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What Small Businesses Need to Know About the 111th Congress - 16 Tax Cuts Signed

Small businesses are the engine of our economy, creating nearly two-thirds of the new jobs over the last 15 years.  The Bush Recession hit American small businesses especially hard - with most of the job losses at the end last year at the smallest firms.  A new analysis finds smaller firms lost a crushing twenty-percent market share during the last decade (1997-2007), while large public firm gross revenues grew 16%. [U.S. Women's Chamber of Commerce analysis of U.S. Census data, 9/27/10] 

That is why the Democratic-led Congress has put small business at the forefront as we have worked to move our economy in new direction.  While Republicans have blocked and delayed action and fought to protect corporations shipping jobs overseas, the 111th Congress has given America's 27 million small businesses 16 tax cuts in the last two years and improved access to credit.

  • Enacted the landmark Small Business Jobs Act that Republicans opposed and delayed all summer
    • creating 500,000 jobs
    • providing 8 tax cuts for small businesses, totaling $12 billion, to spur investment, growth, access to capital, new starts and hiring and
    • unleashing up to $300 billion in private sector lending for small businesses.
  • Provided another 8 tax cuts for small businesses, totaling $75 billion -- including a payroll tax holiday to spur hiring and tax cuts to help up to 4 million small businesses afford health insurance coverage for their employees -- 7 of which House Republicans opposed even as they voted to protect tax breaks for corporations that ship jobs overseas.
  • Expanded access to and lowered costs for SBA loans -- supporting nearly $30 billion in lending to over 70,000 small businesses.  Republicans voted NO. 
  • Republicans voted against repealing small business reporting requirements so they could protect tax breaks for corporations that ship jobs overseas.
  • Republicans are holding tax cuts for at least 97% of small businesses hostage to protect the Bush tax cuts for millionaires and billionaires and so-called “small businesses” like Price Waterhouse, George Soros, the Tribune Company, and even President Obama.

In September, Congress passed and the President signed into law the Small Business Jobs Act - “a landmark piece of legislation that will empower small businesses across the country,” according to the National Small Business Association.  

It is backed by a wide range of business groups, from the Small Business Majority and U.S. Chamber of Commerce to the National Retail Federation, National Restaurant Association, Business & Professional Women's Foundation, International Franchise Association, and the Motor & Equipment Manufacturers.

The bill immediately extends successful SBA Recovery Act provisions, meaning that it is restarting the SBA's Recovery lending, beginning with the more than1,300 small businesses that have been waiting to get the credit they need - with thousands more benefitting in the coming weeks.

And the bill includes eight new small business tax cuts - all effective now and applying to small businesses' taxes for this year - providing an immediate incentive for businesses to make new investments and expand.

As the President of the National Small Business Association said, “It doesn't matter what aspect of small business you are in, this bill has something for you.” For example:

  • if you are a small business and you buy new equipment, you can immediately write off the first $500,000 of your investments;
  • if you are one of over one million eligible small businesses, key long-term investments in your company will be subject to zero capital gains taxes;
  • if you are an entrepreneur and take a chance on a new idea, you can deduct the first $10,000 of your start-up costs;
  • and if you are self employed you can deduct 100 percent of the cost of health insurance for you and your family from your self-employment taxes.


  • Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President - elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.
  • Extension and Expansion of Small Businesses' Ability to Immediately Expense Capital Investments: The bill increases to $500,000 for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year.  The bill also expands purchases qualifying for expensing to include certain types of real property, such as leasehold, retail and restaurant improvements. This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
  • Extension of 50% Bonus Depreciation: The bill extends - as the President proposed in his budget - a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.
  • A New Deduction of Health Insurance Costs for Self-Employed: The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
  • Tax Relief and Simplification for Cell Phone Deductions: The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation - making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.
  • An Increase in the Deduction for Entrepreneurs' Start-Up Expenses: The bill temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.
  • A Five-Year Carryback Of General Business Credits: The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes - providing them with a break on their taxes for this year - while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
  • Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business: The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount - which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances - to a percentage of the tax benefits from the transaction.

99% of Republicans voted against this bill after a summer of delaying it, as well as against efforts to improve the new Health Reform by voting against eliminating the small business “1099” reporting requirements.  (H.R. 5982)


Prior to the landmark Small Business Jobs Act, this Congress passed and President Obama signed into law eight other small business tax cuts - providing $75 billion that would help small business hire new workers, afford health insurance to their employees, and make investments in new plants and equipment.  Congressional Republicans voted against 7 of the 8 (which means they voted against 15 of the 16 total tax cuts for small business in this Congress).

Below are the eight other tax cuts for small businesses that have been enacted so far by the 111th Congress and how House Republicans have voted on each one.

  • Provide a payroll tax holiday for businesses that hire unemployed workers and an income tax credit of $1,000 for businesses that retain these employees.  (According to the Treasury Department, between February and June 2010, businesses had hired 5.6 million workers who had been unemployed for 8 weeks or longer, making those businesses eligible for HIRE Act tax exemptions and credits.)  (HIRE Act, PL 111-147)   97% of House Republicans voted NO.
  • Effective January 1, 2010, provide $40 billion in tax credits for small businesses to help them offer employee health insurance coverage - if they choose to do so.  These tax credits will cover a portion of the premium costs for their employees' coverage.  More than 4 million small businesses are eligible for these credits.  (Affordable Care Act, PL 111-148)  All House Republicans voted NO.
  • Allow businesses to use net operating losses for 2008 and 2009 to offset profits from five previous years, up from two years.  (Worker, Homeownership, and Business Assistance Act, PL 111-92)
  • Spur small business investment by providing enhanced small business expensing, doubling the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2009.  (Recovery Act, PL 111-5)  All House Republicans voted NO.   Extends the enhanced small business expensing provisions for investments and purchases made in 2010.  (HIRE Act, PL 111-147) 97% of House Republicans voted NO.
  • Help businesses quickly recover costs of new capital investments by providing 50% bonus depreciation for businesses that made investments in new plants and equipment in 2009.  (Recovery Act, PL 111-5)  All House Republicans voted NO.
  • Spur investments in small businesses by providing an exclusion of 75 percent (up from 50 percent) of capital gains from taxes for investors in small businesses who buy stock (in 2009 and 2010) and hold it for more than five years. (Recovery Act, PL 111-5)  All House Republicans voted NO.
  • Reduce the required estimated tax payments for certain small businesses in 2009.  (Recovery Act, PL 111-5)  All House Republicans voted NO.
  • Provide tax relief for taxable corporations converting into S corporations in 2009 and 2010 by reducing the built-in gains holding period from 10 years to 7 years (with gains held for the holding period exempt from tax).  (Recovery Act, PL 111-5)  All House Republicans voted NO.

Meanwhile, Congressional Republicans are holding hostage legislation to provide tax cuts for 98% of American families and at least 97% of small businesses until Congress takes up a deficit-busting tax cut for millionaires and billionaires.  They claim that the President's middle class tax cut proposal would hurt small businesses.  The nonpartisan Pulitzer Prize-winning PolitiFact labeled that claim a “pants on fire” lie.

  • At least 97 percent of small businesses would not pay a penny more due to letting these upper-income tax rates expire for the wealthiest 2 percent of Americans.

And even this analysis overstates the impact on small businesses.  Included in that small percentage of “small businesses” affected (2%-3%) that Congressional Republicans are trying to protect is anyone who receives any type of business or partnership income - and many of them are not what you would consider “small business owners.”  They include  hedge fund managers, Price Waterhouse Coopers, athletes, authors, investment bankers, lobbyists, private equity fund managers, owners of large privately-held multinational companies, the Tribune Company, billionaires like George Soros, partners in major law firms and even President Obama himself.  

The House has also passed additional legislation to help small businesses:

  • JOB CREATION THROUGH ENTREPRENEURSHIP ACT, to give established small businesses and entrepreneurial start-ups the needed tools and resources to thrive, create jobs and drive economic growth.  (Passed by House)
  • SMALL BUSINESS FINANCING & INVESTMENT ACT, to reform federal small business lending to help save or create 1.3 million jobs annually--making it easier and more affordable to get loans and access capital, and providing tools for veterans, women, and rural families. (Passed by House)