Two small-business provisions backed by U.S. Rep. Joe Donnelly, D-2nd, have
been approved by the House in the Small Business Jobs and Credit Act of
According to a statement released on Thursday, the first provision is “a
common-sense tax fix to ensure that small businesses are not overly
penalized due to simple filing errors”; the second, an extension of the
Small Business Administration’s Dealer Floor Plan Program.
Donnelly has championed making 6707A tax penalties fair since a 2nd District
businessman contacted him about a complicated tax penalty which threatened
to bankrupt his business with excessive fines. “The owner of an asphalt
paving company employing four people was assessed $600,000 in penalties for
unknowingly failing to alert the IRS of a transaction that resulted in a
total tax savings of $38,000 over two years,” the statement said. “While he
has since fully paid his back taxes to the IRS, these mandatory penalties,
which the IRS is required by law to enforce without exception, would now
bankrupt him for a simple filing error.”
In response, Donnelly introduced H.R. 2143 in the spring of 2009 to make
6707A penalties proportionate and fair. His bill earned the support of the
U.S. Chamber of Commerce, the National Federation of Independent Businesses,
the Small Business Council of America, and 14 bipartisan co-sponsors.
“This started out as a casework issue—someone came to me for help on a very
complicated, very unfair, and also largely unknown problem,” Donnelly said.
“Even though it took an Act of Congress to fix, I’m proud to have led this
effort on behalf of a Hoosier small business. With the legislation passed
today, we’ve permanently fixed a tax penalty that is inherently unfair to
small businesses that make honest mistakes. Now my constituent and others
like him will be able to stay in business and keep Americans on the job.”
The legislation passed on Thursday would make IRS Section 6707A penalties
proportional to the amount of tax benefit accrued as a result of the
activity “listed” by the IRS. This will bring 6707A penalties more in line
with traditional IRS penalty structures. Specifically, the penalty would be
75 percent of the tax benefit received, with a minimum penalty of $10,000
for corporations and $5,000 for individuals, and a maximum penalty of
$200,000 for corporations and $100,000 for individuals.
In addition, The Dealer Floor Plan Program Extension and Improvement Act of
2010, also passed as part of the Small Business Jobs and Credit Act, was
re-upped for three years and its loan limits increased to $5 million.
The Dealer Floor Plan Program, created on a pilot basis in July 200- by the
U.S. Small Business Administration, provides loan guarantees through SBA
lenders for titleable assets such as autos, RVs, boats, and trailers.
That program was set to expire on Sept. 30.
“I’ve heard from dealers, manufacturers, and lenders back home that while
the Dealer Floor Plan Financing Pilot Program is well-intentioned, it needs
to be extended and the government guarantee needs to be raised,” Donnelly
said. “I’m pleased that soon, some of the changes the RV, auto, and marine
industries and lenders have identified as necessary to increase
participation in the program will become law.”