NEW LAW SUPPORTS LENDING, TAX BREAKS FOR SEMA MEMBER COMPANIES

Small Businesses Seen as Engine for Economic Recovery

WASHINGTON, D.C. (September 27, 2010) – SEMA, the Specialty Equipment Market Association, applauded the signing into law of the “Small Business Jobs and Credit Act” (H.R. 5297), including $12 billion in tax incentives for small businesses and creating a $30 billion resource to activate greater lending to small businesses by community banks.

“For months, our member companies and small businesses across the country have struggled to gain access to capital and credit,” said Chris Kersting, SEMA’s President and CEO.  “In many cases, tougher credit access has nothing to do with the SEMA member’s business and everything to do with the bank’s difficulties in meeting current lending to capital ratio requirements.    Under this new law, funding for loans will be infused into community banks nationwide that are positioned to lend, helping small businesses to become an engine for economic growth and recovery.”

The law includes an extension of the bonus depreciation program, which allows businesses to write-off 50% of the cost of newly purchased depreciable property.   Limited depreciation was permitted in 2008 and 2009.  The law also expands and extends the Section 179 program, allowing companies to write-off up to $500,000 in capital expenditures in tax years 2010 and 2011, double the current limit for 2010.

“While SEMA appreciates the enactment of this legislation, we now urge bank regulators to quickly implement the lending program,” said Kersting.  “It is time to get basic working credit available and help small businesses to become an engine of economic recovery.”

Major Provisions of the “Small Business Jobs and Credit Act”

  • Establishes a $30 billion lending program for community banks with under $10 billion in assets.  The Independent Community Bankers of America estimates that the $30 billion program will generate over $300 billion in small business lending.
  • Increases the limits on how much money a company can borrow under the various Small Business Administration (SBA) loan programs.  It also increases the government guarantee on SBA 7(a) loan limits while eliminating borrower fees for 7(a) and 504 loans through 2010.
  • Increases Section 179 expensing, allowing taxpayers to immediately deduct up to $500,000 in capital investments made in 2010 and 2011.  (The expensing limit was most recently $250,000 but is scheduled to revert back to $25,000 in 2012.)  The expensing limit phases-out if the capital investment is beyond $2 million (previously $800,000).
  • Extends bonus depreciation for 2010, allowing business owners to immediately write-off 50% of the cost of new depreciable property (no phase-out limit).
  • Includes $12 billion in tax cuts, including a 100% exclusion of capital gains taxes on small business investments.
  • Allows small businesses to carry back general business tax credits to offset tax burden from the previous five years.  Small businesses will also be able use these credits against the Alternative Minimum Tax (AMT).
  • Increases the tax deduction for start-up expenses to $10,000, double the current level.
  • Allows cell phone costs to be deducted or depreciated like other business property, without onerous recordkeeping requirements.
  • Allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in the calculation of their 2010 self-employment tax.
  • Increases the penalties for failure to file 1099 information returns.
  • Modifies section 6707A of the tax code to make the penalty for failing to disclose a “reportable transaction” proportionate to the underlying tax savings.  Reportable transactions are investments in tax shelters, including large losses or confidentiality agreements.  The penalty would be set at 75% of the tax benefit received.  The minimum/maximum penalties for corporations would be $10,000/$200,000.

For more information, contact Dan Sadowski at dans@sema.org.


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