Spurring Investment: Tax Provisions in The 2010 Small Business Jobs Act

Published By Timothy D. Brown

Spurring Investment: Tax Provisions in The 2010 Small Business Jobs Act

On September 27, 2010, President Obama signed the Small Business Jobs and Credit Act of 2010 (the “Act”). While the primary goal of the Act was to create the Small Business Lending Fund, it also amends the Internal Revenue Code (“IRC”) to provide tax incentives for small business job creation. According to the United States Senate Committee on Finance, the Act will provide small businesses with $12 billion in tax cuts. Unfortunately, these tax breaks come at a cost, and the Act also includes some potentially unfavorable revenue raising provisions. Some of the more notable tax changes, including the revenue raising provisions, are outlined below.

  1. Increase of Section 179 Expensing and Expansion to Certain Real Property. The Act extends the liberalized expensing rules for purchases of business machinery and equipment and expands those rules to make certain real property eligible for expensing. In general, the expensing rules allow businesses to take a current deduction for qualifying property, rather than recovering those costs through depreciation. Under preAct law, qualifying property was limited to depreciable tangible personal property purchased for use in the active conduct of a trade or business. The Act expands the definition to included “qualified real property,” which is generally defined as qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. For tax years beginning in 2010 and 2011, qualifying businesses have the option to currently deduct up to $500,000 under IRC § 179. However, the deduction for qualified real
    property is limited to $250,000 of the $500,000 amount. In addition, the $500,000 deduction is decreased, dollar-for-dollar, for purchases in excess of $2,000,000.
  2. Extension of Bonus Depreciation. Before the Act, IRC § 168(k) allowed taxpayers to claim a 50%
    “bonus” depreciation allowance for most qualified property that was placed in service before January 1, The Act extends the first-year “bonus” depreciation for one additional year, allowing taxpayers the deduction if the qualifying property is acquired and placed in service before January 1, 2011.


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