A group of Senate Democrats introduced a bill that seeks to expand women entrepreneurs’ access to capital through two proposed tax incentives.
The Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success Act (PROGRESS) would create two new tax incentives – one a first employee tax credit and the other an investor credit.
The first employee credit seeks to stimulate business growth and job creation. It allows for a credit equal to 25 percent of W-2 wages reported to 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. Businesses that have not reported full-time equivalent W-2 wages in a previous year are eligible. The business must be majority-owned by U.S. individuals that earn $100,000 or less per year.
The investor credit would encourage third-party capital investment and allow small businesses to grow.
It provides a credit of up to 50 percent of a qualified debt or equity investment, 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. individuals that earn $100,000 or less per year.
“Women business owners, particularly women of color, are underestimated, underrepresented and undercapitalized. This problem has only gotten worse during the pandemic, with millions of women forced to drop out of the workforce,” Sen. Ron Wyden (D-OR), one of the bill’s sponsors, said. “One driver of these disparities is that widely available tax benefits are less likely to help women and people of color, particularly those who are self-employed and want to grow their business. Our bill would help close these gaps, allowing women-owned businesses to grow.”
It was also sponsored by Sens. Ben Cardin (D-MD), Maggie Hassan (D-NH), and Catherine Cortez Masto (D-NV).
“Our economy and communities are stronger when entrepreneurs can turn their innovative ideas into reality and open new businesses, but women and rural entrepreneurs disproportionately face barriers to starting and growing their small businesses,” Hassan said. “This bill will help women and rural entrepreneurs access the capital and hire the employees that they need for their small businesses to thrive.”
Women and minority business owners often face barriers to accessing funding, the lawmakers said. Male entrepreneurs, on average, start with nearly twice as much capital as women entrepreneurs.
“Women and minority-owned businesses have been hit especially hard by the coronavirus pandemic, and it’s crucial that we give these business owners the support they need to get back on their feet,” Cortez Masto said. “This legislation will provide new tax credits targeting women and people of color who want to hire employees, grow their businesses, and jumpstart our economy. We owe it to them to level the playing field and support their entrepreneurial spirit.”