WASHINGTON — In a recent advisory to its members, the Marine Retailers Association of America detailed several tax changes included in the Small Business Lending Bill signed by the president yesterday.
The tax changes in the bill are temporary and should apply to tax years 2010 and 2011.
According to MRAA, the tax changes that could prove beneficial to small businesses include:
• Temporary general business credit changes — In 2010, businesses with less than $50 million in gross receipts would be able to carry back general business credits to offset tax liabilities for five years instead of the year allowed under the current law, and those credits could be applied against the alternative minimum tax
• Section 179 expensing — The changes allow for more lucrative allowances by doubling the first year write off for business equipment under section 179 from $25,000 to $50,000 and raising the cap on eligible expenditures that triggers a phase-out of the incentive from $800,000 to $2 million. It would expand section 179 to cover improvements to some real property. These improvements expire in 2011.
• Bonus depreciation — The bill would restore through 2010 the 50 percent first year depreciation for some kinds of property.
• Deduction for health insurance costs — The bill would permit self-employed business owners to deduct their family’s health insurance expenses from their self-employment tax income in 2010.
• Built-in gains tax — Normally, when a company converts from a C corporation to an S corporation, it must retain its assets for at least 10-years or pay a 35 percent tax on the built-in gains that occur before the company made the conversion. This bill would reduce the period to five years for an asset sold in the 2011 tax year.
• “Listed” tax shelter disclosure penalty — The bill would limit the penalty for failing to report on a tax return a transaction that the IRS has identified as an abusive tax shelter. It would be set at 75 percent of the tax benefit and be capped at $200,000 for corporations and $100,000 for individual.