The Small Business Job Protection Act of 1996 () is a

United States federal law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the nation's Constitution, which prescribes the foundation of the federal government of the United States, as well as va ...

. It was sponsored by Rep. Bill Archer ( R- TX) and it was signed into law by President

Bill Clinton William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...

. The stated intent of the bill is:

"To provide tax relief for small businesses, to protect jobs, to create opportunities,to increase the take home pay of workers, to amend the Portal-to-Portal Act of 1947 relating to the payment of wages to employees who use employer owned vehicles, and to amend the Fair Labor Standards Act of 1938 to increase the minimum wage rate and to prevent job loss by providing flexibility to employers in complying with minimum wage and overtime requirements under that Act."

Effects

401(k)

The Act created a simplified

401(k) In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodical employee contributions come directly out of their ...

retirement plan to make it easier for small businesses to offer pension plans to their employees.

Adoption

A nonrefundable tax credit of up to $5,000 per child for adoption expenses and $6,000 for children with special needs was established. Entitled "Removal of Barriers to Interethnic Adoption," the portion is known as the Interethnic Placement Act (or IEPA).McCarthy, J., Marshall, A., Collins, J., Arganza, G., Deserly, K., & Milon, J. (2003). Relevant Federal Laws/Policies. In ''A Family’s Guide to the Child Welfare System'' (pp. 111-116). Retrieved from Removal of Barriers to Interethnic Adoption Law & Legal Definition. (n.d.) USLegal.com. Retrieved from http://definitions.uslegal.com/r/removal-of-barriers-to-interethnic-adoption%20/The Interethnic Provisions of 1996 – P.L. 104-188. (n.d.). In Major Federal Legislation Index and Search. Administration for Children & Families. Retrieved from https://www.childwelfare.gov/systemwide/laws_policies/federal/index.cfm?event=federal Legislation.viewLegis&id=47 Its amendments strengthened and clarified the Multi-Ethnic Placement Act of 1994 (also known as MEPA). IEPA eliminated some unclear language in MEPA about cultural considerations in the foster care and adoption processes.Removal of Barriers to Interethnic Adoption, Pub. L. 104-188. Small Business Job Protection Act of 1996 § 1808. Retrieved from http://www.gpo.gov/fdsys/pkg/PLAW-104publ188/pdf/PLAW-104publ188.pdf IEPA's primary purpose was to eliminate racial discrimination during federally-funded foster care and adoption placements so that children will not be delayed or denied placement based on their race, color, or national origin. The protection against discrimination also extends to foster and adoptive parents. IEPA established financial penalties for states that do not comply with these provisions. IEPA also reiterated MEPA's requirement that agencies need to recruit more racially diverse foster and adoptive parents to reflect the diverse children in need of placements.

Capital expense

The maximum amount claimed for

capital expenses Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure ...

allowed by small businesses was increased by $7,000. The full amount was phased in over time.

Education tax incentive

Small businesses were allowed to exclude as much as $5,250 from an employee's taxable income for educational assistance provided by the employer until May 1997.

Minimum wage

The Act increased

minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Bec ...

in two steps, from $4.25 per hour to $4.75 effective October 1, 1996, then to $5.15 on September 1, 1997.

Research Tax Credit

The research Tax Credit had expired on July 1, 1995. It extended the credit through May 1997 but was not retroactive.

Work Opportunity Tax Credit

The Targeted Jobs Tax Credit was replaced with the

Work opportunity tax credit A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in recognition of taxes already paid or a form of state "disc ...

FASITs

Section 1621 created the

financial asset securitization investment trust A financial asset securitization investment trust (FASIT) was a type of special purpose entity used for securitization of any debt and issuance of asset-backed securities, defined under section 1621 of the Small Business Job Protection Act of 1996, ...

(FASIT), a type of special purpose entity used for

securitization Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling ...

of any debt and issuance of

asset-backed securities An asset-backed security (ABS) is a security whose income payments, and hence value, are derived from and collateralized (or "backed") by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid asset ...

. In the

Enron scandal The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen then on ...

, Enron used FASITs to avoid

Subpart F Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities. The rules are needed only with respect to income of an entity that is not currently ...

rules on foreign income, and because of their inherent abuse potential, were repealed under section 835 of the American Jobs Creation Act of 2004.

S Corporation Shareholders

Sections 1301-1317 dealt specifically with rules governing S Corporations. Effective January 1, 1998, Section 1316 of the Act permitted certain tax exempt organizations to be shareholders in an S corporation.

References

{{Reflist

External links

Full text of ActPresidential statement
Acts of the 104th United States Congress Small business