Grassley Introduces Bill to Strengthen Job-creating Abilities of Small Businesses

WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, late Thursday introduced a bill to strengthen small businesses by lowering their tax burden so they can continue to create 70 percent of all net new jobs, and ideally more.

“My bill will leave more money in the hands of small business owners so they can hire more workers, keep paying the salaries of their employees, and make additional investments that will lead to new jobs,” Grassley said. “Unfortunately, the White House seems to see a lot of small business owners as a cash cow for other priorities and wants to raise their taxes. My point is, if we raise taxes on the one segment of the economy that creates the majority of new jobs, we’ll be in even worse economic shape than we are now.”

Grassley said the tax relief is especially important, given an expensive stimulus bill that has had little to no measurable effect on job retention or creation, despite predictions to the contrary from the White House and congressional sponsors. A floor statement from Grassley describes the lackluster effect of the stimulus bill on job creation. The text of this floor statement is found below this news release.

Grassley’s Small Business Tax Relief Act of 2009 includes provisions that would:

•    Increase the amount of capital expenditures that small businesses could expense from
$250,000 to $500,000. This would encourage businesses to invest in new equipment.
•    Allow more small C corporations to benefit from the lower tax rates for the smallest C corporations.
•    Take the general business credits out of the Alternative Minimum Tax (AMT) for those sole proprietorships, flow-throughs and non-publicly-traded C corporations with $50 million or less in annual gross receipts.
•    Extend the 1-year carryback for general business credits to a 5-year carryback for small businesses.
•    Provide a 20 percent deduction for flow-through business income for small businesses, which are defined as flow-through entities with $50 million or less in annual gross receipts.
•    Lower the potential tax burden when a C corporation becomes an S corporation. Under current law, there is no tax on built-in gains of assets within a C corporation that converts to an S corporation if those assets with built-in gain are held for 10 years by the S corporation. The stimulus bill reduced this 10-year period down to 7 years for sales of assets with built-in gain that occur within 2009 and 2010. The Grassley bill reduces this time period to 5 years for all S corporations that have converted from a C corporation.
• Expand the net operating loss provision contained in the stimulus bill. Current law provides that net operating losses from any business may be carried back 2 taxable years before the year that the loss arises and carried forward twenty years. The stimulus bill amended the carryback provision by expanding the carryback from 2 years to 5 years if a small business had gross receipts of $15 million or less. The Grassley bill expands this $15 million or less requirement so that small businesses with $50 million or less in gross receipts can get the benefit of the 5-year net operating loss carryback.

“I hope this bill gets bipartisan support,” Grassley said. “Job creation is a bipartisan issue and really should be a non-partisan issue.”

Grassley, an Iowa Republican, is ranking member and former chairman of the Committee on Finance, which writes all tax policy in the Senate.

Following are the text of Grassley’s floor statement and a more bill detailed bill summary.

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