Recent Legislation Offers Opportunities for Business Owners
Three things business owners of color should know about the Inflation Reduction Act and Bipartisan Infrastructure Law
March 15, 2023
Hundreds of billions of dollars have been flowing into the US economy since Washington passed two major economic packages. The Inflation Reduction Act and the Bipartisan Infrastructure Law are designed to improve the country’s infrastructure, advance investments in green technology and lower inflation. But they also could create opportunities for 33 million small business owners across the US.
The legislation comes at a time when the number of new businesses is increasing and many entrepreneurs are searching for ways to drive revenue and scale their business. But studies have shown that Black- and Hispanic-owned small businesses were hit harder by the pandemic, widening historic gaps in opportunity. These new federal investments — ranging from savings to tax credits to business opportunities — could potentially help small business owners rebound.
“The Infrastructure Law and the Inflation Reduction Act include significant new programs designed to incubate different kinds of businesses: everything from installing EV chargers across the country to providing broadband access to traditionally underserved communities,” says Andy Navarrete, Capital One’s Executive Vice President and Head of External Affairs. “All these programs have the potential to benefit Black and Hispanic small businesses, but these entrepreneurs have to know these benefits exist and how to level the playing field of access.”
Indeed, discovering and navigating these new bills can be challenging, so here are three things to know right now:
Tax credits may reduce costs
The Inflation Reduction Act contains opportunities to save money — if business owners know where to look. Health care costs were a focus for legislators, along with expanding renewable energy.
Clean energy incentives are coming into effect that could make sense for some businesses. New tax credits will cover 30% of the cost of switching to solar power, which could cut energy bills by at least $500 a year. Owners who renovate their buildings to be more energy efficient can receive a tax credit of up to $5 per square foot.
The law also includes first-time tax credits for commercial electric trucks or vans. Business owners may find the commercial credits easier to secure than credits for personal vehicles, which carry more requirements regarding annual income, vehicle price and sourcing of components. Credits for commercial vehicles don’t carry as many restrictions and are worth more for larger electric trucks. Business vehicles going into service this year could qualify for a credit up to $7,500 — and up to $40,000 for trucks that weigh more than 14,000 pounds.
Running a small business can also mean entrepreneurs are left exposed without health insurance. More than 2.6 million small business owners and self-employed people rely on the Affordable Care Act for coverage. The inflation act extends tax credits in the marketplace through 2025, saving the average enrollee nearly $800 annually on their health insurance premiums. The extension could allow the marketplace to remain an option for some business owners.
Exceptions and rules are attached to these policies and tax credits, so business owners should consult a certified accountant for more information.
Building boom provides growth opportunities
The infrastructure bill is designed to promote construction activity and promises to expand access to billions of dollars’ worth of government contracts. Small companies are encouraged to pursue these opportunities to rebuild the nation’s roads, bridges, rails and airports.
The law also includes provisions to break up large infrastructure projects into smaller contracts to allow socially and economically disadvantaged businesses to make exclusive bids. The Department of Transportation has outreach efforts underway to connect underprivileged owners with contracting opportunities.
New environmental tax credits are also expected to increase demand from homeowners seeking to make their homes more energy efficient. Small businesses are often employed to install items like new roofs, HVAC systems and heat pumps. Firms may want to consider the implications of these new rules when engaging with existing and potential customers.
Federal agencies and nonprofits expand resources for firms owned by people of color
The Infrastructure Law more than doubled the budget for the Minority Business Development Agency to empower it to create new programs for communities of color. It’s the only federal agency dedicated to helping the 10 million minority-owned businesses across the country by offering new resources to improve access to capital, a particular challenge for many entrepreneurs of color.
Since the law was passed, the agency has helped minority-owned businesses secure $1 billion in capital and over $1.7 billion in contracts. Tens of millions of dollars in grants are available to minority-owned businesses on the agency’s website.
Another resource is Build Up Local, a new group formed in part by the National Urban League. It helps small businesses qualify for and bid on contracts. The group was formed with the goal of closing the racial wealth gap by helping small businesses of color access inclusive contracts made available through the infrastructure act.
Chambers of commerce, business incubators and other organizations in local business ecosystems also can help entrepreneurs navigate these opportunities. Forthcoming research from the Insights Center highlights how important these community partners are to enabling the success of small businesses, especially as they continue to rebuild from the significant economic impacts of COVID-19.
“Small businesses employ more than half of the working population in this country,” said Shena Ashley, President of Capital One’s Insights Center and Vice President of Community Impact and Investment. “Their survival and their ability to go through this recovery is really important to the economy overall.”
These landmark bills are wide-ranging and new, and certain provisions are still being implemented, but they offer significant opportunities that business owners may want to leverage.
About the Capital One Insights Center
The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology.
This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insights Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable.
Analysis and conclusions constitute the Capital One Insights Center’s judgment as of the date of this article and are subject to change without notice. Furthermore, the analysis views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication.
Any opinions expressed herein should not be construed as an individual recommendation for any particular customer or client and is not intended as advice or recommendations of particular securities, financial instruments, market conditions or strategies. Capital One Financial Corporation and its affiliates and/or subsidiaries may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.