PROGRESS Act would create two new tax incentives to help small businesses hire and grow
Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., and Representative Judy Chu, D-Calif., today introduced legislation called the PROGRESS Act that would improve access to capital for small businesses owned by women and people of color. Short for Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success, the PROGRESS Act would create two new tax incentives to help these businesses grow and hire.
“Women business owners, particularly women of color, are underestimated, underrepresented and undercapitalized,” Wyden said. “Nobody can question the entrepreneurial spirit of women small business owners in America, but tax laws on the books today aren’t doing nearly enough to support them compared to others. Everybody wins when more small business owners have a chance to get ahead and grow, and that’s what this bill is all about.”
“The Biden-Harris Administration has overseen a boom in small business growth. But for many small businesses, particularly those owned by enterprising women and people of color without long-term relationships with financial institutions, securing access to capital remains far too tough, which hurts their ability to grow,” Chu said. “Sen. Wyden and I are introducing the PROGRESS Act to create first employee and investor tax credits so we can level the playing field for women-owned and minority-owned small businesses and unlock their full growth potential.”
Owners of small businesses that lack employees are more diverse than employer firms. More than one-third of non-employer businesses are owned by people of color and more than four in ten are owned by women. Unfortunately, these businesses struggle to grow and face endemic barriers to accessing funding.
On average, white business owners start with nearly three times the working capital of black-owned businesses. Male entrepreneurs, on average, start with nearly twice as much capital as female entrepreneurs. The numbers are even more stark when considering only third-party capital. In 2023, only 2.2 percent of venture capital funding went to companies founded solely by women. This disparity is acutely felt by women of color who now account for 50 percent of all women-owned firms, yet received less than one percent of venture capital funding over the past decade.
Because of their size, their industry, or the way they are organized, many women-owned businesses can’t take advantage of tax benefits designed for small businesses. This lack of capital has limited the ability of these entrepreneurs to grow their businesses.
The PROGRESS Act creates two new tax incentives to unlock the growth potential of these businesses:
First Employee Credit:
A new first employee credit will stimulate business growth and job creation.
● A credit equal to 25 percent of W-2 wages reported can be claimed annually, up to $10,000 in a single tax year, with a lifetime limit of $40,000.
● Because many businesses do not turn a profit in their early years, the first employee credit is creditable against the business’ payroll tax liability.
● Certain businesses that have not reported full-time equivalent W-2 wages in a previous year are eligible for the credit.
● Eligible businesses must be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers).
Investor Credit:
A new investment credit will encourage third-party capital investment and allow small businesses to grow and thrive.
● A credit of up to 50 percent of a qualified debt or equity investment can be claimed, up to $10,000 in a single tax year, with a lifetime limit of $50,000.
● Investors that fund certain businesses can use the credit to boost their rate of return.
● Eligible businesses must have at least one full-time equivalent employee and be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers).
A one-page summary of the bill is available here and a detailed summary is available here. Bill text is available here. A web version of this release is here.
John Arensmeyer, Founder and CEO of Small Business Majority: “We support the creation of tax incentives designed to boost the potential of all small businesses, but we’re particularly encouraged to see legislation that would help support historically underserved businesses — those owned by women and minorities. Our research consistently finds that many types of small businesses struggle to access the capital they need to grow, but small firms owned by women and minorities are most likely to experience funding challenges. Policies like the tax credits proposed by Senator Wyden and Representative Chu are critical to ensuring a level playing field so that more entrepreneurs have the chance to succeed.”
Richard Trent, Executive Director of Main Street Alliance: “As an organization that represents thousands of women owned small businesses across the country the Main Street Alliance is proud to endorse the PROGRESS Act. Still too many barriers exist for entrepreneurs to start and grow their small business.
“During the past four years 19 million new small businesses were founded, unleashing the creativity, drive and contributions of people willing to take a risk on the American dream. By providing a critical first employee credit these businesses will be more likely to expand, and thrive.”
Anne Zimmerman, Co-Chair of Small Business For America’s Future: “I am encouraged by the introduction of the Progress Act which will empower small businesses to create more jobs by offering tax credits for hiring and incentivizing investment. Small Business for America’s Future has long championed thinking outside the box on incentives that support small businesses, and this legislation represents an innovative approach to strengthening America’s true economic engine: small business owners. We’ve heard countless stories of small business owners wanting to expand but hit a wall because of limited to no access to capital, which is the lifeblood of any growing business. The Progress Act is the type of smart policy we need to create more opportunities for Main Street businesses to help us grow, innovate and compete in today’s market.”
Chiling Tong, President and CEO of National Asian Pacific Islander American Chamber of Commerce (National ACE): “The PROGRESS Act is a crucial step forward in creating new opportunities for Asian American and Pacific Islander (AAPI)-owned businesses to gain access to capital. Many AAPI-owned businesses, particularly start-ups, face unique barriers to capital, including language barriers, lack of awareness, or lack of relationships with lending institutions. By providing tax credits for investors in these businesses, this legislation opens up critical financial resources that will help AAPI entrepreneurs grow their businesses, create jobs and support their communities.
“Congresswoman Chu is a longtime champion of the AAPI small business community, and we applaud her continued commitment to addressing the unique barriers faced by AAPIs and ensuring that AAPI entrepreneurs have access to opportunities.”
A web version of this release is here.