Small business tax relief heading for the presidents desk

Small business tax relief heading for the presidents desk

Congress approved small business tax relief this week that will provide small-business owners with $12 billion in tax cuts and increase lending opportunities. If the president signs it, as is expected, the measure would essentially reinstate the authority of the Small Business Administration (SBA) to waive upfront borrowing fees for small-business owners, like automobile dealers. The government defines a small business as 500 workers or less for most manufacturers and $7 million and under in annual sales for most non-manufacturing enterprises.

Key provisions of the bill for franchised dealers include: Increases in Small Business Administration (SBA) loan limits from $2 million to $5 million for 7(a) loans; from $1.5 million to $5.5 million for 504 loans; and from $35,000 to $50,000 for microloans. It also increases the government guarantee on 7(a) loan limits, while providing the elimination of borrower fees on 7(a) and 504 loans through December 31, 2010. It increases the 7(a) Express Loans from $300,000 to $1 million to increase working capital to small businesses.

The bill also extends the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75 percent to 90 percent. Since its creation, the program has supported over $26 billion in small business lending, which has helped to create or retain over 650,000 jobs.

Other small business relief pertinent to automobile dealers

Under current law, business owners are not permitted to deduct the cost of health insurance for themselves and their family members for purposes of calculating self-employment tax. The new bill allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in the calculation of their 2010 self-employment tax.

Under current law, small business owners can write off, rather than depreciate, up to $250,000 of capital expenditures, subject to a phase-out once these capital expenditures exceed $800,000. The new bill increases the thresholds to $500,000 and $2,000,000 for the taxable years beginning in 2010 and 2011. At the end of 2011, the amounts would revert to the original SBA loan threshold levels of $25,000 and $200,000, respectively.

Within the temporary higher thresholds, the bill will also allow taxpayers to expense up to $250,000 of the cost of qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. At the end of 2011, the amounts revert to $25,000 and $200,000, respectively.

Businesses will also be allowed to write off 50 percent of the cost of depreciable property placed in service from 2008 through 2010, two years longer than current law.

The bill also removes cell phones and similar devices from the list of items that require taxpayer business purpose substantiation so their cost can be deducted or depreciated like other business property, without onerous recordkeeping requirements.

For a more detailed analysis of provisions of the Senate SBA measure, please contact Jake Kelderman at 202-237-7200.