Small Business 'Jobs' Act
Sep 29, 2010
Now that the Small Business Jobs and Credit Act of 2010 is finally law, it's time to take a look under the hood and see what's in there.
Some have noted that calling it a jobs bill is kind of a stretch. There's nothing that explicitly creates a job in it. The hope is that by provided access to more funding for small business owners, it will allow businesses to do more hiring. We'll see how that pans out.
Job Act provisions... some of which offer at least a glimmer of hope.
Bank Loans: Gives $30 billion in funding that goes to community banks - hopefully to lend to small businesses, but no guarantee there.
Higher SBA loan limits: The maximum size of an SBA-backed 7(a) loan rises from $2 million to $5 million, and 504 loans rise from a maximum of $1.5 million to $5.5 million. Loan fees for these are again dropped for the 2010 tax year.
These changes were sought by many entrepreneurs' organizations. Clearly, the prime beneficiaries here are bigger "small businesses", but those are important to the economy and can potentially be big job creators. We'll see. Let's hope this isn't another ARC loan situation, where there's funding, but rules and paperwork burdens keep much of the money from reaching businesses.
Funding for state small-business investment programs: State venture funds have been drained in the recession. The bill allocates $2 billion in new funds for established and new state small-business loan programs. This one's a savvy move, as the state funds are public-private partnerships that use their own money to leverage bank guarantees and additional funds. So this $2 billion is expected to help catalyze $20 billion in lending.
Tax breaks: There's a 100 percent exclusion from capital gains tax for angel and venture-capital investors on small business investments. This is intended to get more investors putting money into companies again. The Administration says over 1 million small businesses may benefit by receiving investments that won't bring the investors any capital-gains tax as long as they stay invested in a company for five years. Once again, vc investors might want a quicker payout and thus may be less likely to use this exclusion.
Credits your business has and can be applied against any of the previous five years has been renewed, as does Section 179 (depreciation) expensing of up to $500,000 in current year business equipment. The "bonus depreciation" of another 50 percent of the equipment cost has also been renewed.
For smaller businesses, a write-off of up to $10,000 of startup expenses for new businesses has been created and a new deduction for health-insurance costs for the self-employed.
As mentioned in a previous newsletter, the new requirement that small businesses fill out 1099 tax forms for all their substantial contractors is still set to become reality. This paperwork-making nightmare is set to be sprung on us all.
What do you think of the jobs bill? Is there something in it that might help you hire more workers?