Standing at Market Block Books, a woman-owned small business in Troy, U.S. Senator Kirsten Gillibrand today announced bipartisan legislation to extend tax breaks for small businesses. Women-owned small businesses are among the fastest growing segments of the economy. The Small Business Tax Extenders Act would provide investors strong incentives to invest in small business stock, increase deductions for start-up expenses, and continue tax credits small businesses can take advantage of.
"Small businesses are the most powerful job creators we have," Senator Gillibrand said. "I've heard from women in the Capital Region and all across the state. I know women are ready to lead us to a thriving and stable economy, with new good-paying jobs that can support a family. When we provide the tools that small business leaders need, we can ignite a real economic engine."
"Job creation and economic growth continue to be my top priorities in Congress. That is why I am pleased to stand beside Senator Gillibrand today to continue our fight on behalf of our state and nation's small businesses, especially those that are women-owned," Congressman Tonko said. "Small businesses are the engine of job growth, and the springboard to our economic recovery. These tax incentives will help hire workers, expand opportunities, create jobs and reinvest in local companies."
"Fostering an environment that allows small businesses to succeed is an essential part of getting our economy back on track," City of Troy Mayor Lou Rosamilia said. "Senator Gillibrand's tireless work to extend critical tax incentives for small businesses is necessary to create more jobs, to ensure financial recovery, and to help municipalities across New York State address the fiscal challenges they face today."
Last fall, Senator Gillibrand held women's economic empowerment roundtables across the state, and heard firsthand from small business owners. Small businesses play a critical role in the national and local economy, with more than 10 million firms owned by women. Between 1997 and 2007, women-owned businesses added roughly 500,000 jobs, while other private firms lost jobs. In New York, about 26 percent of all small businesses are owned by women. Women on average start their business with eight times less funding than men, making tax credits a critical part of their business plan.
In September 2010, Congress passed the Small Business Jobs Act, which provided a number of key tax benefits to American small businesses, such as eliminating capital gains tax on investments in small business, and cutting taxes for businesses that invest in new equipment. With roughly two-thirds of new jobs in the U.S. generated by small businesses, providing tax benefits for businesses is a key way to encourage growth and hiring.
With these tax incentives now expired as of the beginning of 2012, and with sluggish growth and job creation, Senator Gillibrand, together with the bipartisan women Senators, are working to extend these provisions for at least this year to help small businesses continue to grow.
Small Business Tax Extenders Act
These tax benefits include a number of provisions that help give small businesses the ability to grow and expand now by providing incentives to invest in small businesses, helping businesses make new investments in equipment, and extending benefits that help out new start-ups and reduce the tax burden for the self-employed, where many businesses begin.
Tax Exclusion for Small Business Capital Gains: This provision would provide investors a strong incentive to invest in small business stock. Prior to 2009, 50 percent of the gain of a small business stock was subject to tax. Senator Gillibrand supported legislation that increased this exclusion to 75 percent and the Small Business Jobs Act expanded that benefit to 100 percent of the gain. Eligible small businesses are defined as those with gross assets under $50 million and the stock must be held for at least five years.
Start-up Expenditures Deduction: In the year they get off the ground, new start-ups typically face a number of substantial expenses, such as permits, acquiring facilities and equipment, and other needs, but are limited in the amount of expenses they can deduct that year on their taxes. This provision would extend the increased deduction for start-up expenses, from $5,000 to $10,000. Eligible expenses include studies of potential markets, products, labor markets, or transportation systems; advertisements for the opening of a new business; compensation for consultants and employees undergoing training and their instructors; and travel for the purpose of securing suppliers, distributors, and customers.
Section 179 Expensing: This provision allows small businesses to write off up to $500,000 in tangible property, such as investments in machinery and plant equipment, or other physical equipment (such as refrigerators or stoves for a restaurant or gas pumps for a gas station).
Health Insurance Self-Employment Taxes: Most Americans are able to fully deduct their health insurance from their taxes, but self-employed individuals are unable to deduct this fully from employment taxes. This provision would allow self-employed individuals to continue deducting their health insurance premiums from their Social Security and Medicare Taxes, which because they pay both the employer and employee share is 15.3 percent.
General Business Credit Carryback: This provision would allow businesses to continue to carryback (i.e., count against profits from previous years) general business credits for up to five years. This helps businesses who are currently not profitable by allowing them to claim credits against years where they were making money.
Alternative Minimum Tax: The bill would extend provisions allowing small businesses to apply general business credits against the business Alternative Minimum Tax.