When the Senate returns on September 13th, it will take up consideration of the Small Business Bill (the “Bill”).
The current version of the Small Business Bill was introduced August 5th as Senate Amendment 4594, an amendment in the nature of a substitution.
- the text of the current version of the Small Business Bill;
- a summary of the current Small Business Bill’s provisions; and
- a summary of how it differs from the prior iteration of the Bill.
My comments on the Bill:
- The 100% exclusion for capital gains from investments in qualified small business stock is temporary and of extremely short duration. It only applies to stock purchased after the date of enactment of the Bill through the end of this year. This is not really much to get excited about. If we want to change behavior, the provision should be permanent. Allowing an exclusion of 100% for qualified small business stock purchased before the end of this year probably isn’t going to change much in terms of behavior. Investors who intended to invest this year probably will. Those who didn’t plan to invest this year probably won’t.
- There is no Form 1099 relief for small businesses. In fact, the penalties for failure to file information returns are increased in the Bill, and the events requiring 1099 reporting are being increased–the Bill requires persons receiving rental income from real property to file Forms 1099 to the IRS and service providers reporting payments of $600 or more during the year for rental expenses. So, for example, if you own rental real estate and pay your plumber $601 during the year, you are going to be required to issue your plumber and the IRS a Form 1099.
- The $600 threshold for information reporting needs to be adjusted for inflation. As the Congressional Research Service reported earlier this year:
“Also potentially affecting the administrative burden on payers is because the $600 threshold, which triggers the reporting requirement, has remained constant over time, since at least 1954. In contrast, other dollar amounts specified in the IRC have been legislatively increased over time or indexed for inflation. For example, the personal and dependent exemption amounts were $600 in 1954, but over time have risen to $3650 for tax year 2010. As the buying power of $600 decreases, the number of transactions captured may increase as it becomes more likely that minor expenditures will aggregate to at least $600 and trigger the reporting requirement. “