Tax Alert: President Signs the Small Business Jobs Act of 2010
9/28/2010
On September 27, 2010, President Obama signed the Small Business Jobs Act of 2010. The legislation creates a $30 billion lending
fund that allows the Treasury Department to make capital investments in eligible financial institutions to increase credit available for
small businesses. The legislation also contains $12 billion in tax incentives. The major tax provisions of this bill are as follows.
- Bonus Depreciation — Fifty percent bonus depreciation, which had expired at the end of 2009, has been extended through December 31, 2010. For assets with a depreciable life of seven years or less, the bill decouples bonus depreciation from allocation of contract costs under the percentage of completion accounting method.
- Sec. 179 Expensing — The maximum Sec. 179 expense deduction for fixed asset acquisitions has been increased from $250,000 to $500,000 for tax years beginning in 2010 and 2011. The enhanced deduction is phased out once qualifying fixed asset additions reach $2 million and is fully phased out where qualifying fixed asset additions exceed $2.5 million. In addition, the definition of qualified Sec. 179 property has been expanded to include up to $250,000 of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.
- Business Credits — The carryback period for eligible small business (average annual receipts for three preceding tax years not in excess of $50 million) credits has been increased from one to five years effective for credits determined in tax years beginning after 2009. This applies for both regular and alternative minimum tax purposes.
- Self-Employed Individuals’ Health Insurance — For 2010 only, self-employed individuals who deduct health insurance are allowed to take the deduction in computing net earnings from self-employment.
- S Corporation Built-In-Gains Tax — For tax years beginning in 2011 the recognition period is shortened from ten years to five years.
- Information Returns — Recipients of rental income from real estate will become subject to Form 1099-MISC filing requirements when making payments of $600 or more to service providers for payments made after December 31, 2010. Penalties for failing to file correct information returns are increased for all filers.
- Rollovers to Roth Accounts — 401(k), 403(b), and 457(b) plans can now allow participants to roll over pre-tax account balances into a designated Roth account within their plans. Similar to Roth IRA conversions the income resulting from such a rollover taking place in 2010 is included ratably in income for 2011 and 2012 unless the taxpayer elects to report the income for 2010.
For more information about this legislation and how it may impact your business and its operations, or for information about any
other tax-related issues, please contact Neil Becourtney, CPA or your J.H. Cohn engagement partner at 877-704-3500.