Small Businesses Benefit from Tax Breaks in New Legislation
Small Businesses Benefit from Tax Breaks in New Legislation
George Lanza, CBI, M&AMI, CSBA
Plethora Businesses, La Brea CA
Incoming M&A Source Chair / IBBA
International Business Brokers Association
The new benefits offered by congress allow small businesses to reduce their tax bill which makes the sale more appealing and lucrative for the sellers. This may be a good incentive to promote to clients that may be on the fence about selling their businesses now versus in the future.
Enhanced Breaks On Sales Of Small Business Stock. Under the new law, investors will be permitted to exclude 75% of the gain from the sale of certain small business stock that has been held for more than five years, up from 50% previously. To qualify, the stock must be purchased after the date of enactment and before January 1, 2011. For the purposes of this provision, a small business is defined as a company with assets of less than $50 million that conducts an active trader or business.
S Corporation Built-In Gains Tax Relief. For tax years beginning in 2009 and 2010, ARRA shortens, from ten to seven years, the amount of time that an S corporation that has converted from a C corporation must hold on to its assets to avoid taxes on any built-in gains at the time of the conversion.
Extension Of Green Energy Credits. The legislation extends through 2013 existing renewable energy production tax credits for solar, biomass, geothermal, and certain other alternative energy forms. The credit for producing electricity from wind is extended through 2012. The law also creates a new tax credit of 30% for certain renewable energy investments, up to $2,000 for solar or geothermal installation, $4,000 for wind, and $500 for each one-half kilowatt of fuel cell capacity. The investment tax credit, currently available for 2009 and 2010 only, must be claimed in lieu of the production credit.
With the passage of the American Recovery and Reinvestment Act of 2009, Congress has provided more ways for small businesses to reduce their tax bill. Since many of these provisions are temporary, early planning is key.
George Lanza, CBI, M&AMI, CSBA
Plethora Businesses, La Brea CA
Incoming M&A Source Chair / IBBA
International Business Brokers Association
The new benefits offered by congress allow small businesses to reduce their tax bill which makes the sale more appealing and lucrative for the sellers. This may be a good incentive to promote to clients that may be on the fence about selling their businesses now versus in the future.
Enhanced Breaks On Sales Of Small Business Stock. Under the new law, investors will be permitted to exclude 75% of the gain from the sale of certain small business stock that has been held for more than five years, up from 50% previously. To qualify, the stock must be purchased after the date of enactment and before January 1, 2011. For the purposes of this provision, a small business is defined as a company with assets of less than $50 million that conducts an active trader or business.
S Corporation Built-In Gains Tax Relief. For tax years beginning in 2009 and 2010, ARRA shortens, from ten to seven years, the amount of time that an S corporation that has converted from a C corporation must hold on to its assets to avoid taxes on any built-in gains at the time of the conversion.
Extension Of Green Energy Credits. The legislation extends through 2013 existing renewable energy production tax credits for solar, biomass, geothermal, and certain other alternative energy forms. The credit for producing electricity from wind is extended through 2012. The law also creates a new tax credit of 30% for certain renewable energy investments, up to $2,000 for solar or geothermal installation, $4,000 for wind, and $500 for each one-half kilowatt of fuel cell capacity. The investment tax credit, currently available for 2009 and 2010 only, must be claimed in lieu of the production credit.
With the passage of the American Recovery and Reinvestment Act of 2009, Congress has provided more ways for small businesses to reduce their tax bill. Since many of these provisions are temporary, early planning is key.
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