As we anticipated, the U.S. House of Representatives has sent the Small Business Jobs Bill to President Obama’s desk for signing. The Senate passed HR 5297 last week, sending it to the House where it was passed on Wednesday. See previous post. President Obama is expected to sign.
The bill significantly expands the usability of all of the General Business Credits established by Section 38 (b) of the Internal Revenue Code. This includes the Work Opportunity Tax Credit (WOTC), the Empowerment Zone Employment Credit and the Research & Development Credit, among many others.
First, it’s important to understand that this is a “Small Business” jobs bill. In other words, the tax credit provisions apply only to businesses whose average annual gross income does not exceed $50 million (averaged over the past 3 years). Note that it also does not apply to publically traded corporations.
Beginning with tax credits generated in 2010, the bill’s tax credit provisions:
- Apply to businesses with $50 million or less in gross income (averaged over past 3 years)
- Allow all “general business credits” generated in 2010 (and/ or carried forward to 2010) to be carried back 5 years to secure tax refunds
- Removes the alternative minimum tax (AMT) provision that previously limited the use of tax credits by businesses subject to AMT
Now, we sit back and wait for President Obama to sign the bill so we can get to work!
[Update 10-11-2011: Although the legislative summary by Senate Finance Committee does not mention this, the IRS website states that these provisions only apply to tax credit generated in 2010 or that was carried forward to 2010 from prior periods. Here's the IRS language:
"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010"
[Update 10/24/2011: The day after I posted the previous update above, the IRS changed the language I quoted, creating a much different picture of the tax credit available for carry back. As of October 12, 2011 the IRS site reads :
"This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits earned in the tax year 2010."
Note that it now explicitly states that only credit generated in tax year 2010 is able to be carried back 5 years.