By Congressman Brad Sherman:
Readers of this publication have a great interest in issues that may affect their business. Having now served for ten years as a Member of the House Committee on Financial Services, I continue to work closely with business leaders from the San Fernando Valley and across the country to enact and improve federal laws and regulations of importance to business.
Some of the most significant issues that we have recently considered in the Congress are protecting most taxpayers from the reach of the alternative minimum tax (AMT); limiting the burdens that Section 404 of the Sarbanes-Oxley Act imposes on small business; and extending the research tax credit and other pro-business tax provisions.
ALTERNATIVE MINIMUM TAX RELIEF
The Alternative Minimum Tax (AMT) unfairly raises the tax burden of middle-class families. I voted to prevent the AMT from hitting 100,000 Valley families – a fourfold increase from last year – and Congress finally adopted a partial, temporary “fix.”
I am working to permanently exempt middle-class families from the AMT. I believe this should be paid for by plugging loopholes that have cost the Treasury tens of billions. I will continue my fight for permanent reform of the AMT. Until this goal is achieved, I will continue to support fiscally responsible short-term AMT relief.
SARBANES-OXLEY SECTION 404
At the urging of myself and other members of the Financial Services Committee, the SEC and related agencies have sought to delay and lessen the burden that Section 404 of Sarbanes-Oxley imposes on smaller public companies. On December 15, 2006, the SEC adopted rule changes which give smaller firms more time to comply with the internal controls reporting requirements of Section 404 of the Sarbanes-Oxley Act. Under the extension, management’s assessment concerning internal control over financial reporting is required in its annual reports for fiscal years ending on or after December 15, 2007.
More importantly, the auditor attestation requirement for management’s assessment of internal controls is due for all annual reports for fiscal years ending on or after December 15, 2008. SEC Chairman Christopher Cox testified that he will propose an additional one-year delay to December 15, 2009 for the implementation of this requirement.
In addition to delaying the Section 404 rules, the SEC has reduced the burden that compliance will ultimately entail. Specifically, the SEC approved a relaxed set of guidelines (known as AS 5) for the internal accounting controls required by Section 404 for smaller public companies, defined in most cases as those with a market cap below $75 million.
While continued vigilance is required, I see encouraging signs that the SEC and the Public Company Accounting Oversight Board (PCAOB) are becoming more sensitive to the concerns of smaller public companies about the costs of unnecessary regulatory burden. I will continue to monitor the activities of the SEC and the PCAOB with the goal of providing the public with the benefits of Sarbanes-Oxley Section 404 compliance, while minimizing the burden of such compliance on smaller public companies.
RESEARCH TAX CREDIT AND OTHER BUSINESS TAX RELIEF
The research that the research tax credit promotes helps not only the companies that conduct it, but our economy and knowledge base as a whole. I am a firm supporter of making the research tax credit permanent. The research tax credit has never been a permanent component of the tax code. Since its enactment in 1981, the credit has been extended 12 times. While the credit has been in effect for almost all of the last 25 years, there have been periods where the tax credit was not in effect. I believe that the uncertainty that currently surrounds the research credit deters managers from undertaking projects that they would be likely to pursue if the credit was permanent.
In December, the House voted to extend the research credit to research conducted in 2008. Unfortunately, the Senate did not, and technically the research credit does not apply to research done in 2008. However, I expect that Congress will act in early 2008 to extend the credit to research done in 2008.
In December, I also voted to extend other pro-business tax provisions including (1) fifteen-year straight-line cost recovery for qualified leasehold improvements, and (2) the ability to expense environmental remediation costs. Unfortunately, the Senate also failed to extend these provisions. As with the research tax credit, I am hopeful that Congress will act in 2008 to extend these provisions.
Should you have concerns or require assistance with any federal agency or program dealing with business, please contact my Valley office at (818) 501-9200. Please contact my Washington, DC office at (202) 225-5911 if you want to discuss federal legislation of interest to you that may impact your business.