S. 1381 – Reading Mode

1.

Short title; amendment of 1986 Code; table of contents

(a)

Short title

This Act may be cited as the Small Business Tax Relief Act of 2009.

(b)

Reference

Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

(c)

Table of contents

The table of contents for this Act is as follows:

2.

Permanent increase in limitations on expensing of certain depreciable business assets

(a)

In general

Subsection (b) of section 179 (relating to limitations) is amended—

(1)

by striking $25,000 and all that follows in paragraph (1) and inserting $500,000.,

(2)

by striking $200,000 and all that follows in paragraph (2) and inserting $2,000,000,

(3)

by striking after 2007 and before 2011, the $120,000 and $500,000 in paragraph (5)(A) and inserting after 2009, the $500,000 and the $2,000,000,

(4)

by striking 2006 in paragraph (5)(A)(ii) and inserting 2008, and

(5)

by striking paragraph (7).

(b)

Permanent expensing of computer software

Section 179(d)(1)(A)(ii) of the Internal Revenue Code of 1986 (defining section 179 property) is amended by striking and before 2011.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

3.

Modification of corporate income tax rates

(a)

In general

Paragraph (1) of section 11(b) (relating to amount of tax) is amended to read as follows:

(1)

In general

The amount of the tax imposed by subsection (a) shall be the sum of—

(A)

15 percent of so much of the taxable income as does not exceed $1,000,000,

(B)

25 percent of so much of the taxable income as exceeds $1,000,000 but does not exceed $1,500,000,

(C)

34 percent of so much of the taxable income as exceeds $1,500,000 but does not exceed $10,000,000, and

(D)

35 percent of so much of the taxable income as exceeds $10,000,000.

In the case of a corporation which has taxable income in excess of $2,000,000 for any taxable year, the amount of tax determined under the preceding sentence for such taxable year shall be increased by the lesser of (i) 5 percent of such excess, or (ii) $235,000. In the case of a corporation which has taxable income in excess of $15,000,000, the amount of the tax determined under the foregoing provisions of this paragraph shall be increased by an additional amount equal to the lesser of (i) 3 percent of such excess, or (ii) $100,000.

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(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2009.

4.

General business credits of eligible small businesses not subject to alternative minimum tax

(a)

In general

Section 38(c) (relating to limitation based on amount of tax) is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph:

(5)

Special rules for eligible small business credits

(A)

In general

In the case of eligible small business credits—

(i)

this section and section 39 shall be applied separately with respect to such credits, and

(ii)

in applying paragraph (1) to such credits—

(I)

the tentative minimum tax shall be treated as being zero, and

(II)

the limitation under paragraph (1) (as modified by subclause (I)) shall be reduced by the credit allowed under subsection (a) for the taxable year (other than the eligible small business credits).

(B)

Eligible small business credits

For purposes of this subsection, the term eligible small business credits means the sum of the credits listed in subsection (b) which are determined for the taxable year with respect to an eligible small business. Such credits shall not be taken into account under paragraph (2), (3), or (4).

(C)

Eligible small business

For purposes of this subsection, the term eligible small business means, with respect to any taxable year—

(i)

a corporation the stock of which is not publicly traded, or

(ii)

a partnership,

which meets the gross receipts test of section 448(c) (by substituting $50,000,000 for $5,000,000 each place it appears) for the taxable year (or, in the case of a sole proprietorship, which would meet the test if such proprietorship were a corporation).

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(b)

Effective date

The amendments made by this section shall apply to credits determined in taxable years beginning after December 31, 2009, and to carrybacks of such credits.

5.

General business credits of eligible small businesses carried back 5 years

(a)

In general

Section 39(a) (relating to carryback and carryforward of unused credits) is amended by adding at the end the following new paragraph:

(4)

5-year carryback for eligible small business credits

(A)

In general

Notwithstanding subsection (d), in the case of eligible small business credits—

(i)

this section shall be applied separately from the business credit (other than the eligible small business credits) or the marginal oil and gas well production credit,

(ii)

paragraph (1) shall be applied by substituting each of the 5 taxable years for the taxable year in subparagraph (A) thereof, and

(iii)

paragraph (2) shall be applied—

(I)

by substituting 25 taxable years for 21 taxable years in subparagraph (A) thereof, and

(II)

by substituting 24 taxable years for 20 taxable years in subparagraph (B) thereof.

(B)

Eligible small business credits

For purposes of this subsection, the term eligible small business credits has the meaning given such term by section 38(c)(5)(B).

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(b)

Conforming amendment

Section 39(a)(3)(A) is amended by inserting or the eligible small business credits after credit).

(c)

Effective date

The amendments made by this section shall apply to credits arising in taxable years beginning after December 31, 2009.

6.

Deduction for eligible small business income

(a)

In general

Paragraph (1) of section 199(a) is amended to read as follows:

(1)

In general

There shall be allowed as a deduction an amount equal to the sum of—

(A)

9 percent of the lesser of—

(i)

the qualified production activities income of the taxpayer for the taxable year, or

(ii)

taxable income (determined without regard to this section) for the taxable year, and

(B)

in the case of an eligible small business for any taxable year beginning after 2009, 20 percent of the lesser of—

(i)

the eligible small business income of the taxpayer for the taxable year, or

(ii)

taxable income (determined without regard to this section) for the taxable year.

.

(b)

Eligible small business; eligible small business income

Section 199 is amended by adding at the end the following new subsection:

(e)

Eligible small business; eligible small business income

(1)

Eligible small business

For purposes of this section, the term eligible small business has the meaning given such term by section 38(c)(5)(C).

(2)

Eligible small business income

(A)

In general

For purposes of this section, the term eligible small business income means the excess of—

(i)

the income of the eligible small business which—

(I)

is attributable to the actual conduct of a trade or business,

(II)

is income from sources within the United States (within the meaning of section 861), and

(III)

is not passive income (as defined in section 904(d)(2)(B)), over

(ii)

the sum of—

(I)

the cost of goods sold that are allocable to such income, and

(II)

other expenses, losses, or deductions (other than the deduction allowed under this section), which are properly allocable to such income.

(B)

Exceptions

The following shall not be treated as income of an eligible small business for purposes of subparagraph (A):

(i)

Any income which is attributable to any property described in section 1400N(p)(3).

(ii)

Any income which is attributable to the ownership or management of any professional sports team.

(iii)

Any income which is attributable to a trade or business described in subparagraph (B) of section 1202(e)(3).

(iv)

Any income which is attributable to any property with respect to which records are required to be maintained under section 2257 of title 18, United States Code.

(C)

Allocation rules, etc

Rules similar to the rules of paragraphs (2), (3), (4)(D), and (7) of subsection (c) shall apply for purposes of this paragraph.

(3)

Special rules

Except as otherwise provided by the Secretary, rules similar to the rules of subsection (d) shall apply for purposes of this subsection.

.

(c)

Conforming amendment

Section 199(a)(2) is amended by striking paragraph (1) and inserting paragraph (1)(A).

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

7.

Reduction in recognition period for built-in gains tax

(a)

In general

Paragraph (7) of section 1374(d) (relating to definitions and special rules) is amended to read as follows:

(7)

Recognition period

(A)

In general

The term recognition period means the 5-year period beginning with the 1st day of the 1st taxable year for which the corporation was an S corporation.

(B)

Special rule for distributions to shareholders

For purposes of applying this section to any amount includible in income by reason of distributions to shareholders pursuant to section 593(e), subparagraph (A) shall be applied without regard to the phrase 10-year.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2010.

8.

Carryback of net operating losses of certain small businesses allowed for 5 years

Subparagraph (H) of section 172(b)(1) is amended to read as follows:

(H)

5-year carryback of losses of certain small businesses

(i)

In general

In the case of a net operating loss with respect to any eligible small business for any taxable year ending after 2008, or, if applicable, following the taxable year with respect to which an election was made by such eligible small business under this subparagraph (as in effect before the date of the enactment of the Small Business Tax Relief Act of 2009)—

(I)

subparagraph (A)(i) shall be applied by substituting 5 for 2,

(II)

subparagraph (E)(ii) shall be applied by substituting 4 for 2, and

(III)

subparagraph (F) shall not apply.

(ii)

Eligible small business

For purposes of clause (i), the term eligible small business has the meaning given such term by section 38(c)(5)(C).

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9.

Modifications to exclusion for gain from certain small business stock

(a)

Temporary increase in exclusion

Paragraph (3) of section 1202(a) (relating to exclusion) is amended to read as follows:

(3)

Special rules for stock acquired before 2011

In the case of qualified small business stock—

(A)

acquired after the date of the American Recovery and Reinvestment Tax Act of 2009 and on or before the date of the enactment of the Small Business Tax Relief Act of 2009—

(i)

paragraph (1) shall be applied by substituting 75 percent for 50 percent, and

(ii)

paragraph (2) shall not apply, and

(B)

acquired after the date of the enactment of the Small Business Tax Relief Act of 2009 and before January 1, 2011—

(i)

paragraph (1) shall be applied by substituting 100 percent for 50 percent,

(ii)

paragraph (2) shall not apply, and

(iii)

section 57(a)(7) shall not apply.

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(b)

Increase in limitation

(1)

In general

Subparagraph (A) of section 1202(b)(1) (relating to per-issuer limitation on taxpayer's eligible gain) is amended by striking $10,000,000 and inserting $15,000,000.

(2)

Married individuals

Subparagraph (A) of section 1202(b)(3) (relating to treatment of married individuals) is amended by striking paragraph (1)(A) shall be applied by substituting $5,000,000 for $10,000,000 and inserting the amount under paragraph (1)(A) shall be half of the amount otherwise in effect.

(c)

Modification of definition of qualified small business

Section 1202(d)(1) (defining qualified small business) is amended by striking $50,000,000 each place it appears and inserting $75,000,000.

(d)

Inflation adjustments

Section 1202 (relating to partial exclusion for gain from certain small business stock) is amended by redesignating subsection (k) as subsection (l) and by inserting after subsection (j) the following new subsection:

(k)

Inflation adjustment

(1)

In general

In the case of any taxable year beginning after 2009, the $15,000,000 amount in subsection (b)(1)(A), the $75,000,000 amount in subsection (d)(1)(A), and the $75,000,000 amount in subsection (d)(1)(B) shall each be increased by an amount equal to—

(A)

such dollar amount, multiplied by

(B)

the cost of living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof.

(2)

Rounding

If any amount as adjusted under paragraph (1) is not a multiple of $1,000,000 such amount shall be rounded to the next lowest multiple of $1,000,000.

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(e)

Effective dates

(1)

Exclusion; qualified small business

The amendments made by subsections (a) and (c) shall apply to stock acquired after the date of the enactment of this Act.

(2)

Limitation; inflation adjustment

The amendments made by subsections (b) and (d) shall apply to taxable years ending after the date of the enactment of this Act.

10.

Deduction for health insurance costs in computing self-employment taxes

(a)

In general

Section 162(l) (relating to special rules for health insurance costs of self-employed individuals) is amended by striking paragraph (4) and by redesignating paragraph (5) as paragraph (4).

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.