IFA Urges Super Committee to Tackle Tax Reform for Small Franchise Businesses

It is essential that corporate tax revisions not be enacted that would impede or stifle small-business growth.

Franchising World November 2011

By: Judith Thorman

Last month, the International Franchise Association urged the Joint Special Committee on Deficit Reduction to consider tax reforms that encourage job creation by franchise businesses, but do not hurt small businesses and franchisees that file as individuals. The “Super Committee” is working toward its stated goal of achieving
at least $1.5 trillion in budgetary savings over 10 years from spending cuts or tax revenue.

“IFA believes the Super Committee must view reforms through a lens that ensures businesses of all sizes, and particularly small businesses like the majority of franchise businesses, are given long-term certainty and clarity regarding their future tax rates,” said IFA President and CEO Steve Caldeira, CFE. “As the Super Committee debates comprehensive tax reform, it is essential that corporate tax revisions not be enacted that would impede or stifle small-business growth, especially given that many of our country’s small businesses file taxes as individuals.”

In a letter dated Oct. 3 that was delivered to Super Committee members and members of the House Ways and Means and Senate Finance committees, IFA cautioned against proposals that only consider corporate tax reform that will result in significant tax increases on IFA members who file taxes at the individual rate. IFA members’ taxes, including many franchisees’ taxes, will increase if most business deductions are eliminated as part of corporate tax reform. Franchise businesses also face the prospect of the higher tax rates after 2012 when individual tax rates could be as high as 39.6 percent and in 2013 when the 3.8 percent surtax on “unearned” net investment income takes effect to help pay for Medicare.

“If most or all of the business deductions are eliminated in an effort to lower the overall corporate rate, it will leave all the so-called “pass-through” taxpayers (including “S”
corporations and partnerships) exposed to significantly higher taxes without the benefit of a lower rate,” said Caldeira. “We respectfully urge that you consider the effects of these proposals on the small franchise business owners who reside on virtually every Main Street in America.”

Judith Thorman is senior vice president of government relations and public policy for the International Franchise Association. She can be reached at 202-662-0768 or

jthorman@franchise.org.