Small Business Jobs and tax bill enacted.

• Author: Nevius, Alistair M.

On September 27, President Barack Obama signed into law the Small Business Jobs Act of 2010, P.L. 111-240. The act expands loan programs through the Small Business Administration, strengthens small business preference programs for federal government projects, provides incentives for exporters, offers a variety of small business tax breaks, and includes some revenue raisers.

Small Business Tax Relief

The act includes several tax relief measures aimed at businesses.

Sec. 179 expensing and bonus depreciation: The act increases the maximum amount a taxpayer may expense under Sec. 179 to $500,000 and increases the phaseout threshold amount to $2 million for tax years beginning in 2010 and 2011. It also expands the definition of eligible property to include qualified leasehold improvements, restaurant property, and retail improvement property. The first-year 50% bonus depreciation available under Sec. 168(k) is extended for one year to apply to property acquired and placed in service in 2010 (or 2011 for certain long-lived and transportation property). The 2010 maximum first-year depreciation amount for automobiles that are qualified property is increased to $11,060 (from $3,060). The act also allows taxpayers using the percentage-of-completion method to take into account the cost of qualified property as if bonus depreciation had not been enacted.

Qualified small business stock: The act amends Sec. 1202 to increase the exclusion from gross income of gain from the sale or exchange of qualified small business stock from 50% to 100%, and the minimum tax preference does not apply. This provision applies to eligible stock acquired after September 27, 2010, and before January 1, 2011.

Business credits: The carryback period for eligible small business credits under Sec. 38 is extended from one to five years. The act also allows taxpayers to use eligible small business credits to offset both regular and alternative minimum tax liability. Both provisions are effective for credits determined in the taxpayer's first tax year beginning after 2009.

Built-in gains tax: For tax years beginning in 2011, the act provides that for purposes of computing the Sec. 1374 built-in gains tax, the recognition period is the five-year period beginning with the first day of the first tax year for which the corporation was an S corporation.

Self-employed individuals' health insurance: The act allows self-employed individuals who deduct the cost of health insurance for...