BOARD OF TRUSTEES MEETING
September 19-20, 2013
Omni Fort Worth Hotel 1300 Houston Street Fort Worth, TX (817)535-6664
http://www.omnihotels.com/FindAHotel/FortWorth.aspx
NOTE: Assigned rooms subject to change, so please consult event monitors throughout hotel. In order to accommodate early flight departures, the meeting will adjourn promptly at 12 noon with no lunch provided.
Thursday, September 19, 2013 MEETING ROOMS
300 – 5:00 PM Legislative Action Council (LAC) Stockyards 2 (LAC Members ONLY) (2nd Floor)
5:00 – 6:30 PM Welcome Reception Sundance II (3rd Floor)
Friday, September 20, 2013
8:00 AM – 12:00 PM Board of Trustees Meeting Stockyards 1 (2nd Floor)
BOARD OF TRUSTEES MEETING
Friday, September 20, 2013 8:30 AM – 12:00 PM Omni Fort Worth Hotel (1300 Houston Street) Room: Stockyards 1 Fort Worth, Texas
AGENDA TOPICS
WELCOME DAVID ICKERT
SECRETARY’S REPORT MIKE MITTERNIGHT 1) Approve Minutes of 6/18/2013 Board Meeting
TREASURER’S REPORT TIM REYNOLDS 1) Updated Financials a) Income Statement b) Balance Sheet
CHAIR’S REPORT DAVID ICKERT 1) Executive Committee
STRATEGIC PLANNING COMMITTEE LARRY NANNIS
NOMINATING COMMITTEE CHRIS HOLMAN
ADVOCACY COOKIE DRISCOLL 1) Tax Policy 2) Economic Development 3) Environment and Regulatory Affairs 4) Health and Human Resources 5) Other Issues
September 2013 NSBA Board Packet 2 Back to Agenda
BOARD AGENDA PAGE 2
COMMUNICATIONS PEDRO ALFONSO 1) Media 2) Surveys and Mid-Year Economic Report 3) Communications Audit & Membership Survey
MEMBERSHIP 1) Small Business Leadership Council ERIC TOLBERT a) Draft PowerPoint Presentation 2) New Health Program: TABS 3) Membership Update
SMALL BUSINESS TECHNOLOGY COUNCIL JERE GLOVER
SMALL BUSINESS EXPORTERS ASSOCIATION DAVID ICKERT
COUNCIL OF REGIONAL EXECUTIVES ROB FOWLER
OTHER BUSINESS
ADJOURN
September 2013 NSBA Board Packet 3 Back to Agenda
MINUTES OF THE BOARD OF TRUSTEES MEETING June 18, 2013 Westin City Center Washington, D.C.
Officers Present: David Ickert, Chair Chris Holman, Immediate Past Chair Tim Reynolds, Treasurer Pedro Alfonso, Vice Chair of Communications Cookie Driscoll, Vice Chair of Advocacy Eric Tolbert, Vice Chair of Membership/Marketing
Board Members Present: Marc Amato Steve Millard Theron Cyrus ML Mackey Rob Fowler Tom Mathison Dan Galbraith Rick Murray Jere Glover Robert Schmidt Doyle Hayes Tom Secor Dave Huller Michael Stanek Cynthia Kay Sharon Toerek
Board Members Absent: Jeff Gilling Paul Smiley Mike Mitternight Jeffrey Van Winkle
Associate/Honorary Trustees Present: Keith Ashmus Marilyn Landis Deborah Rutledge David Stetler Cap Willey
Others Present: Sante Ghetti, Council of Smaller Enterprises (COSE) Scott Lyon, Small Business Association of Michigan (SBAM) Brynn Popa, COSE Steve Shivak, SMC Business Councils
Staff Present: Michael Berson Todd McCracken Molly Brogan Jody Milanese David Burton Patrick Post Rosa Wright
September 2013 NSBA Board Packet 4 Back to Agenda
Chair David Ickert called the meeting to order and announced that because of early flight departures, the meeting would adjourn promptly at 12:00 noon, with no lunch. Mr. Ickert thanked everyone for attending and announced that Maya MacGuineas, President of the Committee for a Responsible Federal Budget and a member of the Steering Committee for the Campaign to Fix the Debt would be the special guest speaker.
SECRETARY’S REPORT
In Mike Mitternight’s absence, Mr. Ickert presented the minutes from the March 18, 2013 board meeting held in Arlington, Virginia. It was motioned and seconded to accept the minutes as presented with one typographical correction. Motion carried.
TREASURER’S REPORT
Treasurer Tim Reynolds reviewed the April 2013 consolidated financial statement, noting that revenue and expenses are on-track as projected in the budget. He reported on the year-end audit and said other than the ongoing conflict regarding the posting of the lease payments, the audit came back with no adjustments. Mr. Reynolds explained that NSBA’s decision to report rent expenses on a month- to- month basis rather than averaging it over the term of the lease as suggested by the auditors continues to be the reason for a qualified opinion. He said that the auditors’ way would disrupt NSBA’s budgeting process, therefore, the board made a decision years ago to maintain the payment system in place.
It was motioned and seconded to accept the consolidated financial statement and audit as presented. Motion carried.
CHAIR’S REPORT
Referencing the busy schedules of board members, Mr. Ickert thanked the board for their dedication to NSBA. He said the time, energy and finances set-aside to serve on committees and attend board meetings year- after- year shows invaluable dedication to the small-business community. Mr. Ickert also thanked the staff for their day-to- day juggling to get the various jobs done. He stressed the importance of maintaining old and establishing new relationships that will continue to enhance NSBA’s visibility and its vision which reflects the strategic plan that is currently in place.
Concluding, Mr. Ickert announced that the next board meeting will be held Sept. 19-20, 2013 in Fort Worth, Texas.
GOVERNANCE COMMITTEE / STRATEGIC PLANNING UPDATE
Mr. Ickert said one of the primary issues for this year is the establishment of a leadership council. He said both the Strategic Planning and the Governance Committees have had several meetings since the March board meeting. Mr. Ickert said as part of NSBA strategic planning process, a general consensus was formed around the creation of a “Small Business Leadership Council,” to ensure that NSBA has active leadership, input, and activism from all parts of the country.
Mr. Ickert, assisted by President Todd McCracken, said in order to lay the groundwork for a discussion about the formation and recruitment of this council, the Governance Committee has worked to form a more clearer understanding of the function and how it relates to the NSBA Board and committee
September 2013 NSBA Board Packet 5 Back to Agenda structure, including whether Board and committee roles should be re-thought in light of the creation of this new organizational body. It was reported that after further discussion by the Governance Committee, the committee largely rejected the idea of re-shaping our current board structure, and recommends forming a new leadership council while keeping the current Board structure. Mr. McCracken explained that NSBA would form a new council, which could become a “farm team” for the Board, thereby making the Board more nationally representative over time.
Mr. Ickert then presented some possibilities as suggested by the Governance Committee, and opened the floor for board discussion and questions. During the discussion, Mr. McCracken stressed that many of these ideas will require further discussion and action by other committees within NSBA (Membership and Communications), as many of the operational issues fall within their purview and are not strictly “governance” issues. Other members of the Governance Committee (Mr. Reynolds and Jere Glover) assisted with addressing questions and comments from the board. Board members were thanked for their helpful comments and input, and encouraged to submit additional thoughts regarding the formation of the council to Mr. McCracken.
LEGISLATIVE UPDATE
Cookie Driscoll reported that the Legislative Action Council (LAC) had a great meeting and asked each chair to give an issue update since the last meeting. Ms. Driscoll urged board members to review the informational materials provided.
Tax Policy
Theron Cyrus reported that the Tax Policy Committee will be revamping NSBA’s Fair Tax campaign, especially now with the IRS under so much scrutiny by recent congressional hearings and news reports. Mr. Cyrus said eliminating the IRS altogether will ensure that all taxpayers, including small businesses, are being treated fairly. He said the committee agreed the IRS’s unscrupulous behavior is all the more reason to further make the Fair Tax an NSBA public relations priority.
Mr. Cyrus reported that after a long stretch in which Congress lurched from one fiscal fight to another – the fiscal cliff, the debt limit, sequestration, the chambers’ respective budget resolutions, and a continuing resolution to keep the government funded through the end of fiscal year 2013–non- budgetary issues are currently taking center stage on Capitol Hill. Concluding, he reported that the next opportunity for significant action on fiscal issues is likely to come later this summer as Congress and the White House attempt to reach another agreement on raising the federal debt ceiling. Mr. Cyrus said the current agreement expired on May 19, but Treasury took “extraordinary measures” that has allowed the government to stave off the risk of default on federal obligations until October or November.
Economic Development
ML Mackey reported that according to the most recent lending report from the U.S. Small Business Administration (SBA) Office of Advocacy, small-business lending increased for the first time in ten quarters. She said earlier this year, Sen. Mary Landrieu (D – La.) introduced the following NSBA- supported bills to enhance and improve the SBA’s small-business lending programs: the Commercial Real Estate and Economic Development Act of 2013; the Expanding Access to Capital for Entrepreneurial Leaders; and the Communicating Lender Activity Reports from the Small Business Administration Act. Ms. Mackey said all three bills remain in committee and have not been scheduled for markup.
Referencing cybersecurity issues, Ms. Mackey announced that in order to address the growing concerns surrounding this issue, NSBA has formed an informal small-business cybersecurity working group to
September 2013 NSBA Board Packet 6 Back to Agenda develop a comprehensive small-business cybersecurity policy that will include a set of recommendations for policymakers to ensure that any new policy or legislation minimizes the compliance costs and regulatory burdens on small businesses, and that small firms have adequate access to the necessary resources for their cybersecurity efforts.
She reported that the Senate Judiciary Committee completed its markup and passed the Border Security, Economic Opportunity, and Immigration Modernization Act (S.744). General Counsel David Burton said the legislation now heads to the Senate floor where it is expected to be debated after the Senate finishes consideration of the farm bill amendment, but said the path forward remains unclear in the House. Mr. Burton gave an update on E-verify.
Ms. Mackey reported the JOBS Act, signed into law April 5, 2012, contained a number of important provisions designed to improve small businesses access to capital. Mr. Burton said NSBA continues to aggressively pressure the Security and Exchange Commission (SEC) directly and via Congress to implement the JOBS Act. He reported that NSBA has met all SEC commissioners except the new Chairman, Mary Jo White, but continues working aggressively to make this happen.
Environment and Regulatory Affairs
Mark Amato reported that the ERA Committee is supporting and/or monitoring a number of recently introduced regulatory reform bills: the Small Business Paperwork Relief Act (H.R. 1321); the Closing Regulatory Loopholes Act of 2013 (S.320); the Plain Writing Act for Regulations for 2013 (H.R. 15547; S 807); the Small Business Freedom of Commerce of 2013 (H.R. 168); and the Regulatory Sunset and Review Act of 2013 (H.R. 309). The Committee also is monitoring several proposed and soon-to-be- proposed regulations ranging from EPA’s Greenhouse Gas Emissions Rule to BLM’s Fuel Standards Rule and NOAA’s Offshore Aquaculture Rule, and will update members as new information becomes available.
Mr. Amato said at the urging of the ERA Committee, the LAC has recommended Board support for the Gulf Fisheries Fairness Act (GFFA) (H.R. 1219), which would extend state water boundaries along the coast of the Gulf of Mexico giving the states more control over their reef fisheries and opening up more waters to commercial and recreational fisherman – the majority of which are small-business owners. Tom Mathison commented that water will be a major commodity and a serious forthcoming issue.
It was motioned and seconded to accept the GFFA Act as presented by the LAC. For clarity, Mr. Ickert explained the process for the LAC policy decisions. The LAC takes recommendations from the various issue committees for consideration and has the authority to act immediately in order to move forward in a timely manner before Congress if needed; otherwise, the action will be presented to the Board for approval.
September 2013 NSBA Board Packet 7 Back to Agenda
Health and Human Resources
Mr. Burton, in Mr. Mitternight’s absence, instructed board members to contact him directly if they had questions on immigration, especially the mandatory E-verify.
Referencing the National Labor Relations Board (NLRB) Recess Appointments Challenge (NLRB v. Noel Canning), Mr. Burton explained that the NLRB is composed of five members and must have at least a quorum of three to make decisions or take action. On Jan. 25, 2013, he said the U.S Court of Appeals for the District of Columbia Circuit ruled that the NLRB lacks authority to act because it had only one lawful member. In February of this year, President Barack Obama re-nominated Sharon Block and Richard Griffin. In April, he nominated Mark Gaston Pearce to be reappointed as a member and as Chairman, and he also nominated Harry I. Johnson, III and Philip A. Miscimarra to be members. Mr. Burton said on May 22, the Senate Health, Education, Labor and Pensions (HELP) Committee approved all five nominations. He said on April 25, 2013, the NLRB filed its petition for a writ of certiorari from the Supreme Court, and on May 13, 2013, the respondent Noel Canning filed its brief.
Mr. Burton then gave an update on the health-contingent wellness programs and the Small Business Heath Options Programs (SHOPS) under the Patient Protection and Affordable Care Act. He explained that SHOPs are a key component of the health insurance exchanges that are supposed to be up and running starting on Oct. 1, 2013. The Council of Regional Executives (CORE) gave an update of how this change will impact their memberships.
COMMUNICATIONS
Pedro Alfonso said that Communications has a very active committee, and thanked everyone for their energy and dedication to NSBA’s mission. Mr. Alfonso reported that NSBA has received a good number of media mentions in recent months and continues to proactively reach key media outlets and reporters. Mr. Alfonso said hot topics in the media include: the release of NSBA surveys on taxation and the workforce, the fiscal cliff and sequestration, taxation and tax reform, health care implementation, the NSBA Advocate Awards and Washington Presentation, and immigration reform.
Mr. Alfonso gave a brief update on the following surveys and reports released in 2013: 1) Workforce Survey; 2) Taxation Survey; 3) Exporting Survey; and 4) the Mid-Year Economic Report. He reported that NSBSA also has the following survey topics planned for the last half of 2013: technology, energy and health care, along with the Year-End Economic Report.
Communications Vice President Molly Brogan thanked everyone for their support of the Humana media taping and special dinner. She explained that Humana wanted a geographical representation of the Board for the taping and subsequent dinner which focused on workplace wellness and the best strategies to reach the small-business community.
Mr. Alfonso reported that the Communications Committee has been discussing its role in the strategic plan over the last several meetings and is now in the process of implementing a comprehensive communications audit to aid in the key communications-related goals of the strategic plan: a research- based branding strategy; and upgrading communications and messaging using cutting edge media and technology. He said the communications audit will be identify the strengths and weaknesses of our current internal and external communications.
September 2013 NSBA Board Packet 8 Back to Agenda
MEMBERSHIP COMMITTEE
Eric Tolbert, assisted by Vice President of Membership Development Patrick Post, reported that overall membership revenue is slightly below the first four months of 2012. Mr. Post said both Mutual of Omaha and outside sales revenue show small gains compared to last years production levels, and telesales revenue was slightly below last year’s results, noting one of NSBA’s long-standing membership managers retired at the end of 2012.
Regarding a potential self-funded health insurance option for NSBA Members, Mr. Post reported that NSBA staff held a second meeting with Roger Neece and Michael Mendelevitz on June 7, 2013. He said GMAC Insurance has a business division called The Association Benefits Solution (TABS) which acquired several not for profit entities from the Coca Cola Bottlers Association including the Alliance of Professional Services Organization (APSO). He explained that this health insurance approach differs from traditional fully-insured health insurance because each employer is self-funded and reinsured through APSO. He said this approach can offer unique savings but also has unique, though minimal, risk associated with it.
As a result of interest from staff at the American Dental Association (ADA) in receiving NSBA’s e- newsletter and being able to communicate information from the newsletter to ADA members, Mr. Post said it is apparent that a market exists for trade associations to become members of NSBA. He explained that the Small Business Legislative Council (SBLC) under the leadership of John Satagaj, was formed over 30 years ago to provide trade associations with interest in small business issues, and said NSBA could easily play a similar role in this market and dramatically increase NSBA’s reach in both communications and membership. SMALL BUSINESS TECHNOLOGY COUNCIL (SBTC)
Mr. Glover reported that SBTC is continuing to make contributions to NSBA financially, even though the revenue is slightly slower than in 2012. He said since the retirement of Terry Matthews, Mr. Post has assigned a new sales manager to sell SBTC memberships. He then announced that Bob Schmidt and Heidi Jacobus are serving as co-chairs of SBTC, and Larry Nannis is the treasurer.
Concluding, Mr. Glover reported that the SBTC is proud to announce the roll out of its new, remodeled website. He said the new site is designed to be a sleeker, more intuitive presentation, with all the most important information and documents immediately available and easy to find.
SMALL BUSINESS EXPORTERS ASSOCIATION (SBEA)
Mr. Ickert reported that on May 7, the Senate Committee on Banking, Housing and Urban Affairs held a hearing for Fred P. Hochberg, who has been re-nominated by President Obama to serve as Chairman and President of the Export-Import (Ex-Im) Bank of the U.S. for a second term. He reported that Ex-Im Bank launched a new pilot program in April called U.S. Global Business Solutions. Working together, Mr. Ickert said Ex-Im Bank, SBA and the U.S. Department of Commerce will make it easier and more cost- effective for exporters and their lenders to avail themselves of the programs and products of multiple agencies. As far as the reauthorization of Ex-Im Bank, Mr. Ickert stated that SBEA’s fight will be returning again next year. He explained that the opposition to the bank has gotten a bit more strategic but said the coalitions in which Jody Milanese has been very involved are already preparing for the battle. Mr. Ickert reported that SBEA staff met with the Industry Trade Advisory Committee on Small and Minority Business (ITAC 11), a group which plays a critical role as the industry’s voices and
September 2013 NSBA Board Packet 9 Back to Agenda representatives in formulating U.S. trade policy. He said this is the type of organization on which NSBA should try to get members. COUNCIL OF REGIONAL EXECUTIVES (CORE)
Rob Fowler said the CORE has a renewed commitment to improve sharing and exchange of ideas, noting the group has discussed working to coordinate surveys and reports. He said currently CORE is working on some member benefits to help their members walk through the decisions they have to make in dealing with the Affordable Care Act without having to reinvent the process because it’s the same in each state.
Mr. Fowler said CORE discussed the Governance Committee’s recommendation for a development of the leadership council during their meeting. He said building the leadership council will present opportunities for CORE to work with organizations to identify members in their state who are small- business champions/advocates in the small-business community.
Mr. Fowler explained that currently the CORE has two seats on the NSBA Board. He announced that CORE elected Steve Millard to fill the vacant CORE seat. He explained that he has served as the CORE representative for years, and said at the end of his term, CORE will appoint another representative to fill his seat. He said the group has been meeting once a month, and the plan is to meet in-person quarterly when the board meets. Mr. Ickert thanked everyone for attending, and said NSBA is doing a lot of positive things. Having no other business for discussion, it was moved and seconded to adjourn the meeting. Motion carried.
Respectfully submitted:
Michael Mitternight 2013 Secretary of Board
September 2013 NSBA Board Packet 10 Back to Agenda
September 2013 NSBA Board Packet 11 Back to Agenda
September 2013 NSBA Board Packet 12 Back to Agenda
TAX COMMITTEE – Legislative Update for the Board of Trustees September 20, 2013
Senate Finance “Blank Slate” Tax Reform Approach
On June 27, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Orrin Hatch (R-Utah) issued a “Dear Colleague” letter to all Senators setting forth next steps as the Finance Committee moves forward with comprehensive tax reform.
In the letter to their senate colleagues, Baucus and Hatch announced they intend to approach tax reform as a “blank slate,” a tax code without the current business and individual tax expenditures that are listed annually by the Joint Committee on Taxation (JCT) staff. They also stated that they “are determined to complete tax reform in this Congress” – that is, by the end of 2014.
Baucus and Hatch specify that Congress has made over 15,000 changes to the code since its last major revision in 1986 with a resulting “tax base riddled with exclusions, deductions, and credits.” Further, they add, the tax code’s complexity, inefficiency, and unfairness are stifling economic growth. As such, Baucus and Hatch underscored their commitment to reforming the code and ask their fellow senators for their “ideas and partnership to get tax reform over the finish line.”
In the letter, both senators noted that certain tax expenditures serve important policy objectives and that they both believe that some existing tax expenditures should be preserved in some form. However, the Finance Committee leaders plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.
Baucus and Hatch did not set target corporate or individual tax rates in their letter, but noted that Senators “have different views on whether the revenue raised from eliminating tax expenditures or other reforms should be used to lower rates, reduce the deficit, or some combination of the two,” and states that all senators should understand the trade-offs when adding tax expenditures back to the code.
The letter also asked senators to examine other parts of the code for reform targets. For example, Baucus and Hatch indicated that many income tax provisions are not considered tax expenditures but could be simplified or reformed. In addition, the letter highlighted that almost half of federal tax revenue comes from sources other than income taxes and suggests that these provisions should be up for examination, as well.
To that end, they asked senators to submit legislative language or detailed proposals on what expenditures should make the cut and what other provisions should be added, repealed, or reformed by July 26. They received a significant number of submissions possibly because Baucus and Hatch promised colleagues that their submissions would remain locked in a safe until 2064.
Some lawmakers, including several members of the Finance Committee, opted to make their comments public, however. Although many of these senators limited their comments to
September 2013 NSBA Board Packet 13 Back to Agenda statements of broad principles, some advocated for specific business and individual tax policies.
Baucus and Hatch continue to review the comments and proposals from senators as they prepare legislation for a formal committee mark-up sometime this Fall. Baucus has indicated that he will continue to meet individually with members of the Finance Committee and other senators to discuss their tax reform priorities in preparation for legislative action. Baucus also reportedly has hinted that he may release draft proposals for public comment in advance of a formal mark-up.
The prospects for action by the full Senate on tax reform legislation remain uncertain given sharp disagreement in that chamber over raising revenue as part of tax reform. Senate Majority Leader Harry Reid (D-Nev.) has said that tax reform must raise significant revenue. Senate Minority Leader Mitch McConnell (R-Ky.) has said that any call for new revenue is a stumbling block for even getting started on tax reform legislation.
Ways and Means Committee Chairman Camp: Fall Tax Reform Plans
House Ways and Means Committee Chairman Dave Camp (R-Mich.) has said that his committee will begin to act in October on a comprehensive tax reform bill.
During a joint event in August with Chairman Max Baucus (D-Mont.), Chairman Camp said that he and his staff are working to fill in the blanks on business and individual tax reform legislation that will build on previously released discussion drafts on international, partnership, and financial instrument tax rules.
A key issue to be addressed among his committee members will be agreeing on base- broadening provisions to offset the cost of lower corporate and individual tax rates. Camp supports the goal of moving to 10-percent and 25-percent individual tax rate brackets – in place of the seven current tax brackets with a 39.6-percent top individual tax rate – and providing a more globally competitive business tax system, with a top corporate tax rate of 25 percent.
According to Joint Committee on Taxation (JCT) revenue estimates released in late July by Ways and Means committee Democratic members, reducing current individual tax rates to 10 percent and 25 percent would reduce federal revenues by $3.45 trillion over 10 years. Repealing the individual alternative minimum tax (AMT) would increase the cost of those lower rates by an additional $317.2 billion over the same period. The minority members of the committee also released a JCT staff estimate projecting that reducing the top corporate tax rate to 25 percent would reduce revenues by $1.23 trillion over 10 years; the additional cost of repealing the corporate AMT would increase that overall revenue loss to $1.3 trillion over 10 years.
The 2013 JCT tax expenditure report indicates that the largest business tax expenditures include deferral of CFC active income; the section 199 domestic production manufacturing deduction; the exclusion of interest on public purpose tax-exempt bonds; the tax credit for low-income housing; expensing of research and experimental expenditures; the last-in, first-out (LIFO) inventory method; and the research credit. The same report identifies the top five individual tax expenditures as the exclusion for employer-provided and self-employed health care; the exclusion of retirement contributions and earnings; the reduced rate on capital gains and dividends; the deduction for state and local income, sales, and property taxes; and the mortgage interest deduction.
September 2013 NSBA Board Packet 14 Back to Agenda
Camp is expected to meet with Ways and Means committee Republicans over the next few weeks to get their input in advance of the committee as a whole beginning the formal process of considering tax reform legislation and voting on amendments. While the Democratic members of the committee have been active, Camp will likely have to rely almost exclusively on his Republican colleagues for the votes to pass a comprehensive tax reform bill out of committee.
Since 2011, Camp has issued three discussion drafts of proposals to overhaul specific parts of the tax code, held dozens of information-gathering hearings, and set up bipartisan tax reform working groups to allow Ways and Means Committee members to explore specific issues in tax reform.
Obama’s Corporate Tax Reform and Jobs Proposal
President Barack Obama generally has focused on business tax reform rather than comprehensive tax reform. The administration has expressed some willingness to consider individual tax reform in exchange for increased revenue being provided by deficit reduction.
On July 30, Obama called for a pro-growth tax reform and jobs package that would use “one- time revenues” raised from closing corporate “loopholes” during a transition to a new business tax reform system to fully offset the cost of increased spending on infrastructure and job training programs.
On the corporate tax front, the president’s proposal would reduce the top corporate tax rate to 28 percent and institute a manufacturing tax rate capped at 25 percent. The proposal also calls for eliminating various corporate tax loopholes and removing incentives to move business overseas. Exactly what those loopholes are remains to be seen.
One key piece that stands to benefit small business is Obama’s call for increasing expensing to $1 million. NSBA has been a staunch supporter of increased limits on expensing as a way to both encourage small-business investment while helping to stimulate the economy. It has not been identified whether or not this would be a permanent change or simply a temporary hike to the current expensing limits. Providing long-term stability and predictability is a key tenet of NSBA’s tax policy and, while a temporary hike in allowable expensing would certainly help many small businesses, it would do nothing to address the issue of complexity.
The concept of closing corporate loopholes and reducing corporate taxes is not a new one and, if done without addressing individual income taxes, could prove harmful to small business. Because 83 percent of small businesses are pass-throughs, meaning they pay business taxes at the owner’s personal income tax level, corporate tax reform does nothing for most small businesses. Significantly, the president did not address individual tax reform and how – or if – business tax reform would affect the large number of businesses that operate in pass-through form.
By only addressing the corporate side of things, small businesses could see a tax rate higher than their corporate competitors while at the same time no longer being able to utilize certain deductions that could be eliminated as a corporate tax loophole. The result: small businesses would get an effective tax rate higher than what they have now while corporations would likely have a lower tax rate.
Fiscal Policy Deadlines
September 2013 NSBA Board Packet 15 Back to Agenda
To date, none of the twelve annual appropriations bills for fiscal year (FY) 2014 have been enacted. The House and Senate each approved budget resolutions in March; these budget plans differ by $91 billion, or nearly 10 percent, on the level of annual discretionary spending for federal departments and agencies.
This disagreement over spending increases the risk of a partial shutdown of the federal government after September 30, when current funding for federal departments and agencies expires. Many expect the House and Senate will reach an agreement on a temporary continuing resolution (CR) before Sept. 30, although some Republicans insist that they will not vote for a CR unless funding is denied for implementation of the Patient Protection and Affordable Care Act (PPACA).
The House and Senate have not made noticeable progress since March in resolving their broader disagreement over how to reduce future federal budget deficits. The House-approved FY 2014 budget resolution would balance the federal budget in 10 years by cutting $4.6 trillion in future spending and ruling out any new tax increases. The Senate budget resolution calls for a $975 billion tax increase over 10 years as part of a balanced package of revenue increases and spending cuts that together would reduce projected federal deficits by $1.85 trillion by 2023.
Debt Limit Increase
On August 26, Treasury Secretary Jack Lew informed Congressional leaders that by mid- October the Treasury Department will exhaust the “extraordinary measures” that have been used to finance the federal government since May 17, when the current $16.7 trillion debt limit was reached. In his letter to House and Senate leaders, Secretary Lew said that Congress should act as soon as possible to meet its responsibility to the nation and remove the threat of default.
House Speaker John Boehner (R-Ohio) has said that House Republicans will insist on cuts and reforms that are greater than the increase in the debt limit. Secretary Lew has reaffirmed President Obama’s refusal to negotiate over a debt limit increase, as well as any move to defund or delay implementation of the Patient Protection and Affordable Care Act (PPACA).
Debt limit increase negotiations in 2011 led to a failed “Super Committee” deficit reduction effort and an ongoing series of annual across-the-board Sequestration spending cuts totaling $1.2 trillion through 2023. President Obama and congressional Democrats have made it a priority to replace sequestration spending cuts with a mix of alternative spending cuts and increased tax revenue.
White House officials had been meeting with a small group of Republican Senators to discuss a potential bipartisan compromise on deficit reduction that would replace some of the scheduled sequestration spending cuts. Unfortunately, those talks have hit an impasse because of differences over tax increases that the administration said would have to be part of any agreement.
September 2013 NSBA Board Packet 16 Back to Agenda
ECONOMIC DEVELOPMENT – Legislative Update for the Board of Trustees September 20, 2013
Small Business Lending Update
According to the SBA Office of Advocacy’s Small Business Lending Report for the First Quarter 2013, while the overall economy continued to improve, small business lending contracted slightly by approximately 0.3 percent. Small business loans outstanding decreased from $586 billion in the fourth quarter 2012 to $584.3 billion in the first quarter of 2013. Even though banks reported increases demand and an easing of lending standards, the small business lending environment remains tight.
On August 5, 2013, the Federal Reserve released their Quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. The Fed surveyed 73 domestic banks and 22 U.S. branches and agencies of foreign banks. According to the survey, demand for commercial loans increased and lending terms eased.
SBA Programs
Earlier this year, Senator Landrieu (D – La.) introduced several NSBA-supported bills to enhance and improve the SBA’s small business lending programs. The Commercial Real Estate and Economic Development Act of 2013 (or the CREED Act) would extend for five years the low- interest refinancing provisions under the Local Development Business Program of the Small Business Administration (SBA). By extending these provisions for an additional five years, it will present small businesses with the opportunity to participate in a proven program that provides them with a long-term financing tool to expand their firms and maintain sustainable economic growth. SBA’s Loan Refinancing Program offers qualified small business owners long-term, fixed-rate loans to acquire major fixed assets for the expansion or modernization. In Fiscal Year 2012, the SBA approved more than 2,400 refinancing projects at a value of over $2 billion.
The NSBA-supported Expanding Access to Capital for Entrepreneurial Leaders (or the EXCEL) Act will, among other things, increase the annual authorization amount and family of funds limit for the SBA’s Small Business Investment Company (SBIC) Program. Over the years, the SBIC program has been very successful, facilitating access to more than $462 billion in investment capital for over 164,000 entrepreneurs and small businesses across the country.
The NSBA-supported Communicating Lender Activity Reports from the Small Business Administration Act (or the CLEAR SBA Act) would require the SBA Administrator to make publically available on the SBA website certain information regarding lenders making covered loans to small firms, including, but not limited to the total dollar amounts made by each lender, whether the loan was for an existing business or a new business, and a list of industries of the recipients to which the lender made the covered loan.
All three of the aforementioned bills remain in Committee and have not been scheduled for a markup at this time.
Banking Issues
September 2013 NSBA Board Packet 17 Back to Agenda
Credit Union Member-Business Lending Increase
On February 14, 2013, Congressman Ed Royce (R-Calif.) reintroduced, the NSBA-supported Small Business Lending Enhancement Act of 2011 (H.R. 1418) under a new title, the Credit Union Small Business Jobs Creation Act of 2013 (H.R. 688). By amending the Federal Credit Union Act, this bill would increase the statutory member-business lending cap for credit unions from 12.25 (1.75 times the actual net worth of the credit union) percent to 27.5 percent of the total assets of the credit union so long as the credit union meets specific safety and soundness criteria. H.R. 688 also would require the National Credit Union Administration Board to develop a tiered approval process whereby an insured credit union gradually increases its member-business lending “in a manner that is consistent with safe and sound operations,” but at a rate of no more than 30 percent per year. Currently, H.R. 688 has 111 co-sponsors in the House and has been referred to the House Committee on Financial Services with no markup scheduled to date.
Last month, Senator Mark Udall (D- Col.) reintroduced an identical Senate companion bill, which has 17 co-sponsors and was referred to the Senate Banking Committee.
Reduced Regulatory Burdens on Community Banks
Last Congress, Rep. Blaine Luetkemeyer (R-Mo.) introduced the Communities First Act (CFA) (H.R. 1697) to provide significant regulatory relief for community banks, specifically as such relates to Sarbanes-Oxley’s 404(b) internal attestation requirement. The bill also included a number of other provisions to help increase available capital for small businesses. This Congress, Rep. Luekemeyer has decided to move forward with a piecemeal approach rather than reintroduce the CFA as one large comprehensive bill. Along those lines, Rep. Luekemeyer recently introduced the Community Lending Enhancement and Regulatory Relief Act of 2013 (or the CLEAR Relief Act) (H.R. 1750), which is designed to provide community banks with regulatory relief so that they can lend more to small business. Currently, the bill has 48 co-sponsors and has been referred to the House Financial Services Committee with no markup scheduled to date.
Capital Access
JOBS Act Implementation
The JOBS Act, signed into law Apr. 5, 2012, contained a number of important provisions designed to improve small businesses’ access to capital. Two of the most important were provisions allowing small businesses to advertise seeking accredited investors in their company and allowing small businesses to crowdfund (to raise small amounts of money from many ordinary investors through a web portal).
The SEC was required by the JOBS Act to have issued a final rule by July 5, 2012 implementing the provisions allowing small businesses to advertise seeking accredited investors in their company. The JOBS Act also required the SEC to have issued final rules for crowdfunding by December 31, 2012. There is strong reason to believe that this rule will be substantially more than a year late.
On July 10, the Securities and Exchange Commission (SEC) adopted two final rules and one proposed rule to “implement” the general solicitation (advertising) provisions of the JOBS Act. Only the first is actually required to implement the JOBS Act.
September 2013 NSBA Board Packet 18 Back to Agenda
The first rule adopted by the SEC would implement the JOBS Act provision eliminating the prohibition against general solicitation and general advertising in private placements made under Rule 506 of Regulation D. This provision of the JOBS Act allows small businesses to use the internet or newspapers to seek accredited investors for their business once the SEC has issued rules (which it now has done).
In general, an accredited investor is an institution or an individual with a residence exclusive net worth of $1 million or more or an annual income (joint) of $300,000 or more. Businesses will be required to take “reasonable steps” to ensure that investors are accredited investors.
The new rule provides a “non-exclusive” list of three ways to satisfy the requirement to take reasonable steps to verify the status of an investor as an accredited investor. They are:
with respect to income, reviewing copies of tax forms that report the income of the purchaser and obtaining a written representation that the purchaser will likely continue to earn the necessary income in the current year;
With respect to net worth, obtaining bank statements, brokerage statements and other statements of securities holdings, certificates of deposit, tax assessments or appraisal reports issued by independent third parties to verify assets and, to verify liabilities, a consumer report from at least one of the nationwide consumer reporting agencies combined with obtaining a written representation from the purchaser that all liabilities necessary to make a determination of net worth have been disclosed; or
receiving a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney, or certified public accountant that they have taken reasonable steps to verify the purchaser's accredited status.
The SEC adopted a second rule limiting the ability of “bad actors” to engage in Regulation D Rule 506 private placements. In general, the final disqualification rule covers criminal convictions or final regulatory orders finding fraud or other significant securities law violations by:
the issuer; directors and certain officers, general partners, and managing members of the issuer; 20 percent beneficial owners of the issuer. promoters; and persons compensated for soliciting investors as well as the general partners, directors, officers, and managing members of any compensated solicitor.
The SEC was required by the JOBS Act to issue final rules implementing Title III of the JOBS Act governing crowdfunding by the end of 2012. It has not done so. It is not clear when the SEC will meet this requirement but implementation soon appears unlikely because the rules that must be written are much more complicated than the Title II general solicitation rules just adopted and the SEC has demonstrated that it does not feel particularly bound by Congressionally mandated deadlines.
Proposed Regulation D Information Reporting
September 2013 NSBA Board Packet 19 Back to Agenda
The SEC adopted a proposed rule that places a series of information reporting requirements and other requirements regarding the content of offering documents on Regulation D private placements. This rule was opposed by Commissioners Paredes and Gallagher as placing too great a regulatory burden on small businesses seeking capital. They argued that it may outweigh the good done by the JOBS Act.
NSBA will provide comments to the SEC on this proposed rule and seek to minimize the adverse impact of this proposed rule in other ways.
JOBS Act II
In both the Senate and the House, but especially the House, discussions are underway for a “JOBS Act II.” NSBA is providing input to policy-makers at this early stage in the development of this legislation.
NSBA White Paper
NSBA has released a white paper on capital access issues entitled “Ideas for Improving Small Businesses’ Access to Capital.” These recommendations have been provided to Congress and will be more widely distributed. The recommendations include: 1. Rely more on statutory rules than SEC drafted rules. 2. Create a statutory exemption for business brokers to the broker-dealer registration requirements consistent with the principles of the SEC Country Business no action letter dated November 8, 2006 but extended to include the sale of a controlling interest in the business rather than being limited to the sale of the entire business. Specifically an exemption for business brokers from the section 15 registration requirement should be created provided that:
a) the business broker does not have the power to bind either party in the transaction; b) the business being sold is a going concern; c) the business being sold satisfies the size standards for a "small business" pursuant to the small business size regulations issued by the U.S. Small Business Administration; d) only assets will be advertised or otherwise offered for sale; e) if the transaction is effected by means of securities, it will be a conveyance of a controlling interest of the business's equity securities to a single purchaser or group of purchasers; f) the business broker does not advise the two parties whether to issue securities, or otherwise whether to effect the transfer of the business by means of securities, or assess the value of any securities sold (other than by valuing the assets of the business as a going concern); g) the business broker's compensation will be determined prior to the decision on how to effect the sale of the business and may be a fixed fee, hourly fee, a commission that is based upon the consideration received by the seller (or a combination thereof), regardless of the means used to effect the transaction and will not vary according to the form of conveyance (i.e., securities rather than assets); h) the business broker will not assist purchasers with obtaining financing, other than providing uncompensated introductions to third-party lenders or help with completing the paperwork associated with loan applications.
September 2013 NSBA Board Packet 20 Back to Agenda
3. Create a statutory exemption to the broker-dealer registration requirements for finders who are not “engaged in the business of effecting transactions in securities for the account of others” or of “buying and selling securities” and, as a integral component of that exemption, provide a bright-line safe harbor such that small finders are not deemed to be engaged in the business of being a securities broker or a dealer. Specifically, an exemption should be created for finders from the section 15 registration requirement provided that the finder is not “engaged in the business of effecting transactions in securities for the account of others” and that the exemption provides a safe harbor such that a finder is deemed not to be engaged in the business of effecting transactions in securities for the account of others” if the finder meets one or more of the following criteria:
a) the finder does not receive finder’s fees exceeding $300,000 in any year; b) the finder does not assist an issuer in raising more than $10 million in any year; c) the finder does not assist any combination of issuers in raising more than $20 million in any year; or d) the finder does not assist any combination of issuers with respect to more than 15 transactions in any year.
Among those activities that would be proscribed for finders would be: a) holding investor funds or securities; b) providing investment advice or recommending the purchase of securities; and c) participating materially in negotiations between the issuer and investors.
4. Create a statutory definition of accredited investor that prevents the current thresholds for natural persons from being increased. In other words, make the current accredited investor income and net worth standards statutory. 5. Either define NSMIA covered securities to include securities sold in transactions exempt under Rule 504, Rule 505 and Regulation A (in addition to Rule 506) or define qualified purchasers to include all purchasers of securities in transactions exempt under Rule 504, Rule 505 and Regulation A (in addition to Rule 506), or both. 6. Allow persons to definitively qualify as a sophisticated investor for purposes of Rule 506 by passing an exam. 7. Create a private placement safe harbor so that any offering (within a 12 month period): (1) to people with whom the issuer (or its officers and directors) has a substantial pre- existing relationship; (2) involving 35 or fewer other persons; or (3) of less than $500,000 is deemed not to involve a public offering for purposes of section 4(a)(2). 8. Eliminate the internal control reporting and assessment requirements of Sarbanes-Oxley section 404(b) for companies with market capitalizations of $300 million or less. 9. Repeal the restrictions on credit union lending to small businesses. 10. Permit Peer-to-Peer Lending portals to provide loans to small businesses without filing a registration statement. 11. Simplify the statutory small issue exemption (Regulation A) and permit but not require Reg. A offering statements to be placed on EDGAR. 12. Amend the Bank Secrecy Act to make it clear that federal “Know Your Customer” do not apply to finders, business brokers or crowdfunding web portals that do not hold customer funds. 13. Improve SEC collection of data on private placements and Regulation A offerings and ensure the data is published regularly without materially increasing the administrative burden on issuers.
September 2013 NSBA Board Packet 21 Back to Agenda
14. Have the Government Accountability Office (GAO) undertake the following potentially helpful studies:
a) Examine whether bank regulators inappropriately treat small business loans as disproportionately risky, thereby discouraging bank lending to small firms. Generally, bank regulators deny this but small business owners frequently report this as a reason given by bankers for not lending. b) Determine the typical compliance costs incurred by issuers in various Regulation D filings and Regulation A filings. c) Determine the typical compliance costs incurred by private placement issuers because of blue sky laws. d) Determine the typical compliance costs incurred by small capitalization public companies. e) Determine and quantify what are the primary sources of fraud in private placements and what percentage of offerings involve fraud.
Finders/Business Brokers
As a follow up on an NSBA meeting with SEC staff, NSBA has submitted a letter to the SEC seeking a safe harbor from the broker dealer registration requirements for small finders and business brokers.
Business brokers have a substantial positive economic impact by making the market for closely held small businesses more efficient, by helping entrepreneurs achieve full value for their business when it is sold and by helping aspiring business owners find business opportunities that are appropriate given their skills and financial resources.
Finders play an important role in introducing entrepreneurs to potential investors and raising the capital necessary to launch or grow their businesses. They can reduce the cost of raising capital and increase the likelihood of raising needed capital, particularly for entrepreneurs who have a limited number of pre-existing relationships with accredited investors.
The current regulatory ambiguity surrounding finders and business brokers impedes small firms’ ability to raise capital and has an adverse impact on economic growth and job creation.
NSBA supports a regulatory exemption for business brokers to the broker-dealer registration requirements consistent with the principles of the Country Business no action letter dated November 8, 2006 but extended to include the sale of a controlling interest in the business rather than being limited to the sale of the entire business.
NSBA also supports an exemption for finders from the broker-dealer registration requirement provided that the finder is not “engaged in the business of effecting transactions in securities for the account of others.”
The safe harbor is meant to ensure finders who assist small businesses to find capital from time to time either as an ancillary activity to some other business (e.g. the practice of law, public accounting, insurance brokerage, etc.) or as main street business colleagues or as friends or family members of the business owner are not treated the same for regulatory purposes as a Wall Street broker-dealer.
September 2013 NSBA Board Packet 22 Back to Agenda
Government Contracting / R&D Issues
NSBA’s Economic Development Committee is also monitoring and/or supporting a number of recently introduced pieces of legislation, including, but not limited to the Freedom From Government Competition Act (H.R. 1072; S. 523), Assuring Contracting Equity (ACE) Act of 2013 (S. 196), the Made in America Manufacturing Act of 2013 (S. 63), and the reauthorization of the America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science (COMPETES) Act.
The Freedom from Government Competition Act was introduced in the House by Congressman John Duncan (R –Tenn.) and in the Senate by Senator John Thune (R – S.D.). This bill would require that the federal government procure from the private sector goods and services necessary for the operations and management of certain government agencies (or the “yellow pages” test), excluding those functions and activities that are inherently governmental in nature (i.e. certain national defense and homeland security functions). The bill would also require the Director of OMB to conduct a study, in conjunction with the GAO, to evaluate the activities carried out in each agency.
Introduced by Senator Tom Udall (D – N.M.), the ACE Act would increase the government- wide small business contracting goal from the 23 percent to 25 percent, and the contracting goal for service-disabled veterans, women, qualified HUBZone small business concerns, and socially and economically disadvantaged individuals from 5 percent to 10 percent. The bill would also require the SBA Administrator to consult with the heads of the other federal agencies to develop and implement standards for procurement officers to take into consideration the past compliance of potential contractors with small business subcontracting goals when making contract awards. NSBA is working with Hill and agency staff to determine the parameters of the proposed standards and will update members as soon as information becomes available.
The Made in America Manufacturing Act of 2013 (S. 63) was introduced by Senator Gillibrand (D – Ny.) would, among other things, establish a public-private partnership to partner the Federal government with various stakeholders to implement a comprehensive Manufacturing Enhancement Strategies, including up to $20 million in federal funding per award to support and accelerate growth in manufacturing industry clusters like nanotechnology, biotechnology and aerospace.
Originally signed into law in 2007, the America COMPETES Act invests in innovation through research and development in engineering, the physical sciences, and certain STEM education programs. Given the current fiscal environment, reauthorizing this bill (at least at the current level - $45.6 billion) may prove difficult.
High-skilled Immigration Reform
On June 27, 2013, the full Senate passed the bipartisan Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744) (or the comprehensive immigration reform bill) by a margin of 68-32, with 14 Republicans joining their 52 Democratic colleagues and 2 Independent colleagues to pass the most comprehensive immigration reform measure to gain significant traction since 2006. The bill that passed the Senate included a number of provisions NSBA supported including sections concerning STEM, H-1B, and INVEST (or immigrant entrepreneur) visas, as well as provisions opposed by NSBA such as E-Verify. Now that the Senate has passed their bill, the focus shifts to the House which has decided to take a different path forward – a piecemeal approach.
September 2013 NSBA Board Packet 23 Back to Agenda
The House has introduced several stand-alone bills instead of a comprehensive package, and in one way or another addressed all of the provisions included in the Senate’s bill with the exception of the “pathway to citizenship,” which if not addressed will likely make reconciling the House and Senate measures extremely unlikely.
Patent Reform
Earlier this year, Rep. Goodlatte (Chairman of the House Judiciary Committee) and Sen. Leahy (Chairman of the Senate Judiciary Committee) released a patent discussion draft and recently several bills have been introduced on both sides of the Hill to address the purported increase in patent-related litigation. In addition to the aforementioned legislation, the Administration has also announced a list of legislative priorities and executive actions regarding this issue.
On July 11, 2013, NSBA signed on to a letter urging Members to exercise extreme caution in proceeding with any legislation that has the potential to further weaken our patent system. The letter called for targeted hearings on the various aspects of the proposed legislation before moving forward. Sen. Leahy and Rep. Goodlatte have yet to release a revised patent discussion draft or introduce a bill on the subject, though one is expected in the near future.
NSBA is in the process of meeting and speaking with the relevant stakeholders to determine a position and a path forward, and will update members with any relevant developments.
NSBA is also continuing to work with the Alliance to Prevent Fraudulent Attacks on Patents on their proposed Integrity Loophole bill, which would create a federal cause of action to allow an aggrieved patent owner to assert a damages claim against someone who commits fraud in initiating a post-issuance proceeding or during the proceeding itself.
Copyright Reform
Over the past several months, there has been an ongoing interest in a comprehensive review of copyright law, specifically whether the current copyright laws are still applicable in the new digital age and whether they are accommodating enough to new technologies. To date, there have been two hearings before the House Judiciary Subcommittee on the Courts, Intellectual Property with more to come in the future. The current debate seems to be between technology companies and content creators and appears to be focused on extending and improving copyright protections, better enforcement of rights in light of the advance of technology, and how best to improve the digital marketplace and the economic environment for copyright protections.
Cybersecurity Issues
Earlier this summer, the Senate Commerce Committee released their bipartisan cybersecurity bill (the Cybersecurity Act of 2013 (S. 1353)), which then was passed unanimously by the Committee with only a few amendments. The bill, largely noncontroversial, contains a number of provisions that would be beneficial to the small business community, including, but not limited to, an industry-led collaboration for the development of a flexible and voluntary set of standards and best practices to improve cybersecurity protections for our critical infrastructure, an education and awareness campaign, additional support for cybersecurity efforts, and federal cybersecurity research and development plan. The bill also contains a provision explicitly
September 2013 NSBA Board Packet 24 Back to Agenda stating that nothing in the measure shall be construed to confer any “regulatory authority on any federal, state, or local government agency.”
NSBA will continue to work with staff to improve the bill and ensure that small businesses are adequately represented and protected moving forward.
White House (or National) Conference on Small Business
As expected, it is looking more and more likely that Congress will have to pass and the President sign another continuing resolution (CR) this year to prevent a government shutdown. Therefore, there have been no new developments since our last board meeting on moving forward with a new White House (or National) Conference on Small Business. NSBA will continue to update members if there are any relevant developments.
ENVIRONMENT AND REGULATORY AFFAIRS – Legislative Update for the Board of Trustees September 20, 2013
Regulatory Affairs Issues
The ERA Committee is supporting and/or monitoring a number of recently introduced regulatory reform bills, including, but not limited to, the Small Business Paperwork Relief Act (H.R. 1321), Regulatory Flexibility Improvements Act of 2013 (H.R. 2542), Cost-Benefit and Regulatory Transparency Enhancement Act of 2013 (H.R. 2593), Regulatory Accountability Act of 2013 (H.R. 2122; S. 1029), Plain Writing Act for Regulations for 2013 (H.R. 1557; S. 807), Gulf Fisheries Fairness Act (H.R. 1219), Small Business Freedom of Commerce Act of 2013 (H.R. 168) and the Regulatory Sunset and Review Act of 2013 (H.R. 309), as well as several proposed and soon-to-be- proposed regulations ranging from EPA’s Greenhouse Gas Emissions Rule and BLM’s revised Hydraulic Fracturing Rule to EPA’s Tier 3 Motor Vehicle Emission and Fuel Standards Rule and NOAA’s Offshore Aquaculture Rule, among others. NSBA’s ERA Committee will continue to closely monitor these rules and will update members as new information becomes available.
The Small Business Paperwork Relief Act (H.R. 1321; S. 97) was introduced by Congresswoman Tammy Duckworth (D – Ill.) and would, under certain circumstances, suspend civil fines for first-time paperwork violations by small business concerns regarding the collection of information by a federal agency so long as the violation is corrected within the established time period.
The Regulatory Flexibility Improvements Act of 2013 (H.R. 2542) was introduced by Congressman Spencer Bachus (R – Al.) and would, among other things, amend the Regulatory Flexibility Act (RFA) to define “economic impact” with respect to a final rule and include both direct and indirect economic effects on small entities, require the Chief Counsel of SBA’s Office of Advocacy to issue rules governing federal agency compliance with RFA requirements, and provide for judicial review of an agency final rule for compliance with RFA requirements.
The Cost-Benefit and Regulatory Transparency Enhancement Act of 2013 (H.R. 2593) was introduced by Congressman Duncan Hunter (R – Cal.) and would require the head of a federal agency to submit to the relevant congressional committee a report on the results of—and methods used to
September 2013 NSBA Board Packet 25 Back to Agenda calculate—the cost-benefit or regulatory impact analysis used to promulgate rules, guidelines, or determine administrative decisions.
The Regulatory Accountability Act of 2013 (H.R. 2122; S. 1029) was introduced by Congressman Bob Goodlatte (R – Va.) and would, among other things, expand the scope of judicial review for agency rulemaking by allowing immediate review of a rulemaking under certain conditions, establish criteria for issuing major guidance (guidance likely to lead to economic costs of more than $100 million or significantly increase costs or adverse effects on competition, investment, innovation, etc.), and amend the Administrative Procedure Act (APA) to revise and expand the requirements for federal agency rulemaking.
The Plain Writing Act for Regulations for 2013 (H.R. 1557; S. 807) was introduced by Congressman Bruce Braley (D – Iowa) on the House side and Senator Claire McCaskill (D – Mo.) on the Senate side. This bill, if enacted, would require the use of clear, concise and well- organized language in all new or substantially revised government regulations.
The Gulf Fisheries Fairness Act (H.R. 1219) was introduced by Rep. Jo Bonner (R – Ala.), and, if enacted, would extend state water boundaries along the coast of the Gulf of Mexico giving the states more control over their reef fisheries and opening up more waters to commercial and recreational fisherman – the majority of which are small business owners. The bill also allows charter and commercial fishermen to fish for reef fish in state waters regardless of the more restrictive, one-size-fits-all approach of current federal regulations.
The Small Business Freedom of Commerce Act of 2013 (H.R. 168), introduced by Congressman Scott Garrett (R – NJ), would allow small businesses to be exempt from certain Federal rules and regulations so long as they complied with the requisite notification requirements.
The Regulatory Sunset and Review Act of 2013 (H.R. 309) was reintroduced by Congressman Randy Hultgren (R – IL) on January 18, 2013 and would establish new regulatory review procedures to review significant rules and require agencies to provide for a petition process that allows public and appropriate committees of Congress to request that other rules that are not significant be reviewed in the same manner as significant rules.
Energy / Environmental Issues
Before leaving for August recess, the Senate moved to the Energy Savings and Industrial Competitiveness Act of 2013 (or the Shaheen-Portman Energy Efficiency bill), which NSBA supports. This bill will promote and facilitate the development and deployment of new energy efficiency technologies and adoption of more efficient processes. The Senate is expected to take the bill back up upon their return from recess and after they vote on a resolution authorizing the use of force in Syria. NSBA has continued to work with staff to ensure that a couple of the provisions that were removed from the bill before its introduction are ultimately included on the floor, and will update members with any developments.
NSBA’s ERA Committee has continued to hold committee-sponsored teleconferences focused on key environmental and energy-related issues. Previous teleconferences have addressed current issues such as water resources and development, natural gas exports, hydraulic fracturing, clean coal technology and the potential impacts of climate change on small businesses across the country. For each discussion, NSBA was joined by a renowned expert from the academic or policy community who provided members with a general overview of the issue and answered any questions so as to help members better understand the potential
September 2013 NSBA Board Packet 26 Back to Agenda impact (positive and negative) these issues may have. The most recent teleconference was held on Wednesday, July 17 on water resource and development issues. The items discussed included tensions between water-intensive industries, tighter scrutiny concerning water-related permits (influent, effluent, run-off, etc.), and increased water-rate fees, taxes, and business insurance to mitigate some of these issues.
NSBA is also closely monitoring a number of energy-related bills that have recently been introduced (or will soon be introduced), including, but not limited to the Small Business Clean Energy Financing Act (H.R. 1138), Clean Energy Technology Manufacturing and Assistance Act (H.R. 400), the Clean Vehicles Inventive Act of 2013 (H.R. 407), the Expedited LNG for America Allies Act of 2013 and the Master Limited Partnerships (MLP) Parity Act.
HEALTH AND HUMAN RESOURCES – Legislative Update for the Board of Trustees September 20, 2013
Labor and Employment Issues
NLRB Recess Appointments Challenge (the Noel Canning case)
The National Labor Relations Board (NLRB) is composed of five members and must have at least a quorum of three to make decisions or take action. In a 2010 decision, New Process Steel v. NLRB, the Supreme Court held that the National Labor Relations Act requires the NLRB to have three members to act and cannot delegate its authority to a smaller committee. On January 25, 2013, the U.S Court of Appeals for the District of Columbia Circuit ruled that the NLRB lacks authority to act because it has only one lawful member.
On January 4, 2012, the President made recess appointments of Sharon Block, Terence F. Flynn and Richard Griffin to the NLRB. Flynn has since resigned and both Block and Griffin have withdrawn their nominations (see below). At the time of the President’s recess appointments of the three Board members, the Senate was operating pursuant to a unanimous consent agreement, which provided that the Senate would meet in pro forma sessions every three business days from December 20, 2011, through January 23, 2012. The agreement stated that no business would be conducted during those sessions. During the December 23 pro forma session, the Senate overrode its prior agreement by unanimous consent and passed a temporary extension to the payroll tax reduction. During the January 3 pro forma session, the Senate acted to convene the second session of the 112th Congress.
The D.C. Appeals Court held that the President’s recess appointments to the NLRB made January 4, 2012, were not constitutionally valid since the Senate was not in recess. Since Block and Griffin were not valid members, that left only one validly appointed member (Chairman Pearce). The decision puts in doubt every decision made by the NLRB since January 2012 --an estimated 300 decisions -- because the NLRB did not have the legal authority to act. Moreover, the NLRB says that over a 100 decisions are currently pending.
On April 25, 2013, the NLRB filed its petition for a writ of certiorari from the Supreme Court. On June 24 2013, the petition was granted. In addition to the questions presented by the petition, the parties were directed by the court to brief and argue whether the President's
September 2013 NSBA Board Packet 27 Back to Agenda recess-appointment power may be exercised when the Senate is convening every three days in pro forma sessions. The time for the government to file its brief on the merits has been extended to September 13, 2013. The time to file the respondents' brief on the merits has been extended to November 18, 2013.
NLRB Nominations
On July 30, the Senate confirmed all five NLRB nominees. The new Board consists of the following members:
Mark Gaston Pearce, Chairman Kent Hirozawa, Member Harry Johnson III, Member Philip Miscimarra, Member Nancy Schiffer, Member
The nominations of Sharon Block and Richard Griffin were previously withdrawn in favor of Schiffer and Hirozawa.
NLRB policies are not expected to materially change given the makeup of the new Board. Pearce remains Chairman. Schiffer was AFL-CIO Associate General Counsel and Hirozawa was chief counsel to the NLRB chairman. Johnson and Miscimarra were in private practice.
DOL Advice Rule Regulations
DOL has not yet taken action regarding changes in the so-called “advice” or “persuader” rule. NSBA submitted comments to the DOL and a statement to the House Small Business Committee urging withdraw of a proposed rule under the Labor-Management Reporting and Disclosure Act that would require employers to report on consultants assisting with speech- writing, public relations advice, labor campaigns, web sites, emails or other materials for employer communication to employees or the public, no matter how minor or indirect the relation to any labor dispute. In addition, modifications of personnel policies and practices fall under the persuader activities list. Therefore, arrangements with and the content of the work by attorneys, insurance agents, HR consultants, pension consultants, accountants or financial advisers who review benefits packages or other personnel practices would be reportable.
The Department of Labor (DOL) has indicated to White House Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) that it plans to take final action on the “Persuader” or “Advice” rule (proposed in June 2011) by November 2013. Previously, it had indicated that the rule would be out by April 2013. One likely reason for the delay is that OIRA raised concerns about the rule.
Secretary of Labor
On July 18, the Senate confirmed the nomination of Thomas Perez to be Secretary of Labor by a 54-46 vote.
EEOC and Criminal Background Screening
The Equal Employment Opportunity Commission (EEOC) has continued to file lawsuits against businesses for conducting criminal background checks.
September 2013 NSBA Board Packet 28 Back to Agenda
EEOC “guidance” provides little actual guidance. The EEOC has, however, made one thing clear. Complying with state or local laws requiring criminal background checks will not protect a small business from EEOC enforcement action. And, of course, a business that fails to conduct criminal background screening is likely to be found liable for the crimes of its employees committed while on the job.
There have been two positive developments in the effort to stop the EEOC initiative against criminal background screening.
First, nine state Attorneys General have sent a letter to the EEOC highly critical of the EEOC policies in this area. It is expected that more Attorneys General will follow their lead.
Second, on August 9, the U.S. District Court for the District of Maryland ruled against the EEOC in a strongly worded opinion in EEOC v Freeman. The court stated:
The story of the present action has been that of a theory in search of facts to support it. But there are simply no facts here to support a theory of disparate impact resulting from any identified, specific practice of the Defendant. Indeed, any rational employer in the United States should pause to consider the implications of actions of this nature brought based upon such inadequate data. By bringing actions of this nature, the EEOC has placed many employers in the “Hobson’s choice” of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers. Something more, far more, than what is relied upon by the EEOC in this case must be utilized to justify a disparate impact claim based upon criminal history and credit checks. To require less, would be to condemn the use of common sense, and this is simply not what the discrimination laws of this country require.
NSBA remains active in a coalition working against the EEOC initiative and has testified on this issue before both the EEOC and the U.S. Commission on Civil Rights.
OSHA Inspections
Deputy Assistant Secretary of Labor Richard E. Fairfax has issued an interpretation letter that determines that employees at a non-union workplace may designate union officials or community organizers as their representatives during OSHA inspections. The letter poses two questions and answers them in the affirmative:
Question # 1 – May one or more workers designate a person who is affiliated with a union without a collective bargaining agreement at their workplace or with a community organization to act as their "personal representative" for OSH Act purposes?
Yes.
Question # 2 — May workers at a worksite without a collective bargaining agreement designate a person affiliated with a union or a community organization to act on their behalf as a walkaround representative?
September 2013 NSBA Board Packet 29 Back to Agenda
Yes.
The federal regulation being interpreted is29 C.F.R. § 903.8(c) which reads:
The representative(s) authorized by employees shall be an employee(s) of the employer. However, if in the judgment of the Compliance Safety and Health Officer, good cause has been shown why accompaniment by a third party who is not an employee of the employer (such as an industrial hygienist or a safety engineer) is reasonably necessary to the conduct of an effective and thorough physical inspection of the workplace, such third party may accompany the Compliance Safety and Health Officer during the inspection.
NSBA does not regard the interpretation letter as consistent with the regulation allegedly being interpreted.
E-Verify
The Senate immigration bill (S. 744) that passed on June 27 contains provisions making the use of E-Verify mandatory. The bill would impose stiff civil and criminal employer penalties for failing to use E-Verify (up to $25,000 per violation and up to five years in prison). A violation, in this case, means each employee not run through the E-Verify system. The amendment process was severely abridged. Thus, a number of important amendments sought by NSBA were not offered.
The bill contains the liability bar NSBA sought protecting employers from liability when they make employment decisions because of E-Verify mandates. This language is very strong. Specifically, the bill provides that “An employer shall not be liable to a job applicant, an employee, the Federal government, or a State or local government, under Federal, State, or local criminal or civil law for any employment-related action taken with respect to a job applicant or employee in good-faith reliance on information provided by the System.”
The bill contains an amendment offered by Sen. Franken. This amendment would require the DHS Inspector General to conduct an annual accuracy audit of E-Verify and report annually to Congress. If USCIS does not attain the accuracy standards (0.26 percent), then the penalties on first time violators would be reduced. This amendment was, however, substantially weaker than that originally sought by NSBA.
The bill contains an amendment offered by Sen. Franken that would establish an Office of Small Business and Employee Advocate within USCIS and provide them with authority to issue assistance orders when the USCIS bureaucracy is causing hardship to small businesses or employees. It is based on the successful Taxpayer Advocate office and taxpayer assistance orders. Although not as strong as originally sought, this amendment may make a very significant difference in practice.
The bill contains an amendment offered by Sen. Coons that requires that individuals whose names are run through E-Verify be notified. This will help deal with identify theft.
The Legal Workforce Act (H.R.1772) was reported out of the Judiciary Committee June 26, 2013. The bill would require the use of E-Verify for all new hires. Fines of up to $5,000 per violation would be imposed for first time violators and of up to $25,000 per violation for subsequent
September 2013 NSBA Board Packet 30 Back to Agenda violations and up to 10 years in prison. Thus, a small business with 20 new hires over a period of time could be subject to first time penalties of as much as $100,000.
Health Care Issues
PPACA Employer Penalties
On July 2, the Obama administration announced that it will provide an additional year before the Patient Protection and Affordable Care Act (PPACA) mandatory employer and insurer reporting requirements begin.
“This is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees,” according to Assistant Secretary for Tax Policy Mark J. Mazur.
“Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015. During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA),” Mazur wrote.
NSBA welcomes the announcement. This will provide more time for businesses to grapple with the complex requirements of the PPACA and to have a reasonable period of time to consider their health care alternatives.
The employer shared responsibility requirements and penalties affect employers with 50 or more full time employees (including full time equivalents).
On July 9, 2013, the IRS issued Notice 2013-45 announcing this delay. On September 9, the IRS published a proposed rule, entitled “Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer- Sponsored Plans,” which addresses the information reporting requirements imposed on employers subject to the employer mandate and implements the one- year delay for such requirements.
On July 17, the House passed a bill (H.R. 2667), by a margin of 264-161, delaying the penalties imposed for companies that do not purchase health insurance in 2014. Proponents of this legislation do not believe that the IRS has the authority to waive the penalties enacted by the PPACA without Congressional action changing the law. The Senate is not expected to take this legislation up.
The House also passed a bill (H.R. 2668), by a margin of 251-174, that would delay the individual mandate penalties for one year. Proponents of this bill believe it is unfair to waive the employer penalties under the PPACA without also waiving the individual penalties. The Senate is not expected to take this legislation up.
Health Care Law Defunding Effort
September 2013 NSBA Board Packet 31 Back to Agenda
The Republican controlled House has voted to repeal the PPACA on numerous occasions. Republicans in both chambers have now launched a major push to withhold funding for implementation of the PPACA.
A substantial number of Republicans have cosponsored legislation called the “Defund Obamacare Act of 2013.” H.R.2682, introduced by Rep. Tom Graves (R-Georgia), has 139 sponsors. S.1292, introduced by Sen. Ted Cruz (R-Texas), has 30 sponsors. Minority Leader McConnell ( R-Kentucky) and Sens. Paul (R-Kentucky) and Rubio (R-Florida) are cosponsors. The House Republican leadership has, however, been skeptical about such an approach and is reluctant to set a course likely to lead to a government shut-down in October.
A government funding bill (either an omnibus appropriations bill or a continuing resolution) must be passed in September or the government will run out of money and be forced to shut down on October 1, the beginning of the new fiscal year. A substantial portion of Republicans stand ready to vote against any spending bill that continues funding for the health care law. They regard it as their last chance to stop implementation of the law.
The Democratic controlled Senate and the President, of course, will defend funding for the health care law. The debate over the federal budget in September will be contentious for a wide variety of reasons. The dispute over PPACA funding will make it more so.
Other Congressional Action on Health Care
Congressional action to make major changes to the structure of the PPACA is very unlikely given the support for the PPACA in the Senate. Moreover, the President would veto any effort to scale back the PPACA. Action relaxing the age bands, for example, or other relatively minor changes that achieve bi-partisan support may occur, but given the Congressional schedule such changes are very unlikely until 2014.
PPACA Implementation
PPACA implementation is substantially behind schedule. Exchanges are supposed to be up and running starting October 1, 2013. Some will be. Some probably will not. And some will initially only allow people to access the exchanges in conjunction with “navigators” in case problems arise.
Navigators are people who have been trained (and eventually certified) to help people navigate the exchanges as they make health insurance choices. They are not federal employees but are generally federally funded. They are employed by a wide range of organizations. Almost all have just recently been hired and are being trained. Their responsibilities and training will vary from state to state.
Information technology problems are likely to be commonplace as exchange computers communicate with consumer and insurance company computers and insurance company computers communicate with government computers.
The administration has announced that individuals will be allowed to self-certify their income for purposes of the exchange premium tax subsidy. It was deemed too complex to initially do what the law requires: have insurance companies make a call on IRS databases to verify prior year household income. Individuals will still be required to reconcile on their tax returns the health insurance tax credit they actually received via the insurance company (in the form of
September 2013 NSBA Board Packet 32 Back to Agenda reduced premiums) and what they should have received given their actual household income in 2014.
PPACA Impact on the Health Insurance Market
Insurance companies are in the process of seeking regulatory approval for health insurance to be offered on the exchanges and the outside group market for 2014. In general, it seems that rates will be increasing substantially in most states. However, there has been no comprehensive analysis released to date. In states (e.g. New York) that already restrict the medical underwriting of health insurance, the increases are likely to be less. Premium increases are likely to be higher for employers with younger, healthier groups.
House Over-Criminalization Task Force
House Judiciary Committee Chairman Robert Goodlatte (R-Virginia) has established an Over- Criminalization Task Force. “The number of federal crimes has exploded in recent years, bringing the number to approximately 4,500. According to a study by the Federalist Society, the number of federal criminal offenses grew by 30 percent between 1980 and 2004. Congress added 452 new federal criminal offenses between just 2000 and 2007 alone, which averages to 56.5 new crimes per year. This pace is simply unsustainable,” he said.
The proliferation of crimes and severe civil money penalties often for relatively minor violations of federal regulatory requirements can place small businesses in an impossible position when dealing with federal agencies. Because the potential penalties are so severe, businesses often feel they must comply with unreasonable demands. Moreover, the penalties for paperwork violations or other minor violations can be simply unjust, approaching penalties more appropriate for violent felonies.
The Task force has held two hearings. The first hearing was on June 14 and addressed the issue of the nature and scope of the problem. The second hearing was held July 19 and was entitled “Mens Rea: The Need for a Meaningful Intent Requirement in Federal Criminal Law.” Mens Rea is a Latin term meaning “guilty mind” and is the legal term for the traditional requirement in criminal law that a person had to intend to break the law in order to be found guilty of a crime. More and more federal criminal statutes are dispensing with this requirement.
An example, unfortunately, of over-criminalization would be the Legal Workforce Act (H.R. 1772) reported out of the Judiciary Committee on June 26. This bill would impose prison sentences of up to ten years on small business owners that failed to use the E-Verify immigration status verification system and potentially ruinous civil money penalties even for first time violators.
NSBA will be working both to make federal criminal and civil money penalties applicable to small businesses more comprehensible and more reasonable.
September 2013 NSBA Board Packet 33 Back to Agenda
COMMUNICATIONS UPDATE for the Board of Trustees September 20, 2013
1) Media NSBA has received a good number of media mentions in recent months and continues to proactively outreach key media outlets and reporters. Top mentions of NSBA have been surrounding the release of the NSBA Mid-Year Economic Report and the NSBA/SBEA survey on exporting. Hot topics include immigration reform, contracting, exporting, health care implementation, the national deficit and state of the U.S. economy.
2) Surveys and Reports a) 2013 Mid-Year Economic Report – On Aug. 6, NSBA released the 2013 Mid-Year Economic Report which showed an improved overall economic outlook for America’s small-business owners. When compared with five years ago, 40 percent of small- business owners said today’s economy is better off—the highest it’s been in five years. Unfortunately, past and projected growth in jobs and revenues remained stagnant while two-thirds of small businesses (65 percent) report they are able to obtain adequate financing, down from 73 percent six months ago. We also asked specific policy questions on health care reform and taxation: one-in-five small-business owners say they have a clear understanding of how the new health care law will impact their firms; and almost half (43 percent) say they have been the subject of an IRS audit or follow-up action in the last 10 years. b) 2013 Small Business Technology Survey – On Sept. 17 (estimated), NSBA will release its updated 2013 Technology Survey which provides detailed insight on how small business is faring in today’s ever-changing technology landscape. Among the findings: 94 percent of small-business owners say they are very or somewhat concerned about cybersecurity while nearly half of small businesses report having been the victim of a cyber-attack. c) 2013 Membership Survey – In August, NSBA did a survey of the membership on key items relating to the communications audit. Please see details below. d) Upcoming: NSBA will do a survey on health care implementation sometime in the fall with the goal of coordinating with the CORE groups where appropriate. The final survey of 2013 will be the Year-End Economic Report with an Energy Survey planned for early 2013.
3) NSBA Issue Briefings a) Workplace Wellness – On Aug. 22, NSBA and our corporate sponsor Humana, Inc. offered a webinar on the importance of workplace wellness. Over 500 people registered and speakers included NSBA’s Todd McCracken and Humana Employer Group Vice President and COO Chris Nicholson. Humana was pleased with the turn-out for the webinar and there was good audience participation.
b) Upcoming: Reducing the Deficit. NSBA staff is continuing to work with the Fix the Debt Campaign to secure an issue briefing sometime in the fall. We’re hoping to get a high- level guest speaker from their Board of Directors, and the date is dependent upon securing that guest speaker.
4) Communications Audit
September 2013 NSBA Board Packet 34 Back to Agenda
The Communications Committee has been discussing its role in the strategic plan over the last several meetings and is now in the process of implementing a comprehensive communications audit to aid in the key communications-related goals of the strategic plan: a research-based branding strategy; and upgrading communications and messaging using cutting edge media and technology.
The committee has finalized a survey (included in this report) of just under 200 NSBA members on a host of NSBA communications, member opinions and perceptions, and how engaged our members are with the organization. A few of the key take-aways which the committee is continuing to analyze include:
There still are a high percentage of our active members who perceive NSBA as Republican-leaning – a few reasons for this is the likely more conservative slant of our rank-and-file members as well as some of the more hot-button selling topics could be more right-leaning.
Respondents to this survey were overwhelmingly conservative, about two-thirds, followed by moderate (one-fourth) and then liberal at just four percent.
Despite this imbalance, the overwhelming majority think NSBA represents their concerns most or all of the time—and it was larger in this survey than in the 2010 survey
Many members still think our policy is driven by staff and/or surveys of our membership. One third aren’t sure how our policy decisions are made—this is an area for improvement, despite positive improvement in this indicator from the 2010 survey.
The Weekly Advocate continues to be a good resource for members with the majority saying they read either a few or most of the articles of every edition. The majority also think we’re sending the right amount of communications out.
The majority of our members are older businesses, which underscores the need to bring in newer and younger businesses to the organization and leadership.
NSBA is, by far, the primary resource our members use for small-business policy news, as well as the group they hear the most about when it comes to small-business policy.
About 1/3 of NSBA members belong to a local chamber of commerce and/or NFIB, in addition to NSBA—memberships in both those areas dropped from the 2010 survey.
There was very positive change in website responses for why people don’t go to www.nsba.biz. There were notable drops in those who said information isn’t updated regularly as well as those who said there was too much information. The redesign of the website worked to address those two key issues and it appears we have, as well as made it easier to navigate. Interestingly, the Weekly Advocate is the primary reason people say they don’t visit the website more regularly.
September 2013 NSBA Board Packet 35 Back to Agenda
The committee is now working on surveys to reporters and hill staff to get some external information about how NSBA is perceived, and once all this data collection is finalized, we will work to develop next steps.
5) Media Clips June 4 – Sept. 9, 2013 a) News 352 b) Blog 80 c) Video 47 d) Press releases 375 e) Social Media 20 TOTAL 874
NSBA Notable Mentions June 4 – Sept. 9, 2013
Advice for Owners of Small Firms: Take Stock Associated Press 9/9/13 Nearly half of small-business owners expect growth opportunities in the coming year, according to a survey taken in June and July by the National Small Business Association. That's up from 38 percent six months ago.
IRS Issues proposed rule on ACA Small Business Tax Credit Bloomberg BNA 8/28/13 In their current state, the proposed rule constitutes “a lot of work to go through for a temporary tax credit,” Molly Brogan, a spokeswoman for the National Small Business Association, told BNA Aug. 23.
Smaller Firms May Want to Take Risks San Antonio Express-News 9/3/13 Almost half of small business owners say there will be growth opportunities in the coming year, according to a survey conducted in June and July by the National Small Business Association. That's up from 38 percent six months ago.
New Flash of Optimism for Small-Business Owners Wall Street Journal 8/28/13 A spokeswoman for the National Small Business Association, which also conducted a survey in July that showed a rapid jump in confidence, warned that the findings could be ephemeral. "There haven't been these major economic battles in Congress playing out in the media lately…the sequester, debt ceiling and recession have impacted the surveys in past months," said NSBA's Molly Brogan. Congress's activity in September may bring back the feeling that "the sky is falling," she said.
Washington Journal – Small Business Hiring 8/26/13 C-SPAN Interview featuring Todd McCracken
September 2013 NSBA Board Packet 36 Back to Agenda
Small Business Lending is down? Tell me Something I Didn’t Know Deseret News 8/23/13 Not long ago the National Small Business Association (NSBA) released its 2013 Mid-Year Economic Report, which suggests, “Today, just two-thirds of small businesses (65 percent) report they are able to obtain adequate financing, down from 73 percent six months ago.”
It’s Christmastime for Big Government Contractors. For Small Companies, Not So Much BloombergBusinessweek 8/21/13 Some of those contracts are now primed to start flowing, but end-of-year contracting puts small businesses at a “huge disadvantage,” National Small Business Association spokeswoman Molly Brogan told David Hansen in Bloomberg BNA: “If you have $100 million to get rid of by the end of the year and six really big contracts or 12 smaller ones that may not come close, you will go with the bigger ones,” she said.
Business Tries to Tame Tea-Party Conservatives it Helped Elect National Journal 8/19/13 "You don't really know what they're going to do or why," says NSBA President Todd McCracken, a 20-year Washington veteran. "It used to be there were not many rewards for obstruction. Now there are no consequences."
“There was a sense that this is a weird political time and we'll get past it," he says. "Now, there's the realization that maybe this is the new normal, and we should do something to shake it up." The next few months will offer many tests of his theory—and his optimism.
Novel Ways to Solve Exporting Riddles for Small Businesses BloombergBusinessweek 8/16/2013 About two-thirds of small businesses that don’t export goods or services would like to start selling overseas, according to a June study from the National Small Business Association (NSBA). Almost half of those businesses said a main barrier is that they’re “not sure where to start.”
GAO Study Finds Fault with Export Program Wall Street Journal 8/14/13 In a May survey of 500 U.S. small-business owners, 36% said none of the Obama administration's recent proposals to enhance exporting opportunities, including the National Export Initiative, have
September 2013 NSBA Board Packet 37 Back to Agenda helped them start or expand their exporting operations. Three percent said the proposals have already helped, 13% said they would in the future and 48% said they were unsure. "Small-business owners who want to export have to wear a lot of different hats and there are a lot of challenges for people trying to get in the game," said NSBA Chairman David Ickert. "Bigger business may have representatives in foreign countries, they may have people on the ground, small businesses in most instances will not have their own people there—they might have to pick up what they're doing and hop on a plane."
Small Businesses Seek Cure for Health Care Cost Surge Associated Press 8/16/13 A survey of owners taken last month by the advocacy group National Small Business Association found that 20 percent have held off on implementing a growth strategy because of rising health care costs. Thirty-six percent said they had refrained from raising salaries and 26 percent have held back on hiring.
65% Isn’t Enough and Job Creation is Suffocating Forbes 8/13/13 The National Small Business Association (NSBA) recently released its 2013 Mid-Year Economic Report. I find one of the biggest data points from the report interesting: Today, just two-thirds of small businesses (65 percent) report they are able to obtain adequate financing, down from 73 percent six months ago. Although the report shows many business owners are feeling more confident about the economy generally, it isn’t all a bed of roses, as many Main Street businesses don’t see as positive an outlook for their own businesses.
Small Businesses More Confident in Economy, Less so About Their Own Businesses Huffington Post 8/9/13 Small business owners' confidence in the U.S. economy is increasing considerably as the country gradually recovers from the Great Recession, according to a new report from the National Small Business Association, a small business advocacy group. The segment of the economy they aren't so confident about, however? Their own businesses.
7 Signs of a Muddled Outlook for Small Business American City Business Journals 8/7/13 Small businesses are feeling better about the U.S. economy, but they're still nervous about the future. That's one takeaway from a survey of 1,100 small businesses conducted this summer for the National Small Business Association. This survey, taken every six months, provides a good snapshot of how small businesses are faring, and what issues are most important to them. Here are the survey's seven most important findings:
Small Business Owners Are Optimistic—But Not Racing to Hire Forbes 8/7/13 The National Small Business Association’s new Mid-Year Economic Report, which surveyed 1,100 business owners in June and July, found that 40% of small business owners say the economy is in
September 2013 NSBA Board Packet 38 Back to Agenda better shape than five years ago, the highest percentage in five years. Among owners, 59% say that they are growing their businesses or expect growth in the coming year, up from 50% six months ago.
Lawmakers, Aides Getting ObamaCare Break 8/5/13 Fox News On the Record with Greta Van Susteren Interview with NSBA Trustee Mike Mitternight
Small Businesses Want More from Obama’s Tax Proposal Fox News 8/1/13 Molly Brogan, communications director at National Small Business Association, told FOX Business that while expensing is the way to small business owner's heart, such owners need to have a clearer senses of whether such proposals are permanent or just for a limited time only. "Permanency is important to us. Taxes are complex for small businesses, so it's absolutely helpful to know if it's ongoing, or if it will only be there for one year and then phased out," she said.
Export Revival Underway for Small Businesses Associated Press 7/22/13 Sixty-four percent of small businesses are exporting goods or services, up from 52 percent in 2010, according to a survey by the National Small Business Association and the Small Business Exporters Association. Sixty-three percent of nonexporters said they’re interested in selling overseas, up from 43 percent, according to the trade groups. Of those who are exporting, the majority — 54 percent — get less than 10 percent of their revenue from overseas sales. … Another reason for the decline in exporting was the difficulty small businesses had finding financing for their exports. Many banks believed small companies, including exporters, were too risky to lend to, says David Ickert, chairman of the National Small Business Association.
The Growing Trade Opportunity Overseas for Small Business The Hill Op/Ed by Chairman Sam Graves (R-Mo.) 7/10/13 A National Small Business Association study found that nearly 50 percent of small-business exporters spend at least a few months preparing to export, and spend an average of 8.4 percent of that year’s operating revenue on those preparations.
Could Free-Trade Mean Bad News for Small Business?
September 2013 NSBA Board Packet 39 Back to Agenda
Fox Business 7/10/13 NSBA spokeswoman Molly Brogan says the easing of regulatory burdens will outweigh the negative impact of fiercer competition. “We think 15% who say free trade has hurt their business is quite low, in terms of the other benefits,” says Brogan. She also says an agreement may make small businesses more able to compete with larger competitors in the global marketplace. “Having different rules and regulations for every different country, that are constantly changing, makes it really difficult for smaller companies, where the COO or CEO is likely handling a lot of the export business,” says Brogan.
U.S. Celebrates Main Street Washington Post 6/24/13 Small business exporting is taking off, thanks in part to help from Washington. Sixty-four percent of small firms have sold goods abroad, up from 52 percent in 2010, according to a recent poll by the National Small Business Association.
Credit Reports: What Small Businesses Don’t Know Can Hurt Them Wall Street Journal 6/21/13 A survey in May 2012 of 300 small-business owners by the National Small Business Association found that 23% had difficulty disputing or correcting a mistake with a debt collector or credit-report firm.
Every Week is Small Business Week. This Week It’s Official BloombergBusinessweek 6/17/13 In 2010, President Obama pledged to double the nation’s exports by 2015, and is counting on small businesses to play an important part. A study published by the National Small Business Association last week indicated that small businesses want to expand internationally, but don’t know where to start.
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2013 Membership Survey
NSBA asked just under 40 questions of our members as part of our ongoing communications audit to get a better idea how our communications are impacting NSBA’s members, what perceptions of NSBA exist and how we can better serve our members through our communications. This survey was conducted online August 9 – 23, 2013 among 185 small-business members of NSBA.
Below are the key findings.
There still are a high percentage of our active members who perceive NSBA as Republican-leaning – a few reasons for this is the likely more conservative slant of our rank-and-file members as well as some of the more hot-button selling topics could be more right-leaning.
Respondents to this survey were overwhelmingly conservative, about two-thirds, followed by moderate (one-fourth) and then liberal at just four percent.
Despite this imbalance, the overwhelming majority think NSBA represents their concerns most or all of the time—and it was larger in this survey than in the 2010 survey
Many members still think our policy is driven by staff and/or surveys of our membership. One third aren’t sure how our policy decisions are made—this is an area for improvement, despite positive improvement in this indicator from the 2010 survey.
The Weekly Advocate continues to be a good resource for members with the majority saying they read either a few or most of the articles of every edition. The majority also think we’re sending the right amount of communications out.
The majority of our members are older businesses, which underscores the need to bring in newer and younger businesses to the organization and leadership.
NSBA is, by far, the primary resource our members use for small-business policy news, as well as the group they hear the most about when it comes to small-business policy.
About 1/3 of NSBA members belong to a local chamber of commerce and/or NFIB, in addition to NSBA—memberships in both those areas dropped from the 2010 survey.
There was very positive change in website responses for why people don’t go to www.nsba.biz. There were notable drops in those who said information isn’t updated regularly as well as those who said there was too much information. The redesign of the website worked to address those two key issues and it appears we have, as well as made it easier to navigate. Interestingly, the Weekly Advocate is the primary reason people say they don’t visit the website more regularly.
September 2013 NSBA Board Packet 62 Back to Agenda
CONFIDENTIAL NSBA Member Survey 2013 2013 2010
Q1. How many total full-time personnel are currently employed by your business? 0 4.3% 1 to 5 31.0% 6 to 19 28.8% 20 - 99 27.7% 100 - 499 7.6% 500 or more 0.5%
Q2. How many years has your firm been in business? Less than 1 year 0.6% 0.6% 1 to 5 years 2.9% 3.1% 6 to 10 years 6.4% 17.7% More than 11 years 90.1% 78.7%
Q3. Which of the following best describes the structure of your business? C-Corp 30.2% S-Corp 39.5% Sole Proprietorship 11.0% Partnership 2.3% LLC 16.9%
Q4. Which of the following best describes the industry or sector in which your business operates? (Based on NAICS codes) Accommodation and Food Services 2.3% Administrative and Support 0.6% Agriculture, Forestry, Fishing and Hunting 3.5% Arts, Entertainment, and Recreation 0.6% Construction 9.9% Educational Services 0.0% Finance 2.3% Health Care and Social Assistance 2.9% Information (IT) 6.4% Insurance 4.1% Management of Companies and Enterprises 0.0% Manufacturing 18.6% Mining 0.6% Other Services (except Public Administration) 7.6% Professional 14.0% Public Administration 0.0% Real Estate, Rental and Leasing 4.1% Retail Trade 7.6% Scientific and Technical Services 5.8% Transportation and Warehousing 3.5% Utilities 0.0% Waste Management and Remediation Services 0.6% Wholesale Trade 5.2%
September 2013 NSBA Board Packet 63 Back to Agenda
Q5. What were your gross sales or revenues for your most recent fiscal year? Less than $100,000 7.1% $100,000 to less than $250,000 8.2% 10.1% $250,000 to less than $500,000 11.2% 14.5% $500,000 to less than $1,000,000 8.8% 9.4% $1,000,000 to less than $5,000,000 32.9% 36.5% $5,000,000 to less than $25,000,000 22.9% 21.4% $25,000,000 to less than $75,000,000 2.9% 4.4% $75,000,000 to less than $150,000,000 1.2% 0.6% $150,000,000 or more 1.8% 3.1% N/A 2.9%
Q6. In what region is your business located? New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) 6.4% Mid-Atlantic (New York, Pennsylvania, New Jersey, Delaware, Maryland, District of Columbia, Virginia, West Virginia) 15.2% Great Lakes (Wisconsin, Michigan, Illinois, Indiana, Ohio, Minnesota) 22.8% Farm Belt (Missouri, North Dakota, South Dakota, Nebraska, Kansas, Iowa) 6.4% South (Mississippi, Alabama, Arkansas, Louisiana, Florida, South Carolina, Georgia, North Carolina, Kentucky, Tennessee, Oklahoma, Texas) 25.7% Mountain (Idaho, Montana, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico) 11.7% Pacific (Alaska, Washington, Oregon, California, Hawaii) 11.7%
Q7. Are you a member of any of the following organizations? (Check all that apply) Local Chamber Of Commerce 38.5% 53.7% National Federation Of Independent Business(NFIB) 37.3% 47.8% I am only a member of NSBA 31.4% n/a Other business organization 20.7% n/a US Chamber of Commerce 17.2% 29.1% State Chamber Of Commerce 12.4% 17.9% National Association For The Self Employed (NASE) 1.8% 3.7% National Association Of Women Business Owners(NAWBO) 1.8% 2.2% Not a member of any organization 1.2% 14.9% Comments
Q8. What is your perception of NSBA’s political leanings? Nonpartisan 35.9% 39.4% Democratic 0.0% 0.7% Republican 48.5% 41.3% Not sure 15.6% 18.7% Q9. What is your own political leaning? Conservative 65.9% Liberal 3.6% Moderate 24.6% N/A 6.0%
September 2013 NSBA Board Packet 64 Back to Agenda
Q10. In your opinion, does NSBA accurately reflect the concerns of most small businesses… All the time 17.5% 11.0% Most of the time 72.9% 78.1% Not often enough 8.4% 9.7% Not at all 1.2% 1.3%
Q11. Do you believe NSBA’s positions on issues are primarily driven by… NSBA volunteer leadership 19.4% 13.6% Staff 15.8% 9.7% Surveys of membership 29.1% 25.8% Not sure 35.8% 51.0%
Q12. What is the primary reason you joined NSBA? To support advocacy efforts 86.5% 84.7% Benefit programs 1.2% 4.0% Volunteer activities 0.0% 0.0% Networking opportunities 1.2% 1.3% Resources and education 4.9% 8.7% Events held by NSBA 0.0% 1.3% Other 6.1%
Q13. Are you involved with any of NSBA’s legislative issue committees? Yes 18.7% 6% No - wasn't aware of committees 25.3% 34.3% No - don’t have time 32.5% 60.1% No - I don't expertise on the issues 5.4% 16.8% No - it doesn’t make a difference 1.2% 4.9% No -other 16.9%
*2010 question was 2 separate questions which is why the no… responses are slightly higher in 2010 than in 2013
Q14. Are you aware of NSBA’s priority issues? Yes – I know what they are 32.3% Yes – I am aware they exist 41.9% No 25.7%
Q15. Which of the following groups do you hear and/or read the most about when it comes to small -business policy? NSBA 42.6% National Federation Of Independent Business(NFIB) 32.7% U.S. Chamber of Commerce 17.9% Small Business Majority 3.7% National Association Of Women Business Owners(NAWBO) 1.9% National Association For The Self Employed (NASE) 1.2%
Q16. Do you believe the NSBA brand (logo, graphics, tag-line, etc…) are easily recognizable in all communications you receive from NSBA? Yes 75.6% No 7.9% Not sure 16.5% Q17. Do you receive the NSBA Weekly Advocate (e-mailed newsletter)?
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Yes 73.6% No 26.4%
Q18. Which of the following most accurately describes how you read the NSBA Weekly Advocate (e-mailed enewsletter)? I read only a few articles of every edition 40.8% I read most of the articles of every edition 22.5% I read only a few articles occasionally 31.7% I don't read any articles - I’ve already read about the issue in another publication 1.7% I don't read any articles - they are not of interest to me 0.8% I don't read any articles - they are too long 0.0% I don't read any articles - they are too technical 0.0% Other 2.5%
Q19. What is the largest benefit you get from the NSBA Weekly Advocate (e-mailed newsletter)? Latest news on issues that matter to small business 51.7% 62.7% Action Alerts 22.5% 16.4% Quick Polls 2.5% 1.5% Detailed analysis on key issues 8.3% 4.5% Status report on NSBA’s priority issues 9.2% 14.9% N/A - I don't read or receive the Weekly Advocate 3.3% n/a Other 2.5%
Q20. How often do you visit the NSBA.biz Web site? Daily 0.6% 0.7% Weekly 3.1% 2.8% A few times a month 15.4% 11.8% Rarely 50.0% 45.8% Never 30.9% 38.9% *Drop in never and increase in a few times a month is good
Q21. If rarely or never, why? Information isn’t updated regularly enough 2.5% 14.6% Difficult to navigate 1.7% 4.9% Web site is slow 1.7% 4.9% Too much information to sort through 25.4% 78.1% Other 68.6%
Q22. Do you use the NSBA Action Center to send your elected officials letters and correspondence? Yes 51.6% 28.8% No 48.4% 71.2% * This is positive, but likely indicitave of who took the survey, not high Alert responses.
Q23. If no, why not? Too time consuming 15.4% 43.8% Too difficult to navigate 15.4% 10.4% I don’t send letters to Congress 23.1% 39.6% Alerts aren’t on issues of interest to me 0.0% 10.4% Other 46.2%
Q24. What is the largest benefit you get from the NSBA Web site?
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Latest news on issues that matter to small business 77.4% 15.0% Action Alerts 3.2% 7.1% Survey Data 0.0% 0.8% Press Releases 3.2% 3.2% NSBA’s priority issues & detailed issue briefs 12.9% 7.9% Information on upcoming NSBA events 3.2% 2.4% Other 0.0% Q25. Do you follow NSBA on social media outlets? (Check all that apply) Twitter 3.7% Facebook 6.2% LinkedIn 8.1% I do not follow any NSBA social media accounts 87.0%
Q26. What kinds of social media do you use? (check all that apply) LinkedIn 54.0% 25.0% Facebook 41.6% 29.5% Twitter 14.3% 8.9% Instagram 1.2% Pinterest 5.0% Foursquare 1.2% None 36.0% Other 2.5% Q27. If none, why? I don’t have time 38.6% 41.2% I don’t know how 8.8% 5.9% I don’t see how they will help my business 36.8% 52.9% Other 15.8%
Q28. Would you say that you receive communications (emails, action alerts, eNewsletters, mailings, etc…) from NSBA... Just the right amount 83.8% 80.8% Too frequently 6.9% 8.3% Not enough 9.4% 10.8%
Q29. Do you receive e-mails or eNewsletters from NSBA’s councils, the Small Business Technology Council (SBTC) or the Small Business Exporters Association (SBEA)? Yes 26.9% 22% No 63.1% 78% No, but I would like to 10.0% n/a
Q30. Have you seen NSBA staff or members interviewed on a television news program, or seen them quoted in print or on-line publications? Yes 34.2% 21.9% No 65.8% 78.1%
Q31. Have you participated in any NSBA Issue Briefing teleconferences? Yes 25.3% No 74.7% Q32. If no, why not? Too busy 38.7% Never heard about them 32.8%
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Not necessary—issue updates are included in the Weekly Advocate 18.5% Not interested in the issues covered 5.0% Other 5.0%
Q33. What resources to you regularly look to for information on small-business policy news? (Check all that apply) NSBA 63.1% Industry-specific trade groups 49.0% Business-specific magazines and journals (Inc.com, Business Journals, etc…) 42.0% Business-specific television programming (Fox Business, CNBC, etc…) 32.5% Government resources (SBA, SBDC’s, local economic development offices, etc…) 23.6% Other small-business specific trade groups 21.0% Small-business blogs (which ones) 5.1% Other 10.8% Q34. What external sources of information do you use? (check all that apply) Answer Options Print Online Local Daily Newspapers 56.5% 18.1% Wall Street Journal 34.1% 21.0% Local Business Journal 30.4% 11.6% USA Today 15.2% 8.7% Time Magazine 13.0% 1.4% Bloomberg/BusinessWeek 10.9% 13.8% NY Times 10.1% 10.9% Other 5.8% 5.8% Washington Post 5.1% 10.9% LA Times 5.1% 3.6% Politico 5.1% 13.8% Newsweek 4.3% 2.2% US News & World Report 2.2% 2.2% Q35. What Web sites/blogs do you visit for information when it comes to business issues and policy? (Check all that apply) None 64.5% Drudge 14.2% Huffington Post 11.6% Slate 5.2% Other 11.6%
Q36. How often would you be willing to contact via email or communicate with the following people and/or outlets on key small-business issues if it took less than 10 minutes? Occasionall Answer Options Regularly y Rarely Never Your U.S. Representative 35.4% 46.2% 13.9% 3.8% Your U.S. Senators 35.4% 44.9% 13.9% 4.4% Federal regulators 23.4% 29.1% 22.2% 14.6% State and local lawmakers 36.7% 38.0% 16.5% 5.1% Local and regional reporters 20.3% 27.8% 22.8% 20.3% National reporters 20.3% 20.9% 21.5% 27.2%
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MEMBERSHIP MARKETING UPDATE for the Board of Trustees September 20, 2013
Overall membership revenue through July, 2013 was $1,265,563 compared to revenue of $1,298,913 for the first seven months of 2012. While both Mutual of Omaha and Outside Sales revenue are near last year’s production levels, Telesales revenue continues to perform slightly below last year’s results.
Telesales Telesales revenue through July of 2013 is slightly below last year with revenues of $1,171,599 compared to $1,210,343 through the same period in 2012. New sales results are very close to last year’s level of production and renewal sales are ahead of last year’s level; however special funding and dues increase revenue are both down from last year. Revenue for the Small Business Technology Council that is managed by a telesales Membership Manager is close to last year’s production level with revenues of $55,450 through July 2013 compared to $55,835 last year.
Mutual of Omaha Mutual of Omaha revenue through July of 2013 was $38,739 compared to $35,800 for the same period in 2012.
Outside Sales Outside sales revenue through July of 2013 was $55,225 compared to $52,000 in 2012.
Health Insurance Benefit for NSBA Members NSBA staff has held numerous meetings in the last three months with GMAC Insurance to discuss a program for self- insurance for small business owners and their employees. At this point in the negotiation a final contract has been agreed upon and staff are doing due diligence before signing the contract. GMAC has a business division called The Association Benefits Solution (TABS) which acquired several for-profit associations from the Coca Cola Bottlers Association including the Alliance of Professional Services Organization (APSO). This health insurance approach differs from traditional fully insured health insurance because each employer is self funded and reinsured through APSO. This self-funded insurance plan is designed for firms that employ 10 or more employees and is available in all 50 states.
This approach can offer unique savings but also has unique, though minimal, risk associated with it. Employers providing self-insured coverage for their employees will be offered two provider networks, the national CIGNA provider network or the national Aetna provider network. Employers will be asked to choose the program with the best local network, coverage options and premium options. For small businesses who generally have healthy employees and smaller claims, this self- insurance option could provide dramatic savings compared to the rates that will be charged through the Health Insurance Exchanges. Self -Insured plans avoid additional taxes such as the HIT Tax and state mandates.
In order to qualify for participation in this self-insurance program, NSBA members would have to join and pay dues to one of the for- profit associations that make up the TABS group. Dues range between $100 and $1,000 annually depending on the size of the company. NSBA staff view this program as a potentially great benefit for certain NSBA members and also an additional tool to
September 2013 NSBA Board Packet 69 Back to Agenda attract new members. The marketing plan involves using NSBA’s existing sales managers to identify and forward to TABS NSBA members who have expressed interest in the program, and also to have a series of member teleconferences to explain the program to members and non-members.
Corporate Partnerships AXA Equitable has agreed to become an NSBA Platinum Partner ($20,000). AXA Equitable provides retirement options for small business owners including 401k plans SEP plans and IRAs. AXA Equitable also markets life insurance products.
Leadership Council The NSBA Membership Committee discussed in detail the proposed Leadership Council and discussed several marketing concepts to assist in its growth and development.
Membership/Marketing Database NSBA has moved its employee desktops to the cloud and has developed a new membership database that can be accessed by employees remotely. Membership records have also been updated to include congressional district information, updated employee counts and sales revenue providing important new data on members.
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NSBA Leadership Council Proposed Program Outline August, 2013
As part of NSBA strategic planning process, a general consensus has formed around the creation of a “Small Business Leadership Council,” to ensure that NSBA has active leadership, input, and activism from all parts of the country. Currently, NSBA has nationally representative membership, but great regional variation when it comes to leadership and activism.
As we discussed at the June 18 Board of Trustees meeting, the Governance Committee recommended forming a new Leadership Council while keeping the current Board structure. NSBA would form a new council, which could become a “farm team” for the Board, thereby making the Board more nationally representative over time. To make SBLC membership enticing under such a scenario, the group would need special benefits and specific responsibilities.
Following the June meeting, staff has considered how such a council could be structured, created, and grown. We proposed the following basic framework for the Leadership Council:
Council Benefits and Privileges
Opportunities to testify before Congress. By maintaining a detailed data base of council member interests, positions, business experience, and expertise, NSBA will be able to find and create new opportunities for council members to testify before Congressional committees, both in Washington and at field hearings.
Exposure in both national and local media. NSBA will both refer targeted media calls to relevant council members, and also assist council members in cultivating relationships with local media— increasing both the NSBA presence and visibility of the council member in their local markets.
Quarterly legislative “insider” briefing teleconferences. Council members will be invited to quarterly legislative teleconferences with NSBA staff and Board leadership. These teleconferences will be designed to update members with an inside perspective on developments and strategy on key priority issues.
Invitation to annual Leadership Council issues conference. NSBA will create an annual Leadership Council issues conference (which may merge with the Small Business Congress) to provide a regular forum for council networking and issue education.
Surveys to “take the pulse” of the Council before major issues come before the Board. When significant and potentially controversial issues come before the board for consideration, input from the council could be quite valuable.
Collaboration with other leaders across the nation on issues of local, state, or national concern. In addition to the teleconferences and the annual conference, NSBA will create a special “members only” webpage and other social media tools for the Council members to network, share experiences and gain insight from a wide variety of expertise and activities.
Council Responsibilities
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Cultivate relationships with government officials. Council members will be expected to create and sustain relationships with local, state, and federal officials. NSBA staff will assist these efforts by providing guidance, opportunities (e.g., Congressional “town halls”), and issue support, but the primary responsibility for relationship building rests with the council members.
Respond to action alerts. It is critical that council members respond to a high percentage of NSBA requests for action. As the council grows in members, these requests will become more numerous (in the aggregate), but also more targeted, making high response rates critical.
Stay informed on the issues. In order to be an effective advocate and spokesperson on the issues, council members will need to maintain a generally high level of knowledge and a broad array of NSBA issues. While NSBA staff will be available to provide briefings and add information as opportunities are addressed, these briefings can be maximally effective only if members start with a good base of current knowledge.
Circulate NSBA issue materials to local and industry contacts. By actively promoting NSBA and its issues within their local business community and trade groups, council members can both become leaders on key issues and establish NSBA as a key source of information to a broader cross-section of the business community. These activities also include supporting NSBA’s activities on social media.
Attend NSBA events and teleconferences. Attendance at events is a crucial piece of integrating activists within the NSBA “family.” Council members will be expected to attend the Washington Presentation, the Small Business Congress, and the annual Leadership Council issues conference (which may coincide with the other two events). Members will also be expected to participate in the regular quarterly teleconferences.
Membership and financial support. Naturally, NSBA would expect all members of the council to maintain their current membership status with the association. For direct NSBA members, we would also work to create the expectation that council members would support the association at a higher level than the base recommended dues. While NSBA must be careful that the council does not become (and is not perceived as) a strictly “pay-to-play” activity, there are significant benefits that accrue to council members, and there will be significant association resources dedicated to facilitating their participation.
Council Selection and Appointment
Membership in the Council will be pursued from four main sources:
Current members who appear to be ready to become more active. This potential pool will include those members who have attended NSBA events, participate in NSBA conference calls and issue committees, and those identified by our membership managers as good candidates for additional leadership opportunities. CORE member recommendations. NSBA’s current affiliated organizations will be solicited to recommend individuals who could be key participants in this group. Current small business activists who are not NSBA members. NSBA will seek to identify current small business activists nationally and seek to recruit them into the organization. We will look for a broad diversity of individuals (geographically and otherwise) who would be a good “fit” for NSBA’s culture and issues.
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Members of associations we are recruiting into NSBA. As a separate initiative, we will be seeking to recruit additional associations as members of NSBA. The ability to nominate members to our Leadership Council will be a key point in defining the association benefits of aligning with NSBA.
While they will not be considered members of the council, staff of all NSBA member associations will be invited and encouraged to participate in all council events, communications, and initiatives.
Once potential members are identified and/or nominated, they will be carefully evaluated by NSBA staff, and the NSBA President will make recommendations for membership on the council to the Board of Trustees. Council members will be appointed for a renewable two-year term. While we will seek broad diversity, geographic diversity will be a significant factor in making the final recommendations. The Board will make the final decision on membership of the council. This process will be ongoing, with the Board potentially considering council membership at any of its quarterly meetings.
All Trustees will be automatically conferred Leadership Council membership, and the NSBA Chair will appoint one Trustee to chair the Leadership Council. This chair shall convene Leadership Council meetings and teleconferences and provide a liaison role between the two bodies.
While it may be necessary to limit the overall size of the council at some point in the future, at this point we do not anticipate the necessity of setting a particular ceiling on membership.
Staffing and Implementation
To maximize the chances of success, we believe that the council will need dedicated staff. We currently anticipate hiring one new full-time staff member (and new interns, as needed). We have already had preliminary discussions with potential candidates. Other staff responsibilities may be reorganized at the same time, in order to better align particular functions.
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SBEA Update for the Board of Trustees September 20, 2013
President Pushing for Fast Track Authority The U.S. Trade Representative Michael Froman has said that he along with President Barack Obama will continue to push and work with Congress to put “fast track” trade authority in place to help the U.S. finish talks with the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP). Indeed, on July 30 while delivering remarks on his economic agenda, the president issued a brief request for Congress to grant his administration Trade Promotion Authority (TPA) and renew Trade Adjustment Assistance (TAA).
In conjunction with the speech, the White House released a fact sheet, which reads in part: "As part of his commitment to increase exports and the good-paying jobs supported by exports, President Obama will work with Congress to secure Trade Promotion Authority as part of a package that ensures American workers have the support and skills they need to compete in the global economy, including through the Trade Adjustment Assistance program."
The Fast Track mechanism involves special procedures for the negotiation, consideration, and implementation of trade agreements. The U.S. Constitution gives Congress authority over setting the terms of international commerce, and the Executive branch jurisdiction over negotiations with foreign nations. Fast Track, however, delegates Congresses authority to the Executive branch so that the administration is granted the power to negotiate trade agreements, draft implementing legislation to change U.S. law, and sign agreements into international law. Congresses involvement is restricted to 20 hours of debate and an up-or-down vote on the final bill with no amendments allowed. It was last passed by Congress in 2002 and expired in 2007.
The U.S. is now working on two trade deals of historic size—one with twenty-eight countries of the European Union, another with an assortment of Pacific-Rim nations. Each of these negotiations has the potential to significantly transform world trade patterns and provide unprecedented growth opportunities for the U.S. and the global economy.
SBEA and NSBA have long stated that free trade agreements are extremely important as they lower foreign barriers to our exports and produce a more level playing field. It is critical the president has the authority to negotiate trade agreements through TPA, as it will help provide new economic opportunities for American businesses, farmers, workers and consumers. New and expanded market access through trade agreements has been an important catalyst for increased small business exports.
In July, Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Susan Collins (R- Maine) introduced the Trade Adjustment Assistance Extension Act of 2013 (S. 1357), to extend the TAA program, a critical job training and worker assistance program that helps strengthen the American workforce to be better equipped and more competitive. The bipartisan bill extends all TAA programs through 2020 and maintains training and assistance for workers in all sectors of the economy, including manufacturing, services and agriculture. Bipartisan, bicameral discussions among trade leaders on the Hill are continuing on TPA legislation, which could be introduced in early Fall.
September 2013 NSBA Board Packet 83 Back to Agenda
Government Accountability Office (GAO) Report: Federal Export Coordination is Lacking
The Government Accountability Office (GAO) recently released a report on the Trade Promotion Coordinating Committee (TPCC), an interagency taskforce charged with ensuring coordination and development of a government-wide export promotion plan. The TPCC comprises 20 agencies and lists seven core agencies with which it works: the Departments of Commerce, State and Agriculture, along with the U.S. Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, and the U.S. Small Business Administration (SBA).
At the request of House Small Business Committee Chairman Sam Graves (R-Mo.), the GAO began back in February 2013 their analysis on federal export promotion resources available to TPCC agencies. The findings assess how TPCC complies and reports information and how existing resources match up with stated exporting goals – in short: not well.
What GAO found is that, “…[the TPCC] neither reports nor compiles information on how federal export promotion resources align with government-wide priorities. As a result, decision makers lack a clear understanding of the total resources dedicated across the country and around the world by TPCC member agencies to priority areas…”
The report highlighted areas of lacking information including the goals of increasing exports among small- and mid-sized businesses. GAO went on to state that, while the TPCC has, since the start of the National Export Initiative (NEI), reported on government-wide goals and provided status updates on those goals, it has failed to detail how various agency resources are allocated to support such goals.
Despite record-high exporting in June of 2013, according to Census data, the absence of tangible and useful data is prohibitive in determining whether or not agencies are doing enough to promote exporting, particularly to smaller businesses.
This lack of coordination underscores a broader problem facing small- and mid-sized exporters. According to the SBEA May 2013 survey there was a notable drop among non-exporters who said lack of goods or services to export was their main barrier to selling internationally. Today, their main barrier is a lack of information and an unclear understanding of where to start.
In that survey, we found that nearly half of small-business exporters spend a minimum of a few months as well as an average of 8.4 percent of their annual operating revenue preparing to export. The GAO report—along with SBEA’s findings—is clear evidence for the need to make exporting more accessible for Americas’ small businesses. Two of the top three recommendations to improve federal exporting were that the government should improve availability of information and consolidate federal agencies to provide a one-stop-shop.
SBEA and NSBA have been outspoken proponents for the development of a one-stop-shop as well as ensuring reliable information and data—the GAO report clearly makes the same case.
House Committee Approves Bills to Improve SME Trade Opportunities
On May 9, House Small Business Committee Chairman Sam Graves (R-Mo.) and Committee member Steve Chabot (R-Ohio) introduced two pieces of legislation—the Export Promotion Reform Act (H.R. 1409) and the State Trade Coordination Act (H.R. 1926) aimed at reducing some of the key barriers and obstacles faced by small-business exporters. On July 24, the House Foreign Affairs
September 2013 NSBA Board Packet 84 Back to Agenda
Committee approved by a unanimous voice vote these measures and both are now pending floor action.
NSBA and SBEA are pleased with the committee passage of these bills because we have been urging for years—decades, even—that more must be done to emphasize the needs of small business within the scope of U.S. trade in order to enhance exporting opportunities for small U.S. companies.
The Export Coordination Act would establish stronger Congressional oversight and coordination of the federal export promotion agencies. Currently, there are over 20 federal agencies that provide some, or all, of the steps in the export process, and many small businesses do not know where to go for the information relevant to their needs. Graves' legislation was merged with Foreign Affairs Committee Ranking Member Rep. Eliot Engel’s (D-N.Y.) Export Promotion Reform Act (H.R. 1409) during a subcommittee markup on June 26. Additional provisions of the Graves bill were added during the full committee markup.
Second, the State Trade Coordination Act, sponsored by Rep. Chabot, would establish the framework to ensure that federal and state trade agencies work in unison to assist their local exporters. The bill would direct the president to appoint as least one representative of state trade promotion agencies to the Trade Promotion Coordinating Committee (TPCC). It also calls on the Commerce Secretary to develop a plan to integrate resources and strategies of state trade promotion agencies into the overall federal trade promotion program.
SBEA and NSBA have long stated that enhanced export training and technical assistance are essential to small exporters’ success. Cross-agency outreach guides and learning materials on the intended foreign markets with virtual marketplace and virtual trade missions would make it easier and less expensive for small businesses to reach foreign partners.
By making it easier for small businesses to sell their products overseas, we can create an environment in which small businesses can thrive, grow and expand. The presence of small business exporter’s in America’s global trade strategy must continue to increase and the government needs to ensure that they facilitate the exporting process, and not hamper it through excessive regulations.
USITC Investigating EU Trade-Related Barriers for SME’s
On July 30, the U.S. International Trade Commission (USITC) published a Federal Register notice notifying small and medium-sized enterprises (SME’s) that the USITC is seeking information for a report that will identify trade-related barriers that SMEs perceive as disproportionately affecting their exports to the European Union (EU), compared to those of larger U.S. exporters to the EU.
The investigation, Trade Barriers that U.S. Small and Medium-Sized Enterprises Perceive as Affecting Exports to the European Union, was requested by the U.S. Trade Representative (USTR) in a letter received on June 18, 2013.
In identifying these barriers to exporting, the USITC will use information and definitions contained in the three previous studies on SMEs that were released by the USITC in 2010, including definitions of “SME,” “disproportionate,” and “barrier,” any relevant literature, and information gathered from SMEs and others.
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As requested by the USTR, the USITC's report will cover barriers faced by SMEs exporting both goods and services, and will focus primarily on barriers identified by SMEs that have experience in exporting to the EU. Also as requested, the report will identify barriers by economic sector or by special issue to the degree practicable and will focus on sectors with high concentrations of SMEs.
In the letter, the USTR noted that the report will help U.S. negotiators attain broad input from SMEs as part of the domestic consultation process to support negotiations related the Transatlantic Trade and Investment Partnership (TTIP) and will seek to strengthen U.S.-EU cooperation to enhance the participation of SMEs in transatlantic trade, and to address trade barriers that may disproportionately impact small businesses.
As requested by the USTR, the USITC will:
Base its report on available information, including information furnished by SMEs and interested parties following the Commission's notice of investigation; Address, where information is available, specific trade barriers in individual EU member states; Provide, to the extent applicable, qualitative distinctions among the identified trade-related barriers; and Include suggestions gathered from SMEs or the relevant literature to strengthen U.S.-EU cooperation to enhance the participation of SMEs in transatlantic trade.
As requested by the USTR, the USITC expects to transmit its report to the USTR by Jan. 31, 2014.
USITC is inviting written and oral submissions to assist U.S. negotiators attain broad input from SMEs as part of the domestic consultation process to support negotiations related to the TTIP. All written submissions should be addressed to the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, D.C. 20436.
The deadline for filing requests to appear at the public hearing is Sept. 13, 2013 and the deadline for filing pre-hearing briefs and statements is Sept. 20, 2103. the public hearing is scheduled for 9:30 a.m. on Oct. 8, 2013 in Washington, D.C. The deadline for filing post-hearing briefs and all other statements is Oct. 15, 2013.
Export-Import Bank Update
On July 17, the Senate voted 82-17 to approve Fred Hochberg for a second four-year term as president and chairman of the U.S. Export-Import (Ex-Im) Bank. Ex-Im Bank, a self-sustaining federal agency, is the official export credit agency (ECA) of the U.S. It helps finance American exports of manufactured goods and services, with the objective of contributing to the employment of U.S. workforce, primarily in circumstances when alternative financing is not available.
By law, the Bank’s Board of Directors must have a quorum—or three of its five members—to approve transactions. Chairman Hochberg was previously confirmed by the Senate on May 14, 2009. His first term ended on Jan. 20 and he was leading the Bank under a six-month extension. The extension allowed under the Bank’s charter would have expired on July 20, had the Senate not reconfirmed Hochberg for another term, and the Bank’s business would have grinded to a halt and transactions would not have gotten approval.
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Additionally, President Obama recently nominated Ex-Im Bank Vice Chair Wanda Felton for a second term as she has been a driving force behind the expansion of financing exports to Sub- Saharan Africa. She had yet to be confirmed by the Senate. Meanwhile, Director Larry Walther has left the Board after serving two years, and a replacement has yet to be named.
Hochberg was easily confirmed in 2009—by unanimous consent in the Senate—and saw the Bank through a difficult reauthorization fight last year that renewed the Bank’s charter for three years and raised the limit on the total financing the Bank can guarantee, to $140 billion from $100 billion.
In the 2012 budget year, which ended last September, the Bank provided a record $35.8 billion in direct loans, loan guarantees and other types of financing to help U.S. exporters make sales. That was the fourth consecutive record year for the Bank, which has seen increased demand for its services in the aftermath of the global financial crisis.
During a recent speech, Chairman Hochberg noted that U.S. exporters often face head-to-head competition with competitors backed by foreign governments that offer attractive financing terms, sometimes tipping the scale for their own domestic manufacturers and how U.S. companies can succeed in an increasingly competitive global environment, by identifying diverse opportunity areas ranging from nuclear power to infrastructure.
In conjunction with his speech, Hochberg released Ex-Im Bank's 2012 Competitiveness Report. The Bank has produced these reports for Congress annually since 1972, and this year's report the challenging trends in trade finance driven by emerging economies.
The Ex-Im Bank’s 2012 Competitiveness Report found that commercial bank capacity has declined since the global financial crisis, making export credit agencies (ECAs) an increasingly important tool. Many Asian countries have ambitious export plans to gain market share, and the report finds China, Korea, Japan and others are ramping up government export support.
The report goes on to state, U.S. exporters compete in many markets and sectors that other countries have targeted as a “national interest,” either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits. More and more financing is being offered outside of OECD guidelines. But it is not just interest rates. It is open season on other inducements as non-OECD countries continue to use financing to sway purchase decisions.
In the report, the 2013 Advisory Committee commended the Bank for its continued success in filling commercial financing gaps in support of U.S. exports. The Advisory Committee also noted that certain public policy issues –domestic content requirements, economic impact studies and MARAD shipping requirements – continue to be a concern.
September 2013 NSBA Board Packet 87 Back to Agenda
Council of Regional Executives Update for the Board of Trustees September 20, 2013
CORE Activities The NSBA CORE continues to meet on a regular basis to discuss various items including best practices, ways to coordinate on key projects and ideas for expanding the existing CORE group. At the last meeting, the CORE named Steve Millard of COSE as the second CORE representative on the board, serving with Rob Fowler.
Health Care Implementation As effective dates draw closer for the Patient Protection and Affordable Care Act (PPACA), CORE groups are continuing to work with SBAM in utilizing the SBAM Decision Point tool on their own websites and branding it for their respective memberships.
Survey Coordination The CORE is continuing to work on developing a key set of economic questions upon which each organization relies and uses to compare against national data. There is also discussion of working to coordinate on other targeted surveys including health care, energy and manufacturing.
September 2013 NSBA Board Packet 88 Back to Agenda