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Senate mulls Y2K tax cut for small business

Looking to motivate small businesses to become Year 2000 compliant, two Senators propose tax relief to companies that invest in certain technologies.

Looking to motivate more small businesses to become Year 2000 compliant, two Senators want to give tax relief to companies that invest in technology not affected by the Y2K bug.

Sens. Chris Dodd (D-Connecticut) and Patrick Leahy (D-Vermont) have Back to Year 2000 Index Page introduced the Small Business Y2K Compliance Act of 1999, which would offer small businesses a tax reduction of up to $40,000 toward the expense of purchasing and installing Year 2000-compliant software and hardware in 1999.

The legislation would also reward those small businesses that already have made progress on their Y2K efforts by allowing an accelerated depreciation of up to $40,000 for the purchase and installation of compliant computer hardware and software made in 1997 and 1998.

The Small Business Administration (SBA) recently warned that 330,000 small businesses are at risk of closing down as a result of the Year 2000 technology problem, and another 370,000 could be temporarily or permanently be hobbled.

"Unlike government agencies or large corporations, small businesses do not have an army of technicians ready to fix any Y2K problems," Leahy, the ranking minority member of the Senate Judiciary Committee, said in a statement.

"Small businesses need and deserve a helping hand in Y2K compliance. Our bill will help encourage small businesses to squash any Y2K bugs before they can hatch."

The new bill joins another measure introduced in January and signed by the president in April. The Small Business Year 2000 Readiness Act authorizes the SBA to expand its guaranteed loan program to provide eligible businesses with the means to continue operating successfully after January 1, 2000.

"Small businesses are the engines of our economic growth," Dodd said in a statement.

"We cannot allow the Y2K problem to stall those engines. This legislation will encourage small businesses to identify their Y2K vulnerabilities and free up resources to address them."

Dodd, the vice chairman of the Senate Special Committee on the Year 2000 Technology Problem, co-sponsored both bills.

Although Republican Senators have yet to comment on the Dodd-Leahy bill, Democrats expect the tax cut measure to get GOP support.

The bill has been endorsed by the White House, the American Small Business Alliance, and the SBA.

The Year 2000 problem, also known as the millennium bug, stems from an old programming shortcut that used only the last two digits of the year. Many computers now must be modified or may mistake the year 2000 for the year 1900 and may not be able to function at all, causing widespread disruptions in services in the transportation, financial, utility, and public safety sectors, observers warn.