Te help small business attract private investment to meet its long-term and equity capital needs:

IT IS RECOMMENDED that:

THE TAX BENEFITS FOR SBICS (AND THEIR SHAREHOLDERS)
BE EXPANDED TO MAKE THEM MORE EFFECTIVE VEHICLES
FOR ATTRACTING PRIVATE CAPITAL AND PROVIDING CAPITAL
TO SMALL BUSINESS; (Chapter 9)

A DEDUCTION BE ALLOWED FOR DIVIDENDS ON PREFERRED
STOCK PAID TO VENTURE CAPITAL INVESTORS BY SBES
AND MBES; (Chapter 9)

UNLIMITED ORDINARY LOSS TREATMENT BE ALLOWED FOR
LOSSES FROM THE SALE, EXCHANGE OR WORTHLESSNESS OF
SBE AND MBE EQUITY INVESTMENTS; (Chapter 9)

THE 25% ALTERNATIVE CAPITAL GAINS RATE BE APPLIED

TO ALL GAINS FROM SALE OF SBE OR MBE EQUITY INVESTMENTS
WITHOUT LIMITATION; (Chapter 9)

GAINS FROM SALE OF SBE OR MBE EQUITY INVESTMENTS BE
EXEMPTED FROM THE MINIMUM TAX ON TAX PREFERENCES;
(Chapter 9)

FROM

DEFERRAL OF TAX ON GAIN FROM DISPOSITION OF EQUITY
INVESTMENTS IN SBES, MBES, SBICS, AND "SBE BONDS"
BE ALLOWED IF THE PROCEEDS ARE REINVESTED IN OTHER
QUALIFYING PROPERTY. (Chapter 9)

To help the operator of a small business achieve security in his

retirement years:

IT IS RECOMMENDED that:

THE MAXIMUM DEDUCTION FOR INDIVIDUAL RETIREMENT
ACCOUNTS BE INCREASED TO $7500. (Chapter 10)

To ease the burden of the estate tax on the family of a deceased

small business operator:

IT IS RECOMMENDED that:

THE VALUATION OF THE BUSINESS FOR ESTATE TAX PURPOSES
BE APPROACHED IN TERMS OF THE INCOME FROM THE ENTER-
PRISE RATHER THAN THE FAIR MARKET VALUE OF ITS ASSETS.
(Chapter 10)

To help maintain the small business as a viable independent

enterprise:

IT IS RECOMMENDED that:

A PORTION OF THE GAIN FROM THE SALE OF AN SBE
EQUITY INTEREST BE EXEMPTED FROM TAX IF IT IS
TRANSFERRED TO ANOTHER SMALL BUSINESSPERSON;
(Chapter 10)

TAX ON GAIN REALIZED BY A LARGER ENTERPRISE FROM
THE SALE OF AN OPERATING DIVISION TO AN SBE OR MBE
BE DEFERRED IF THE PROCEEDS ARE INVESTED IN "SBE
BONDS. (Chapter 10)

To provide a formal structure for continuing analysis of the impact of taxation on small business:

IT IS RECOMMENDED that:

AN OFFICE OF SMALL BUSINESS TAX ANALYSIS BE CREATED
WITHIN THE SMALL BUSINESS ADMINISTRATION. (Chapter 8)

х

THE IMPACT OF TAXATION ON SMALL BUSINESS:

A PROPOSAL FOR REFORM

PREFACE

The importance of taxation and the small business community in the national effort for economic recovery was summarized by Senator Gaylord Nelson, Chairman of the Senate Select Committee on Small Business, in remarks on the floor of the United States Senate on January 10, 1975 as follows:

"There is wide agreement that a package of tax reductions
is urgently needed to pull the country out of a recession,
without further aggravating inflation."

"What should be the participation of small business in this
tax package? The small business community numbers 97 per-
cent of the Nation's 12 million enterprises. It accounts
for more than one-half of all employment and about one-third
of the gross national product. It also provides invaluable
leadership in local communities across the Nation, maintain-
ing economic bases which contribute to balance between rural
areas, smaller towns and larger cities."

"It can certainly be argued that one of the approaches to im-
proving the economy is to confer the lion's share of the new
advantages on a very few great corporations which already have
lower effective tax rates than smaller companies ...

"To me it seems far more equitable, and potentially more effective,
to distribute the benefits...so that smaller business receives at