Widely regarded as the principal generator of net new employment in the United States, small businesses are a source of economic vitality, yet with the economic downturn, small businesses are failing, prompting the administration to try to do something to bring them back. The latest legislation involves a new bill small business bill under consideration in the U.S. Senate called the Small Business Job bill, there may be some temporary as well as permanent changes to loan program enhancements, tax relief-provisions and other government programs. Many small businesses are surviving via alternative financing methods such as accounts receivable factoring, so there is much focus to helping small businesses get back on their feet.
A top news item, the new bill would permit self-employed business owners to deduct their family’s health insurance expenses from their self-employment tax income in 2010. Businesses with less than $50 million in gross receipts would be able to carry back general business credits to offset tax liabilities for five years. Currently it is only one year; and first-year write-offs would temporarily increase for business equipment from $250,000 to $500,000 and raise the cap on eligible expenditures that triggers a phase-out of the incentive from $800,000 to $2 million.
The latest version of the Small Business job bill temporarily increases the capital gains exclusion for stock that has been issued by some small businesses to 100 percent. This would be from the time the bill is enacted through the end of the year, with a gain that’s limited to ten (10) times the original investment or $10 million.
If a small business converts from a C to an S corporation, it must retain its assets for at least ten years or else pay a 35 percent tax on the built-in gains that occurred before the company made the conversion. The government’s new bill would reduce the period to five years for an asset sold in the tax year 2011. Although these provisions expire after the year 2011, this bill would expand Section 179 to cover some real property improvements.
A generous 50 percent first-year depreciation is slated for some types of properties as part of the bill, which also brags an increase of the deduction for start-up expenditures from $5,000 up to $10,000 for the year 2010, It would raise the cap on expenditures that triggers a phase-out of the deduction from $50,000 up to $60,000 – all benefits to small businesses.
Finally, if you fail to report on a tax return or a transaction you get a penalty that is set at 75 percent of the tax benefit and capped at $200,000 for corporations and $100,000 for individuals. A more detailed summary of the bill and the legislative text are posted at the Senate Finance Committee Web site.
These laws, if the bill is passed, will still take some time to put in place, as there are many businesses that are still struggling.
In the meantime, accounts receivable factoring is a safe, productive and excellent alternate method of financing for small to medium-sized businesses, to meet payroll expenses, bills and to survive until such time as the new Small Business Jobs bill is put in place, and or until the economy is healed. After all, accounts receivable factoring has been around helping small business survive for more than 4,000 years.
This article was added on Wednesday 11 August, 2010.
