A New Administration & Small Business

This past year has proven to be quite a challenging, wrought with risks and uncertainties, impacting even the most well positioned companies. Now businesses will have to likely come to terms with changes from a new administration, so what potential impacts will that have in the upcoming year?

COVID Impacts

COVID 19 is still experiencing ups and down with the likelihood of the new administration encouraging OSHA to promulgate and enforce more stringent mandatory national workplace safety rules. Due to the spike in cases and hospitalizations, it is possible there may be advancements in some type of emergency Covid-19 protections in the workplace come January, mandating the Center for Disease Control Guidelines (allowing for social distancing, frequently disinfecting the work place and providing protective equipment like goggles or face masks.)

Business owners have expressed concern the proposed emergency standards may not be flexible enough to accommodate differences in manufacturing procedures and operations. Employers, fearful they may be unable to comply with a “one-size-fits-all” ruling, are wary of robust OSHA enforcement and are seeking some type of COVID-19 liability protection. A maximum fine OSHA can issue against an employer is $134,937 per violation, when an employer’s breach of safety rules is considered willful” or is a repeated violation. For other violations, including “serious” and other than “serious” offenses, the safety agency’s fines max out at $13,494 per infraction.

Made in America

The President-Elect has plans to build on the current administration's “Buy American” focus by making a $400 billon procurement investment. By cracking down on waivers to Buy American requirements, ending false “Made in America” advertising and using expanded Manufacturing Extension Partnerships, small firms will have the opportunity to fulfill these procurement needs. It is likely there will be a priority on smaller manufacturers, particularly those owned by women and people of color thorough specific incentives, additional resources and financing tools. There is also a commitment to apply the Federal

Government’s goal of ensuring that at least 23% of federal contracts get awarded to small businesses.

Business owners should be aware that there will be a required commitment for companies receiving procurement contracts using taxpayer dollars to pay at least $15.00 an hour, provide paid sick leave, maintain fair overtime and scheduling practices, and guarantee a choice to join a union and bargain collectively.

Reshoring

To dissuade companies from building overseas, the next administration is considering a 10% advanceable tax credit for investments meant to create manufacturing jobs or modernize manufacturing facilities. There’s a stick to the carrot, too—companies that offshore production and then sell products or services back to the United States will have to pay a cumulative 30.8% tax penalty on their profits.

Taxes

Tentative plans to increase taxes of those earnings over $400,000 have been discussed. President Elect Biden also proposed raising the corporate tax 7 points to 28%, but this would not affect partnerships and S-corporations. There is also a proposal to impose a 12.4% social security tax on income owned above $400,000, evenly split between employers and employees. Qualified business income deductions (Section 199A) will be phased out for filers with taxable income above $400,000.

The administration has also proposed to offer tax credits to small businesses for offering workplace retirement saving plans and to expand energy related tax credits.

Many of these proposals require congressional approval. With the makeup of the Senate is still up in the air and the impact of our struggling economy, even Democrats may be reluctant to raise taxes right off the bat. Either way, small and medium sized businesses should keep an eye on these topics in 2021.