On the Senate floor this week is the Small Business Jobs Act of 2010 (H.R. 5297) that was introduced by Sens. Max Baucus (D-Mont.), and Mary Landrieu (D-La.), with a strong assist by Sens. Charles Grassley (R-Iowa) and Olympia Snowe (R-Maine) which provides tax benefits to small businesses as well as efforts to improve access to credit.

Senate Majority Leader Harry Reid (D-Nev.) has finally reached an agreement with Republicans on amendments to be offered, and intends to finish the bill later this week. On July 19, the measure was called up, but not debated, and no roll call votes were taken. It was interrupted on July 20, when the Senate again turned its attention to an extension of unemployment benefits (H.R. 4213).

NSBA President Todd McCracken joined several Democratic senators at a press conference today calling on the Senate to pass, in its entirety, the Small Business Jobs Bill. Please click here for more details on that press conference.

On the tax front, H.R. 5297 would temporarily increase the first-year write-off for business equipment under Section 179 to $500,000 in capital expenditures in tax years 2010 and 2011—doubling the current limit of $250,000 for 2010. The provision also would raise the threshold for when the higher expensing limits phase out to $2 million, up from the current 2010 level of $800,000. The bill would restore through 2010 the generous 50 percent first-year depreciation for some kinds of property.

NSBA has been working to increase awareness and encourage inclusion of a proposal which would benefit self-employed individuals by allowing them to deduct the cost of health insurance for their families when calculating self-employment taxes. Sen. Landrieu heard our cries and, thanks to our efforts, included a provision for a one-year business deduction of health costs for the self-employed.

Under current law, business owners are not allowed to deduct the cost of their own health insurance from self-employment taxes. This provision would allow 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. The addition of the deduction for self-employed individuals' health insurance costs would only apply to their 2010 taxes and would cost the federal government an estimated $2 billion.

In addition to those items, the bill features a capital gains tax exclusion for investors that buy and hold qualifying small-business stock for more than five years and an increased deduction limit for business start-up expenditures. The measure would increase the limit to $10,000 for tax year 2010 and the value of the deduction would be phased out after expenditures exceed $60,000. The current limits are $5,000 for start-up costs with a $50,000 phaseout threshold.

Another key element to the jobs bill is a proposal to permanently reform the federal estate tax introduced by Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) The proposal would require the Senate Finance Committee to amend H.R. 5297, to permanently set the estate tax rate at 35 percent, with a $5 million exemption amount phased in over 10 years and indexed for inflation. It would also provide a "stepped up basis" for inherited assets.

The Lincoln-Kyl proposal also instructs the Senate Finance Committee to offset the difference in revenue loss between the Obama Administration’s proposed 45 percent estate tax rate with a $3.5 million exemption amount and their proposed reform. The estate tax temporarily expired this year, but if Congress does not act this year, the estate tax is scheduled to jump to 55 percent with only a $1 million exemption at the beginning of 2011.


The legislation, which Reid hopes for quick Senate approval is threatened by this ongoing dispute over the estate tax. This issue could further derail the bill because some Democrats say it would add substantially to the massive federal deficit, while benefiting a small number of multimillionaires. Meanwhile, other Democrats are in favor of some sort of estate tax relief, but they do not want the controversy to threaten the passage of this legislation and would rather see it dealt with separately.  

NSBA has been an outspoken proponent of a permanent estate tax reform and encourages the Senate to approve the Lincoln-Kyl compromise. Please click here to urge your Senators to support this much-needed estate tax fix.