Congress Considers Small Business Tax Breaks

While many congressional observers predict that no significant tax legislation will be passed before the November election, several important measures have been introduced that would provide tax relief to small businesses. Three significant pieces of tax legislation that are currently under consideration in Congress are outlined below:

• Startup Act 2.0 This legislation would allow small businesses that are less than five years old and with annual receipts of less than $5 million to offset their payroll tax liability through the use of a refundable research and development tax credit. It would also increase the financial stability of these young companies by providing a permanent exemption from capital gains taxes on the sale of stock that has been held for at least five years.

• Small Business Taxpayer Bill of Rights Act The overall purpose of this legislation is to facilitate the interaction of small business taxpayers with the Internal Revenue Service. The provisions of this law strengthen the protection of small businesses with the IRS, ease their compliance requirements, increase their access to the United States Tax Court, and provide for compensation when abuse occurs.

• Extension and Increase of Bonus Depreciation Legislation is under consideration that would increase and extend the bonus depreciation provision of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This act allowed small businesses to depreciate 100% of investments placed in service before December 31, 2011 to a maximum amount of $500,000. The new legislation would restore these higher levels form the current amounts of 50% and $139,000.

The National Federation of Independent Businesses is urging Congress to pass the measures outlined above. They maintain that tax reform for small businesses as well as large corporations is a necessary prerequisite to boosting the sagging economy. Since there seems to be bipartisan support for some these measures, it would not be surprising to see some business tax relief legislation voted into law before the end of the calendar year.

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