small business

Useful Stats: Microbusinesses executed $6.1 billion of domestic R&D in 2021

In 2021, U.S. microbusinesses reported $8.1 billion in research and development (R&D) expenditures, of which the microbusinesses themselves performed 75% ($6.1 billion) The $6.1 billion in microbusiness-performed R&D represents an increase of 9% over the prior year and 17% since 2019. Microbusinesses are those with nine or fewer employees.

Spending decisions made during the pandemic influence the rate of recovery

Most states, businesses, families, and individuals spent the pandemic walking on the edge of a jagged economic cliff. Luckily, there were some guardrails in the form of fiscal recovery funds, disaster loans, paycheck protection, and childcare grants. These devices helped pull thousands back from the edge.

Department of Defense Approves $30 Million in Grants Under Defense Manufacturing Community Support Program

The Department of Defense recently awarded six Defense Manufacturing Community Support Program (DMCSP) grants totaling approximately $30 million from the Office of Local Defense Community Cooperation (OLDCC). The DMCSP invests long-term in critical skills, facilities, workforce development, research and development, and small business support to strengthen the national security innovation base.

IRS provides new direction on R&D expenses

The Internal Revenue Service recently published new interim guidance for companies to use when amortizing research or experimental expenditures — a new requirement for tax year 2022 created in the Tax Cuts and Jobs Act. The law’s changeover from allowing deductions to requiring amortization was expected to create significant tax burdens for small businesses, which could prove particularly destructive to newer companies funded primarily through nonfungible grants or contracts. According to an initial analysis by Grant Thorton, the proposed rules provide additional direction to help companies identify the appropriate costs for amortization but also could require further accounting method changes. A notable clarification in the rules seems to state that companies providing research services must amortize only those research expenditures that either entail financial risk to the company or would allow the company to use any resulting product for its business. Congress has proposed legislation allowing companies to return to deducting their research expenses, but these rules have not moved forward despite widespread support.

SBA rules changes mean more opportunities, TBED orgs should take second look at SBA lending programs

The U.S. Small Business Administration finalized new rules that provide more opportunities to leverage the agency’s flagship lending programs to support economic development strategies. The most significant changes in the rules would allow more non-depository lenders (e.g., loan funds) to participate in SBA’s lending programs, make employee ownership transitions an eligible use of loan proceeds, and remove many of the existing underwriting criteria. These changes mean tech-based economic development organizations should consider becoming approved SBA lenders.

Concerns raised about 2017 tax law’s impact on industry R&D

While the Tax Cuts and Jobs Act of 2017 was passed more than five years ago, many businesses seem to be just discovering the effects of one of its sections this tax season. The law stipulated that, for tax years beginning in 2022, companies could no longer choose to expense their entire “research and experimentation” costs in one year and must instead amortize those cost over five years (with a half year look-back). The result is posing a threat for companies with limited, or non-fungible, cash flow. Congress displayed broad support for restoring the original rule but failed to pass the change during the previous session. The question on many people’s minds is, “what happens now?”

Treasury approves $635.6 million in SSBCI funding for Texas and Washington

The U.S. Department of Treasury has announced approval of $635.6 million in State Small Business Credit Initiative (SSBCI) funding for Texas and Washington. The addition of these two states means 48 states and three territories have had their SSBCI programs approved.

Microbusinesses performed $5.6 billion of US R&D in 2020

Microbusinesses (businesses with 1-9 domestic employees) spent $7.5 billion in both domestic and foreign R&D expenditures or costs in 2020, of which $6.7 billion was in the U.S. Of this total, $5.6 billion was performed by microbusinesses themselves, according to the National Center for Science and Engineering Statistics (NCSES) and data from the Annual Business Survey (ABS). The $5.6 billion performed by U.S. microbusinesses in 2020 shows over a $1 billion increase in domestic R&D performed by microbusinesses themselves as compared to 2018.

SSTI responds to SBA’s proposed changes to Small Business Investment Company (SBIC) program

SSTI has written a response to the U.S. Small Business Administration’s (SBA) proposed revisions to the Small Business Investment Company (SBIC) program, which aim to increase program participation. The proposed changes include reductions in licensing fees for first- and second-time funds, exceptions to the conflict of interest rules for follow-on financing, increasing access to credit for leveraged funds and a new “accrual debenture” option for SBICs.

11 additional states approved for federal funding through SSBCI

The U.S. Department of the Treasury announced 11 additional states whose SSBCI plans have been approved: Alaska, Idaho, Iowa, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Mexico, Ohio, and Utah. This is in addition to the 20 states that have been approved this year: California, Hawaii, Kansas, Maryland, Michigan, West Virginia, Arizona, Connecticut, Indiana, Maine, New Hampshire, Pennsylvania, South Carolina, South Dakota, Vermont, Colorado, Montana, New York, North Carolina and Oregon. Funds aim to make capital more accessible for underserved communities and increase economic growth and opportunity.

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