Just three months after September 11th, the Defense Department began consulting with its trainers who teach service members to resist torture.  Those trainers obtained their severe interrogation tactics used by the Chinese against Korean and American prisoners to elicit FALSE confessions. They include sleep deprivation, slapping, fear, humiliation, and waterboarding.

This was the beginning of wide spread discussion among top officials within the Defense Department, Department of Justice, the National Security Agency, even up to the President and the Vice on the use of interrogation tactics the Geneva Conventions deemed illegal.

Democratic Senator Carl Levin, Chair of the Armed Services Committee, which authored the report, says “it connects the dots.”

“What people sat at Abu Grahib was not just the random acts of people acting on their own,” Levin said.

The administration has blamed Abu Ghraib and accusations of torture on “a few bad apples.” But this report shows deliberate discussions and policy formations of interrogation tactics at the Defense Department and the CIA.

President Bush signed a memo justifying harsh interrogation tactics, the report quotes then National Security Advisor, Condoleezza Rice. She tells the investigators that she was told about concerns about the techniques. Secretary of Defense Donald Rumsfeld approved the tactics for detainees at Guantanamo Bay, Afghanistan and Iraq.

Top officials at the Justice Department’s Office of Legal Council, Jay Bybee and John Yoo, provided the legal justification after the interrogations began.

“I think the legal opinions were abdominal,” Senator Levin says.

The 200 page unclassified report took one and a half years to compile. Investigators reviewed more than 200,000 documents and interviewed more than 70 people. They Defense Department spent 5 months reviewing the results.

Senator Levin recommends the Justice Department open an investigation. He did not rule out implicating Vice President Cheney and President Bush.

“Investigations go where ever they take them,” Levin said.

Top Republican on the committee and torture survivor, John McCain, agrees that the report reveals abuses but that the Bush Administration officials should not be investigated or prosecuted.

“We need to look forward, not backward,”  McCain said.

When Bush administration officials were making decisions to use these interrogation tactics, the US law, the War Crimes Act of 1997,  said that any violations of the Geneva Conventions constituted a war crime.

To sidestep US law, in 2002, President Bush signed a memo that said  the Geneva Conventions did not apply to the Taliban or Al Qaeda. Also in 2002, the Justice Department issued a far-fetching definition of torture, that torture amounts to “organ failure” and “significant psychological harm” for an extended amount of time.

Congress attempted to define cruel and inhumane treatment in 2005 and then again in 2006. The Military Commissions Act of 2006 narrowly defined torture, similar to the Justice Department’s extreme interpretation in 2002.

For the first time, yesterday, President Obama suggested the Justice Department or an independent commission investigate.

Vice President Cheney continues to defend interrogations. On Fox News he says all the memos should be released, and a picture of necessity would be painted, he says.

EARLIER:

President Obama signaled a possible Justice Department investigation and prosecution of top Bush administration officials if they knowingly authorized illegal interrogation tactics.  This comes just hours before US Senator Carl Levin (D-MI), Chair of the Armed Services Committee, released a report that confirms top officials approved interrogation tactics the Geneva Conventions outlaws.

The report, which took 1 1/2 years to compile, has been reviewed by the Defense Department.  It says President George Bush, Vice President Dick Cheney, and Defense Secretary Donald Rumsfeld approved and knew about interrogations using “stress positions, forced nudity, and military working dogs.”  The harsh interrogation tactics were  used at all US detention facilities at Guantanamo Bay and in Iraq and Afghanistan.

This is the first time memos have revealed that orders came from top-ranking administration officials.

Senator Levin said the Department of Justice should “open an investigation” and see where the investigation leads.  He did not rule out investigation of Vice President Cheney or Defense Secretary Donald Rumsfeld.

Top Republican on the Senate Armed Services Committee, John McCain, former torture survivor, says the Justice Department should open an investigation.  “We should look forward,” McCain said.

Petitions and email campaigns are sounding the alarm.  So are blogs such as Campaign for Liberty and The Truth or the Fight.

The internet campaigns charge that H.R. 875 authored by Representative Rosa DeLauro (D-CT), as well as S. 425 by Senator Richard Durbin (D-IL) and H.R. 759 by Representative John Dingell (D-MI), would squash family farms, local farms, farmers markets, organic farming and even the back yard garden.

DeLauro’s proposal would create one agency to oversee the food industry, rather than the current patchwork of the FDA, USDA and other regulatory bodies, and would institute high fines for noncompliance or violations.

The concerned blogoshpere says the penalties, regulations and inspections would be too expensive and to burdensome for small farmers and organic farmers to comply.

But the most progressive advocate of local and organic farming call the outrage nonsense.

John  Peck, Executive Director of Family Farm Defenders, said they are “conspiracy theorists.”

Carol Tucker Foreman with the Consumer Federation of America’s Food Policy Institute, a food and consumer advocacy group says the bill is meant to impose better regulations on the food supply, in light of the latest pistachio recall and recent peanut and spinach recalls.

“We’d been surprised that the bill that was most directed at consumer health and safety that promotes simple good food and good farming became the objective of the attack,” Foreman says.

Foreman also says DeLauro’s bill is meant to reign in large corporate farms.

“You’d focus your resources on mammoth producers whose food is going to go everywhere. If you have limited resources you’re not going to expend a whole lot of them to people selling to small markets and I don’t think you’d spend any at all on direct farmer to consumer markets.”

Mark Kastel is Co-Director of the Cornucopia Institute in Wisconsin, which advocates for small local organic farming.  He has concluded that Representative DeLauro’s bill does not have any provisions that would directly hurt small-scale or organic farmers, but he says its a warning to watch out for unintended consequences.

“We’re not against what’s happening in Washington but the food community, farmers and consumers who care, need to send a strong message that family scale farmers are not run over by the steamroller of the problem when new regulations are promulgated.”

Carol Tucker Foreman with the Consumer Federation of America, who helped to write the controversial bill, says they are amending the language to reassure small and local farmers.

Congress and President Obama have called for swift action.  It is still unclear if legislation will successfully  make its way through Congress this year.

“To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game. And rules must be simpler and more effectively enforced,” Geithner said.

Currently, only traditional banking practices are regulated. Geithner’s new proposal would bring entities and transactions such as hedge funds and the dubious credit default swaps under government purview. It would strengthen regulation of money markets and create an oversight body that would monitor financial transactions and determine risk.

The new rules would be a major marker in the bumpy road of financial regulation. The stock market crash of 1929 resulted in a series of legislative actions to regulate the banks, the market, and major trusts.  A path of deregulation began in the 80′s and culminated in a massive deregulation of banks in 1999, the Gramm Leach Bliley Act.  Many experts say this spurred innovation and creative ways to make money, including naked short selling and credit default swaps, which resulted in an financial environment out of control.

If Geithner’s plan passes Congress, this will be the most robust set of regulatory law since the 1930’s.

Spencer Bachus, Top Republican on Financial Services Committee expressed concern.  “This empowers federal regulators with incredible discretion. This discretion is not always administered fairly or evenhandedly,” Bachus says.

Many holes exist in the plan which Geithner expects Congress to help close, such as which agencies will gain more oversight or who should lead the new oversight body.

Geithner also says this is just the first step. He plans to release plans to protect consumers, streamline regulatory agencies, and coordinate a regulatory framework with international economies.

President Obama will discuss a global framework at the G-20 meeting next week.

Top Democrat on the Budget Committee, Kent Conrad, emerged from the meeting touting Obama’s budget priorities.

“We preserved the President’s budget policies: energy, education, health care, dramatic reduction in the deficit, extending the middle class tax cuts.” Conrad says.

But Conrad has stripped from Obama’s budget a $800 tax cut for working families passed in the stimulus. Conrad also removed a controversial carbon cap and trade program. Those are just some of the cuts that that result in a $600 billion dollar reduction in 5 years.

Top Republican on the Senate Budget Committee, Judd Gregg, referred to  Conrad’s cuts as “gimmicks” because Conrad’s budget looks only 5 years ahead, instead of the traditional 10 year outlook.

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UPDATE:  President Obama responds to Senator Conrad’s budget proposal. He is refusing to say if he would support Conrad’s budget plan, he says “Now, we never expected when we printed out our budget that they would simply Xerox it and vote on it.”

Obama  also says “he is confident the budget will have [his] priorities in place.”

It appears as if some tough negotiations between Democrats and the White House lie ahead.

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Just three hours before President Obama makes his case in a news conference to the American people for his economic policies, which includes a massive budget with major spending increases in education, health care and energy, top Democrat on the Senate Budget Committee, Kent Conrad, cut carbon cap and trade program and middle class tax cuts. Such changes result in a cut of $600 billion dollars over 5 years from Obama’s proposed budget.

To make it more palatable for queasy Democrats and moderate Republicans, Senator Conrad told reporters he was able to “keep Obama’s priorities” despite the cuts.

Senator Conrad’s budget proposal would reduce Obama’s proposed deficit from nearly 4% of GDP to 2.9% of GDP.  He directs Congress to pay for new spending in health care, energy and education with in five years. Conrad also removes a cap and trade program for the energy, instead, he gives energy legislators a dollar amount to spend with no policy directive. Conrad does the same for the sections of education and health care.

No word yet if this is enough for Republicans to support.

Before Conrad released his numbers, Republicans made their case, over and over again, on Capitol Hill with a series of news conferences, claiming the budget was too big.  They pointed to Congressional Budget Office estimates that the debt would triple in ten years.

Top Republican on the Senate Budget Committee, Judd Gregg says that “if the President wants to propose this dramatic expansion in government, he’s got to figure out a way to pay for it.”

Conrad’s budget proposal would halve the deficit in 5 years from $1. 2 trillion to $500 billion.

The verdict is out if Republicans, and President Obama, will support Conrad’s proposal.

Probably because under his plan, taxpayers will contribute 93% while investors will contribute 7%.

“We’re giving taxpayer money to the banks. The stock market will always rally if we tell the stock market we’re going to tax people to get the banks profits,” said Dean Baker, C0-Director of the Center for Economic and Policy Research in Washington, DC.

This is how it will work:

Private entities are encouraged to enter the bidding process to buy pools of toxic loans or loan-backed securities. The Federal Reserve will  loan the financial firms up to 85 % of the money, which the FDIC will insure.  The investor will put in 7%t of equity while the US taxpayers will also put in 7% of equity.

Timothy Geithner said the investor will “share in the risks with the taxpayers and the taxpayers will share in the profits.”

If the assets make money, the taxpayer and the investor will split the profits, even though the government has put in or guaranteed 93% of the investment. If the assets loose money, the investor will only loose the 7% of equity, the taxpayer will take the fall for the remaining loses.

It’s low-risk investing for investors.

Some are attempting to remind America.

On the National Mall, with the White House in direct sight, the group Iraq Veterans Against the War set up a vigil.  TJ Buonomo, a veteran military intelligence officer, was discharged in 2007 for outspoken opposition to US war policy.  He says “It’s important to continue to voice our opposition to this thing.”

He is one of 6 veterans of the Iraq war keeping vigil at a self-made two story metal structure, decorated with camouflage, military netting, and sand bags, to represent materials used in the war.
To these activists, the war in Iraq is not winding down.  “We’re supposedly going to be out within three years or so. But my concerns is that there will be some residual influence” Buonomo says.

They point to the 50,000 non combat troops that will remain until the end of 2011 and to intelligence agents and contractors that Obama has not promised to withdraw.

They are also skeptical about President Obama’s transfer of 17,000 troops to Afghanistan and attacks along the border with Pakistan.

This small group of activists will maintain their vigil until a march to the Pentagon on Saturday.

But expectations of the size of Saturday’s march are low.

“We’re realistic in our expectations that there won’t be 250,000 or 500,000. “

James Circello was part of the invasion of Iraq in 2003.  He estimates a couple thousand people will attend.

The anti-war community has seen a loss of momentum after an Obama victory.

Adam Kokesh, board member of Iraq Veterans Against the War,  says “It’s been pretty decimating.  Most of the movement has not been engaged. “  Kokesh says most in the movement drank the Obama “cool-aid.”

1.8 million people gathered on in Washington to watch Obama be sworn in as President. He ran as the anti-war candidate, pledging to end the war in Iraq.  For comparison, the largest anti Iraq war protests, brought about 200,000 people to DC.

Tom Hayden, long time peace activist, says “The vast cross section of anti-war activists were supporting Obama or supporting Edwards, had moved in the direction of political pressure.“

Hayden says “you can’t get significant traction and send thousands of people into the streets with the economy in collapse.”

Adam Kokesh says the anti-war movement needs a new approach, but he doesn’t have it. Instead, he blames complacency.  “You know that’s my biggest gripe with the American people, they’re living in their bubble culture and concerned with the things that impact their personal lives.”

On idea, Tom Hayden says, is that the anti-war movement should sit back for a while and take some time to rebuild. “I believe we will be back on the streets again opposing the war in Afghanistan,” Hayden says.

Iraq war protests will be held in major cities across the country Saturday.

Ron Kirk

Gary Locke

Meanwhile, in a the Senate Commerce Committee was a confirmation hearing for Obama’s third nominee to be Commerce Secretary. Gary Locke, as former Governor of Washington state implemented trade deals with Asia, making Washington the third largest exporting state in the US.

He received high praise from lawmakers on both sides of the aisle.  But, as Locke is known to be a trade governor, lawmakers peppered Locke with their trade tirades.

Republican Senator Mel Martinez, Republican of Florida says he’s “concerned about the protectionists attitudes that is pervading this moment in history.”

Senator Byron, Democrat of North Dakota defended Democrats trade position. He says “you can’t run trade deficits of 800 billion dollars range and believe that can be sustainable for your economy. No one is describing these trade deficits as helping undermine this economy and help cause this crisis. It has but no one wants to talk about it because the minute you talk about it they suggest you are somehow anti-trade.”

Locke commits to “enforce trade agreements.”

Trade has not been a front burner topic of discussion this political season, with the domestic economy and behavior of wall street dominating. But trade has been in the background of nearly every major debate. There was the buy America provision in the stimulus, a ban on imports of toys with lead paint and most recently, last week, in the massive spending bill, they cancelled a pilot program that would implement a NAFTA provision to allow Mexican trucks on US highways. Mexico responded by announcing it was raising Mexico’s tariffs on US goods.

During the campaign, then candidate Obama had said NAFTA needs to be re-negotiated and trade deals must include strict labor and environmental protections.

Lori Wallach, Director of Public Citizens’ Global Trade Watch, says Kirk and Locke have supported past free trade agreements. She says “they will have do take up their job and implementing their boss, the President’s plan.”

Yes, he went further.  He inferred that AIG executives should pursue the option of suicide.

“I do know this, that corporate America needs an ethic like they have in Japan where corporate executives take responsibility for what they’re doing and we don’t have that in this country.”

AIG ad but probably where the bonus recipients are now

Anger flooded the halls of Congress which is on the hook for approving 170 billion dollars for AIG.

Democrats are asking AIG to renegotiate the contracts that include the bonuses. If AIG refuses, Democrats say they will devise a plan to tax the bonuses up to 90 percent.

New York Senator Charles Schumer

“So that it’s returned to its rightful owners, the taxpayers. So those of you who are getting these bonuses, be forewarned, you will not be able to keep them.”

Republicans are reluctant to opine on the Democrats tax proposal, but top Senate Republican, Mitch McConnell, says “It is shocking that they, the administration, would come to us know and act surprised about these contracts. Why didn’t they ask the question two weeks ago before they gave them 30 billion dollars?”

“Cause with out this  money, these  bonuses could not be paid,” says Republican Senator John Ensign of Nevada.

AIG paid out 165 million dollars worth of bonuses to derivative traders, traders of credit default swaps, which are blamed for AIG’s need for government rescue.

Chair of the Financial Services Committee, Barney Frank, says the US should start acting like owners of the company and take AIG to court. US taxpayers own 80 percent of the firm.

Republican Senator Richard Shelby of Alabama is questioning Secretary Geithner’s competence.

President Obama defended his Secretary.

“In the last six months, AIG has received substantial funds from the US Treasury. I have asked Secretary Geithner to pursue every legal avenue to block these bonuses.”

President Obama outlined restrictions on executive compensation last month. Those guidelines have not yet been completed. Democrats took out a provision of the stimulus package that would have imposed retroactive limits on executive compensation, which would have applied to this set of AIG bonuses. But the amendment was replaced with more lenient restrictions which applied for future bonuses.

Labor unions and consumer advocates are planning to protests outside AIG and banks across the country on Thursday.

His plan is a combination of boosting capital boosting confidence.

To provide capital, the plan targets the secondary market, where many small business loans are made and re-sold. The government will purchase $15 billion dollars of Small Business Administration (SBA) loan-backed securities.

The government will also guarantee up to 90 percent of loans made through the SBA.

David Beck, Policy Director for Center for Community Self Help, which lends to low-income borrowers, says “it’s big steps in the right direction. We think it will unfreeze credit markets to small businesses.”

Banks are also pleased with the plan as their loans will be guaranteed. James Ballentine, Senior Vice President at the American Bankers Administration, says “anything at this point helps and these seem very helpful. Clearly a lot of things have been tried and we’ll see more things in the future.  Each announcement gets better and this one provides a great advance for business and the bankers trying to serve the bankers needs.”

Small businesses, the intended recipients, are concerned.

This program helps small businesses that obtain loans through the Small Business Administration. William Dennis, Senior Research Fellow at the National Federation of Independent Business, which represents small businesses in all 50 states, says only 1 percent of small businesses receive loans through the SBA.

“It’s discouraging because….community banks who have many more small business customers and are much more in tune with business owners” aren’t included in this plan.

Dennis also says loan assistance doesn’t address the number one problem: hurting business because of low sales and lack of customers.

Stern Warning to Banks

Treasury Secretary Timothy Geithner issued a stern message to banks.

“We need our nation’s banks to go the extra mile. When banks individually pull back out of the sense of prudence and caution, the collection impact of those actions will make the economy weaker.”

To ensure bank lending to small business, the 21 largest banks must file monthly lending reports and all banks must file a lending report every quarter.

James Ballentine, Senior Vice President at the American Bankers Administration says the reporting requirement “are the same thing they’ve heard before,” and that banks will comply.

Details from Treasury

1. Jumpstart Credit Markets For Small Businesses By Purchasing Up to $15 Billion in Securities

• • Begin Direct Purchases of Securities Backed by Loans from SBA’s 7(a) Program: Traditionally, SBA lending has been supported by an active secondary market, as community banks and other lenders sell the government-guaranteed portion of their loans, providing them with new capital to make additional loans. But since last fall, this secondary market – which has historically supported over 40 percent of SBA’s 7(a) lending program – has frozen up. As a result, both lenders, including community banks and credit unions, and the “pool assemblers” that securitize their loans have been left with government-guaranteed SBA loans and securities on their books. This has prevented them from making or buying new loans.Today, the Treasury Department announces that – in order to get credit moving immediately to small businesses – it will:
    • Stand Ready to Purchase Securities Backed by 7(a) Loans Packaged Since Last July: Treasury has hired an investment manager who will be authorized to purchase – starting by the end of this month – securities backed by guaranteed portions of 7(a) loans packaged on or after July 1, 2008. This will help clear the backlog of securities that has built up since the beginning of the credit crisis last year, providing pool assemblers and banks with a source of liquidity so that new lending can occur.
    • Stand Ready to Purchase New 7(a) Securities Packaged Between Now and the End of the Year: Between now and the expiration of Emergency Economic Stabilization Act (EESA) authority on December 31, 2009, Treasury stands ready to purchase new securities backed by the guaranteed portions of 7(a) loans. By making this pledge, Treasury provides assurances to community banks and other lenders that they can sell the new 7(a) loans they make, providing them with cash they can use to extend even more credit.
  • Make Direct Purchases to Unlock Credit Markets for SBA’s 504 Community Development Loan Program: The SBA’s 504 program combines government-backed loans with mortgage loans from private lenders to provide long-term financing of up to $10 million that directly supports economic development within a community. First-lien mortgage loans made by private-sector lenders – which account for 50 percent of the financing for 504 projects, and are not SBA guaranteed – were often traded in the past on an active secondary market that has frozen in the last year, leaving billions in unsold assets on the books of banks. To get the 504 lending market moving again, Treasury will:
    • Stand Ready to Purchase Securities Packaged From 504 First-Lien Mortgages: Treasury will stand ready to buy first-lien mortgage securities connected to SBA’s 504 loan program.  No later than May, Treasury will begin purchasing securities packaged on or after July 1, 2008 that meet eligibility criteria designed to protect taxpayers.
    • Prepare to Buy 504 First-Lien Mortgage Securities That Receive New SBA Guarantees: As part of the Recovery Act, SBA is working to develop a secondary market guarantee program for securities issued from pooled 504 first mortgage loans. Once this program is fully implemented by SBA, Treasury will stand ready to purchase these government-guaranteed securities.

• • Provide Liquidity While Keeping The Secondary Market in Place: These direct purchases of 7(a) and 504 securities will provide liquidity to lenders, including community banks and credit unions, enabling them to restart the process of recycling capital and extending loans. At the same time, the TALF component of the Consumer and Business Lending Initiative will provide investors with an attractive source of financing, allowing them to continue participating in the market. This is intended to keep the existing secondary market in place so that private investors can replace the government as the purchaser of these securities when market conditions return to normal.

1. Temporarily Raise Guarantees to Up to 90 Percent in SBA’s 7(a) Loan Program: The purpose of the 7(a) loan program is to provide a government guarantee that reduces the risk lenders face when they make loans to borrowers who cannot find credit elsewhere. But during the current recession, the guarantees – up to 85 percent for loans at or below $150,000 and up to 75 percent for larger loans – have not been large enough to give banks the confidence they need to lend. As part of its implementation of the Recovery Act, the SBA today announces:
   • An Increase in Maximum Loan Guarantees to 90 Percent: Beginning today, any lender who participates in the 7(a) program can request a guarantee from the SBA of up to 90 percent for each eligible loan. This temporarily available increase in guarantees will help provide banks with the greater confidence they need to extend credit during the current recession.
   • A Confidence Boost Lenders Need to Extend Credit: Combined with Treasury‘s efforts to unlock secondary markets, higher loan guarantees will ensure that lenders have both greater safeguards against possible credit losses and assurances that there will be an active secondary market to purchase their loans and provide the liquidity they need to keep lending.
2. Temporarily Eliminate SBA Loan Fees to Reduce the Cost of Capital
   • Elimination of Borrower and Lender Fees for 504 Loans: On any new eligible 504 applications submitted beginning today, SBA will temporarily eliminate the Certified Development Company (CDC) processing fees charged to borrowers and the third-party participation fees charged to lenders. As a temporary provision authorized by the Recovery Act, these measures will reduce costs to both borrowers and lenders participating in the 504 program, which has a demonstrated record of supporting community development and creating jobs.

• • Elimination of Up-Front Fees for 7(a) Loans: For any new eligible 7(a) loan, the SBA will temporarily eliminate the up-front fees that lenders pass along to borrowers. These fees – which go up to 3.75 percent for larger loans – increase the cost of borrowing for small businesses and make it more difficult for them to access the credit they need to expand or make new investments.
  • Rebates for Fees Paid Since February 17th: For borrowers or lenders charged any of these fees on loans approved on or after February 17th, the SBA will provide a refund, to ensure that Recovery Act provisions create the maximum possible economic stimulus.
  • A Pledge to Quickly Turn Around Loans: To maintain a high level of service to potential borrowers and lenders alike, the SBA also pledges that complete loan applications will be turned around quickly by the SBA – usually in as little as two to three days.

1. Call by Secretary Geithner for New Reporting Requirements on Bank Lending to Small Businesses and Greater Efforts to Extend Small Business Loans

• • Require the 21 Largest Banks Receiving Financial Stability Plan Assistance to Report Their Small Business Lending Every Month: As part of the President’s commitment to increasing transparency and accountability, Treasury will – for the first time – require the 21 largest banks receiving capital from the government to report how much small business lending they do every month.
  • Call for Quarterly Reports of Small Business Lending By All Banks: Today, Secretary Geithner called for every bank nationwide to report their total lending to small businesses in their regular quarterly reports, rather than just once a year. Secretary Geithner will ask bank regulators to take steps to amend the quarterly Report of Condition to achieve this important objective. This will offer more current information about trends in small business lending, while at the same time providing important information about how well government programs are working to stimulate these loans.

• • Issue Call for All Banks to Make Efforts to Increase Small Business Lending: Today, Secretary Geithner called on all banks – whether or not they receive FSP assistance – to make an extra effort to extend small business loans to creditworthy borrowers. In light of the extraordinary assistance provided to the banking system, Secretary Geithner emphasized that lenders should take a special responsibility for providing the credit that small businesses need to operate, expand and add jobs.

1. Issue Guidance for An Expanded Carryback Provision as Part of the Recovery Act’s Comprehensive Tax Cut Package for Small Businesses:

• • Establish Five-Year Carryback Provision to Increase Tax Refunds for Small Businesses:Today, the IRS will issue guidance for a provision in the Recovery Act that allows businesses with gross receipts of up to $15 million to “carry back” their losses for up to five years, effectively allowing them a rebate on taxes paid in previous years. The Joint Committee on Taxation estimates that this measure will increase liquidity for small businesses by $4.7 billion by September 30, 2009.
    • Continue Implementation of Recovery Act’s Comprehensive Tax Cut Package for Small Businesses: The carryback provision is only one of several measures in the Recovery Act that will improve liquidity for small businesses by lowering their taxes, including:
      • Incentives to Invest in Plant and Equipment by Allowing Small Businesses to Write Off Up to $250,000 of Investment: The Recovery Act allows small businesses to immediately write off up to $250,000 of qualified investment in 2009, providing an immediate tax incentive to invest and create jobs.
      • Additional Liquidity Support By Reducing Estimated Tax Payments: Normally, small businesses have to pay 110 percent of their previous year’s taxes in estimated taxes. But with incomes down for many small businesses this requirement is too burdensome – and causing a cash crunch. The Recovery Act allows small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes, helping to boost their liquidity and better align their estimated taxes with their actual taxes in a year of severe economic contraction.
      • Extension of Bonus Depreciation Deductions Through 2009: The Recovery Act also extends through 2009 bonus depreciation,allowing businesses to take a larger tax deduction within the first year of a property’s purchase.
      • Incentives for Investors to Put Money in Small Businesses: Finally, the Recovery Act includes a measure that will exclude from taxation 75 percent of the capital gains for investors in small businesses who hold their investments for five years. In his budget, the President proposes to go further, eliminating all capital gains taxes on small businesses and making this measure permanent.