Bush Tax-Cut Plan Seen Helping Agencies

By Steven Brostoff, Washington Editor

NU Online News Service, Jan. 9, 10:44 a.m. EST, Washington?Insurance agents are praising President Bush’s tax reduction package for containing provisions aimed at assisting small businesses.

Agents said also they are hoping to obtain an amortization provision from Congress- possibly as part of the reduction package.

Justin Roth, director of federal government affairs for the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, singled out two provisions from the president’s $670 billion proposal that would benefit some IIABA members.

First, he said, the president wants to immediately reduce the top income tax bracket to 35 percent from the current 39 percent. (Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the top bracket is scheduled to drop to 35 percent in 2006. The president would accelerate the reduction, making it effective retroactive to Jan. 1, 2003.)

That is important for insurance agencies organized as Subchapter S corporations, Mr. Roth said, since they are taxed at the highest individual rate. Reducing the top rate, Mr. Roth said, is a huge advantage for these agencies.

Second, he said, the plan would allow small businesses to write off as expenses up to $75,000 in new equipment purchases, a substantial increase from the current limit of $25,000. This increase, Mr. Roth said, would help smaller agencies modernize their operations.

Meanwhile, he said, IIABA’s top tax priority in the new Congress is to accelerate the amortization of intangible assets, such as insurance agency expirations. Current law allows intangible assets to be amortized over a 15-year period, Mr. Roth noted. IIABA, he said, wants to reduce that to five years.

IIABA, he said, will promote this effort either in the context of the president’s stimulus package or separately.

Mr. Roth said this is an important issue for agents considering the consolidation taking place in the market.

It is very difficult for a $5 million agency to purchase a $3 million agency, for example, when amortization of the expirations must be spread out over 15 years, he said. By that time, he said, the expirations have very little value.

Reducing the amortization period to five years would assist agents wanting to consolidate, he said, while increasing the value of the agency that is for sale.

Mr. Roth said that IIABA wants to get the ball rolling on this issue, which is the association’s major tax concern in the 108th Congress.