a few areas that still provide relief. The overtime rule threatens to close those career pathways that have been paved by hard work,” he added.
Small Local Governments and Non-Profits Also Affected
“Mineral County is the very definition of a small governmental entity and we are very concerned about the potential impact of the new overtime rule on our ability to fulfill our fundamental responsibilities — many of which are mandated by the state and federal government,” testified Jerrie Tipton, the Chairman of the Mineral County Board of Commissioners in Nevada.
“Unfortunately, the new overtime rule does not adequately address the wide variations in local labor markets in counties across the country. And ultimately, please remember that the new rule will have broad consequences for taxpayers — and county services,” observed Commissioner Tipton.
“[T]he rule will drastically impact the budget and operations of nonprofits, as well as colleges and universities, health care providers, small businesses and local governments. These employers may be unable to absorb such costs without adverse impact to employee relations or fiscal operations,” testified Christine V. Walters, the Sole-Proprietor of FiveL Company in Westminster, MD.
“One of my clients provides rehabilitation services to a disadvantaged population, of which 85 percent of their clients meet the current poverty threshold. Unlike other employers, this organization cannot transfer increased costs to their lower-income consumers,” explained Walters.
WASHINGTON – Today small business owners and advocates told a key Congressional subcommittee that increasingly aggressive audit tactics by the Internal Revenue Service (IRS) have been used to intimidate small companies, creating an atmosphere of fear and uncertainty in the small business community.
“In the administration of the tax code, the IRS has dual roles: collection and enforcement,” said Subcommittee on Economic Growth, Tax and Capital Access Chairman Tim Huelskamp (R-KS) in his opening remarks. “Small businesses have a right to be treated fairly on both counts. Unfortunately, that isn’t always the case.”
“The Small Business Committee has heard from a number of small businesses that have been harmed in one way or another by the IRS. In at least two cases, aggressive audits have resulted in these companies closing their doors.” Subcommittee Chairman Huelskamp added.
National Taxpayers Union Speaks Out
“To this day, taxpayers and advisers continue to report on troublesome developments in IRS audits that range from isolated cases to broader policies,” testified Pete Sepp, the President of the National Taxpayers Union (NTU).
“From the view of the small business person immersed in an audit, such matters of policy seem academic. What, therefore, are the more palpable “fear factors” foremost in business owners’ minds when undergoing this process?” asked Sepp.
“Based on NTU’s review of research literature, statistical analysis, oversight reports, and hundreds of anecdotes over the past several decades, we believe the following are most pertinent,” said Sepp pointing to “uncertainty” and “intimidation tactics.”
“A September 2014 report for the National Association of Manufacturers calculated that the regulatory cost per worker for all tax compliance activities in firms of any size was a whopping $960 (using 2012 data and expressing in 2014 dollars). For companies with fewer than 50 employees, the tab was much worse – over 50 percent more, at $1,518 per worker. Unfortunately, these considerable outlays and resources do not buy peace of mind for small business owners who, as Ranking Member Velázquez stated, often operate in fear of vague laws being used against them,” Sepp added.
“Time Consuming,” “Expensive” and “Devastating”
“If Federal Express can manage millions of packages all over the world, it seems that the IRS could come up with some sort of bar code or other tracking system that would allow both the IRS and the taxpayers to track correspondence responding to notices and the status of their cases," testified Roger Harris, a franchise owner based in Athens, Georgia.
“The vast majority of small business audits are correspondence audits. While they are intended to cover only simple issues, because of the IRS’s focus on efficiency, they can be frightening to small business taxpayers, as well as being time consuming and expensive. In some circumstances when things go wrong, they can be devastating to a business,” Harris added.
A Lack of Transparency
“Aligned with this issue is a lack of transparency with the IRS,” said Lee Davenport, a Member of the Electronic Tax Administration Advisory Committee (ETAAC). “For most taxpayers, the information the IRS has about them is a mystery. It’s not easy for taxpayers to access and understand their tax information on file with the IRS, their previous tax-related interactions or their tax compliance obligations.”
“For small-business taxpayers, this issue is even more critical, because small businesses are more likely to complete multiple year-round transactions with the IRS. In many cases, when there is a compliance issue, small-business taxpayers find out with a surprising IRS notice after they file, or – even more stressful – an audit that can take months or years to resolve. For all types of taxpayers, accessing and using their tax information to proactively comply is almost entirely out of the question in the current system,” Davenport noted.
Job Creators Tell Committee Members: DOL Overtime Rule Bad for Their Businesses
WASHINGTON – Today, House Small Business Committee Chairman Steve Chabot (R-OH) held a roundtable discussion with small business owners from across the country on how their businesses and workers will be harmed by the new overtime rule issued by theDepartment of Labor last month. Committee members and entrepreneurs discussed how the Obama Administration’s pattern of regulatory overreach has created an atmosphere of uncertainty for America’s small businesses and hurt the very employees they claim to help.
“For months now, our Committee has been warning the Obama administration that the proposed DOL overtime rule will be a disaster for America’s 28 million small businesses and their workers,” said Chairman Chabot (R-OH). “With the December 1st compliance deadline approaching, small employers and their employees are now dealing with the consequences of this terrible policy in the form of job losses, demotions, less flexibility, lower wages, and reduced benefits.Today’s discussion highlighted just how devastating this rule will be for the millions of Americans who go to work every day at a small business. During these difficult times, small businesses need to know we have their back and will continue to do all we can to slash the government red tape that is harming them.”
Participants in the roundtable included Committee members Rep. Trent Kelly (R-MS) and Rep. Warren Davidson (R-OH), as well as Ms. Rudaina Hamade of Renaissance Property Management Solutions, LLC in Dearborn, MI, Mr. Ron Collins, of JCM Industries in Nash, TX, Mr. Harold Jackson of Buffalo Supply in Lafayette, CO, Ms. Ciara Stockeland, the Founder and COO of Mama Mia Inc. / MODE in Fargo, ND, Dr. Herb Sohn, the Owner of Strauss Surgical Group in Chicago, IL, Ms. Maxine Turner, President of Cuisine Unlimited Inc. in Salt Lake City, UT, Mr. Ian MacLean, of Highland Landscaping, LLC in Southlake, TX, and Mr. Jeffrey G. Tucker of Tucker Company Worldwide, Inc. in Haddonfield, NJ.
Chabot, Committee Members talk cutting government red tape with a diverse roundtable of small business owners from across the United States
Third Plank of Bold Agenda Includes More Than 100 Ideas to Tackle Excessive Regulations, Develop American Energy, and Promote Financial Independence
This is the third plank of A Better Way, a bold agenda to tackle some of our country’s biggest challenges. Last week, Republicans unveiled initiatives aimed atlifting people out of poverty andkeeping the American people safe.
Our plan—available now at better.gop—is comprised of at least 101 ideas, including:
· Fewer and smarter regulations. Cut down on needless regulations and make the rules we do need more efficient and effective.
· More affordable and reliable energy. Connect our energy boom to consumers, responsibly produce more of our own resources, and end needless delays that hold up jobs and projects.
· More financial independence and no more bailouts. Reward people who work hard and do the right thing, and put an end to Wall Street bailouts.
· More choices for workers and students. Make it easier for people to excel in schools and workplaces, and rip up the red tape that gets in their way.
· Real Internet innovation. Establish clear and consumer-friendly rules that prevent the FCC from making up regulations as it goes along.
· A crack down on lawsuit abuse. Keep trial lawyers in check, and improve protections for consumers and small businesses.
These ideas were developed by the Task Force on Reducing Regulatory Burdens, which includes: Agriculture Committee Chairman Mike Conaway (R-TX), Energy & Commerce Committee Chairman Fred Upton (R-MI), Financial Services Committee Chairman Jeb Hensarling (R-TX), Judiciary Committee Chairman Bob Goodlatte (R-VA), Natural Resources Committee Chairman Rob Bishop (R-UT), Oversight & Government Reform Committee Chairman Jason Chaffetz (R-UT), Science, Space, and Technology Committee Chairman Lamar Smith (R-TX), Small Business Committee Chairman Steve Chabot (R-OH), and Transportation & Infrastructure Committee Chairman Bill Shuster (R-PA).
About A Better Way. A Better Way is a bold policy agenda to address some of the country’s biggest challenges. It takes our timeless principles—liberty, free enterprise, consent of the governed—and applies them to the problems of our time. Developed with input from around the country, it starts the debate now on what we can achieve in 2017 and beyond. It is our vision for a Confident America, at home and abroad. Now we are taking these ideas to the people, so you have a clear choice about the direction of the country. To learn more, visit better.gop.
Dodd-Frank Destroying Jobs, Communities in America’s Heartland
WASHINGTON – Today representatives from community banks in America’s heartland told a key Congressional subcommittee how government regulations like the Dodd-Frank Act are killing small businesses in rural communities. The witnesses shared their stories with the House Small Business Subcommittee on Economic Growth, Tax and Capital Access about how new red tape like Dodd-Frank has killed jobs and devastated communities in rural America over the past six years.
“Across the country community banks are seeing the costs of complying with regulations soar, and the result has been less capital available for the main street shop looking to expand, for the entrepreneur looking to start a business, or for our neighbor hoping to purchase a new home,” explained Subcommittee on Economic Growth, Tax and Capital Access Chairman Tim Huelskamp (R-KS) in his opening remarks. “The impact of regulation on community banks is felt especially hard in our country’s rural areas, like my district in Kansas.”
“The rising cost of regulation is causing many small banks to merge with large entities that may not understand the local community, or causing some to shut their doors entirely,” Subcommittee Chairman Huelskamp added. “In rural towns without many other alternatives for access to capital, the results of top-down regulation can be devastating and impact the whole town. Home mortgage lending, small business lending, agricultural lending‒ all areas where community banks play a lead in providing capital‒ become much more difficult, and much more costly to consumers.”
COMMUNITY BANKS: VIEWS FROM THE HEARTLAND
“Rural banks will continue to serve their customers to the best of their abilities despite the many obstacles that have hurt their business models,” testified Shan Hanes of the First National Bank of Elkhart, Kansas. “Rural banks will compete with anyone on a level playing field and they have not backed down from such competition in the past. But when there is a combination of an unfair playing field and over burdensome regulations, all banks have great difficulty in surviving, not just competing. Banks are drivers of the economy, and this is especially true for rural banks.”
“Due to these factors in banks similar to mine, banks are exiting the mortgage lending market not due to credit decisions, but due to compliance and regulatory decisions,” Hanes stated. “The mortgage lending rules were intended to address the credit risk side; however the compliance risk has become greater than the credit risk.”
“America’s hometown banks are resilient, and have found ways of meeting our customers’ needs in spite of the ups and downs of the economy,” said Roger Beverage of the Oklahoma Bankers Association. “But it is a job that has become much more difficult because of the avalanche of new rules, guidances and seemingly ever-changing expectations of the regulators. This new regulatory atmosphere—not the local economic conditions—is often the tipping point that drives small banks to merge. The fact remains that there are nearly 1,500 fewer banks today than there were 5 years ago—a trend that will continue until some rational changes are made that will provide some relief to America’s hometown banks.”
Chabot Hails House Passage of Ozone Standards Implementations Act
Bipartisan Measure Protects Jobs and Public Health
WASHINGTON – House Small Business Committee Chairman Steve Chabot (R-OH) made the following statement after H.R. 4775, the Ozone Standards Implementation Act of 2016, was passed by the U.S. House:
“Over the last seven years, we have seen a disturbing pattern of regulatory overreach by President Obama’s EPA. To make matters worse, this dangerous pattern has been accompanied by an alarming lack of candor and clarity from the EPA about what exactly their new standards entail. This has left state governments and small businesses at a serious disadvantage as they try to navigate this maze of costly new environmental regulations and fight back against the EPA. With this bipartisan, common sense legislation, the House has restored important powers back to the states that will enable them to better protect the small businesses in their states against the EPA’s overreach.”
National Taxpayer Advocate: IRS Not Helping Entrepreneurs in the Sharing Economy
WASHINGTON – The National Taxpayer Advocate told members of the House Small Business Committee today that the Internal Revenue Service (IRS) has not been helping Americans navigate tax rules and regulations in the new sharing economy. Today’s hearing was the second in a two-part series held by the Committee examining tax compliance challenges for entrepreneurs in the sharing economy.
“When the IRS is behind the times, it puts small businesses behind the eight ball,” said House Small Business Committee Chairman Steve Chabot (R-OH). “This failure has left on-demand platform companies and their workers confused and frustrated as they try to do the right thing and pay the taxes they owe.”
“Here’s the real kicker: many on-demand companies say they would gladly provide tax compliance training but they don’t because they are afraid the IRS will reclassify their relationship and subject them to whole new host of regulations and obligations,” Chairman Chabot observed.
“Congressional committees like ours have a duty to provide robust oversight of the IRS and ensure they are providing small businesses with clarity and treating them fairly,” Chabot added.
THE NATIONAL TAXPAYER ADVOCATE’S VIEW
“If a person working in the sharing economy called the IRS toll free line today, he or she would hear a recording saying the IRS is not answering any tax law questions after April 15th, so please check IRS dot gov,” testified Nina Olson, the National Taxpayer Advocate at the IRS. “The same message is given to people asking questions at IRS walk-in sites. For a tax agency to not answer questions from taxpayers trying to learn what they need to do to comply is beyond unacceptable, it’s absurd.”
Under current IRS rules, Olson explained, “An Airbnb host would have to sift through a 24 page publication 527 residential rental property and an Uber driver would have to navigate through the 50 page publication 463 travel, entertainment, gift and car expenses and they still might not understand how these rules apply to themselves as service providers in the sharing economy.”Read More
WASHINGTON—House Small Business Committee Chairman Steve Chabot (R-Ohio), joined by House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-Utah) today asked the Office and Management and Budget for a long overdue status update on the federal paperwork burden.
Chairmen Chabot and Chaffetz, whose Committees have jurisdiction over the Paperwork Reduction Act, pointed out to OMB Director Shaun Donovan that “the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses and others by federal agencies and efforts to reduce those burdens.”
As Chabot and Chaffetz noted, “OMB’s report, which it calls the Information Collection Budget, is long overdue. Congress did not receive a report in 2015.”
Read full text of the letter here.
May 26, 2016
The Honorable Shaun Donovan
Office of Management and Budget
Washington, D.C. 20503
Dear Director Donovan:
As Chairmen of the Committees with jurisdiction over the Paperwork Reduction Act,
5 U.S.C. §§ 3501-21 (PRA), we write to inquire about the Office of Management and Budget’s annual report on the federal paperwork burden. Pursuant to the PRA, the Office of Management and Budget (OMB) is required to annually submit a report to Congress on the paperwork burden imposed on individuals, small businesses, and others by federal agencies and efforts to reduce those burdens. OMB’s report, which it calls the Information Collection Budget, is long overdue.
Congress did not receive a report in 2015. The last report that OMB issued was in 2014 and covered the paperwork burden imposed on the public in Fiscal Year (FY) 2013. We are concerned that OMB is not fulfilling its obligations under the PRA. Congress needs the Information Collection Budget to evaluate the overall federal paperwork burden and determine whether legislative changes are necessary to ensure the PRA operates as Congress intended. Therefore, we request that OMB provide the following information:
1. Why did OMB fail to issue a report to Congress on the federal paperwork burden in 2015?
2. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2014?
3. On what date will OMB publish the Information Collection Budget that covers the federal paperwork burdens for FY 2015?
4. Please explain how OMB will ensure that it provides Congress with an annual report on the federal paperwork burden as required by 5 U.S.C. § 3514 from now on.
5. Please provide all policies and guidance documents explaining how OMB approves information collection requests.
Please provide your responses no later than June 23, 2016
Committee on Small Business
Committee on Oversight and Government Reform
cc: The Honorable Howard Shelanski, Administrator
Office of Information and Regulatory Affairs, Office of Management and Budget
TaskRabbit, Experts Describe Challenges of the Sharing Economy to Congress
WASHINGTON – A representative for the on-demand platform company TaskRabbit told the House Small Business Committee today that the current tax, regulatory and legal climate threatens the success of entrepreneurs in the new sharing economy. The panel of experts described to lawmakers the bevy of new tax compliance challenges faced by small employers, employees and their customers as they navigate the online, app-driven sharing economy.
“No matter what you call it, the sharing economy is changing the face of American entrepreneurship and small businesses before our very eyes,” said House Small Business Committee Chairman Steve Chabot (R-OH). “The dizzying pace of this change has presented many new opportunities and new challenges for the millions of Americans who participate in it.”
“These new platforms have dramatically changed the way companies provide goods and services, giving their workers unprecedented freedom and independence. However, in their enthusiasm, these entrepreneurs are running smack-dab into the buzz-saw of an outmoded tax code that is not designed to accommodate them,” observed Chabot.
“Unfortunately, the IRS has not been part of the solution for entrepreneurs in navigating this new sharing economy. Too often, it has been part of the problem. Our current tax system isn’t working for these new small businesses. In many ways, it is working against them. We can do better, we must do better,” Chabot added.
ENTREPRENEURS TASK WASHINGTON WITH TAX & REGULATORY REFORM
“Tax compliance is just one area of many where our Taskers could benefit from better training. Our Taskers also are looking for direction on how to better market themselves and their services, access health care, and plan for retirement,” testified Rob Willey, the Vice President of Marketing for TaskRabbit.“We at TaskRabbit would like to be a resource, a partner, and a collaborator for that training – it is one of our main areas of focus in determining what types of services we can provide for our Taskers. We hesitate to pursue the kinds of training services we want to provide simply because the threat of litigation and the risks tied to worker classification laws and regulations at the federal and state level are real.”
Pointing to a proposal by economist Joseph V. Kennedy, who also testified at today’s hearing, Willey called for a legal and regulatory “time-out” for new sharing economy companies.
“In the early years of the Internet, Congress imposed a moratorium on federal and state taxation of Internet transactions. Doing so helped a young, nascent sector of the economy develop and provide real benefits for consumers,” explained Willey. “A limited period of legal and regulatory relief would enable platform economy companies to pursue innovative ways to develop and provide services and benefits to those small business owners and entrepreneurs who utilize platform services.”
“What we want to avoid is a situation in which the burdens of tax compliance become so great that it forces Taskers to scale back on their tasks, if not compel them to leave the network altogether,” added Willey.
NEW STUDY: SMALL BIZ GETTING “SHORT-CHANGED” IN SHARING ECONOMY
“The current tax administration system isn’t working for a significant percentage of on-demand platform small business operators or Treasury or IRS,” noted Caroline Bruckner, the Managing Director of the Kogod Tax Policy Center at American University. “At the root of this problem is a lack of information and understanding of tax filing obligations, which is compounded by an information reporting regime that results in widespread confusion. And these tax compliance challenges are only going to continue to grow and impact more and more self-employed small business owners.”
“Everyone is losing under the current rules. Both on-demand economy players and the IRS deserve greater efficiency and less hassle. We can do better,” said Bruckner.
Bruckner is the author of a brand new study released this week titled“Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy.”
“Although millions of Americans are engaging in the on-demand platform economy every day as sellers and service providers, the tax compliance challenges this new frontier presents have gone relatively unnoticed,” Bruckner’s study found. “At the same time, these challenges will grow with this fastest growing segment of the labor economy—creating unnecessary and ongoing burdens for the small business operators who power the on-demand economy.”
“At best, these small business owners are short-changed when filing their taxes; at worst, they fail to file altogether. In addition, these taxpayers face potential audit and penalty exposure for failure to comply with filing rules that are triggered by relatively low amounts of earned income and inconsistent reporting rule adoption,” the study concluded.
IS THERE AN APP FOR THAT?
“Congress and the IRS should take great care to make sure that the federal tax code enables—rather than stifles—the sharing economy,” testified Morgan Reed, the Executive Director of ACT/The App Association. “Specifically, the treatment of all sharing economy workers as 'employees' under the federal tax code would be detrimental to the sharing economy, especially small businesses.”
“Congress should work to advance legislation that would provide taxpayers with certainty and transparency in the tax resolution process and would provide the ability to settle disputes with the IRS in an effective and efficient manner,” Reed suggested.
*Today’s hearing was the first in a two-part series on tax compliance for small businesses in the sharing economy. On Thursday, the Committee will hear from the IRS’ National Taxpayer Advocate Nina Olson.
WASHINGTON - House Small Business Committee Chairman Steve Chabot (R-OH) made the following statement on House passage of the 55th National Defense Authorization Act (NDAA):
“The contracting reforms included in this year’s NDAA will provide new and improved opportunities for America’s 28 million small businesses to compete for defense contracts so that we can get the best possible products in the hands of our war fighters and make sure the tax payers get the most bang for their buck. I want to thank Chairman Thornberry and the House Armed Services Committee for their work in putting together this year’s NDAA and for including these common sense small business contracting reforms. I look forward to continuing to work with them and our Senate colleagues to get this vital national security bill to the President’s desk post haste.”Chairman Chabot penned an op-ed for Defense News this week in outlining the key contracting reforms included in this year's NDAA. Read More
Emmy-nominated actor and Made in America advocate
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Elite Aviation Products
Dr. Ray Perren
Lanier Technical College
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