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Small business tax relief bill passes in U.S. House
By Shelia Watson
Contributing Writer
The U.S. House of Representatives has voted to pass H.R. 976, the Small Business Tax Relief Act of 2007. The bill now moves on to a vote in the Senate.
The bipartisan legislation, introduced by Ways and Means Committee Chairman Charles Rangel and ranking member Jim McCrery, “will amend the Internal Revenue Code of 1986 to provide tax relief for small businesses and other purposes,” according to the bill summary.
H.R. 976 was designed to extend critical tax provisions for small business owners while paving the way for the House and Senate to come to agreement on legislation to raise the federal minimum wage from $5.15 per hour to $7.25 per hour.
The measure gained significant bipartisan support, passing by a margin of 360 to 45.
The House and Senate versions differ slightly, with the House version considered slimmer both in terms of its generosity of relief for small business taxpayers and in that its increases in revenue are not as harsh as the Senate version.
H.R. 976 provides for a one-year extension on Section 179 expensing, which allows an immediate deduction on certain tangible personal property, and increases it from $112,000 to $125,000, a measure that allows for inflation. The bill also increases the phase-out threshold from $450,000 to $500,000.
The Work Opportunity Tax Credit is extended for one year with enhancements for disabled veterans. The age limitation is increased from 25 to 40 for residents living in areas known as “empowerment zones,” “enterprise communities” and “renewal communities.”
There is a waiver of the individual and corporate Alternative Minimum Tax limitation, which in the past prevented many small businesses from claiming the WOTC and the credit for Social Security taxes paid with respect to tax tips.
The legislation also proposes a Family Business Tax Simplification, which would allow an unincorporated business that is jointly owned by a married couple in a common law state to file as a sole proprietor without penalty.
“This tax relief will help small businesses continue to grow and hire new workers to keep our economy strong,” said Rangel.
McCrery noted the importance of coupling a minimum wage increase with tax cuts to help small businesses. The legislation will provide nearly $2 billion in tax relief.
“Unlike in the Senate bill, much of that relief will be immediate, helping business when costs are rising, not just down the line,” McCrery said.
To pay for the measures, the legislation proposes to deny lower capital gain and dividend rates for certain dependents of wealthy taxpayers and allow the IRS an extension of time to provide notice to delinquent taxpayers, which means more time for the IRS to collect before a suspension of interest and payments.
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