Environmental groups are pushing to kill a tax break for small businesses that buy large sport utility vehicles.

Under current law, a business may deduct up to $25,000 of the cost of vehicles weighing more than 6,000 pounds, a category that includes only the biggest SUVs as well as light trucks and vans. That deduction would rise to $75,000 if Congress passes the proposed increase in small business expensing limits.

The Sierra Club wrote a letter to the Internal Revenue Service, urging it to “aggressively audit” taxpayers who claim the deduction, to make sure they are using the vehicle primarily for business purposes.

“People who buy luxury SUVs for predominantly personal use should not be able to send the bill to the American taxpayer,” said Daniel Becker, director of the Sierra Club’s Global Warming and Energy program. He described the provision as “a loophole big enough to drive a Hummer through.”

Rep. Anna Eshoo (R-CA) has introduced legislation to treat large SUVs the same as cars, limiting the deduction to $7,660.

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The Defense Department is proposing to drop a requirement that contracting officers withhold 5% of the amount due on a time-and-materials or labor-hour contract until the contractor signs a release.

In the proposed rule, DOD says, “Normally, there should be no need to withhold payments when dealing with contractors that typically comply with contractual requirements in a timely manner.”

The money is withheld until the contractor signs, at the time of final payment, a release discharging the government from all liabilities, obligations, and claims arising under the contract.

The proposed rule is DFARS Case 2002-D017 in the Feb. 28 Federal Register. Comments are due by April 29.

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The Internal Revenue Service announced it has postponed consideration of a proposed “mobile machinery tax” on heavy equipment such as cranes, drilling rigs and utility vehicles. IRS had proposed that the machinery should no longer be exempt from federal excise taxes and highway use taxes.

The rule will be held in abeyance while Congress considers legislation to re-authorize the Highway Trust Fund. SBA’s Office of Advocacy had protested the impact of the new tax on small firms.

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Restoring America’s small-business industrial base is “my number one priority in this Congress,” House Small Business Committee Chairman Donald Manzullo (R-IL) said at the committee’s organizational meeting Feb. 26.

He said the manufacturing sector has lost more than two million jobs during the current economic downturn.

“We must put Americans back to work in jobs where they actually make a tangible good,” he said. “Only with a small manufacturing base can we truly ensure economic security in America.”

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House Democrats completed reorganizing their side of the aisle on the Small Business Committee.

The Democratic Steering Committee named six freshmen to the committee. Nine members from last year’s Congress have left the panel.

Because Republicans gained seats in the new Congress, the committee now consists of 19 Republicans and 17 Democrats, down from 18 last year.

New Democratic members are Frank Balance (NC), Madeleine Bordallo (Guam), Ed Case (HI), Denise Majette (GA), Jim Marshall (GA), Michael Michaud (ME) and Tim Ryan (OH).

Most of the newcomers identified themselves as present or former small-business owners.

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Senator Kit Bond (R-MO), who turned down the chairmanship of the Senate Small Business Committee in favor of heading a powerful Transportation Subcommittee, is flexing his newfound muscle.

Bond circulated a letter signed by 64 of the 100 senators, branding President Bush’s proposed funding for highways inadequate.

The president’s 2004 budget proposal would spend $29.3 billion on highway construction, $2.5 billion less than this year. Bond said the president’s plan won’t even make it out of committee.

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Correction

A story in the Feb. 21 edition of Set-Aside Alert misstated SBA policy on PRO-NET registrations.

Companies must update their profiles every 12 months, and those that are not updated within 18 months will be removed, said Gary Jackson, assistant administrator for size standards.

We apologize for the error.