March 5, 1997
Washington, D.C. -- Home-based businesses would be much more likely to claim a tax deduction for the business use of their home under legislation introduced today by Rep. James Talent, R-Mo., chairman of the House Committee on Small Business, and freshman Rep. Mike Pappas, R-N.J., and endorsed by the National Association for the Self-Employed (NASE).
The Family Freedom Home Office Deduction Act of 1997 would redefine who could take the home office deduction by revising current court findings that, to be eligible for the deduction, home-based business owners must meet with clients and generate business income within the home office. The proposed House legislation would permit the deduction of home offices that are the sole, fixed location of business, regardless of the amount of time or type of work performed in the office, and regardless of the amount of income generated there.
"Modernization of the home office deduction is important for two reasons," said NASE President Bennie L. Thayer. "One, because it allows more home-based business owners to recoup additional costs -- with tight cash flows, these small businesses need every deduction they are entitled to. And two, because it signals that Congress recognizes the importance of these businesses and is willing to expend time and effort to help them. Small business advocates like the NASE have long urged this reform, and it's encouraging to see such a strong level of support for this issue."
The NASE has lobbied for the home office deduction modernization for several years and for many reasons:
Equity: while customers of home office businesses must visit the office, rented office space is tax deductible even if no customer ever sets foot in it.
Economic changes: as the economy restructures itself and big businesses lay off thousands of employees, it is important to assist individuals who prefer to go into business for themselves.
Technology: computer networking and faxing technology makes home offices increasingly productive.
Families: the deduction is pro-family, allowing people to work from home while raising children or tending to aged or infirm family members.
Zoning: many home businesses are caught in a "Catch-22" -- required by the IRS to bring customers into their homes, but forbidden to do so by their local zoning laws.
Public benefits: home offices reduce the pollution, energy consumption and road maintenance caused by commuting.
According to a report by the Washington, D.C.-based research firm, the Public Affairs Group, 14 million home-based businesses are run by a full-time, self-employed worker, with 500,000 more being added every year. An additional 13.1 million home-based businesses are run on a part-time basis; that number increases by 600,000 per year.
"Small businesses are the engine that runs America's economy," Thayer concluded. "By modernizing the home office deduction, and undertaking other efforts to cut costs and expand opportunities, Congress helps to keep that engine running smoothly. We salute the leadership of Senator Hatch and his co-sponsors. They recognize that the success of small business will benefit the entire nation, and we look forward to working with them to turn their proposals into action."
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