Yesterday, following Senate passage last week, the House passed, by a 237-to-187 vote, H.R. 5297, the “Small Business Jobs Act of 2010,” which, once signed into law by President Obama, will provide approximately $30 billion to small banks for lending to small businesses, provide approximately $12 billion in tax breaks to small businesses, and expand the loan limitations of the Small Business Administration (SBA). The bill, endorsed by President Obama and passed along partisan lines, is expected to be signed into law early next week.
Originally proposed by President Obama in February and first passed by the House in June, the bill would create a $30 billion credit facility administered by Treasury to boost business lending by banks that meet certain performance-based standards and have less than $10 billion in assets. In addition, $1.5 billion would be provided in grants to state programs that lend to small businesses but have been experiencing financial difficulties. The bill would extend the waiver of SBA loan fees, increase government guarantees on certain SBA loans through the end of this year, and increase the caps on small business loans. Notable tax breaks provided by the bill are summarized below:
- Capital Gains. Capital gains taxes on investments in qualifying small businesses would be eliminated. To qualify for the exclusion, the business must be organized as a C corporation and have less than $50 million in assets, and the investor must purchase the stock directly from the company (“original issue”) and hold the investment for at least five years.
- Five-Year Carryback Provision. The bill would allow certain losses by qualifying small businesses to be carried back for five years.
- Section 179 Expenses. The bill would increase the maximum Section 179 deduction, which generally allows for a deduction in the year of purchase, for small businesses from $250,000 to $500,000 in 2010 and 2011, and expand the types of qualifying expenditures.
- Bonus Depreciation. Small businesses would be permitted to deduct, in 2010, 50% of certain capital expenditures made in 2008 and 2009.
- Start-up Expenses. The bill would increase the maximum amount of deductible start-up expenses from $5,000 to $10,000.
- Healthcare Costs for Self-Employed Individuals. Self-employed individuals would be permitted to deduct healthcare costs for payroll tax purposes.
According to President Obama, the “common-sense plan” will “help provide loans and cut taxes for millions of small-business owners without adding a dime to our nation’s deficit.” Costs of the bill are intended to be offset by closing tax loopholes and increasing tax-reporting requirements and penalties. According to House Speaker Nancy Pelosi (D-CA), the legislation will “unleash hundreds of billions of dollars in loans for America’s small businesses, create half a million new jobs, and provide billions of dollars in tax relief.” Treasury Secretary Timothy Geithner applauded the passage of the bill, claiming that it will “unlock credit for small businesses” and “create new jobs in local communities.”