It is official.
On September 27, 2010, President Obama signed the "Small Business Jobs Act" (SBJA) into law as Public Law 111-240. It includes two of the Wood Manufacturer of America's (WMMA) priorities for creating tax incentives for investment in capital goods, including woodworking equipment. Unfortunately, both of them are only extended temporarily.
The "direct expensing" allowance or "Section 179 expensing" for the tax code section that permits it, has been increased and extended - temporarily. The new law 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 will revert to $25,000 and $200,000, respectively.
The new law also extends the additional, first-year 50 percent depreciation bonus for qualifying property purchased and placed in service in 2010.
SBJA removes cell phones and similar devices from the list of items that require taxpayer business purpose substantiation, so now their cost can be deducted or depreciated like other business property, without onerous recordkeeping requirements.
Under existing law, "pass-through" business entity owners (sole proprietors and some partners and S Corporation shareholders) 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 law 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.
The new law also creates a Small Business Lending Fund to provide the U.S. Department of the Treasury with the ability to purchase preferred stock and other debt instruments from eligible financial institutions that have less than $10 billion in total assets. The program is structured to provide incentives to community banks to make loans to smaller businesses.
One item the SBJA did not address is the repeal of the provision enacted earlier this year that requires a business to issue tax information reports, known as Forms 1099, for all vendors of goods or services to which the business paid at least $600 in a year. The WMMA lobbied to add an amendment in the Senate to SBJA to repeal it, but for a variety reasons we were not able to get the 60 votes needed to have it repealed. For the moment, the provision remains "on the books" and we will pursue repeal during the remainder of this Congress and in the next one if necessary.
Unfortunately, the new law increases the penalties for inadvertent filing errors when filing Form 1099. The penalties double. This provides an additional reason to secure repeal of the Form 1099 requirement.
Editor's note: John S. Satagaj is a long-time Washington lawyer, specializing in small business, trade association and tax matters. He serves as legal counsel for the Wood Machinery Manufacturers of America (WMMA) and is also the first president of the Small Business Legislative Council (SBLC), a permanent, independent coalition of nearly 70 trade and professional associations that share a common commitment to the future of small business.
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