For many businesses, a big disappointment was Congress’ failure to use this bill to repeal the onerous Form 1099 reporting requirement, which Republicans, Democrats and the President have said they support. But even with this shortcoming, there is a definite upside in this legislation for businesses with the inclusion of two important provisions for businesses:
- R&D Credit Extension. A two-year retroactive extension of the R&D tax credit from January 1, 2010, through December 31, 2011; the legislation also extends the Alternative Simplified Credit rate at 14 percent for 2010 and 2011. This R&D tax credit benefits companies that incur expenses in the development or improvement of products and technologies.
- 100 Percent Expensing. For the 2011 tax year, businesses will be allowed to expense 100 percent of their investments in qualified depreciable property and equipment purchased and put into service during 2011. So, instead of depreciating the cost of an asset over a period of years, the entire expenditure can be expensed on the 2011 tax return. Small businesses already can expense as much as $500,000 for tax years 2010 and 2011, so this provision extends this stimulating provision to all businesses.
While not benefitting businesses directly, another provision that will increase net income for employees is a 2 percent decrease in payroll tax for social security (i.e., a reduction from 6.20 to 4.20 percent).
Clearly, the lame duck session brought signs of Congressional bipartisanship that have not been seen over the last year, and we hope this working relationship will extend into the next Congress. We certainly anticipate bipartisan support for repealing the 1099 reporting requirement will extend to the next Congress, and we will continue to push for repeal of this burdensome reporting requirement. Small businesses need certainty to adequately plan their budgets and business operations, and repeal of this provision will be at the top of our small business agenda for 2011.
