The Small Business Jobs Act....You Need to Know the Details!
 
Every year, many bills are introduced by the legislature, without many people knowing the details of the bill. 

One of the most significant pieces of legislation was the Small Business Jobs Act of 2010 (H.R. 5297), passed by the 111th United States Congress and signed into law by President Barack Obama on September 27, 2010. The law authorizes the creation of the Small Business Lending Fund Program administered by the Treasury Department to make capital investments in eligible institutions, in order to increase the availability of credit for small businesses. 

This piece of legislation is extremely important because small businesses employ two-thirds of the country’s private sector workforce and represent 99.7 percent of all employer firms, according to the Small Business Administration.  Small businesses are the cornerstone of our communities and this bill could not have come at a better time.

But what exactly is in the bill?

The bill includes a series of small business proposals that President Obama introduced in early 2010 and that small businesses were able to benefit from the day the bill passed.

While all of the details of the bill and provisions in the bill are important, I have decided to share what I believe are the top twelve (12) benefits to small businesses:

SBA Recovery Loan Provisions Extension: With funds provided in the bill, SBA began funding new Recovery loans within a few days of the President’s signature, starting with the more than 1,400 businesses – with loans totaling more than $730 million – that were waiting in the Recovery Loan Pipeline. In total, the extension of the provisions provided the capacity to support $14 billion in loans to small businesses.  The SBA Recovery loan provisions have already supported $30 billion in lending to over 70,000 small businesses.


More Than Doubled the Maximum Loan Size for The Largest SBA Programs: The bill also increased the maximum loan size for SBA loan programs, allowing more small businesses to access more credit to allow them to expand and create new jobs. The bill permanently raised the maximum size for SBA’s two largest loan programs, increasing the maximum 7(a) and 504 loans from $2 million to $5 million, and the maximum 504 manufacturing related loan from $4 million to $5.5 million.  In addition, it temporarily increased the maximum loan size for SBA Express loans from $350,000 to $1 million, providing greater access to working capital loans that small businesses use to purchase new inventory and go after new business – allowing them to create new jobs.

A New $30 Billion Small Business Lending Fund: The bill will establish a new $30 billion Small Business Lending Fund which – by providing capital to small banks with incentives to increase small business lending – could support several multiples of that amount in new credit.


An Initiative to Strengthen Innovative State Small Business Programs – Supporting Over $15 Billion in Lending: The bill will support at least $15 billion in small business lending through a new State Small Business Credit Initiative, strengthening state small business programs that leverage private-sector lenders to extend additional credit – many of which have been forced to cut back due to budget cuts.

Eight New Small Business Tax Cuts – Providing Immediate Incentives to Invest: The President has already signed into law sixteen overall small business tax cuts, eight of which are new tax cuts that were added as a result of his signing the bill into law that went into effect immediately.

Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily put in place for 2010, a provision called for by the President – eliminating all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.


Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments: The bill increases, for 2011, the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been only $25,000 next year, down from $250,000 last year.  This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.

Extension of 50% Bonus Depreciation: The bill extended – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.
 

A New Deduction of Health Insurance Costs for Self-Employed: The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.

Tax Relief and Simplification for Cell Phone Deductions: The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.

An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses: The bill temporarily increases the amount of start-up expenditures entrepreneurs can deductfrom their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.

A Five-Year Carryback Of General Business Credits: The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year – while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.

Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business: The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances – to a percentage of the tax benefits from the transaction.

So, the bill is something that all small businesses should be aware of. 

Please contact us should you need more clarification or to learn how your business may benefit.
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