Tax Advisor - U.S. House and Senate Pass Small Business Job Act of 2010

Update: Sept. 27 - Bill officially signed into law by President Obama.  

Akron, Ohio (Sept. 24, 2010) - Yesterday, the U.S. House of Representatives passed H.R. 5297, the Small Business Jobs Act (SBJA) of 2010, thereby clearing the path for President Obama to sign the bill into law.  The U.S. Senate passed the bill on Sept. 16.

The act, which aims to encourage investment and provide access to additional capital, includes a wide-ranging assortment of tax breaks and incentives for small businesses, paid for with various revenue raisers.  Here is a brief overview of the tax changes in the new law:

Renewal of 50 Percent Bonus Depreciation
This bill allows for additional first-year bonus depreciation of 50 percent for property placed in service in 2010.

Enhanced Small Business Expensing (Section 179)
To help small businesses quickly recover the cost of certain capital expenses, H.R. 5297 increases the maximum amount expensed under Section 179 to $500,000 and raises the phase-out threshold to $2,000,000 for tax years beginning in 2010 or 2011.  Further, this bill enables taxpayers to expense up to $250,000 for qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property.

Five-Year Carryback of General Business Credits
The SBJA allows eligible small businesses to carry back unused general business credits (determined in the first taxable years beginning in 2010) five years.  Prior to this bill, taxpayers were allowed to carry back general business credits one year.  Eligible small businesses are corporations, partnerships, and sole proprietorships with average annual gross receipts for the prior three taxable years that do not exceed $50,000,000.

General Business Credits May Offset AMT
The SBJA allows eligible small businesses to use all types of general business credits determined in taxable years beginning in 2010 to offset the Alternative Minimum Tax (AMT).  Prior to this bill, taxpayers have been restricted in utilization of credits below the AMT threshold.

100 Percent Exclusion of Small Business Capital Gains
This bill temporarily expands the amount of the exclusion to 100 percent of the gain from the sale of qualifying small business stock that is acquired after the date President Obama signs the bill into law and before January 1, 2011.  The stock must be held greater than five years for the increased exclusion to apply.  Further, the bill would eliminate the AMT preference item attributable to the gain on the sale of the qualifying small business stock.

S Corporation Relief on Built-in-Gains
H.R. 5297 will reduce the recognition period for S Corporation built-in-gains to five years for tax years beginning in 2011 if the fifth taxable year in the holding period precedes the taxable year beginning in 2011.

Boosted Deduction for Start-Up Expenditures
The SBJA increases the deduction for start-up expenses from $5,000 to $10,000.  Further, the phase-out threshold for start-up expenditures is increased from $50,000 to $60,000.

 

If you would like more information on how the SBJA affects your business, please contact your BMF advisor or call or email:

Michael Hydell, tax manager
P: 330.255.2456
Email