Agriculture Secretary Tom Vilsack and SBA Administrator Karen Mills Discuss Benefits of Obama Administration's Tax Cut Package and Small Business Policies for Rural America

Press Conference

MODERATOR: Hello, everyone, and thank you for joining us for today's media briefing. On the phone, we have Agriculture Secretary Tom Vilsack and Small Business Administrator Karen Mills. They will be discussing benefits from the Obama administration's tax cut package as well as small business policies for Rural America. If you would like to ask a question, let us know by pressing Star/1 on your touchtone pad, and now I turn it over to Secretary Vilsack.

SECRETARY VILSACK: Susan, thank you very much, and I want to thank Administrator Mills for not only participating in this phone conference but also for the tremendous work that she and her SBA staff have done in terms of getting resources and capital moving and particularly in Rural America.

Over the past two years, we all know our country has worked to rebound from the worst recession since the Great Depression. At the President's direction, USDA has focused on building a very robust future for Rural America, putting in place a framework for long-term growth by investing in new technologies like broadband, making better use of natural resources, opening up new markets for our ag products, and supporting the production of renewable energy, and we have been able to do that by providing financing through our Rural Development programs like the Business and Industry Grant and Loan Program and our Rural Business Enterprise Grant Program. And we've actually helped thousands of small and emerging rural businesses expand, grow, and innovate, creating or saving nearly 200,000 jobs.

Our work is beginning to pay off and it's beginning to show, and we've seen private sector job growth each month for the last year, and unemployment in Rural America is dropping. However, we know that our work is not finished until every American who wants a job can find one. In Rural America, that means continuing to get small businesses active, to employ more people, because they already employ nearly two-thirds of those who live and work and raise their families in Rural America.

Last December, the President brought both parties together to pass a tax relief bill that will do just that and is doing just that, and I think it is fair to say that economists across the political spectrum say that it will continue to strengthen economic growth, stimulate the economy, and increase gross domestic product. The tax law contained an important incentive to help small businesses, farms, and ranches throughout Rural American.

And as folks are preparing their tax return today and at this time period, they need to know that all businesses in Rural America, large and small, and all across the country can now write off 100 percent of their new investments this year. Grocery store owners can write off the purchase of a new freezer or a farmer can replace a tractor that he's wanted to replace for sometime and get a tax benefit. The corner store or the local manufacturer can buy computers or other tools they need to start selling their products online and more efficiently. We believe this means that businesses across Rural America are going to be encouraged to purchase new equipment as they modernize, as they grow, and as they hire more people, and these investments in turn will create a demand for manufactured products that will stimulate economic growth across the country.

President Obama and I believe that to win the future, Americans will need to work hard and specifically will need to be innovative leaders. This tax provision and the write-off it carries with it will make it much easier for small businesses to be innovators. It is going to allow them to be creative. It is going to allow them to take a risk and buying the tools they need to develop a new product or to offer a new service, and it's sending a clear message to small businesses that their time is now to drive job growth with new ideas and skills.

Now, this December tax bill was just one of 17 tax credits that the Obama administration has provided to stimulate growth in Rural America. Small businesses have already benefitted from the Recovery Act, the Small Business Jobs Act, the HIRE Act, and the Affordable Care Act, all of which have provided tax relief to small business and provided significant economic growth potential for communities. We are going to continue to invest in rural businesses, and we are going to continue our partnership with the SBA. And it's been a good, strong, positive partnership. Where their programs work, we're there to support; where our programs work, they are there to support.

I want to turn it over now to Karen Mills for her comments from an SBA perspective.

SBA ADMINISTRATOR MILLS: Thank you very much, Secretary Vilsack, and thank you for your partnership and for your deep commitment to America's small businesses.

As the Secretary said, we work together very closely in our field operations to make sure that small businesses have the access and opportunity they need, so they can grow their businesses and create jobs.

Over the past two years, I have traveled a lot, maybe not as much as Secretary Vilsack, but I visited 30 States, more than 30 States, met with all kinds of small businesses. Last year, I was in Arkadelphia in rural southwest Arkansas. We went to Shields Lumber, and just one story. Richie and Angela Shields had gotten an SBA Recovery Act loan for just over a million dollars. They run a sawmill operation there, and they turned to me and said, "You know, this loan helped us through this tough year. Now business is picking up, but you saved our business, so thank you," and that's just one of the success stories attributable to the loan enhancements that we received in the Recovery Act and a second bill that passed last September, the Small Business Jobs Act.

Through those two programs, the SBA supported $42 billion in lending, and the cost to taxpayers was just about $1.2 billion in subsidies, so that's a pretty good bang for the taxpayer buck.

I am pleased to announce that nearly 10 billion of that, or 23 percent of the 42 billion, is helping about 20,000 rural businesses survive and grow and create some jobs, but as Secretary Vilsack said, we still have more work to do.

One of the things that we know is in many underserved communities, particularly in rural areas, they were hard hit over the past two years by a big drop in the volume of smaller dollar loans. I'm from the State of Maine, so I know firsthand that smaller loans can go a long way to help rural small businesses that need to grow and thrive. So we at the SBA looked for a solution because we know that the larger loans, the total loan volume had come back, but the small loan volume had not.

Now, you may know that since 2008, we have had a program that's actually called Small Rural Lender Advantage, and it has been offering streamlined paperwork for lenders in these communities who only do a few SBA loans each year. And it's a very successful program in that it has a very low default rate, but we weren't reaching enough folks.

So we expanded this platform by rolling out two new programs under our Advantage mantle, so we are calling the first the Small Loan Advantage. There, we used the same program as Small Rural Lender Advantage, but we allow our most trusted lending partners, which are our Preferred Lenders, to use this streamlined paperwork and our regular guarantee for SBA loans that are under 250,000, so this will help the rural branches of our largest lenders do more small business lending in these markets.

The second is Community Advantage, and there, we are allowing mission-based community lenders to start making SBA loans for the first time, again, with up to $250,000 limit and some streamlined paperwork -- these are community development financial institutions, certified development companies, and micro lenders -- as long as they keep at least 60 percent of their portfolio in underserved communities which can include rural businesses.

So we have a lot of activity going on in terms of access to capital, but as Secretary Vilsack mentioned, there's nothing that small business owners like more than money in their pocket, and that's why the tax credits that the Secretary described are so important.

Just to reiterate, the second piece of what we have been able to do and what the President has signed into law are 17 tax cuts for small businesses, including the one that was described, 100-percent write-offs for new equipment and investments, a higher threshold of expensing up to $500,000 for small businesses, zero capital gains on small business investments, certain small business investments, and tax credits of up to 35 percent for small businesses that provide health insurance to their employees.

So we are working across the administration to make sure that at tax time, right now, small businesses know about these tax cuts, that they know about the access to capital, especially in rural communities, so that rural entrepreneurs and small business owners have this access and opportunity.

Thank you very much, and thanks again to USDA for their partnership. We are working very closely together across our entire field operation to bring these programs into the hands of small businesses. Thanks very much. I'm happy, and the Secretary I'm sure is happy, to take your questions.

SECRETARY VILSACK: Susan?

MODERATOR: Yes. Reporters, if you would like to ask a question, let us know by pressing Star/1. As we wait for callers to come on the line, Secretary Vilsack, is there anything that you can expand on, on how people can get access to this? I am sure that there are a number of small businesses and business owners who are either ready to jump in or could benefit from this.

SECRETARY VILSACK: Susan, this is obviously an opportunity to basically reduce your tax liability for 2011. So any purchases that are made, you will be able to rather than spread the depreciation, if you will, over a period of years that provides you a tax benefit over a period of years, you will actually be able to accelerate that deduction in one year, 100 percent of the purchase price of whatever the item is.

So, if you're buying a $100,000 tractor, instead of depreciating it over a period of perhaps 7 years or 10 years, you get to write off that entire amount this year. Now, that comes at a good time for farmers and ranchers as we're seeing near or record levels of income for farmers. As commodity prices and livestock prices are strong, this is a good time for farmers to consider purchasing that piece of equipment that they may have been putting off simply because they couldn't make it pencil out. Now it might be able to pencil out, and as they purchase more of these items, that then generates more opportunities for manufacturing.

And the interesting thing about that is that a lot of the manufacturing that takes place in the United States takes place in rural communities, so it's a double opportunity, if you will, for farmers to be more efficient and to improve their bottom line and for small manufacturing located in Rural America to potentially get more business opportunities.

This is, as Karen indicated, one of many tax cuts and credits that are available, as well as one strategy in addition to grants and loans through either SBA or the USDA Rural Development programs, Business and Industry Loan programs, the Rural Enterprise, Rural Opportunity Grant Program. All of that is available to folks, and so anyone who is interested in looking at a USDA loan can obviously contact the local USDA office.

MODERATOR: Reporters, once again, if you would like to ask a question, let us know by pressing Star/1 on your touchtone pad. We don't have any questions right now. Is there anything else that people need to know about these new opportunities, these tax cut packages that are available to them?

SBA ADMINISTRATOR MILLS: Well, there's one other thing, and Tom, you may chime in on this, which is that both of our operations have very, very strong counseling, and sometimes it's not the loans or the money that's most important to small businesses, it's the advice and the counseling help.

So, if there is any question about the tax credits, if there is a sense of wanting to understand what the opportunities might be in either of these loan programs, our field operations and the USDA field operations actually work together in sort of knowledge exchanges. We refer people back and forth. You can come to SBA.gov or any local office. You can go to the USDA offices and find out about the SBA programs, so we are working together to make sure whatever the need of the small business, that we make sure they have the knowledge and the access and the opportunities.

MODERATOR: Once again, Reporters, if you would like to ask a question, let us know by pressing Star/1 on your touchtone pad. Our first caller is Steve Baragona with Voice of America. Steve?

QUESTIONER (Voice of America): Yeah, hi. Thanks for doing the call. I'm just curious what the cost of this tax cut was, the one that you're talking about with 100-percent write-off.

SBA ADMINISTRATOR MILLS: Tom, do you want to take that? But, in fact, what happens is that with accelerated depreciation, it's really a timing question, so these things actually have fairly low cost because the ability to depreciate is only accelerated.

SECRETARY VILSACK: Right. So, essentially, it's all concentrated in a single year as opposed to spread out.

We anticipate and expect that there might be as many as possibly up to 2 million businesses that might benefit from this tax write-off now, and the purpose of it, obviously, is to stimulate purchases which in turn stimulate economic activity. When you analyze the cost of something, you also have to factor into the fact that if there are more tractors being produced, there are more people working, there are more people working longer hours, and they in turn may be increasing their income, which results in additional revenues for the country, so it's a way to grow the economy and also at the same time at very little, if any, expense overall to the Treasury.

QUESTIONER (Voice of America): And the other, the 17 credits, is there a total figure on the cost of the 17 tax credits you mentioned?

SECRETARY VILSACK: I don't have that, and I don't know if Karen does. If she doesn't, we will try to get it. If there is a cost estimate, we will try to get it to you.

QUESTIONER (Voice of America): That would be great. Thank you.

MODERATOR: We continue with reporters on the line. Sara Wyant with Agri-Pulse.

QUESTIONER (Agri-Pulse): Thank you. This question is for Administrator Mills. As someone who is a recipient of an SBA package of counseling, the first time I started my business -- I appreciated the information that you're sharing -- I was never able to qualify for a loan, but my question for you is, under your Small Loan Advantage Program, is there a limit on the size of the business? You clarified the size of the loan up to 250,000, but are there certain limits on the size of the business and the scope of the business that potential borrowers should know about?

SBA ADMINISTRATOR MILLS: Yes, we do have business-sized standards which govern eligibility for our loan programs because we are a small business-focused agency, and those sizes vary by industry category.

So I tell people, for instance, if you are a manufacturer and you're a hundred people, you might be small, but if you're an accounting firm and you're a hundred people, you might be big. So they vary by category, and you can find them on our SBA.gov.

QUESTIONER (Agri-Pulse): Okay. And are all the loans that you are talking about guarantees, not any direct operating or other loans? They're all guarantees; is that correct?

SBA ADMINISTRATOR MILLS: Yes, that's correct. We work through banking partners.

QUESTIONER (Agri-Pulse): Right.

SBA ADMINISTRATOR MILLS: We have about 3,000 active banking lenders, so many, many, many community banks, and we guarantee those loans up to 75 or 85 percent, depending on the amount, so that the bank can find a way to do some loans that they might now otherwise be able to quite get their on their credit standards.

We have the rules called "Credit Elsewhere." If the market can provide you a loan, if a bank can provide a loan, then why should taxpayers get involved because the marketplace is doing it, but if you're a great small business and for various reasons you need a little wind at your back, a little help, you still meet the standards and we can underwrite this loan and support it by a loan guarantee with your bank, we have been able to create more access and opportunity.

MODERATOR: We are going to bring today's media briefing to a close. We want to thank everyone who was on the line and who called, and with that, have a good afternoon.

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