Tax Law

Small Things Come in Small Packages - The 2010 Small Business Jobs Act

I didn't think I would ever say this, but it can be good to be small.  President Obama's Small Business Jobs Act (H.R. 5297) is intended to benefit both small businesses and small business lenders.  The House passed the 2010 Tax Act on Thursday night, September 23, 2010, and President Obama signed the Act into law on Monday, September 27, 2010.


Frankly, the tax benefits under the 2010 Tax Act are not much to brag about from an overall tax perspective.  Among other things, the 2010 Small Business Jobs Act: 

  • Excludes 100 percent of the gains from the sale of qualified small business stock ("QSBS") for regular tax purposes. The AMT would still apply.
  • Allows small businesses carry back general business tax credits for up to five years.
  • Allows small businesses to apply the general business credits against the AMT.
  • Establishes a Small Business Lending Fund of $30 billion providing capital investments to small community banks for small business lending.
  • Establishes a state Small Business Credit Initiative to provide $1.5 billion in grants to existing successful state small business programs.
  • Raises the cap on small business loans to increase lending by $5 billion in the first year after enactment.
  • Allows taxpayers to write off more of the cost of purchases for their business, such as equipment and machinery, in the year the purchase is made.
  • Doubles the amount of start-up expenditures that may be deducted.
  • Targets resources to support the Office of the United States Trade Representative's small business export promotion and trade enforcement activities to help U.S. small business exports grow in foreign markets and ensure small businesses compete on an equitable playing field.
  • Establishes the State Export Promotion Grant Program, which would increase the number of small businesses that export goods to other countries.
  • Allows the SBA to waive or reduce the state-matching share of its funding requirement for up to one year to continue providing technical assistance to underserved communities to start and grow small businesses.
  • Revises Section 6707A of the Tax Code to make the penalty for failing to disclose reportable transactions (tax shelters) proportionate to the underlying tax savings (75 percent of the tax credit claimed).
  • Allows self-employed individuals to deduct health insurance costs for purposes of paying the self-employment tax. This by the way is not very significant. Taxpayer with income, after subtracting insurance premiums, is $106,800 or less save 15.3 percent of their premium. However, taxpayer with income over $106,800 saves only 2.9 percent of your premium.
  • Removes cell phones from listed property so their cost can be deducted or depreciated like other business property, without onerous record-keeping requirements.
  • Closes certain tax loopholes and reduces the tax gap. The offsets include requiring information reporting for rental property expense payments and substantial increases in the penalties for failure to file information returns.

Of course the two big tax issues remain at large: the estate tax and the sun-setting Bush tax cuts. 

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