Small Business Jobs and Credit Bill: Key Provisions

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The US senate passed the Small Business Jobs and Credit Act, introduced on May 13, 2010, by a vote of 62 to 38.  The vote included the support of two republicans - George Voinovich of Ohio and George LeMieux of Florida.  The bill will go back to the House of Representatives where democrats are hoping it will be approved without delay.  Some of the key provisions of the bill are as follows:

  • The capital gains exemption on qualifying small business shares, acquired after the date of enactment and that are held for at least 5 years, will be temporarily increased to 100%.
  • Writeoff of qualified tangible personal property (purchased for use in the active conduct of a trade or business) in the year of acquisition has been increased from $250,000 to $500,000.  Phaseout amount has been increased from $800,000 to $2,000,000 for the taxable years beginning in 2010 and 2011. This will allow taxpayers to expense up to $250,000 of the cost of qualified leasehold improvement,  restaurant and retail improvement property.
  • The loss carryback period has been extended from 1 to 5 year for unincorporated and incorporated (non-public) businesses with average gross revenues of $50 million.
  • Immediate depreciation of 50% on qualifying expenditures, available in 2008 and 2009, was extended to qualifying capital costs incurred in 2010.
  • Deductibility of start up expenditures has been increased from $5,000 to $10,000.  The phase-out threshold has been increased from $50,000 to $60,000.
  • Self employed individuals will be allowed to deduct their 2010 health insurance costs (currently not deductible) for themselves and their families .
  • Record keeping requirements for cell phones have been eliminated; They are no longer "listed" property and will be treated like any other depreciable property
  • Persons receiving rental income will have to submit information returns to IRS.
  • Penalties for failure to file information returns will increase significantly
  • Retirement savings plans sponsored by state and local governments will be allowed to include Roth IRAs.  Although contributions to a Roth account are made on an after tax basis, principal and earnings received are generally tax free.
  • Rollovers will be permitted from elective deferral plans to Roth IRAs.  All amounts that do not represent after tax contributions will be subject to tax, however the taxes payable may be deferred to 2011 or 2012.
  • Holders of non qualified annuities will be allowed to received reduced annuity payments, while the balance of the contract will be allowed to accumulate income on a tax deferred basis.
  • Elimination of fees on specific classes of loans (SBA 7(a) and 504)have been extended, while guarantees of 7(a) loans have been increased from 75% to 90%.
  • Provision of $1.5 billion in grants to States to support small business lending programs.
  • Assistance to U.S. small and mid-sized businesses that are looking to export their products but do not have the resources or know-how to find new international customers.

The bill is expect to provide  $12 billion in tax relief for small businesses and a $30 billion lending fund, which should be very stimulative to small businesses who have had trouble getting financing since the recent economic crisis.  It is estimated that 700 jobs will be created as a result of the initiatives in the bill.