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'stax reduction package for containing provisions aimed at assistingsmall businesses.

Agents said also they are hoping to obtain an amortizationprovision from Congress- possibly as part of the reductionpackage.

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

First, he said, the president wants to immediately reduce thetop income tax bracket to 35 percent from the current 39 percent.(Under the Economic Growth and Tax Relief Reconciliation Act of2001, the top bracket is scheduled to drop to 35 percent in 2006.The president would accelerate the reduction, making it effectiveretroactive to Jan. 1, 2003.)

That is important for insurance agencies organized as SubchapterS corporations, Mr. Roth said, since they are taxed at the highestindividual rate. Reducing the top rate, Mr. Roth said, is a hugeadvantage for these agencies.

Second, he said, the plan would allow small businesses to writeoff as expenses up to $75,000 in new equipment purchases, asubstantial increase from the current limit of $25,000. Thisincrease, Mr. Roth said, would help smaller agencies modernizetheir operations.

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

IIABA, he said, will promote this effort either in the contextof the president's stimulus package or separately.

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

It is very difficult for a $5 million agency to purchase a $3million agency, for example, when amortization of the expirationsmust 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 assistagents wanting to consolidate, he said, while increasing the valueof the agency that is for sale.

Mr. Roth said that IIABA wants to get the ball rolling on thisissue, which is the association's major tax concern in the108^th Congress.