Wyden, Chu Introduce Bill to Boost Access to Capital for Businesses Owned by Women and People of Color

Wyden, Chu Introduce Bill to Boost Access to Capital for Businesses Owned by Women and People of Color

PROGRESS Act would create two new tax incentives to help small businesses hire and grow

Washington, D.C. - Senate Finance Committee Chair Ron Wyden, D-Ore., and Representative Judy Chu, D-Calif., today introduced legislation called the PROGRESS Act that would improve access to capital for small businesses owned by women and people of color. Short for Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success, the PROGRESS Act would create two new tax incentives to help these businesses grow and hire.

"Women business owners, particularly women of color, are underestimated, underrepresented and undercapitalized," Wyden said. "Nobody can question the entrepreneurial spirit of women small business owners in America, but tax laws on the books today aren't doing nearly enough to support them compared to others. Everybody wins when more small business owners have a chance to get ahead and grow, and that's what this bill is all about."

"The Biden-Harris Administration has overseen a boom in small business growth. But for many small businesses, particularly those owned by enterprising women and people of color without long-term relationships with financial institutions, securing access to capital remains far too tough, which hurts their ability to grow," Chu said. "Sen. Wyden and I are introducing the PROGRESS Act to create first employee and investor tax credits so we can level the playing field for women-owned and minority-owned small businesses and unlock their full growth potential."

Owners of small businesses that lack employees are more diverse than employer firms. More than one-third of non-employer businesses are owned by people of color and more than four in ten are owned by women. Unfortunately, these businesses struggle to grow and face endemic barriers to accessing funding.

On average, white business owners start with nearly three times the working capital of black-owned businesses. Male entrepreneurs, on average, start with nearly twice as much capital as female entrepreneurs. The numbers are even more stark when considering only third-party capital. In 2023, only 2.2 percent of venture capital funding went to companies founded solely by women. This disparity is acutely felt by women of color who now account for 50 percent of all women-owned firms, yet received less than one percent of venture capital funding over the past decade.

Because of their size, their industry, or the way they are organized, many women-owned businesses can't take advantage of tax benefits designed for small businesses. This lack of capital has limited the ability of these entrepreneurs to grow their businesses.

The PROGRESS Act creates two new tax incentives to unlock the growth potential of these businesses:

First Employee Credit:

A new first employee credit will stimulate business growth and job creation.

• A credit equal to 25 percent of W-2 wages reported can be claimed annually, up to $10,000 in a single tax year, with a lifetime limit of $40,000.
• Because many businesses do not turn a profit in their early years, the first employee credit is creditable against the business' payroll tax liability.
• Certain businesses that have not reported full-time equivalent W-2 wages in a previous year are eligible for the credit.
• Eligible businesses must be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers).
  
  

Investor Credit:

A new investment credit will encourage third-party capital investment and allow small businesses to grow and thrive.

• A credit of up to 50 percent of a qualified debt or equity investment can be claimed, up to $10,000 in a single tax year, with a lifetime limit of $50,000.
• Investors that fund certain businesses can use the credit to boost their rate of return.
• Eligible businesses must have at least one full-time equivalent employee and be majority owned by U.S. individual(s) that each earn $100,000 or less per year ($200,000 in the case of joint filers).

A one-page summary of the bill is available here and a detailed summary is available here. Bill text is available here.

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