The Marine Retailers Association of America issued a membership advisory today on the tax provisions of the small-business lending bill that President Barack Obama signed into law on Monday.
In addition to revisions to the Small Business Administration's loan programs that were identified in an earlier membership advisory, the new law provides several tax relief changes that benefit small businesses.
The tax changes in the law are temporary and apply to tax years 2010 and 2011. Among the points noted by MRAA:
- Temporary general business credit changes - In 2010, businesses with less than $50 million in gross receipts will be able to carry back general business credits to offset tax liabilities for five years; those credits could be applied against the alternative minimum tax.
- Section 179 expensing - The changes allow for more lucrative allowances by doubling the first year write-off for business equipment under Section 179 from $25,000 to $50,000 and raising the cap on eligible expenditures that triggers a phase-out of the incentive from $800,000 to $2 million. The law will expand Section 179 to cover improvements to some real property. These improvements expire in 2011.
- Bonus depreciation - The law will restore through 2010 the 50 percent first-year depreciation for some kinds of property.
- Deduction for health insurance costs - The law will permit self-employed business owners to deduct their family's health insurance expenses from self-employment tax income in 2010.
- Built-in gains tax - Normally, when a company converts from a C corporation to an S corporation, it must retain its assets for at least 10 years or pay a 35 percent tax on the built-in gains that occur before the company made the conversion. The law will reduce the period to five years for an asset sold in the 2011 tax year.
- "Listed" tax shelter disclosure penalty - The law will limit the penalty for failing to report on a tax return a transaction that the IRS has identified as an abusive tax shelter. It will be set at 75 percent of the tax benefit and be capped at $200,000 for corporations and $100,000 for individuals.