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FULL COMMITTEE HEARING ON 

TAX INITIATIVES THAT PROMOTE 

SMALL BUSINESS GROWTH 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

May 5, 2010 

Small Business Committee Document Number 111-066 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

W. TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

W. TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, North Carolina, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1 

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Koenig, Mr. Dave, Director of Tax and Profitability, National Restaurant 

Association ............................................................................................................ 3 

Joyce, Mr. Hugh, James River Air Conditioning, Richmond, VA. On behalf 

of Air Conditioning Contractors Association ...................................................... 5 

Collins, Mr. Chad. Bone Dry Roofing Company, Director, Athens, GA. On 

behalf of National Roofing Contractors Association .......................................... 7 

Green, Mr. Christopher J., AIA LEED AP, AGO Studios, Inc. Avon, CO. 

On behalf of The American Institute of Architects ........................................... 9 

Dubay, Mr. Curtis, Senior Policy Analyst, Tax Policy, The Heritage Foundation ........................................................................................................................ 11

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 22 

Graves, Hon. Sam .................................................................................................... 23 

Joyce, Mr. Hugh, James River Air Conditioning, Richmond, VA. On behalf 

of Air Conditioning Contractors Association ...................................................... 25 

Koenig, Mr. Dave, Director of Tax and Profitability, National Restaurant 

Association ............................................................................................................ 32 

Collins, Mr. Chad. Bone Dry Roofing Company, Director, Athens, GA. On 

behalf of National Roofing Contractors Association .......................................... 39 

Green, Mr. Christopher J., AIA LEED AP, AGO Studios, Inc. Avon, CO. 

On behalf of The American Institute of Architects ........................................... 44 

Dubay, Mr. Curtis, Senior Policy Analyst, Tax Policy, The Heritage Foundation ........................................................................................................................ 53

Statements for the Record: 

H.R. 4841: ′′Small Business Tax Relief and Job Growth Act of 2010′′ ................ 62 

Associated Builders and Contractors, Inc. ............................................................. 66 

Associated General Contractors of America .......................................................... 68 

(V) 

(1) 

FULL COMMITTEE HEARING ON 

TAX INITIATIVES THAT PROMOTE 

SMALL BUSINESS GROWTH 

Wednesday, May 5, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 2360 

Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairwoman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Moore, Dahlkemper, Clarke, 

Ellsworth, Bright, Graves, Thompson, and Coffman. 

Chairwoman VELA ́ ZQUEZ. This hearing is now called to order. In 

recent weeks, our economy has shown promising signs of recovery. 

Gross domestic product grew at 3.2 percent during the first quarter 

of this year, marking the third straight quarter of economic growth. 

Consumer spending is on the rebound. March saw the sixth 

straight month with a rise in individual spending. Most importantly, the U.S. economy added 162,000 jobs in March, the largest 

increase in nearly 3 years. 

The American Recovery and Reinvestment Act fueled much of 

this progress. Not only did that measure boost infrastructure 

spending. It provided billions of dollars in tax cuts, including $15 

billion in targeted tax relief for small firms. 

Today’s hearing would allow the Committee to analyze how tax 

policies can sustain and further accelerate our economic recovery 

going forward. 

Since the Recovery Act’s passage, we have built on its momentum, extending many provisions that would have otherwise expired 

at the end of 2009. More recently, the Hire Act was enacted, providing a tax credit for small businesses that bring on new employees. It also extended a credit for entrepreneurs purchasing business 

equipment, helping firms to expand and stimulating demand for 

everything from trucks to computers to machinery. 

Our witnesses today will be able to give us an assessment of how 

well these initiatives are working and how to improve them. In 

every previous economic recovery, small firms have led the way, 

creating more jobs and generating them more quickly than their 

big business counterparts. 

Following the recession of the early 1990s, small firms created 

3.8 million jobs. After the recession of 2001, micro businesses alone 

generated one million jobs. Entrepreneurs will be just as important 

2 

to bringing our nation out of today’s downturn but only if they have 

the right tools. 

While showing promising signs, today’s recovery is in its earliest, 

most fragile stages. As our recovery gains traction, it is vital that 

our tax policy promotes small business job growth and does not 

hinder it. In that vein, it is my hope that today’s hearing will help 

improve existing tax programs while generating new ideas for targeted tax relief. 

With that, I would like to take this opportunity to thank all of 

the witnesses in advance. And I now yield to Ranking Member 

Graves for his opening statement. 

Mr. GRAVES. Thank you, Madam Chair, for calling this hearing 

on the critical topic of tax incentives that promote small business 

growth. I would also like to thank our witnesses. Some of you have 

come from a ways away and obviously taken time away from your 

company to be here with us today. So thank you very, very much. 

The economy is still struggling. And outlook is still uncertain. We 

have got foreclosures, credit card defaults, and bankruptcies that 

still remain high. And unemployment is still hovering around 10 

percent. For businesses and especially small ones, capital markets 

remain tight. Few are expected to hire or expand. Companies remain skeptical about a lasting economic recovery. 

Small businesses are reeling from the news. And under the new 

health care law, they are going to be forced to provide health insurance or pay a penalty. And that is in addition to the myriad of new 

regulations and reporting requirements. 

Just one example, in section 9006 of the new law, it requires 

businesses to submit a form 1099 for every business-to-business 

transaction at $600 or more of property of services. 

Small businesses already bear a heavy burden of paperwork compliance. And this is just another example of forcing small business 

owners to take time away from the business to comply with an unnecessary mandate. 

Of course, small business owners could choose to outsource the 

paperwork to an accounting firm, but either way, the entrepreneur 

loses scarce resources that could be spent gaining more customers 

or producing more product. 

Higher taxes, more mandates, new regulations, and piles of paperwork do not foster an environment that is conductive for creating jobs. Taxes are a constant concern for small businesses. In 

this economic climate, every expense is an added burden. Small 

businesses pay more per employee to comply with the tax code and 

often can’t afford the experts to help navigate through it. 

Entrepreneurs depend on tax incentives to offset some of the 

costs of innovation and expansion. While I support temporary tax 

provisions or entendres because I know they are critical to small 

businesses, their temporary nature causes uncertainty. 

Not knowing whether these tax provisions are going to be renewed makes it very difficult for small businesses to plan for future growth. And I also believe we must make permanent the 2001 

and 2003 tax provisions, which lowered marginal rates. And that 

is why I have introduced legislation to do just that. 

Finally, I want to say a word about the estate tax. In my support 

for complete repeal, if Congress does nothing, the top marginal rate 

3 

of 55 percent and an exemption of just a million dollars is going 

to take effect in 2011. 

Small businesses and farms are often operated by families who 

transferred from one generation to the next. And to pay the estate 

tax, their heirs could be forced to sell the very land or equipment 

that is needed to operate that family business. As you have heard 

me say before, death should not be a taxable event. We must kill 

the death tax. 

Again, thank you, Madam Chair, for holding this hearing on the 

vital subject of taxes. I look forward to that testimony. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

And now it is my pleasure to welcome Mr. Dave Koenig. He is 

the Director of Tax and Profitability for the National Restaurant 

Association. Mr. Koenig has over two decades of experience in the 

tax and regulatory areas. The National Restaurant Association, 

founded in 1919, represents more than 380,000 restaurants and 

suppliers. Welcome. And you have five minutes. 

Mr. KOENIG. Thank you. 

STATEMENT OF DAVE KOENIG, DIRECTOR, TAX AND 

PROFITABILITY, NATIONAL RESTAURANT ASSOCIATION 

Mr. KOENIG. Chairwoman Vela ́zquez, Ranking Member Graves, 

members of the House Committee on Small Business, I appreciate 

the opportunity to testify before you today on behalf of the National 

Restaurant Association. 

My name is Dave Koenig, Director of Tax and Profitability at the 

Restaurant Association. I am here today to ask Congress to make 

permanent the 15-year depreciation schedule for leasehold improvements, restaurant improvements and new construction, and 

retail improvements. In addition, I ask that Congress increase the 

business meal deduction from its current level of 50 percent to 80 

percent to provide additional stimulus to the economy. 

The restaurant industry plays a significant role in this nation’s 

economy. There are 945,000 restaurant and food service outlets in 

this country. Seven out of ten restaurants are single-unit operators, 

which means the restaurant industry is an industry of small businesses. 

Most eating and drinking establishments employ 50 or fewer employees. Restaurants also serve as the conference rooms for many 

of the self-employed and other small businesses. 

This year the restaurant industry is estimated to generate $580 

billion in sales, with an overall economic impact of $1.5 trillion. 

Every dollar spent dining out generates $2.34 in business for other 

industries. 

The 15-year depreciation schedule for leasehold improvements, 

restaurant improvements and new construction, and retail improvements expired at the end of 2009 and must be retroactively 

extended through the end of 2010 and, in fact, should be made permanent. Bipartisan legislation, H.R. 4306, introduced in December 

2009 by Representatives Kendrick Meek and Pat Tiberi would 

make the 15-year depreciation schedule permanent. 

The 15-year depreciation schedule has made significant capital 

available for restaurant owners to make capital expenditures with 

4 

the tax savings. These capital expenditures translate into jobs in 

the rest of the economy. 

In addition, a faster, more accurate depreciation schedule has a 

direct impact on a restaurant’s bottom line. The shortened depreciation schedule provides restaurateurs additional cash flow to reinvest in their businesses, allowing them to expand restaurant jobs 

and contribute to the community. 

Even during these difficult economic times, restaurateurs are 

planning capital expenditures to improve or expand their businesses. According to the National Restaurant Association’s most recent tracking survey, last month, 47 percent of restaurant operators plan to make a capital expenditure for equipment, expansion 

or remodeling in the next 6 months. The ability to plan for these 

expenditures and know what the tax treatment will be in subsequent years, particularly during these tough times, is important to 

those making such decisions right now. 

This provision is an important driver of economic stimulus. Making the depreciation schedule for restaurant improvements and 

new construction permanent will fuel economic activity and create 

jobs. 

It is important to note that 15 years, rather than the current 

law, 39 years, is also a much more accurate time frame for depreciating or writing off restaurant buildings. With 133 million Americans patronizing restaurants every day, restaurant building structures experience a daily human assault, unlike that borne by any 

other type of retail building. In fact, our research shows that most 

restaurants remodel and update their building structures every six 

to eight years. 

The other issue I would like to talk about in my oral statement 

is the need to increase the business meal deduction to stimulate 

the economy. We strongly urges Congress to provide economic stimulus by increasing the deduction from 50 to 80 percent for spending 

on business meals and entertainment. 

For many small companies, the ability to conduct business over 

a meal is their only means of advertising and marketing their business. While officially the recession may be ending, the restaurant 

industry is still feeling the effects of decreased consumer spending 

and increased unemployment. Increasing the business meal deduction to its previous level would encourage consumers to dine out 

and would also benefit small businesses. 

This Committee has been a long-time supporter of increasing the 

business meal and entertainment deduction as a means of providing a boost to the economy and tax relief for a legitimate business deduction incurred by our nation’s small businesses. 

Last Congress this Committee included a provision to increase 

the deduction from 50 to 80 percent in the Small Business Tax 

Modernization and Stimulus Act of 2008. 

In closing, I greatly appreciate the opportunity to testify on behalf of the restaurant industry before you today. And I am happy 

to answer any question that you may have later on. Thank you 

very much. 

[The statement of Mr. Koenig is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Koenig. 

5 

Our next witness is Mr. Hugh Joyce. He is the owner of James 

River Air Conditioning located in Richmond, Virginia. The company 

was founded in 1967 and now has over 150 employees. Mr. Joyce 

is testifying on behalf of Air Conditioning Contractors Association, 

ACCA, representing over 4,00 air conditioning contractors. 

Welcome. 

STATEMENT OF STATEMENT OF HUGH JOYCE, JAMES RIVER 

AIR CONDITIONING, ON BEHALF OF AIR CONDITIONING 

CONTRACTORS ASSOCIATION 

Mr. JOYCE. Good afternoon, Chairwoman Vela ́zquez, Ranking 

Member Graves, and members of the Small Business Committee. 

Thank you for the opportunity to provide testimony on behalf of 

small business service contractors that make up the heating, ventilation, air conditioning, and refrigeration industry. 

My name is Hugh Joyce. I am the owner of James River Air Conditioning, a family business that offers commercial, residential 

heating, cooling, plumbing, and electrical services started by my 

dad in 1967. 

I come before you this afternoon as a former Board Member and 

Member of Air Conditioning Contractors of America. Every day, 

more than 4,000 ACCA small business contractor members across 

the nation help homeowners and small businesses and building 

managers realize the comfort, convenience, and cost benefits of energy-efficient HVAC equipment. 

My comments this afternoon summarize my written submitted 

testimony and focus on energy conservation tax incentives and how 

they benefit not only residential homeowners and commercial 

building owners but also the small businesses of the HVACR industries that serve them. 

Financial incentives, such as tax credits, tax deductions, and accelerated depreciation, are a powerful way to encourage homeowners and building owners to reach for and obtain higher efficiency HVAC equipment. Financial incentives, like section 25C, the 

homeowners tax credit, help soften the initial cost of installation 

and shorten the payback period. 

The residential tax credits in the stimulus bill have been crucial 

in driving investment. They have incentivized homeowners to retrofit their homes with higher-efficiency HVAC appliances, saving 

energy, and creating jobs, particularly in my business. 

In response to a survey conducted in preparation for my testimony today, 75 percent of ACCA contractors have seen such an increase in the sale of qualifying higher-efficiency equipment. 

Sugar, in this case tax credits, is very effective with consumers 

and businesses. It gets them to take action and helps them overcome inertia, particularly in the recessionary time. It is an excellent catalyst for investment. Financial incentives to install energy 

conservation measures are a quadruple bonus. They save consumers and small businesses money. They create jobs. They result 

in less greenhouse gas emissions. And they help the environment. 

Our company helps consumers aggregate credit programs and assists them in finding what they qualify for. And, in fact, right now 

our firm is reconstructing 2 1940s homes, deploying every practical 

energy durability, sustainable strategy that we are aware of, inVerDate Aug 31 2005 16:19 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\56192.TXT DARIEN
6 

cluding things like rainwater recovery, high-efficiency HVAC, solar 

voltaic panels, super insulation, et cetera. 

These homes will serve initially as model idea homes so our clients can see, feel, touch, and experience near net zero living. And 

since over 50 percent of American homes were built prior to efficiency standards, there is a huge opportunity to reduce energy consumption and increase sustainability with retrofit programs and incentives. 

The gains as a result of the tax code changes in the stimulus bill 

could come to a halt at the end of this year. ACCA urges Congress 

to extend these important incentives. ACCA also encourages a robust rebate program in Home Star to complement the 25C tax 

credit incentives. 

There is also no doubt tax credits in the stimulus bill have made 

high-efficiency HVAC equipment more affordable for homeowners. 

However, the stimulus lacked a companion incentive for commercial and small business building owners. 

We expect the commercial market to be sluggish for some time. 

And incentives to upgrade and improve can make significant impact quickly. Just look at my state’s solar and wind tax credit program, which sold out in hours. There is an appetite for these types 

of investment assistance. 

Additionally, I encourage Congress to reinstate the 50 percent 

bonus depreciation allowance that expired at the end of 2009, 

which could also be used for HVAC equipment. 

There is a significant amount of deferred maintenance of this 

type of work that will drive growth while the new construction 

market sorts itself out over the next two to five years, which is how 

much time we think it is going to take. 

Let me finish by saying fear is crippling American business managers and owners, fear of the unknown and what will come up 

next. The people I speak with on a day-to-day basis are afraid to 

do anything right now because they are concerned with the impact 

of limited credit, new taxes, new rules, health care, and other regulations. We just don’t know what will happen next. 

We feel we have few advocates other than this Committee. You 

can help us by sending the right signals and reduce that fear for 

us as business people. And I can assure you we will work hard to 

create jobs. 

[The statement of Mr. Joyce is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. We have done that in the past. And we 

will do it again. 

Mr. JOYCE. Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Our next witness, Mr. Chad Collins, is the co-owner of Bone Dry 

Roofing Company in Athens, Georgia. Bone Dry Roofing Company 

is a full-service residential and commercial roofing contractor. Mr. 

Collins is also a Director in the National Roofing Contractors Association. NRCA is a nonprofit association that represents all segments of the roofing industry. Welcome. 

Mr. COLLINS. Thank you. 

7 

STATEMENT OF CHAD COLLINS, BONE DRY ROOFING COMPANY; AND DIRECTOR, NATIONAL ROOFING CONTRACTORS 

ASSOCIATION 

Mr. COLLINS. Madam Chair, distinguished members of the Committee, I would like to thank you for the opportunity to testify on 

behalf of the National Roofing Contractors Association. I am Chad 

Collins, President of Bone Dry Roofing. And we have offices in Augusta and Athens, Georgia. 

Established in 1886, NRCA is one of the nation’s oldest trade associations and the voice of professional roofing contractors worldwide. NRCA has roughly 4,000 members from all 50 states and 54 

countries. And our members are typically small businesses. 

Unemployment in the construction industry is an alarming 24.9 

percent according to recent government statistics. While it was recently reported that the economy grew at an annual rate of 3.2 percent during the first quarter, the data also show that both commercial and residential construction continue to struggle. Clearly the 

construction industry is one of the hardest hit sectors of the economy. 

NRCA urges Congress to take immediate action on targeted policy measures that will spur job growth. We strongly support the 

Green Roofing Energy Efficiency Tax Act and Small Business Tax 

Relief and Job Growth Act and believe that the passage of these 

initiatives will help create jobs in the construction industry, particularly among small businesses. 

The roofing industry is uniquely positioned to play an important 

role in creating high-quality jobs. One of the ways that this can be 

done is by enhancing the energy efficiency of our nation’s buildings. 

The Green Roofing Energy Efficiency Tax Act will immediately 

create an estimated 40,000 new jobs within our industry while also 

helping to conserve energy and reduce carbon emissions. GREETA 

also will provide savings to small businesses of all types through 

a simpler and more equitable system of taxation and lower energy 

costs. 

Passage of GREETA is necessary because between 1981 and 

1993, the depreciation schedule for nonresidential property was increased from 15 years to 39 years. However, the current 39-year 

depreciation schedule is not a realistic measure of the average life 

span of a commercial roof, which we estimate to be approximately 

17 years. 

The large disparity between the 39-year depreciation schedule 

and the average life span of a commercial roof serves as a major 

incentive for building owners to delay the replacement of failing 

roofs as long as possible. 

An owner who replaces a roof before 39 years have elapsed must 

continue to depreciate that roof for tax purposes, even though it no 

longer exists. This incentive to delay roof replacement is slowing 

the adoption of more advanced energy-efficient and environmentally beneficial roofs in today’s marketplace. 

GREETA will rectify this situation by reducing the depreciation 

schedule from 39 to 20 years for roofs that meet a benchmark energy efficiency standard. 

Given GREETA’s unique combination of job creation and environmental benefits, this legislation enjoys strong support among 

8 

both business groups and organized labor. NRCA is also working 

with our union and industry partners on a targeted version of 

GREETA that is designed to maximize job creation and energy efficiency in commercial buildings in the short term. Under this targeted proposal, 20-year depreciation would be made available to 

building owners for energy-efficient roofs only in 2010 and ’11 and 

would adopt the more stringent energy efficiency standards contained in the Energy-Efficient Commercial Roofs Act of 2009. 

I want to emphasize that GREETA will create jobs, not through 

a special tax incentive but by the removal of an obstacle in the tax 

code which restricts economic growth and impedes the movement 

towards green buildings that can help us achieve important environmental policy objectives. 

NRCA wishes to again thank Chairwoman Vela ́zquez and Representative Moore for your continued support for GREETA. And we 

urge other members of the Committee to sponsor GREETA as well. 

Like other small businesses, many NRCA members have experienced great difficulty in obtaining access to credit in the current 

economic environment. The scarcity of credit is a key factor in preventing entrepreneurs from expanding businesses and creating 

jobs. 

NRCA wants to commend Chairwoman Vela ́zquez for introducing 

the Small Business Tax Relief and Job Growth Act, which will help 

create jobs by providing tax relief targeted at helping entrepreneurs start and grow businesses. 

This legislation will increase the tax deduction for business startup expenditures; will allow businesses to expense structural improvements to buildings, including roofs; and will reduce the capital gains tax rate of small corporations from 35 to 15 percent. 

NRCA believes these target measures will significantly increase 

the capital that entrepreneurs need to grow their businesses and 

create jobs. 

To conclude, NRCA urges Congress to address the alarming 25 

percent unemployment rate in the construction industry by approving the Green Roofing Energy Efficiency Tax Act and the Small 

Business Tax Relief and Job Growth Act. 

Thank you for your time, and I will be glad to answer any questions. 

[The statement of Mr. Collins is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Collins. 

Our next witness is Mr. Christopher J. Green. He is President 

of AGO Studios in Avon, Colorado. AGO Studios is an architectural 

firm with commercial, hospitality, and residential clients. 

Mr. Green is testifying on behalf of the American Institute of Architects. AIA is the leading professional membership association for 

licensed architects, emerging professionals, and allied partners. 

Welcome. 

Mr. GREEN. Thank you. 

9 

STATEMENT OF CHRISTOPHER J. GREEN, AIA, LEED AP, AGO 

STUDIOS, INC., ON BEHALF OF THE AMERICAN INSTITUTE 

OF ARCHITECTS 

Mr. GREEN. Chairwoman Vela ́zquez, Ranking Member Graves, 

and members of the Committee, I am Christopher J. Green, AIA, 

President of AGO Studios, a two-person architectural firm based in 

Avon, Colorado. I want to thank you for giving me the opportunity 

to testify today on behalf of my firm and the American Institute 

of Architects. 

The written testimony I have provided you describes in detail the 

economic challenges facing our profession and proposals to help 

bring about the economic recovery, but today I would like to use 

my time to talk about what this crisis feels like in my community 

and in communities around the country. 

We, like everyone else, see the stock market moving up and down 

and hearing the analysis about the positive signs of the economy, 

but what we see on Wall Street is not what we are seeing on Main 

Street with regard to the architects. 

First of all, the architects in our organization are, by and large, 

small business people. And, in fact, 95 percent of those architecture 

firms employ 50 or fewer people. They are truly the engine that 

drives the design and construction industry. 

Today my industry and colleagues are suffering. Our unemployment rate is 25 percent. That is one of four people is looking for 

work. That is only counting those who have applied for unemployment insurance. 

Many of my colleagues report being underemployed or working 

without pay for more than a year. And many of those small business owners are not able to get unemployment because they own 

their firms and, therefore, are not able to be seen in the numbers 

that we see at the federal level. 

It is a huge burden to bear for the workers who have families 

to feed, mortgages, and tuition bills to pay. At my firm, billings are 

down significantly from a year ago. Construction starts are few, 

primarily because the clients I work with are either unable to get 

the necessary credit to help finance new construction or the remodels that they are contemplating, and they are facing falling property values that are skewed by comparables to short sales or foreclosures that are unnecessarily offsetting the real value of their 

property. 

And in a number of instances, municipalities have cut back so 

heavily on budgets, personnel, and services that capital projects are 

not being considered unless absolutely necessary. And in some 

cases, those are the life blood of some of the firms that do work in 

our area. 

These problems are not unique to Colorado. They are being repeated in virtually every community around the country. And while 

there are glimmers of hope in the economic figures, I am here to 

tell you that for our industry, the light at the end of the tunnel is 

still a distant flicker. Our data shows that we are still at least a 

year away from having a healthy business environment in the design and construction industry. 

A colleague recently came back from a conference with the Associated General Contractors, who indicated that some of the large 

10 

firms that do large construction work have a nine-month backlog 

at best. Our industry provides the work that they use, and it takes 

9 or 18 months to get stuff off the drawing boards for these guys 

to build. 

With that in mind, there are a number of tax-related policy incentives that Congress should take and ones Congress should avoid 

in order to help small business get on their feet. 

First, Congress needs to extend and expand clean energy tax incentives. That is why the AIA with a broad coalition of environmental, business, real estate, design and construction groups 

strongly supports H.R. 4226, the Expanding Building Efficiency Incentives Act of 2009. In particular, the AIA has long backed increasing the energy efficient commercial buildings tax deduction 

from its current $1.80 per square foot to $3 per square foot. 

Because the provision allows for the deduction to be assigned to 

the designer in the case of a public building, many architects have 

been able to take advantage of it to lower their tax burden. 

In fact, one accounting firm has reported it has secured almost 

half a billion dollars in tax deductions for firms in the last year 

alone, and this with nearly half going to firms with 50 or fewer employees. This means greener buildings, lower energy costs, and 

money back in the pockets of small design firms. 

Second, Congress needs to expand tax incentives for small businesses. I am very pleased that Chairman Vela ́zquez has introduced 

H.R. 4841, the Small Business Tax Relief and Job Growth Act of 

2010, which would help small businesses gain access to capital and 

create jobs. 

And, third, Congress needs to oppose tax increases on small businesses. It is my understanding there is a proposal being floated in 

the Ways and Means Committee to significantly increase the payroll taxes paid by S corporation shareholders. This proposal would 

hurt small firms, like mine, who are struggling to get back on their 

feet. 

In conclusion, I would like to thank Chairwoman Vela ́zquez, 

Ranking Member Graves, and the members of this Committee for 

giving me the opportunity to testify before you today. And I will be 

happy to answer any questions you may have. 

[The statement of Mr. Green is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you. 

The Chair recognizes Mr. Graves for the purpose of introducing 

our next witness. 

Mr. GRAVES. Thank you, Madam Chair. 

Madam Chair, I am pleased to introduce Curtis Dubay, who is 

a Senior Policy Analyst for the Heritage Foundation, where he specializes in tax issues. 

Before coming to Heritage, Mr. Dubay was a Senior Associate 

with PricewaterhouseCoopers, previously has served as Senior 

Economist with the Tax Foundation, and has done research on a 

wide range of tax issues, including income tax, sales tax, capital 

gains dividends, and corporate tax. 

Welcome to the Committee. 

11 

STATEMENT OF CURTIS DUBAY, SENIOR POLICY ANALYST, 

TAX POLICY, THE HERITAGE FOUNDATION 

Mr. DUBAY. Madam Chairwoman, Ranking Member Graves, 

members of the Committee, thank you for the opportunity to testify 

on what can be done through federal tax policy to help small businesses. 

My name is Curtis Dubay. I am a tax economist at The Heritage 

Foundation, a non-profit research organization based in Washington, D.C. with over 650,000 members nationwide and growing 

rapidly. 

The views I express in this testimony are my own and should not 

be construed as representing any official position of the Heritage 

Foundation. 

Many small businesses are struggling to survive as economic recovery remains precarious. There is much the federal government 

can do to help them, mostly by allowing the recovery to continue 

without the threat of punitive new taxes and burdensome new regulations. Eliminate these threats, and small businesses will then 

thrive as the recovery quickens its pace. 

Unfortunately, Congress is threatening to do the opposite in four 

ways. The first threat is a scheduled increase of income tax rates. 

On January 1st, 2011, the top two income tax rates will rise from 

33 percent and 35 percent to 36 and 39.6 percent. According to the 

Treasury Department, the 8 percent of small businesses that pay 

the highest 2 tax rates earn 72 percent of all small business income 

and already pay 82 percent of all income taxes paid by small businesses. 

Higher tax rates on these most productive small businesses 

would drain the businesses of cash flow, the lifeblood of any business, and would diminish the incentives to grow and add new 

workers. 

Instead of raising these rates, at the very least, Congress should 

drop its plan to increase top tax rates on small businesses and 

make permanent the current-law tax rates for all taxpayers. This 

would be the best stimulus for the economy to date. 

The second threat is the impending increase of taxes on capital. 

Under current law, the tax rate on capital gains will increase to 20 

percent. And that on dividends will increase to 39.6 percent on 

January 1, 2011. 

Congress should at the very least hold these rates at 15 percent 

and make permanent President Obama’s sensible plan to provide 

immediate small business expensing of all capital purchases. 

The third threat is the planned increase of the death tax. The 

death tax returns to life in full force on January 1st, 2011. Despite 

the common misconception that the death tax impacts only wealthy 

estates, economists now generally agree that the death tax is actually a tax on capital because of its impact on businesses and workers. 

The death tax is a drag on America’s small businesses, destroys 

jobs, and lowers wages while raising little revenue. As such, Congress should kill the death tax once and for all to remove an unfair 

burden from the backs of American small businesses and their 

workers. 

12 

The fourth threat is the burden of new regulation. A little noticed provision added to the new health care law will harass small 

businesses with new paperwork. Section 9006 of the new law requires businesses to issue 1099s whenever they do more than $600 

of business with another entity. 

Small businesses will now have to issue reams and reams of new 

forms to the IRS. While large businesses can absorb the cost of this 

new bureaucracy with their large legal and accounting teams, the 

new requirements will inundate small businesses with an avalanche of paperwork. The paperwork burden will force small businesses to redirect scarce resources from productive activities that 

could grow the business, add jobs, and pay higher wages to complying with the onerous new reporting requirements. 

Now, many in Congress would prefer to offer targeted tax credits 

to specific small businesses, instead of keeping income tax rates 

and taxes on capital low for all small businesses. The targeted tax 

cuts are no substitute. Of course, the businesses that receive the 

targeted tax cuts will benefit, but Congress should not be the arbiter of which businesses succeed and which do not. 

Its track record of making such choices is far from exemplary. 

And further efforts to manipulate the market based on the whims 

of the moment could actually prevent breakthroughs that would 

benefit the economy and the United States. 

Thank you. And I look forward to your questions. 

[The statement of Mr. Dubay is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you. 

I would like to address my first question, if I may, to Mr. Koenig. 

A true economic recovery is going to rely on improving consumer 

confidence and overall spending. Recent reports indicate spending 

is on the rise. Can you comment, please, on where your industries 

stand today, as opposed to 12 or 18 months ago? 

Mr. KOENIG. Certainly, Chairwoman Vela ́zquez. The restaurant 

industry was certainly not immune from the economic troubles of 

the last couple of years. We have had well-documented in the public media stories about demand being way down because of consumer spending and unemployment. Recently—and we do regular 

surveys—we see an up tick. Anecdotally speaking, we see an up 

tick in overall business in the industry. 

Not to say that conditions are ideal, but I think it is safe to say 

that from the restaurant industry’s standpoint, we are cautiously 

optimistic that things are on the up turn, at least with our business. 

Chairwoman VELA ́ ZQUEZ. I have noticed it in my district. 

Mr. KOENIG. Glad to hear it. 

Chairwoman VELA ́ ZQUEZ. You know, I didn’t have to make reservations two, three months ago. 

[Laughter.] 

Chairwoman VELA ́ ZQUEZ. Mr. Collins, can you explain how outdated depreciation schedules for commercial roofs affect economic 

activity within your industry? And do you find that these businesses are choosing to repair older, inefficient roofs because they 

do not have the necessary incentive to do so? 

13 

Mr. COLLINS. Yes, ma’am, absolutely. And we see it time and 

time again, regardless of reason, whether it is a facility that is 

being held for an investment and going to be turned or whatever 

the reason, the current depreciation schedule has created a disincentive for the owner to be proactive in addressing the issues. 

And it is literally as simple as that. 

Activity like GREETA that would provide incentive would immediately create results. I mean, there is no doubt about that at all. 

Chairwoman VELA ́ ZQUEZ. And how would decreasing the recovery 

period encourage more businesses to upgrade their infrastructure? 

Mr. COLLINS. Well, it would encourage the activity by the tax 

breaks, by the incentives that would be present. 

Chairwoman VELA ́ ZQUEZ. Mr. Joyce, I have introduced the Small 

Business Tax Relief and Job Growth Act, which will expand section 

179 to include roofs, electrical systems, HVAC systems, and other 

structural improvements. 

Do you believe that these incentives would encourage businesses 

to make those investments now? And is it enough to help businesses overcome the challenge of up-front costs? 

Mr. JOYCE. Absolutely. And by allowing that early and quick depreciation, it is just enough to bump them off doing nothing. And 

right now we see businesses make repairs to old, inefficient machines that if there was just a little extra incentive out there for 

them to go ahead and buy a new efficient machine with better refrigerant, more environmentally friendly operating characteristics, 

they would do that. 

What I have told some folks, the way the depreciation schedule 

is on HVAC now, you almost have to pay for the equipment twice 

when you buy it. You write a check to me when it is put in. But 

then you have got to gross up your income 30, 40, 50 percent to 

offset that because it is after-tax money. And then you have to depreciate over such a long time you never recoup it. So it is almost 

like a double payment where the changes that you have introduced 

would give immediate relief. 

And folks are sitting there waiting for an excuse to act. And we 

see and we saw it residentially with the $1,500 credit for energy 

efficiency upgrades that literally kept us from laying off a single 

person over the past year. So yes, absolutely. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Graves? 

Mr. GRAVES. Thank you, Madam Chair. 

My question is to all of you. And whether it is your individual 

business or your members, you can comment. We have got the 

2001-2003 tax cuts expiring, which is going to raise the marginal 

rate structure. 

I am curious how it is going to affect your members, specifically 

if you are filing. You may have your business, but you may be filing as an individual or as a couple, whatever the case may be. But 

I would be very curious, Mr. Koenig. 

Mr. KOENIG. Thank you, Ranking Member Graves. 

Certainly the National Restaurant Association, we represent all 

restaurants, from the local entrepreneur with one establishment to 

multinationals. As I said earlier in my testimony, most of our members are your traditional small businesses. 

14 

Almost two-thirds of our membership operate as so-called subchapter S corporations. So for those who are in the 33 percent or 

35—and, of course, for tax treatment purposes, S corporations, the 

income flows through to the individual shareholders. For those in 

the 33 percent rate and the 35 percent rate, they will see their 

taxes increase if nothing is done before the end of the year. 

Mr. GRAVES. Mr. Joyce? 

Mr. JOYCE. It is a very difficult time. It is a very difficult time 

to see any type of increase because, you know, most of us are living 

right on the edge, whether profitable or not profitable. 

If that rate goes up, all of our banks sit and look at our financial 

statements and our balance sheets. And we may have made commitments to buy capital and things that we are paying with aftertax dollars. 

Maybe it is a business buyout from a family member or whatever. And every time these things change, they have dramatic impact on our cash flows, what we are showing in our banks, and how 

we move forward, whether we can invest, buy that next truck or 

whatever that is. 

So I can’t say enough how important it is to get some stability 

across the board in some of these tax areas. And I think the velocity—you know, if we can get business growing, the velocity of new 

business and paying at a little bit lower rate will far outpace what 

you would get from an increase. 

And, again, I feel so backed in a corner as a business person because every penny of my after-tax money is committed to do something with. So if taxes go up ten percent and we expect a tough 

couple of years, it really puts me in a jam, particularly on the credit side. A lot of people don’t think about that. 

So anything you can do to help and just get stability there, just 

don’t increase it. If you leave it where it is, we will make it work, 

but if you keep going every which way because we have already 

got, you know, health care increases and other areas that we have 

got to pay. So anything that can be done to stop that will be a big 

help. 

Mr. GRAVES. Mr. Collins? 

Mr. COLLINS. And to echo, NRCA membership as a whole, you 

are roughly talking about 97 percent of our membership would fall 

in what the government would quantify as a small business. So 

when I speak to the effect personally, I am speaking to the effects 

of the association as a whole and its membership base. 

And it would be the same. I mean, the fear that is out there is 

stagnating growth. And uncertainty is compounding that problem. 

And whether it is through stability or whether it is through stimulating activity like GREETA, those are the things that we are looking for and trying to encourage. 

Mr. GRAVES. Mr. Green? 

Mr. GREEN. I would echo those comments. I think anything we 

can do to keep the tax rates from going up would be beneficial to 

all the small business owners, not just the architects but, as we 

have heard at this table, anybody that is working hard right now 

to keep food on their table that lower tax rates would be critical. 

Our industry is absolutely subject to the credit market. And, in 

addition to keeping the taxes low, what we really need to do is we 

15 

need to get control of the credit markets so that we can be putting 

projects on the boards that these gentlemen can be working on. 

And until we get those credit markets stabilized and we get strong 

rules on them, it is not just the taxes, but it is the credit markets 

that are affecting our industry in an enormous way. 

Mr. GRAVES. Mr. Dubay? 

Mr. DUBAY. Raising taxes on small business at any time is not 

a good idea, but doing so now seems particularly unwise. We often 

hear it argued that raising the top two rates wouldn’t impact small 

business because only a few of them will actually pay that. 

Well, like I said in my testimony, according to the Treasury Department, it is true that only eight percent of small businesses pay 

at the top two rates, but those small businesses earn a vast majority of the income earned by small businesses and pay almost all the 

taxes paid by small businesses. 

They are the biggest ones that create the most economic activity. 

They are the ones we need to help pull us out of this recession or 

get the recovery going and creating jobs. Now is not the time to 

raise taxes on them. 

Mr. GRAVES. Okay. 

Chairwoman VELA ́ ZQUEZ. Mr. Moore? 

Mr. MOORE. Thank you, Madam Chair. 

None of you want to see tax increases on small business or tax 

increases generally, I think. And I don’t personally like tax increases either. When I came into Congress in 1999, the national 

debt was about $5.8 trillion. The next two years, there were balanced budgets both years and no additional debt. The next 8 years 

under the President Bush, we accumulate more than $5 trillion 

more debt, almost double, almost doubled. 

What do we do? How do we get back to fiscal responsibility and 

start living within a budget like most, not all but most, American 

families do if we are not going to do something with this tax situation to try to deal with this horrible debt that we have and passing 

this horrible debt onto future generations, our children and grandchildren? 

We start down here and just move down the line. 

Mr. KOENIG. Congressman Moore, I wish I had an answer for 

you. Obviously— 

Mr. MOORE. I do, too. 

Mr. KOENIG. Obviously it is a difficult situation, so difficult that 

the President has gotten a commission together, a bipartisan commission, to try to examine all of the issues and putting everything 

on the table. I would say that that is probably what needs to be 

done, is having everything examined at once and hopefully a solution. 

Mr. MOORE. Thank you. Can I stop right there and go back here 

and then go down this way, please? And we have 3:19. I sure would 

like to hear from all of you. If you can each take just about 45 seconds or something, we can get this in. Thank you. Mr. Dubay? 

Mr. DUBAY. Well, if you look at the projections from the Congressional Budget Office for the end of this decade, tax revenues will 

be back to 18 percent of gross domestic product. That is where we 

were for the last 60 years, about the average. 

16 

Over that time, we averaged spending about 20 percent of GDP. 

So we had a deficit somewhere around two percent of GDP. That 

is sustainable, more sustainable than the course we are on. It is 

not perfect, but it is better than where we are. 

And if you take the new health care legislation, the new law, the 

tax revenues would actually be higher than 18 percent, the postwar average. 

So my point is that we have a spending problem, not a taxing 

problem. If spending is brought back down to historical averages, 

the deficit will be brought back down as well. 

Mr. MOORE. Mr. Green? 

Mr. GREEN. I would submit that we have got short-term and 

long-term issues here. The short-term is everybody wants to get the 

deficit down, but we are also in an economic situation where we 

can’t generate the income to tax right at the moment. 

So if we can figure out elements that we can address right now 

makes sense, but we also have to look at the long-term, as Mr. 

Dubay here says, of saying, how do we stimulate the spending so 

that we can legitimately get tax revenue back up to where it once 

was? And then we can deal with the spending issues. I think it is 

a balanced approach. And I think that makes a lot of sense in the 

overall scope of what you are asking. 

Mr. MOORE. Thank you, sir. 

Mr. Collins? 

Mr. COLLINS. I agree and would like to see just the ability to operate day to day and not have the restrictions and regulations that 

we see increasing at what appears to be more regularity so that we 

can continue to create jobs, that we can continue to—we are fortunate. 

And, again, our size is representative of average membership, 

where we create jobs that are across anywhere from office staff to 

field technicians, mechanics, superintendents. We have a wide 

range of employment and feel like when left alone and left to be 

creative and left to do what we do, we have the ability to generate 

more revenues and more income for those employees. 

Mr. MOORE. Thank you. 

Mr. Joyce? 

Mr. JOYCE. I would just say currently be gentle with the tax increases to get our velocity back. If I had my druthers, I would just 

look at our total budget, and I would roll it back a couple of percent 

every year for the next few years. 

I would focus across the board, everybody, just like we have done 

in business in America. Every household in this country has rolled 

their budget back. 

And I would said, military, you are going to get across the board. 

Gentle on taxes. Let’s see what traction we get. And then there are 

a lot of things that are off the grid that aren’t taxed. And the tax 

has gotten to the point where things are outside of the system. We 

need to get those back in the system and then move forward. 

And I think we can get the two across relatively quickly, but it 

has got to be a team effort. 

Mr. MOORE. Thank you. Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Time has expired. 

Mr. Thompson? 

17 

Mr. THOMPSON. Thank you, Madam Chair, Ranking Member, for 

this important hearing. And thanks to all of the witnesses today 

for your expertise and representing all of those small businesses 

that you do. 

I certainly agree that the mounting debt is a problem. It provides 

us a really rocky terrain to do business in. And I appreciate what 

the debt has been accumulated over the years. 

I certainly want to note, though, that President Obama’s doubling down on the debt in the past 16 months has really taken us 

to the edge of a cliff. We need to reverse direction. And I think that 

we are all in agreement with that. 

Mr. Dubay, I wanted to ask you. Last Wednesday this Committee 

did a hearing on trade and small business. I happen to believe that 

for our small businesses, where we can, that is an important market to reach out to the rest of the world. 

I want to get your opinion on—we have, I believe it is, the second 

highest corporate tax rate in the world. And many of our small 

businesses incur that burden. Your opinion on, is that a disadvantage and how to our small businesses to compete? 

Mr. DUBAY. The corporate income tax rate is a huge disadvantage for American businesses. Right now our rate is the second 

highest in the developed world. We trail only slightly Japan. 

When you take the top federal rate at 35 percent and add on 

state corporate tax rates, it gets pretty close to 40 percent. That 

is, like I said, higher than almost every other developed country. 

It is one of the major factors driving businesses overseas, driving 

them to open up new operations overseas, send jobs overseas. 

The average in the Organization for Economic Cooperation and 

Development, the 30 largest economically developed countries, is 

about 25 percent. So we are ten percentage points over that rate. 

Over the last 10 to 15 years, most countries have been cutting 

their rates. I think every country except us cut their rate over that 

period. So by standing still, we have fallen behind. 

It is absolutely imperative that action be taken soon. Otherwise 

we are going to keep seeing jobs go overseas. 

Mr. THOMPSON. Okay. Thank you. 

Mr. Green, in your testimony, you said that billings at your company are down due, in part, to tight credit, the result, you say, of 

conflicting bank policies and additional requirements. Now, you believe the financial regulatory reform legislation being considered by 

the Senate will add or reduce the tight credit? 

Mr. GREEN. I am hopeful that it will increase the credit available. I think what we are seeing is there are enough mixed signals 

in the credit markets that there is inconsistent policy that we are 

seeing right now that says, what is your loan-to-value ratio? What 

is the consistent loan-to-value ratio? What are the incentives? 

What are the capital requirements on a project that is being considered? And then what are the pro forma requirements for that in 

order for the financing to be considered a solid financing package 

for our client? 

So hopefully we will see that, but we need to get that under control and get a consistent level of rules and regulations in right now. 

I think we spoke a little bit to the fear factor. There is a significant uncertainty on Main Street about what is being asked of and 

18 

required of folks that are thinking about really good projects right 

now. 

Mr. THOMPSON. I see that in my discussion with job creators. 

And you represent the job creators. They are sitting on the sidelines. They are normally small men and women who take a percentage of their profits, reinvest it in their company, hire more people. And they are afraid. They are sitting on the sidelines. 

Mr. Collins, you mentioned in your testimony about the effect of 

tight credit. Do you believe that credit markets are easing for small 

companies? What are you seeing out there? 

Mr. COLLINS. I don’t believe so, no. You know, we rely on not 

only what we see but some pretty substantial indicators as well 

that either confirm or deny what we are seeing in-house. And one 

of those is activity of general contractors, the other being the activity in the surety market. Those are really strong indicators of what 

is going on around us. 

I can say with certainty from either conversations that we have 

had with both or with just real examples of what we have experienced that there is no movement and no encouraging outlook there. 

If anything, it is the opposite. It is that the commercial element of 

what we do has really yet to potentially fully bottom. And when it 

does, the idea that there is going to be a rebound of any sort is not 

there. 

If it hasn’t bottomed, once it does, it is going to bounce there. 

And the surety underwriting market is shrinking today. 

Mr. THOMPSON. Yes. Thank you, Madam Chairwoman. 

Chairwoman VELA ́ ZQUEZ. Time has expired. 

Chairwoman VELA ́ ZQUEZ. Ms. Dahlkemper? 

Ms. DAHLKEMPER. Thank you, Madam Chair. 

I want to say as a business owner, bonus depreciation has been 

something we have used successfully in keeping our fleet modern 

and buying equipment to make us more efficient and look forward 

to seeing that type of legislation move forward. 

I wanted to ask all of you just real quickly because we have votes 

and I only have five minutes here, but do you feel the IRS adequately is providing the business community with the information 

that you need so that you know what tax incentives are out there 

for you? And just very quickly, if you can let me know how you find 

out what is out there for your industry? And if you could just give 

me a short answer, Mr. Koenig? 

Mr. KOENIG. Congresswoman Dahlkemper, we try to keep on top 

of things within the restaurant industry and feed information out 

to our members constantly through a combination of working with 

the IRS on new forms, on new laws, working with our state partners. We think that they do a pretty good job of keeping us informed. 

However, I find them I think probably overburdened in the years 

to come with a lot of the new responsibilities that the health care 

law has placed on the IRS. So I think it will be interesting to see 

how their level of service to the small business community is impacted by that. 

Ms. DAHLKEMPER. Mr. Joyce? 

Mr. JOYCE. Typically we get our information from our CPAs as 

we go through the review. We really count on them to back into 

19 

what is appropriate for us and what is not appropriate to us. So 

we feel like it is the IRS’s job to— 

Ms. DAHLKEMPER. So your CPAs are doing that? 

Mr. JOYCE. Yes, they are doing that. 

Ms. DAHLKEMPER. Thank you. 

Mr. Collins? 

Mr. COLLINS. The same. 

Ms. DAHLKEMPER. Okay. Mr. Green? 

Mr. GRAVES. We have CPAs, but we also have clients that are 

trying to work through some of the energy credits and some of the 

sustainability issues. And some of that gets a little convoluted and 

tough to understand. Whether it is a credit, whether it is an additional line item on the taxes, those could be a little more clear to 

us. 

But we are with these guys. The CPAs provide a lot of information. Every now and then, they get confused. I am not sure tax regulations are that simple. 

Ms. DAHLKEMPER. No, they aren’t. That is why I was wondering 

how each industry—Mr. Dubay, I have a separate question for you. 

You had mentioned that in your testimony, you had said that the 

death tax, the estate tax, you said it raises little revenue I think 

were the exact words you said. And it is estimated that for 2009, 

there will be 14,900 estate tax returns filed; of those, 5,500, actually very few, across the country who will owe that estate tax. But 

it is going to total $13.8 billion. 

Do you think $13.8 billion is just a little bit of revenue? 

Mr. DUBAY. Well, compared to the total federal tax revenues, yes. 

I mean, the federal government collects about $3 trillion a year. 

Ms. DAHLKEMPER. Okay. But if we don’t have the $13.8 billion, 

what are we going to do about making up that amount of money? 

Mr. DUBAY. Well, there are actually studies that show that if you 

repealed the death tax, you would get increase in economic activity 

so much that it would make up for all of the revenue on the income 

side. 

Ms. DAHLKEMPER. I don’t think I totally agree with you on that. 

Last year we tried to pass a permanent fix because, as some of the 

business owners mentioned here, part of the issue with business— 

and I say this as somebody who has a business back home—it is 

the uncertainty. 

So this year the estate tax has gone back down to zero. And next 

year it is going to go to a million. Last year it was 3.5 and 7. And 

so we tried to fix that in December. We passed a bill through the 

House to permanently fix the 3.5 and 7, which it seemed most people in my district were very comfortable with. And it would give 

some certainty to business owners and farmers and people who 

may have enough in their state to cause that to be an issue for 

them. 

So I guess I am just questioning that we have got 5,500 people 

who may owe this in 2009, bringing in $13.8 billion raised. Of 

course, this year in 2010, it is expected that 70,000 people will be 

affected because, again, the uncertainty with allowing that fix that 

we had tried to get through the entire Congress didn’t pass. I guess 

I just want your opinion on that. 

20 

Mr. DUBAY. Right. I agree that stability matters. All businesses 

crave it. But it doesn’t matter how many estates are being impacted by the death tax. What matters is the economic impact that 

is created by that tax. 

What we have seen is that it is a huge economic impact. Businesses, especially small family-owned businesses, get hit particularly hard. They can’t afford the expensive preparation that bigger, 

larger estates can afford. 

So when the death tax hits, they are often stuck with large bills. 

And they have to liquidate part of their firms or the whole thing. 

That means they cost people their jobs. That means the business 

cannot expand. 

Chairwoman VELA ́ ZQUEZ. Time has expired. 

Ms. Clarke? 

Ms. CLARKE. Thank you, Madam Chair. 

It is a very interesting debate because we are trying to find the 

balance. And I don’t know how you necessarily strike a balance. 

But that is why we are trying to get informed by you. 

Clearly we don’t want to inhibit innovation. We don’t want to inhibit business growth and expansion. But, like all other entities in 

the United States of America and individuals, there is an expectation that there is going to be revenue generated. 

So my question to you is, giving through to where we are right 

now in the development of our economy and given the fact that 

there are a number of tax incentives made available to small business, where do we draw the line? Where do you feel that there is 

an obligation for you to pay revenues, to pay taxes? 

Mr. Dubay, your answer at one point was that, well, you don’t 

feel that it is appropriate to pay taxes, there is never really a good 

time. You know, if you were negotiating, what would you say is appropriate? 

Mr. DUBAY. What I said is it is never a good time to raise taxes, 

not to pay taxes. We should all pay taxes. We all have an obligation to pay them. 

But from an economic standpoint, there is never a good time because all tax increases, all taxes have economic drag. So raising 

them during a recession seems unwise to me. Even though we are 

not in a recession anymore, we are trying to recover. But as recovery is trying to take off and still going slowly, it seems unwise to 

raise them now. 

I mean, at the very least, I would suggest extending the 2001- 

2003 tax cuts for at least the next couple of years. 

Ms. CLARKE. So you feel that extending the tax cuts would give 

you sort of the ground you need to sort of lift the companies? Is 

that your contention? 

Mr. DUBAY. I will leave that to the other gentlemen, who can 

speak more personally to that. 

Ms. CLARKE. Okay. 

Mr. DUBAY. But I would say so, yes. 

Ms. CLARKE. Would anyone else care to? Please? 

Mr. JOYCE. It would be a big help to not have—you know, in a 

lot of the businesses, when you get into rates, you know, most of 

us are in the 40 to 50 percent when you look at the fed and state 

and add it together if it’s an S. 

21 

And I think that when you start going past that, you grind up 

so much disposable capital it becomes very difficult to do things, 

create jobs, take risks because you are always trying to leave a 

cushion. And if the taxes take the cushion, you get into the fear 

slot. So anything that can be done to moderate and flatten them? 

And I would just like to say one thing on the death tax. Having 

gone through a very difficult transfer between the death of my 

mother and the father to the business to me and buying my sisters 

out,—and they did an incredibly good job of planning—it was so 

difficult you cannot imagine the pain it puts on a family. 

And if we could come up with some 20-30 percent number and 

call it a transfer tax and just let us transfer at any time you want 

and not make it happen at death. Causing everything to go down 

in the nine-month death period is so difficult. 

I have got your attention. If there is anything that could ever be 

done, it would be wonderful because it is so difficult, having done 

it. 

But back to the tax part, my late father said, ‘‘And it is our duty 

to pay tax. And I want to pay tax.’’ 

Ms. CLARKE. Yes. 

Mr. JOYCE. I would like to just keep it in a gentle ramp and have 

everyone doing it and have everyone playing, rather than it be punitive in one direction or another. 

Ms. CLARKE. Thank you very much, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Joyce, what would you think is— 

what will stimulate the economy? If we cut taxes to 95 percent of 

American families or just 1 percent of American families, we need 

to increase consumer spending. What will generate the type of activity in terms of consumers: the 1 percent cut to the wealthy families or the 95 percent to all American families? 

Mr. JOYCE. I think a combined approach would do it, some incentives for the families where it is that piece. And if we could take 

the 1 or 2 percent that are paying 50-ish percent—and I am not 

asking for tax decreases. 

I would also say I think we are very close to a breaking point 

for medium to large or small—you have got little teeny smalls, and 

then you have got this medium group of smalls, which I kind of fall 

in. We are real close to a breaking point. 

And I think if we could just be given a cushion and no more increases, let it all settle out, we will drive it and give the 95 percent 

incentives. 

Chairwoman VELA ́ ZQUEZ. That balance was what we tried to do 

in the stimulus package, where so many tax cuts and credits were 

provided to small businesses because you are the ones creating the 

jobs that we need in order to get this economy growing again. 

Mr. JOYCE. Thank you. And it is working. 

Chairwoman VELA ́ ZQUEZ. I ask unanimous consent that members 

will have five days to submit a statement and supporting materials 

for the record. Without objection, so ordered. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 2:09 p.m., the foregoing matter was concluded.] 

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