The provisions of the new Tax Relief Act directly applicable to businesses include:
- Capital expenditures from September 9th, 2010 to December 31st, 2011 are 100% deductible; expenditures in 2012 are eligible for 50% bonus depreciation;
- Research and development tax credit is retained;
- Subsidies for alternative energy projects, motor-sports facilities, restaurant buildings, railroad maintenance and corporate donations of food and other items are extended.
The provisions of the Act applicable to business owners include:
- Current tax rates for long term capital gains and dividends are retained with top rate of 15%;
- The Alternative Minimum Tax (AMT) is patched for two-years retroactive to 1/01/2010;
- Social Security (FICA) contribution of employees is reduced by 2% for 2011.
The Act failed to address several issues of interest to certain businesses:
- Private equity and hedge fund managers escaped efforts to tax their “carried interest” at ordinary income rates rather than as capital gains;
- Small business lost push for relief from the requirement to issue IRS forms 1099 to vendors paid $600 or more in a year.
In conclusion, while many business executives worry about the “patchwork” of short expiration dates in the Act and the lack of predictability it affords, John Arensmeyer, president of Small Business Majority, says the bill “will help struggling entrepreneurs by extending tax benefits, encouraging small businesses to invest via the Research and Development Tax Credit, and putting more money in consumers’ pockets via the payroll tax reduction and the extension of unemployment benefits.”
We welcome your questions and concerns about how this time of legislative change will affect you and your business.