US Senate Approves Small Business Tax Package

by Mike Godfrey, Tax-News.com, Washington

20 September 2010

United States President Obama has welcomed the Senate's approval by a vote of 61 to 38 of legislation that is designed to help small business access capital and provide additional tax breaks to spur investment.

Two Republican Senators crossed the aisle to break the procedural deadlock which had delayed the bill coming to a vote for many weeks. The House of Representatives passed its version of the legislation on June 15.

Commenting after Thursday's (September 16) crucial vote, the President said: “Today’s vote brings us one step closer to ending the months-long partisan blockade of a small business jobs bill that was written by both Democrats and Republicans. This is a bill that would cut taxes and help provide loans to millions of small business owners who create most of the new jobs in this country. It is fully paid for, it won’t add to the deficit, and small businesses across the country have been waiting for Washington to act on this bill for far too long."

The Small Business Jobs Act would increase from 50% to 100% the exclusion from gross income of the gain from the sale or exchange of qualified small business stock acquired after March 15, 2010 and before January 1, 2012, while also increasing the tax deduction for trade or business start-up expenditures from USD5,000 to USD20,000 in 2010 and 2011, subject to a USD60,000 phase-out threshold.

The bill would also extend the one year carryback for general business credits to five years, and allow all types of general business credits to be used against alternative minimum tax for certain small businesses.

Additionally, the bill extends and expands section 179 expensing limits, allowing taxpayers to write off up to USD500,000 in investment expenses beginning in tax years 2010 and 2011. Currently USD250,000 can be expensed for the taxable year beginning in 2010, but this limit is set to revert back to its normal level of USD25,000 unless extended.

Furthermore, the bill would extend the bonus depreciation measure by allowing taxpayers to immediately write-off 50% of the cost of depreciable property placed in service in 2010 as well as in 2008 and 2009.

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