The Committee on Small Business and Entrepreneurship recognizes the importance of a fair and simple federal tax code for small businesses to help keep them competitive. Targeted tax relief, passed as part of the American Recovery and Reinvestment Act, aids entrepreneurs and allows small businesses to carry back their 2008 losses to offset their profits from the previous five years, providing them with quick access to needed funds. The Act also allows small businesses to immediately write off up to $250,000 of qualified investment in 2009, providing an immediate tax incentive to invest and create jobs.
Normally, small businesses have to pay 110 percent of their previous year's taxes in estimated taxes. But with incomes down for many small firms, this requirement is too burdensome - causing a cash crunch. The Recovery Act allows entrepreneurs to reduce their estimated payments to 90 percent of the previous year's taxes, helping to boost their liquidity and better align their estimated taxes with their actual taxes in tough economic times. The Act also extends bonus depreciation through 2009, allowing businesses to take a larger tax deduction within the first year of a property's purchase.
Finally, the Recovery Act includes a measure that will exclude from taxation 75 percent of the capital gains for investors in small businesses who hold their investments for five years. In his budget, the President proposes to go further, eliminating all capital gains taxes on small businesses and making this measure permanent.
Although tax legislation is considered by the Committee on Finance, our Committee remains engaged in examining the impact of tax legislation on America's small businesses and self-employed entrepreneurs.
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