The Senate has passed the Small Business Jobs Act, a small business bill aimed at increasing lending. The measure would invest $30 billion in small community banks to spur business lending. The New York Times has a good detailed look at what’s inside the bill. Here’s the quick and dirty of it, from the bill itself and this Reuters Factbox:
Forcing banks to lend to small businesses
The Treasury would have one year to send money to those banks. The banks would pay a 5% dividend on the government money. If banks lend enough money to make up the 2009 base level of lending, their dividends would decrease, with 1% being the lowest payment. If banks take the money, but do not increase small business lending in two years, they’ll have to pay a 7% dividend.
The government will provide an additional $1.5 billion to state small business credit program. All Small Business Administration (SBA) loan limits will go up, with the highest limit (from a 504 loan) now at $5.5 million. Loan fees will also be eliminated.
Starting this year, if you own a business, you can deduct the cost of health insurance for yourself and your family from your self-employment tax calculations.
Cell phones can now be deducted and depreciated “like any other business property.”
Tax deductibles for startup costs will go up to $10,000 from $5,000. You can write off depreciable assets by 50% in the first year. You will be able to expense up to $250,000 in capital spending, including leased property that you improve (“qualified leasehold property”), restaurant, and retail property.
No Long-Term Capital Gains Tax for Certain SMB Stock
If you hold the stock of a “C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement,” you won’t have to pay capital gains tax if you sell it after more than five years.
More Carry Back for Tax Credits
You can also now carry back your unused tax credits five years, instead of just one. You can carry them forward 20 years.
Government Help for Exporters and Federal Contractors
The government will start an effort to help make it easier for small businesses to export their goods. The Department of Commerce will hire more people to help small businesses in this capacity.
The government will give more funds to export grants, while beginning to take export potential into account when assessing manufacturing and innovation grants. There’s also a new State Export Promotion Grant Program (STEP) grant designed for small businesses that export.
The act will also make it easier for small businesses to land government contracts by closing loopholes and red tape that traditionally make it easier for multinationals, but harder for businesses, to land a contract.
How will the government pay for the bill?
By making certain tax rules stricter, so that fewer people get certain tax credits, and more people have to pay others. For small business owners, this means the following:
If you get rental income from a real estate property, you now need to file an “information return” to the IRS (I interpret this to be a new form, rather than the usual rental income you report in your taxes). You also have to send a return to anyone who worked on your property who you paid more than $600 during the year. If you just rent out a room in your property, this doesn’t apply.
If you don’t file your returns on time or miss filing a return (I imagine this also applies to estimated taxes), penalties will double or triple, depending on what you did and the amount at stake.
If you’re a federal contractor, and you owe the government taxes, the IRS can now levy your account without a hearing. It used to be that you had your hearing before they could issue a levy. This one could really hurt, if you happen to be in that position.
State and local governments can now issue Roth retirement accounts.
If you have a 401(k), 403(b), or 457(b), you can roll your pre-tax account balances into a Roth account. But the amount you roll over now becomes taxable income (“except to the extent it is the return of after-tax contributions”).
Other income sources for the Feds:
The Cellulosic Biofuel Producer Credit, given to producers of biofuels from “cellulosic feedstocks,” will no longer apply to any highly corrosive fuels, such as the Crude Tall Oil that is a byproduct of paper manufacturing. Translation: Some big manufacturers are getting the shaft on some of their tax credits.
A complicated new rule on guarantees basically means that US taxpayers (the banks and savvy investors who deal with guarantees, which are generally associated with mortgage-backed securities) will have to pay a new withholding tax.