1. CCH Tax Briefing
Small Business Jobs Act
of 2010 (H.R. 5297)
September 27, 2010 Special Report
HIgHlIgHTs
President signs small Business Jobs
Extended Bonus Depreciation
Act with $12 Billion in Tax Incentives
Increased Code Sec. 179
O
n September 27, 2010, President that is very valuable to larger businesses.
Expensing Obama signed into law a package The new law also includes some retire-
of enhanced business tax incen- ment savings incentives for individuals
100 Percent Exclusion For tives, as part of a larger Small Business Jobs and other provisions impacting taxpayers
Qualified Business Stock Act of 2010, H.R. 5297. Passage was marked beyond small businesses.
by months of negotiations, culminating in
Code Sec. 6707A House approval on September 23, 2010 by a COMMENT. Despite a full plate of tax
Penalty Relief vote of 237 to 187, after clearing the Senate on bills, such as the fate of expiring indi-
September 16, 2010 by a 61 to 38 margin. vidual income tax rate cuts, capital gains/
Enhanced Start-Up Deduction dividends tax rate reductions and the
The new law extends bonus depreciation, ex- federal estate tax, the small business bill
Retirement Savings Incentives tends and doubles Code Sec. 179 expensing, may be the last tax-related bill to pass
provides for 100 percent gain exclusion for Congress before the November elections.
Rental Expense Payment qualified small business stock, relaxes the S Many House and Senate members want
Information Reporting corp built-in gain conversion rules, extends to recess earlier than planned, so they can
the carryback period for eligible small busi- return to their home districts to campaign
Increased Information
ness credits to five years, removes cell phones for re-election.
Return Penalties from listed property, enhances the deduction
for start-up expenses, provides retroactive PLANNING NOTE. Like many recent tax
And More
Code Sec. 6707A penalty relief, and allows bills, the small business bill provides incen-
a self-employment FICA tax deduction for tives but does not make most of them perma-
2010 health insurance costs. nent. Some have a very short lifespan. For
example, enhanced Code Sec. 179 expensing
InsIde Revenue raising provisions to help pay for is available for 2010 and 2011; bonus de-
Bonus Depreciation................................1 these tax breaks include a first-time opportu- preciation is generally available only through
nity for certain active participants in 401(k) the end of 2010; and rollovers within 401(k)
Code Sec. 179 Expensing ...................... 2 and other plans to roll over existing balances and other elective deferral plans to designated
to a designated Roth account under their Roth accounts are entitled to a special two-
Carryback for General
plans. Among the revenue provisions that year tax deferral only if done in 2010.
Business Credit ....................................... 3
will not be as well received by certain tax-
Small Business Stock ............................ 3 payers are increased failure-to-file penalties
on information returns, new information geneRAl BUsIness
Code Sec. 6707A Penalty Relief ......... 3 reporting for rental property expense pay- InCenTIVes
Start-Up Expense Deduction .............. 4 ments, tightened U.S. sourcing on guarantee
fees, streamlined tax levies on federal con- The new law includes a familiar package of
Retirement Savings ............................... 4 tractors, accelerated estimated tax payments tax incentives designed to stimulate busi-
Revenue Raisers ..................................... 5 by certain large corporations, and more. ness investment and spending.
Pending Tax Legislation ........................ 6 IMPACT. The tax title’s “small business”
label does not reflect its true scope; its
Bonus Depreciation
White House Business Tax Proposals .... 7
provisions impact businesses of many The new law extends, through December
Information Reporting.......................... 7 sizes. Bonus depreciation is one provision 31, 2010, 50-percent first-year bonus de-

2. 2
preciation, which had expired at the end of price of qualified Code Sec. 179 property. the dollar cap will apply to the aggregate cost
2009. The extension is retroactive to January Under current law, the maximum deduction of qualified real property. Further, the bill pro-
1, 2010. The new law also extends, through for tax years beginning in 2010 is $250,000. vides for limitations on the carryover of quali-
2011, the additional year of bonus depre- The dollar limit is reduced by the amount fied real property deductions.
ciation allowed for property with a recovery by which the cost of qualifying property
period of 10 years or longer, and for transpor- placed in service during the tax year exceeds COMMENT. A taxpayer may elect to ex-
tation property (tangible personal property $800,000. For 2011, the expensing limit clude real property from the definition
used to transport people or property). had been scheduled to revert to prior lev- of Code Sec. 179 property. That election
els of $25,000 and $200,000, respectively, might prove useful to certain taxpayers if
IMPACT. Bonus depreciation is not lim- both not indexed for inflation. the regular $2 million eligible property
ited by the size of the business, unlike cap is otherwise close to being reached.
practical access to Code Sec. 179 “small The new law increases the maximum de-
business” expensing. The bonus depreci- duction to $500,000 and the investment COMMENT. The new law continues to
ation provision is by far the most expen- limit to $2 million for tax years beginning treat computer software as qualified Code
sive single tax break in the bill, weigh- in 2010 and 2011. Sec. 179 property that is subject to full
ing in at $5.4 billion over 10 years, but Code Sec. 179 expensing otherwise re-
carrying an initial cost of $29.5 billion served for tangible personal property.
in its first two years because of acceler-
ated depreciation that would otherwise
“The tax title’s ‘small COMMENT. President Obama had pro-
be deducted in later years. Bonus depre- business’ label does not posed to end what has become the fre-
ciation under the new law carries a very quent extensions of increased Code Sec.
short window of opportunity --- quali-
reflect its true scope; 179 expensing by permanently raising
fying equipment must be purchased and its provisions impact the expensing amount to $125,000 and
placed into service on or before Decem- the phase-out threshold to $500,000 for
ber 31, 2010.
businesses of many sizes.” tax years beginning after 2010 (both
amounts indexed for inflation). Now that
Long-term contracts. The new law also de- Code Sec. 179 expensing has been raised
couples bonus depreciation from allocation IMPACT. The new law increases in the for 2011 as well as 2010, it is unlikely
of contract costs under the percentage of qualifying property cap from $800,000 that Congress will act on a permanent
completion accounting method rules for to $2 million effectively increases the extension of increased Code Sec. 179 ex-
assets with a depreciable life of seven years availability of Code Sec. 179 expensing pensing before next year.
or less. to many more businesses. Under the
new law, the Code Sec. 179 expensing
IMPACT. This change permits contractors deduction does not phase out completely
S Corp Built-In Gain Period
to benefit from bonus depreciation even until the cost of eligible property exceeds A C corporation that converts to an S cor-
if they do not complete their contracts $2.5 million. Perhaps even more im- poration generally must hold any appreciated
within the same year. portant, however, the nontax provisions assets for 10 years following the conversion
in H.R. 5297 will serve to open up the or, if disposed of earlier, pay tax on the ap-
Code Sec. 280F. The limitation under Code credit markets needed by small businesses preciation at the highest corporate level rate
Sec. 280F on the amount of depreciation to find the capital to buy equipment that (currently 35 percent). The American Recov-
deductions allowed with respect to certain qualifies for either enhanced Code Sec. ery and Reinvestment Act of 2009 (2009 Re-
passenger automobiles is increased in the 179 expensing or bonus depreciation covery Act) temporarily shortened the usual
first year by $8,000 for automobiles that under the bill. 10-year holding period to seven years for
qualify and for which the taxpayer does not dispositions in tax years beginning in 2009
elect out of the additional first-year deduc- Qualified real property. The new law also tem- and 2010. The new law further shortens the
tion. For 2010, therefore, maximum first- porarily expands the definition of qualified holding period to five years in the case of dis-
year depreciation for passenger automobiles Code Sec. 179 property to include qualified positions in any tax year beginning in 2011,
is $11,060 ($11,160 for light trucks). real property, which is defined as qualified if the fifth year in the recognition period pre-
leasehold improvement property, qualified res- cedes the tax year beginning in 2011.
taurant property and qualified retail improve-
Code Sec. 179 Expensing ment property. However, taxpayers are limited IMPACT. The built-in gains tax prevents
Eligible taxpayers may elect to claim a Code to expensing up to $250,000 of the total cost C corporations from avoiding corporate
Sec. 179 expense deduction on the purchase of these properties. The new law provides that level tax on the disposition of appreciated
CCH Tax Briefing ©2010 CCH. All Rights Reserved.

3. September 27, 2010
3
assets it acquired while a C corporation Extended Carryback Of General PLANNING NOTE. To be eligible for the
by first converting to S corporation status. Business Credit exclusion both prior to and under the bill,
The new law offers S corporations more the individual must generally acquire the
flexibility in shedding historic C corpo- The new law extends the carryback period small business stock at its original issue
ration assets that either no longer suit for eligible small business credits to five (directly or through an underwriter) for
business needs or can provide additional years. Eligible small business credits are money, for property other than stock, or as
capital through their sale to better assure the sum of the general business credits de- compensation for services. When the stock
the S corporation’s survival during the termined for the tax year with respect to is issued, the aggregate gross assets of the
economic downturn. an eligible small business. The extended issuing corporation may not exceed $50
carryback provision is effective for credits million. In addition, the corporation also
COMMENT. The five-year period in the determined in the taxpayer’s first tax year must use at least 80 percent of the value
new law refers to five calendar years from beginning after December 31, 2009. of its assets in the active conduct of one
the first day of the first tax year for which or more qualified trades or businesses. The
the corporation was an S corporation. IMPACT. An eligible small business for stock or eligible replacement must be held
purposes of the enhanced general business for at least five years.
credit is a corporation whose stock is not
Cell Phones publicly traded, a partnership or a sole COMMENT. Under Code Sec. 1202
The new law removes cell phones and similar proprietorship. Additionally, the average limitations already in place, the amount
personal communication devices from their annual gross receipts of the corporation, of gain eligible for the 100 percent exclu-
current classification as listed property un- partnership, or sole proprietorship for the sion by an individual with respect to any
der Code Sec. 280F, thereby lifting the strict prior three tax year periods cannot exceed corporation is capped at the greater of (1)
substantiation requirements of use and the $50 million. 10 times the taxpayer’s basis in the stock
additional limits placed on depreciation de- or (2) $10 million.
ductions. In addition, the provision enables AMT offset. Under the new law, an eligible
the fair market value of personal use of a cell small business credit may offset both regular
phone or other similar device provided to an and AMT liability.
Code Sec. 6707A Penalty Relief
employee predominantly for business pur- Taxpayers failing to disclose participation
poses to be excluded from gross income. in certain tax shelters are liable for penal-
Qualified Small Business Stock ties under Code Sec. 6707A. For certain
IMPACT. This “listed property” designa- The 2009 Recovery Act temporarily increased violations, those penalties had netted
tion was imposed on cell phones when the Code Sec. 1202 percentage exclusion for minimum dollar amounts that, in practice,
they were novel, expensive, and not wide- qualified small business stock sold by an in- were draconian to certain small businesses
ly owned. Today, not only are cell phones dividual from 50 percent to 75 percent for as compared to any claimed tax benefits.
widely available and used, but also nec- stock acquired after February 17, 2009 and
essary for doing business. IRS Commis- before January 1, 2011, and held for more The new law provides a general rule that
sioner Douglas Shulman announced in than five years. The new law raises the ex- a participant in a reportable transaction
January 2010 that the IRS would call clusion to 100 percent for gain on stock ac- that fails to disclose the transaction is sub-
a temporary halt to enforcing strict sub- quired after the date of enactment of the bill ject to a penalty equal to 75 percent of the
stantiation on cell phone use until Con- and before January 1, 2011. Under the new decrease in tax shown on the return as a
gress made good on its leadership’s prom- law, the excluded gain will not count as an result of the transaction or which would
ise to pass remedial legislation. The new AMT preference item but the five-year hold- have resulted if the transaction was respect-
law’s relief applies to tax years beginning ing period continues to apply. ed for federal tax purposes. Regardless of
after December 31, 2009. the amount determined under the general
IMPACT. With both the income tax and rule, the new law specifies that the penalty
capital gains rates anticipated to rise in may not exceed certain maximum amounts
sMAll BUsIness the future, the benefits of an investment ($10,000 for an individual taxpayer fail-
PROVIsIOns in Section 1202 stock become even more ing to disclose a reportable transaction;
substantial as acquired shares are sold in $50,000 for all other taxpayers, $100,000
The new law targets a variety of tax incen- 2015 or later under the five-year holding for an individual taxpayer failing to dis-
tives exclusively to small businesses, includ- period rule. Since stock is the key to this close a listed transaction; and $200,000
ing extended carryback for the general busi- benefit, the corporate form of doing busi- for all other taxpayers). The new law also
ness credit, enhanced AMT offset, and relief ness may have a leg up on unincorporated provides a minimum penalty of $5,000 for
from Code Sec. 6707A penalties. entities in this regard. an individual taxpayer failing to disclose a
CCH Tax Briefing

4. 4
reportable transaction or a listed transac- tal or equipment and have been gener- PROMOTIng ReTIReMenT
tion. The minimum penalty for all other ally relegated to amortization above the
taxpayers would be $10,000. current $5,000 deductible amount. The
sAVIngs
increase in the deduction amount is in- The new law gives taxpayers a greater num-
The relief in the new law applies to Code tended to allow entrepreneurs to recover ber of options for their retirement plan
Sec. 6707A penalties assessed after Decem- more small business start-up expenses dollars. Two provisions facilitate contribu-
ber 31, 2006. up-front, increasing cash flow and the tions to designated Roth accounts. A third
ability to hire more workers. provision expands the options for non-
IMPACT. The change is intended to ame- qualified annuity contracts.
liorate the impact of the penalty on small
businesses. At Congressional hearings,
Self-Employment Income IMPACT. Although these are taxpayer-
small business owners told lawmakers of A self-employed individual can take a de- friendly provisions, they are treated as
penalty assessments that vastly exceeded duction for health insurance costs paid revenue raisers because they encourage
the tax benefits of the transactions, many for the individual and his or her immedi- up-front distributions that are taxable.
of which, the small business owners testi- ate family for income tax purposes. How-
fied, they did not know were tax shelters. ever, in determining the self-employment
income subject to self-employment taxes,
457(b) Plan Deferrals
IMPACT. The retroactive effective date the self-employed individual cannot de- Beginning in 2011, the new law authorizes
opens up refund opportunities on penal- duct any health insurance costs. Under eligible state and local government 457(b)
ties that the IRS has not otherwise held in the new law, the deduction for income plans (but not plans of nonprofit organiza-
abeyance pending this much-anticipated tax purposes for the cost of health insur- tions) to allow participants to contribute de-
law change. The IRS temporarily stopped ance is allowed in calculating net earn- ferred amounts to designated Roth accounts.
collecting Code Sec. 6707A penalties for ings from self-employment for purposes A similar provision already applies to 401(k)
undisclosed tax shelter transactions starting of self-employment taxes. The provision and 403(b) plans and will take effect in 2011
in June 2009 and extended its forbearance only applies to the self-employed taxpay- for the federal Thrift Savings Plan.
several times. Its latest collections moratori- er’s first tax year beginning after Decem-
um had officially ended on June 1, 2010. ber 31, 2009. IMPACT. Contributions to Roth accounts
are after-tax, but earnings accumulate
COMMENT. A reportable transaction COMMENT. The health insurance busi- tax-free and can be distributed tax-free if
is one that the IRS has determined re- ness deduction for self-employed individu- contributions are held for five years and
quires disclosure because it has a poten- als was implemented in 1987 and subse- certain other requirements are met.
tial for tax evasion. A listed transaction quently made permanent. This equalized
is a reportable transaction specifically the treatment of health insurance costs
identified by the IRS as an improper tax that an employer pays for employees and
401(k) Rollovers To Roth
avoidance transaction. for self-employed individuals. However, Accounts
health insurance costs did not reduce wag-
es subject to self-employment taxes. Em- The new law authorizes 401(k), 403(b) and
Start-Up Expense Deduction ployees must take health insurance costs as 457(b) governmental plans to allow par-
Taxpayers have generally been able to de- an itemized deduction, but get the benefit ticipants to roll over qualified distributions,
duct up to $5,000 in qualified trade or of having pre-tax premium contributions including in-service distributions, into a
business start-up expenses. The $5,000 reduce the amount of wages subject to designated Roth account within their plans.
deduction is reduced (but not below zero) FICA. The new law reduces the burden The rollover will be taxable, except for any
by the amount of the taxpayer’s total start- on self-employed individuals. after-tax contributions. The provision is ef-
up costs that exceed $50,000. The new fective for distributions after September 27,
law raises the deduction limit to $10,000 COMMENT. The Joint Committee on 2010. If an amount is rolled over in 2010,
and increases the phaseout threshold to Taxation noted that it is intended that the amount is included ratably in income in
$60,000 for one year, 2010. earned income within the meaning of equal amounts over 2011 and 2012, unless
Code Sec. 401(c)(2) be computed with- the taxpayer elects otherwise.
IMPACT. Start-up expenses are costs re- out regards to the deduction for health
lated to creating an active trade or busi- insurance. Thus, earned income for pur- IMPACT. The ability to report income
ness, or investigating the creation or ac- poses of the limitation applicable to the from the 2010 rollover in 2011 and
quisition of an active trade or business. health insurance deduction is computed 2012 echoes existing rules for convert-
They are costs not directly related to capi- without regard to this deduction. ing a traditional IRA to a Roth IRA in
CCH Tax Briefing ©2010 CCH. All Rights Reserved.

5. September 27, 2010
5
2010. Plans and taxpayer may need to ReVenUe RAIseRs payer Advocate. However, the IRS has
move quickly. First, the plan must be promised to remove duplicative reporting
amended to permit these rollovers. Then, In addition to the $6.6 billion raised by the where possible.
participants must act before year-end on retirement-friendly provisions (discussed
any qualifying distribution if they want above), the Small Business Jobs Act offsets Exceptions. The new law includes excep-
to take advantage of either the two-year the price tag for its $12 billion in tax relief tions to the rental property expense report-
deferral into 2011 or 2012 or lower tax with some not-so-friendly changes in the ing requirement, such as exceptions for in-
rates in 2010 if Congress does not extend name of reducing the tax gap and closing dividuals who can show that the reporting
the 2001 individual marginal income unintended “loopholes.” requirement creates a hardship and any in-
tax rate reductions. dividual who receives rental income of not
more than a minimal amount (both as will
IMPACT. Especially with 401(k) bal-
Information Reporting On Rental be determined by the IRS). The new law
ances still reeling from stock market Property Expense Payments also provides for an exception for members
declines, distribution rollovers to Roth of the military or employees of the intelli-
accounts now — while the income to be The new law requires qualified individu- gence community who rent their principal
recognized on those balances upon dis- als receiving rental income from real residence on a temporary basis.
tribution is still low — will make im- property to file information returns with
mediate rollovers highly popular. One the IRS and to service providers report-
drawback, for many taxpayers, however, ing payments of $600 or more during
Higher Failure-To-File Penalties
will be finding the cash to pay the income the year for rental property expenses. The On Information Returns
tax. If taken from the otherwise qualify- new information reporting requirement
ing distribution, that amount would be applies to payments made after Decem- The new law substantially increases the pen-
taxed immediately and permanently lose ber 31, 2010. alties for failing to timely file information
the benefit of deferral. returns with the IRS:
IMPACT. Expanded information report-
COMMENT. The JCT explained that ing is a popular revenue raiser in Con- First-tier penalties (filing an information
it is intended that the IRS will provide gress and predictions are that reporting return after the filing deadline but not
employers with a remedial amendment obligations, and their related compliance more than 30 days after the due date)
period to allow employers to offer this costs, will more than quadruple for tax- increase from $15 to $30. The calen-
option for distributions during 2010 payers if Congress continues on its present dar year maximum will increase from
and then have adequate time to amend course. Reliance by Congress on increased $75,000 to $250,000.
their plans. information reporting to provide “quick Second-tier penalties (filing an informa-
and easy” revenue offsets worries many tion return more than 30 days after it is
tax practitioners and the National Tax- due but before August 1) will increase
Annuitization
The bill allows an owner of a nonquali-
fied annuity contract to split up the con- H.R. 5297: esTIMATed ReVenUe effeCTs*
tract, by taking a portion of the benefits
FY 2011 - 2020 FY 2011 & 2012
as a separate stream of annuity payments
while leaving the balance of the contract Bonus Depreciation - $5.4 billion -$29.5 billion
untouched. The annuitization period must Code Sec. 179 Expensing -$2.2 billion -$12.7 billion
be for 10 years or more, or for the lives
General Business Credit -$1.0 billion -$2.4 billion
of one or more individuals. Amounts re-
maining with the contract will continue Small Business Stock -$518 million -$2.0 million
to accumulate earnings on a tax-deferred Cell Phones -$410 million -$54 million
basis. The provision applies to amounts
Start-Up Deduction -$230 million -$343 million
received in tax years beginning after De-
cember 31, 2010. 6707A Penalty Relief -$176 million -$106 million
Cellulosic Biofuel Credit +$1.8 billion +$1.2 billion
COMMENT. A nonqualified annuity
contract is an annuity contract held out- Retirement Savings +$6.6 billion +$809 million
side of a qualified retirement plan or an * Source: Joint Committee on Taxation, September 16, 2010
individual retirement account.
CCH Tax Briefing

6. 6
from $30 to $60, and the calendar year Levies PENDING TAX LEGISLATION
maximum will increase from $150,000
to $500,000. Under the new law, the IRS may issue levies IndIVIdUAl TAx RATe RedUCTIOns
Third-tier penalties (for failing to file before a collection due process (CDP) hearing
before August 1) will increase from $50 in cases involving certain federal contractors. After December 31, 2010, reduced individ-
to $100, and the calendar year maxi- The provision applies to levies issued after Sep- ual income tax rates are scheduled to revert
mum will increase from $250,000 to tember 27, 2010. to their pre-2001 levels, with the top rate
$1.5 million. rising to 39.6 percent. President Obama
IMPACT. When a levy would be issued wants to permanently extend all of the indi-
Penalties for failing to file information re- before a CDP hearing, it is anticipated vidual rate cuts except for the top two rates.
turns to payees similarly increase. that a taxpayer will have the opportunity A growing number of lawmakers are calling
to be heard at a CDP hearing within a for a temporary extension, for one or two
IMPACT. The enhanced penalties apply to reasonable time after the levy. years, of all the sunsetting tax cuts. For more
information returns required to be filed details about the expiring tax incentives, see the
on or after January 1, 2011. CCH Tax Briefing: Sunsetting Benefits of the
Cellulosic Biofuel Producer Credit Economic Growth and Tax Relief Reconcilia-
Intentional failures. The minimum pen- The cellulosic biofuel producer credit re- tion Act of 2001 on CCH’s Intelliconnect.
alty for each intentional failure-to-file will wards qualified taxpayers with a $1.01 per
increase from $100 to $250. gallon nonrefundable income tax credit TAx exTendeRs
for the production of qualified cellulosic
Small filers. For qualified small filers with biofuel. The health care reform package A package of tax extenders (H.R. 4213), which
average gross receipts of not more than (the Patient Protection and Affordable passed the House earlier this year, has languished
$5 million, the calendar year maximum Care Act and the Health Care and Edu- in the Senate. Sen. Max Baucus, D-Montana,
will increase from $25,000 to $75,000 cation Reconciliation Act) excluded so- recently introduced a new tax extenders bill.
for the first-tier penalty, from $50,000 to called “black liquor” from the cellulosic Baucus’ bill would extend a host of popular but
$200,000 for the second-tier penalty, and biofuel producer credit. The new law ex- temporary tax incentives, such as the state and
from $100,000 to $500,000 for the third- cludes crude tall oil and other corrosive local sale stax deduction, the teachers’ classroom
tier penalty. fuels from the cellulosic biofuel producer expense deduction, and the higher education
credit, effective retroactively for fuels sold tuition deduction, through the end of 2010.
COMMENT. The dollar amounts in the or used on or after January 1, 2010. Baucus’ bill excludes a controversial revenue
bill will be adjusted for inflation for each raiser: the imposition of self-employment taxes
fifth calendar year beginning after 2012. COMMENT. Crude tall oil, like black on certain shareholders in S corps.
liquor, is a waste product of paper
manufacturing. The individual tax rate reductions and tax
U.S. Sourcing On Guarantees extenders are not the only tax items on
The new law clarifies the income sourcing Congress’ Fall agenda. The list includes:
rules for guarantee fees. It amends Code Sec.
Corporate Estimated Tax Payments
861 to clearly treat amounts received for guar- The Hiring Incentives to Restore Employ-
antees of indebtedness as U.S. source income ment (HIRE) Act, enacted by Congress in
if paid by a U.S. person or by a foreign person March 2010, increased the estimated tax COMPleTe COVeRAge
where effectively connected to the conduct of payments required to be made by corpora- Of sMAll BUsIness
trade or business in the U.S. tions with assets of $1 billion or more in
July, August or September 2015 to 121.5
JOBs ACT
IMPACT. The new law prospectively percent of the payment otherwise due. The For more in-depth analysis of the new
overturns the U.S. Tax Court’s deci- next required installment is proportionately tax law, see CCH’s 2010 Small Business
sion in Container Corp., 134 TC No. reduced to reflect the increase. The new law Jobs Act: Law, Explanation and Analysis.
5, CCH Dec. 58,131, holding that, raises the percentage under the HIRE Act by The publication is the most comprehen-
since the guarantee fees were treated as 36 points. sive and practical guidance available to
payments for services, the foreign parent explain the provisions of these enhanced
was not subject to U.S. tax on them. It, COMMENT. On July 27, 2010, Presi- small business tax incentives. The Law,
rather, treats them as interest payments, dent Obama signed H.J. Res. 83, which Explanation and Analysis is located on
whose source is determined by the posi- increased the percentage under the HIRE CCH’s IntelliConnect under Federal
tion of the payor. Act by 0.25 percentage points. Tax, Federal Tax Legislation.
CCH Tax Briefing ©2010 CCH. All Rights Reserved.

7. September 27, 2010
7
The federal estate tax; posal, the simplified research credit would ed business information reporting under
Reduced capital gains/dividends tax increase to 17 percent. the Patient Protection and Affordable
rates; Care Act (PPACA). Under the PPACA,
An AMT "patch;" IMPACT. Under the president’s proposal, businesses, charities and state and local
Worker classification reform; qualified taxpayers would be able to im- governments will file an information re-
More international tax reforms; mediately write-off business expenses in turn for all payments aggregating $600
Energy tax incentives; and the first year, enabling taxpayers to lower or more in a calendar year to a single
National disaster relief. their taxable income by the full amount provider of goods or services (with some
of qualified investments. exceptions for tax-exempt payees), for
WHITe HOUse BUsIness TAx payments made after 2011. The PPACA
PROPOsAls COMMENT. President Obama proposed also repeals the long-standing reporting
to offset the estimated $180 billion cost of exception for payments to a corporation,
President Obama has proposed allowing his proposals by unspecified closings of tax also effective for payments made after
qualified businesses to immediately write- loopholes. The $180 billion cost means 2011.
off 100 percent of new investments in the proposals are unlikely to gain much
equipment made through the end of 2011. traction in Congress. COMMENT. Stand-alone legislation (S.
Generally, current rules provide for a lon- 3783) to exempt very small businesses
ger period, three to 20 years. The president InfORMATIOn RePORTIng and raise the filing threshold to $5,000
has also proposed to make permanent the has been introduced in the Senate but is
research tax credit, which expired at the The House and Senate have considered unlikely to be taken up before the No-
end of 2009. Under the president’s pro- but rejected legislation to repeal expand- vember elections.
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04707401 ..........760 .........Oct. 2010 .......$217.00
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CCH Tax Briefing