The New U.S. Small Business Efficiency Act

ABLE Act, Gierach Law Firm, Illinois small business law attorney, small business efficiency act, tax-free savings accounts, small business clientsThe Small Business Efficiency Act of 2013 (SBEA), also known as Senate Bill 479, is a federal law that was recently signed into law by President Obama after first being approved by the U.S. House of Representatives and then by the U.S. Senate. This bipartisan endeavor was introduced by Senator Grassley, a Republican from Iowa, and Senator Nelson, a Democrat from Florida, and passed both chambers with broad bipartisan support. The SBEA provides guidance for those Professional Employer Organizations that have voluntarily been certified by the Internal Revenue Services (IRS) in order to be capable of both remitting and collecting the federal employment taxes paid by their small business clients.

Originally approved as an additional provision to the ABLE Act, the SBEA is intended to offset at least some of the costs associated with implementing the ABLE Act, which is a piece of federal legislation intended to lessen at least some of the financial strain experienced by individuals with disabilities. The funds received from the SBEA will used to offset the costs of the ABLE, which will provide tax-free savings accounts to the disabled that can be used to pay for an assortment of covered expenses such as transportation, education and housing.

What is a Professional Employer Organization? 

Professional employer organizations, or PEOs, are organizations that provide employer-clients with cost-effective outsourcing options for a broad range of business services, including for the management of employee benefits, payroll, human resources and workers’ compensation. PEOs take away some of the stress associated with managing the different parts of a business so that an employer can work on developing and expanding his or her business’ bottom line.

PEOs are especially effective with providing outsourced services to small businesses and their services have allowed many small businesses to foster sustainable growth and to also acquire more talented employees. Some of the macroeconomic benefits associated with PEOs and small businesses include:

  • Fostering fluidity within different small business markets;

  • Facilitating the efficient reallocation of those functions that are determined to be non-essential; and

  • Bringing about the enhanced acceleration and more focused endeavors of a small business.

 What the SBEA Means for Your Small Business

The Small Business Efficiency Act is one of the first bipartisan legislative acts of 2015 that specifically focuses on small businesses. As a result of the president’s approval, the SBEA will soon:

  • Create a PEO certification process to be enforced by the IRS;

  • Eliminate the current wage-based restart requirement for when PEO clients terminate or enter into a PEO relationships;

  • Provide certified PEOs (CPEOs) with the defined legal authority to collect and remit the federal employment taxes of their clients; and

  • Provide for the codification of the right of CPEO customers to qualify for federal tax credits that the employer would be entitled to even in the absence of a PEO relationship.

On January 1, 2016 the SBEA will come into effect. Before this date the IRS must issue its official guidance and regulations for the implementation of the law. If you need legal advice regarding a PEO relationship, or legal assistance with any other small business law issue, contact the Illinois small business law attorneys at the Gierach Law Firm today.