Antiquated tax regulations and zoning laws have prohibited or
severely limited homebased business for the past two or three
decades. However, the tide is starting to turn. A friendlier
regulatory climate for homebased entrepreneurs is on the horizon,
experts predict.
"Many of the laws on the books are outdated, written at a
time when the majority of people went to work at major corporations
outside the home," says Jim Blasingame, host of weekday radio talk show The
Small Business Advocate Show and author of Small Business Is Like a Bunch of Bananas.
"The laws have some catching up to do to reflect the new
reality, which is that homebased business is a major growth segment
for the economy. The good news is that legislators are beginning to
realize this."
Chad Moutray, chief economist with the SBA Office of Advocacy,
points out that "53 percent of businesses in the U.S. are
homebased businesses. The explosion of the Internet has made it
possible to do everything from home. Ten years ago, we couldn't
even envision how this would change the economy or how great the
pressure would be for regulatory change."
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In February 2004, the SBA released a comprehensive study, Home-
Based Business and Government Regulation, which found that
homebased businesses are subject to a disproportionate number of
both federal and municipal regulations. For instance, the study
cites how federal regulations make it especially complex to claim a
home-office deduction and how depreciation is spread over a longer
period of time than for other types of offices. As for
municipalities, the study points to the fact that many local zoning
codes prohibit businesses in residential areas outright and that
few local jurisdictions use different zoning categories pertaining
to type and density, which would provide greater flexibility in
homebased business regulations.
One state is on the forefront of change. The New Jersey
legislature is expected to pass Bill A1118, sponsored by Republican
Assemblyman Joseph Azzolina, which will exempt some businesses from
seeking variances in residential zoning, making it easier to
establish a low-impact homebased office. As of press time, the bill
had not been scheduled for a vote.
Over the past decade, New Jersey has gained more than a
quarter-million new homebased businesses, according to the Family
Home Occupation Act, and this is fueling the momentum toward
legislative reform favorable to homebased business.
"Local government is worried about transportation and
environmental hazards in residential areas, and rightly so. This
legislation addresses [these issues], excludes manufacturing and
warehousing, and has a provision permitting municipalities to opt
out," explains Alan Steinberg, the former executive director
of the New Jersey Meadowlands Commission, currently serving as the
SBA regional advocate for New Jersey, New York, Puerto Rico and the
U.S. Virgin Islands. "This is common-sense legislation that
reflects the economic changes that have taken place."
Other states are making inroads, too. The U.S. Chamber of
Commerce Small Business Center reports that in California, Maryland
and Vermont, legislation is being created to reform homebased
business regulation.
"Across the country, there's a growing impetus to make
these changes," says Steinberg. "It's only a matter
of time."