'Small' Business Tax Relief Act of 2009?
On Friday, Senator Chuck Grassley introduced the Small Business Tax Relief Act of 2009. It aims to cut taxes for small businesses. If enacted, the bill would spread tax benefits to small, but also to many large businesses. Here is a breakdown of the bill's main features.
The primary benefits the Small Business Tax Relief Act of 2009 would give businesses is decreased tax liability along with increased deductions. It both expands small business tax benefits offered, and increases the size of businesses eligible for many of them.
One element that would please many small businesses is the increased "Section 179" expensing. Section 179 expenses refer to the portion of the tax code that allows deductions for qualifying equipment purchased and put into service in a given tax year. The Obama administration's stimulus package increased the amount that can be expensed from $125,000 to $250,000. Currently, this deduction phases out for businesses that purchase more than $800,000 worth of such equipment.
Grassley's bill would increase the maximum Section 179 deduction to $500,000, and wouldn't phase out any deduction unless a business spent more than $2,000,000 on qualifying equipment in a given year.
In another move would benefit many small and not-so-small businesses, the bill would keep general business credits out of a business' Alternative Minimum Tax, as long as the business has less than $50 million in annual receipts and is not a publicly traded corporation. It would also extend the carryback provisions for general business credits from 1 to 5 years.
Grassley's bill would also expand the Net Operating Loss provisions of the tax code, to allow larger businesses the ability to spread current year operating losses over a longer range of prior tax years. Recent stimulus legislation already did this for businesses with less that $15 million in annual receipts. Grassley's bill would open it up to businesses with less than $50 million in annual receipts.
Under Grassley's bill, income from businesses with less than $50 million in annual receipts would also be eligible for a higher domestic production tax deduction (20%).
In another move to benefit larger small businesses, Grassley's bill would bump up the line at which C corporations have increased income tax. The current tax code provides increased taxation for C corporations with above $100,000 in taxable income. The Small Business Tax Relief Act of 2009 would prevent businesses with less than $2,000,000 in taxable income from facing graduated tax increases.
While small businesses could benefit from the Small Business Tax Relief Act of 2009, they should also ask whether their larger competitors will perhaps benefit more. In introducing the bill, Senator Grassley repeated what many small business owners have reiterated over the past year - that this reform is vital because small business create most of the jobs in this country. How many of those "small businesses," however, make $50 million in annual receipts?
- The Small Busniess Tax Relief Act of 2009 [pdf]
- Senator Grassley's Press Release
- Economic Stimulus Package (Small Business Administration)
- Business Taxation (FindLaw)
- Small Business Tax FAQ (Nolo)