Overview of the Small Business Job Protection Act of 1996
The Small Business Job Protection Act of 1996 is a U.S. legislation designed to enhance small business competitiveness. It simplifies pension rules, lowers taxes, adjusts S corporation regulations, and increases the minimum wage.
Basics
The Small Business Job Protection Act of 1996 had substantial implications for small businesses in the United States. It changed federal minimum wage requirements, simplified pension rules, adjusted taxes, and streamlined 401(k) plans for small businesses. It also made adjustments to S corporation regulations related to worker employment status.
A Closer Look at the Small Business Job Protection Act of 1996
The Small Business Job Protection Act of 1996 was signed into law by President Bill Clinton on Aug. 20, 1996. It aimed to support and stimulate small businesses in the United States, encouraging job creation. Sponsored by Rep. Bill Archer (R-TX), the act brought significant changes to benefit small businesses.
Minimum Wage and S Corporation Elections
Key provisions of the act included increasing the minimum wage from $4.25 to $5.15 per hour. It also expanded the eligibility for S corporation elections, allowing more corporations to benefit from it and enabling small businesses to offer attractive 401(k) retirement accounts to employees.
Three Main Sections
The act had three main sections. Firstly, it allowed small businesses to expense up to $25,000 for tax purposes by amending the Internal Revenue Code (IRC). Secondly, it reduced the work opportunity tax credit from 40% to 35% and redefined the targeted groups eligible for the credit. Lastly, the third section raised the number of permitted S corporation shareholders from 35 to 75, making S corporation status accessible to larger firms.
Additional Subsections
The act had additional subsections that addressed various aspects, such as financial institutions holding safe harbor debt, tax-exempt organizations becoming S corporation shareholders, and provisions related to 401(k) individual retirement accounts and employer contributions.
Minimum Wage Increase
In 2007, Congress increased the minimum wage to $7.25 per hour (effective in 2009), and it remains unchanged until 2021. The Small Business Job Protection Act has been instrumental in fostering the growth of small businesses and leveling the playing field for them in the market.
Repeal of FASIT by the American Jobs Creation Act of 2004
In 2004, the American Jobs Creation Act repealed the financial asset securitization investment trust (FASIT), an entity designed to secure debt and issue asset-backed securities. The FASIT had been created to serve this purpose. Unfortunately, Enron misused FASIT during its scandalous activities in the year 2000.
Conclusion
The Small Business Job Protection Act of 1996 was a U.S. legislation that played a crucial role in enhancing small business competitiveness. The act brought significant changes to benefit small businesses, including simplifying pension rules, adjusting taxes, expanding the eligibility for S corporation elections, and increasing the minimum wage. Overall, the act was instrumental in fostering the growth of small businesses and leveling the playing field for them in the market.