There have been several important tax bills introduced during the 110th Congress that are supported by the NFIB. Below are a summary of those most critical to small business.
Small business expensing
H.R. 1797 [Sponsored by Rep. Wally Herger (CA)] would make the small business expensing limit permanent, increase it to $200,000 and index it for inflation.
- The current limit is $250,000. This limit will expire at the end of 2008, and fall to $130,000 and fall to $25,000 in 2011.
- Expensing provides small business owners with an immediate deduction for the cost of certain investments made in their business, such as purchasing new equipment.
- Expensing applies only to small-business owners who invest less than $800,000 in their business this year.
Diesel Parity Tax
S. 2896 [Sen. Olympia Snowe (ME)] would reduce the federal diesel tax from 24.3 cents per gallon to 18.3 cents per gallon (the current federal tax on gasoline).
- Reducing this tax is a good step to help relieve the burden of high diesel prices on small business owners who operate diesel fuel vehicles and reduces the cost of transporting goods.
- Rep. Gabrielle Giffords (AZ) is expected to introduce the House version in the near future.
S Corporation Modernization Act
S. 3063 / H.R. 4840 [Sen. Blanche Lincoln (AK) / Rep. Ron Kind (WI)] would increase access to capital by reducing S corp ownership restrictions and modernizes the rules that apply to firms that have selected S corporation status.
- S Corps are now the most common business form for small businesses. These changes support the growth in S Corps and encourage investment in and expansion of existing S Corps.
Restaurant depreciation
S. 2170/H.R. 3622 [Sen. Kay Bailey Hutchison (TX) / Rep. Kendrick Meek (FL)] would make permanent the 15-year depreciation period for qualified investments in restaurant property.
- The shorter period better reflects the wear-and-tear experienced by a restaurant so that restaurant owners can receive a tax deduction for making improvements to their businesses.
Cash Accounting
S. 296 [Sen. Christopher Bond (MO)] would allow small businesses (except farms) to use the simplified cash method of accounting if they meet the gross receipts test.
- Increases the amount of the gross receipts test to $10 million (currently $5 million) and permits an annual inflation adjustment of that amount.
Tax penalties on transactions
S. 3121 / H.R. 6266 [Sen. Ben Nelson (NE) / Rep. Jerry Moran (KS)] would provide relief from high penalties and reduces the regulatory burden for small business owners who do not willfully fail to report certain transactions to the IRS.
Standard home office deduction
H.R. 6214 [Rep. John McHugh (NY)] would provide a standard home office deduction of $1,500.
- Sen. Olympia Snowe (ME) is expected to introduce the Senate companion in the near future.
Cell phone deduction
H.R. 5450 / S. 2668 [Rep. Sam Johnson (TX) / Sen. John Kerry (MA)] modernizes and simplifies the tax deduction for business-related cell phone use.
