Bill Overview
Title: ABC Act of 2022
Description: or the ABC Act of 2022 This bill excludes from the gross income of certain banks, for income tax purposes, interest received on small business loans of up to $5 million. The exclusion does not apply to interest received after 2027. The bill applies to loans that are (1) secured by land situated in the United States that is used or held by the small business in connection with the active conduct of a farming business, or (2) incurred in the ordinary course of the trade or business of the small business. To be eligible for the exclusion, a bank must have less than $50 billion in assets at the close of the preceding taxable year.
Sponsors: Rep. Kim, Andy [D-NJ-3]
Target Audience
Population: small business owners
Estimated Size: 30000000
- The legislation is specifically about small business loans, which indicates the primary target population is small business owners.
- The bill excludes certain amounts from the gross income of banks, suggesting potential indirect benefits may apply also to banks under $50 billion in assets.
- Small businesses involved in farming and ordinary business activities in the U.S. will benefit from potentially increased access to credit as loans become slightly more accessible.
- The limited scope of the act, focusing on loans secured by U.S. land and ordinary trade activities, does indicate a more restricted range of small businesses than those that exist globally.
- There are an estimated 30 million small businesses in the U.S., according to the U.S. Small Business Administration.
- Globally, there are approximately 400 million small and medium-sized businesses based on data from the World Bank.
Reasoning
- The target population is small businesses in the U.S., particularly those in farming and the ordinary course of small business activities, due to the nature of the legislation.
- Most of the benefit will likely be indirect, seen through increased loan availability from eligible banks, impacting small business owners who are positioned to obtain these loans.
- A diverse set of interviewees covers various small business sectors, demographic areas, and different stages of business maturity to reflect the broad spectrum of potential impacts.
- Some individuals and businesses will experience no direct impact if not seeking loans or if operating in sectors or under conditions that don't match the policy's conditions.
- The impact on wellbeing will be subtle unless the business owners plan to expand or refinance rapidly; thus, only moderately translating into direct wellbeing changes over time.
Simulated Interviews
Farmer (Platteville, Colorado)
Age: 45 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- This policy sounds beneficial, especially if it encourages local banks to lend more at lower rates.
- I may look into expanding or improving my irrigation systems if rates are favorable.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 5 |
Owner, small retail shop (Raleigh, North Carolina)
Age: 32 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 15/20
Statement of Opinion:
- I'm happy to see policies supporting small businesses.
- If loans become more accessible, I could consider opening another location.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 5 |
Rancher (Kingston, Nevada)
Age: 55 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- Reducing taxes for banks could indirectly help my business get a better loan to expand.
- However, banks are unpredictable; I'll have to see how it plays out.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 6 |
Tech Startup Founder (San Francisco, California)
Age: 29 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 12/20
Statement of Opinion:
- The impact might be negligible for me since I don't own land or operate in traditional sectors.
- Still, any policy supporting small enterprises is a positive.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Retired Banker (Missoula, Montana)
Age: 62 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 7.0 years
Commonness: 5/20
Statement of Opinion:
- I see this as a smart move; incentivizing banks helps the small business ecosystem.
- Community banks could become more competitive with this aid.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 6 |
Café Owner (Detroit, Michigan)
Age: 37 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 11/20
Statement of Opinion:
- Access to more favorable loans could really help renovate and expand our kitchen.
- Policies like this often don't trickle down enough, though.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 4 |
Construction Business Owner (Houston, Texas)
Age: 40 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 9/20
Statement of Opinion:
- Banks might become more relaxed with strict lending criteria, especially for small construction projects.
- Eco-friendly initiatives could benefit if loans become easier to manage.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Restaurant Owner (Austin, Texas)
Age: 53 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 14/20
Statement of Opinion:
- Restaurants often don't have secure asset-backed loans, so this may not directly help us much.
- If the policy reduces overall bank costs, I might see lower fees indirectly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 4 | 4 |
Freelance Graphic Designer (Boston, Massachusetts)
Age: 27 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 16/20
Statement of Opinion:
- I don't directly interact with banks for loans since I freelance.
- The policy seems more beneficial to tangible asset-heavy businesses than service-oriented ones.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Small Equipment Rental Business Owner (Omaha, Nebraska)
Age: 48 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- Access to additional credit can ease expanding rental inventory.
- Favorable borrowing terms are crucial as my business grows.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 5 |
Cost Estimates
Year 1: $300000000 (Low: $200000000, High: $400000000)
Year 2: $315000000 (Low: $210000000, High: $420000000)
Year 3: $330750000 (Low: $231000000, High: $430000000)
Year 5: $367500000 (Low: $250500000, High: $450000000)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- Tax revenue loss due to exclusion will cease after 2027, raising potential concerns about the cliff effect on lending incentives.
- The measure primarily affects small banks, potentially providing competitive benefits over larger banks not eligible for the exclusion.