JA: Economic recovery act will benefit jewelers

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JA: Economic recovery act will benefit jewelers

February 26, 2009

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New York--Jewelers of America (JA) says the economic stimulus act contains several measures that will benefit jewelers, including small business provisions that will benefit the industry, and tax relief measures that will help pry open consumer wallets.

President Obama signed "The American Recovery and Reinvestment Act of 2009" into law on Feb. 17, less than two months after what turned out to be a dismal holiday selling season for many jewelers, independents and chains alike. From JA's perspective, though, the legislation will help ease the pain for jewelers whose profits sank in the fourth quarter.

"The economic stimulus measure is a step in the right direction and will provide essential relief to jewelers during this challenging period," JA President and Chief Executive Officer Matthew Runci said in a release issued Wednesday. "However, Jewelers of America will continue to pressure Congress on other issues that affect our members' economic viability, such as assistance with business health care costs and passage of a Sales Tax Fairness and Simplification Act, to level the playing field between brick and mortar and Internet-only businesses."

In terms of business provisions in the new law that could have the biggest impact on jewelers, JA cites the following.

--Small businesses can use losses from 2008 to offset profits in earlier years (any year more than two but less than six years ago) to obtain an immediate refund. The provision is limited to businesses with annual revenues under $15 million.

--The Small Business Administration (SBA) will eliminate or reduce fees for participation in its flagship loan guarantee program, which insures banks against default by small business borrowers. The new law also increases the percentage of qualifying loans that the SBA can guarantee to 90 percent.

--The new law also provides "small business stabilization financing," through which the SBA can back existing loans for up to $35,000. Businesses can then use the money to make up to six months of payments on previous loans. Interest on stabilization loans will be fully subsidized, and while borrowers won't have to make any payments in the first year, the loans must be repaid within five years.

--Businesses restructuring their debt could delay paying taxes on the transaction for five years, and then spread the payments over an additional five years.

The recovery bill also includes critical tax incentives to get consumers back in stores, such as a refundable tax credit--effective in 2009 and 2010--of up to $400 for working individuals with annual incomes up to and including $75,000, and $800 for working families bringing in $150,000 and less.

There is also a refundable first-time home buyer credit, which could impact young bridal market consumers. Overall, about a third of the stimulus funds, totaling $286 billion, will be spent on tax cuts designed to jump start consumer spending.

Additional stimulus measures geared toward businesses include an extension of bonus depreciation on capital expenditures through 2009, allowing businesses to immediately write-off 50 percent of the cost of depreciable property. Businesses buying equipment can also speed up depreciation through 2009.

The act also includes a per-worker tax credit of $2,400 for companies that hire unemployed veterans and youth who have not been regularly employed or in school in the past six months; a reduction of the 2009 required estimated tax payments for certain small businesses; and a break on capital gains taxes for small business investors.

Jewelers who are interested in taking advantage of the various business tax relief measures in the stimulus act should check with their local tax consultants.

For more information on the Small Business Administration provisions in the act, go to www.sba.gov. SBA announced that it plans to release more details on implementation of the stimulus act provisions in the next few weeks.

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