June 16, 1997
Washington, D.C. -- In preparation for this week's budget reconciliation mark-up in the Senate Finance Committee, the National Association for the Self-Employed (NASE) today urged committee members to follow the lead of the Administration and the House Ways and Means Committee and support modernization of the home office deduction.
"This is a pro-family, pro-environment provision," said NASE President Bennie L. Thayer. "Having a home-based business can allow a parent to earn an income while caring for children, or gives downsized workers a chance to start over from home. Reduced commuting costs mean less traffic, pollution and road deterioration. But instead of encouraging home offices, the IRS has made it increasingly difficult to deduct the costs of home offices from income taxes. We ask the Senate Finance Committee to modernize the home office deduction to allow these hard-working individuals to keep a little more of their earned income."
Today, to claim a deduction for a home office, the customers of the business must physically visit the home office and the income from the business must be generated within the office -- two tests that no other type of business must pass. These criteria unfairly discriminate against sales representatives, real estate professionals and countless others who must visit their customers to conduct their businesses, and create a "double-standard" in which home-based businesses -- which are making a profit and paying taxes like other businesses -- must meet requirements demanded of no other businesses.
"Even those businesses that can claim the deduction face harassment from the IRS," Thayer added. "Because so many business owners taking the home office deduction are subject to aggressive IRS audits, many accountants advise their clients not to take it even if they are entitled. That's why, out of the estimated 14 million home-based businesses, only about 1.5 million take the deduction. Essentially, the IRS is telling businesses where to locate."
Momentum for the deduction is strong: the provision was included in the "Chairman's Mark," released last week by House Ways and Means Committee Chairman Bill Archer, R-Texas, and in the marked-up legislation approved by the full committee. Vice President Al Gore has also endorsed modernizing the deduction. In both cases, the deduction would be expanded to include any home office which is the business' sole office, and is used regularly for substantial administrative or management activities.
"Congress and the President have allotted $135 billion in tax cuts," Thayer continued. "Modernizing the home office deduction would cost less than one percent of this. It is one of the few current tax reduction proposals that would directly benefit very small businesses and taxpayers in the $20,000 to $50,000 range. Plus, it would help reduce costs associated with child care, pollution, energy and infrastructure usage.
"Home-based business owners show that it is possible to be pro-business, pro-family and pro-environment," Thayer concluded. "Let's give these smallest of small businesses our support by modernizing the home office deduction."
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