What Is the Small Business Job Protection Act of 1996?
The Small Business Job Protection Act of 1996 is a piece of American legislation that had substantial implications for small businesses. The act increased the minimum wage requirements, simplified pension rules, and adjusted taxes for small businesses.
The act also made adjustments to S Corporation regulations on safe harbor provisions and rules governing worker employment status. The act also simplified the administration and maintenance of 401(k) defined contribution plans as an incentive for employers to provide this type of retirement plan to its employees.
- The Small Business Job Protection Act of 1996 is a piece of American legislation designed to increase small businesses' competitiveness.
- The act changes minimum wage requirements, simplified pension rules, lowered taxes for small businesses, and adjusted S Corporation regulations.
- The act also increased the minimum wage.
Understanding the Small Business Job Protection Act of 1996
The Small Business Job Protection Act Of 1996 is an important piece of legislation that makes it easier for small businesses in the United States to operate and create jobs. The law is one of several acts passed by Congress and signed by the President to increase the competitiveness of small businesses relative to larger firms. The act was sponsored by Rep. Bill Archer, (R-TX) and signed into law by President Bill Clinton.
In addition to increasing the minimum wage, the act significantly expanded the number of corporations that could take advantage of S Corporation elections. The act also made it far simpler for small businesses to offer 401(k) retirement accounts, which allowed small firms to compete with larger companies by attracting employees with their benefits packages.
The law has several sub-sections. The first section amends the Internal Revenue Code (IRC) and increases the amount that a small business may expense for tax purposes to $25,000. The second section decreases the work opportunity tax credit from 40 to 35% and redefines members of targeted groups with respect to the credit. The third section increases the number of S corporation shareholders permitted in a firm from 35 to 75, granting S corporation status to larger firms.
This section also permits financial institutions to hold safe harbor debt and certain tax-exempt organizations to become S corporation shareholders. The final section simplifies pensions addressing 401(k) individual retirement accounts and employers' ability to match the retirement contributions of employees. Several other subsections address foreign ownership of small businesses and foreign tax compliance.
The act also modified the minimum wage requirements, increasing the minimum wage from $4.25 an hour at the time to $5.15 an hour (the U.S. federal minimum wage has been increased further in the years since) and made overtime compensation more generous for workers.
The act created the financial asset securitization investment trust (FASIT). This was an entity used to secure debt and issuance of asset-backed securities. However, FASITs were abused by Enron during its scandalous activities around the year 2000, and they were repealed under the American Jobs Creation Act of 2004.