Small Business Jobs Act Signed into Law: A Windfall for Small to Mid-sized Manufacturers

President Obama signed the Small Business Jobs Act (SBJA) of 2010, today, on September 27, 2010.  The SBJA provides much needed tax relief that will be available to numerous small and medium sized businesses for 2010.  Of particular note are two provisions: the modification to a five year credit carryback and the modification of the Alternative Minimum Tax (AMT) in relation to general business credits.

Five Year Carryback on Unused General Business Credits 

Previously, the carryback and carryforward rules for general business credits stated, generally, that unused credits were to be carried back only one year and, if unused in that year, then carried forward up to twenty years.  The previous rules do not provide the immediate tax relief many taxpayers need.

With the SBJA, taxpayers will be able to carry back unused credits generated in 2010 a total of five years before having to carry them forward.  This change will allow many taxpayers who have been hit recently by the economy to still receive an immediate tax benefit, even if they are unprofitable in 2010.

General Business Credits Not Subject to AMT 

Prior to the SBJA, general business credits generated by a taxpayer were subject to the AMT.  This credit subjugation to the AMT drastically limited or completely eliminated the benefit of the general business credit to many taxpayers.  With the passage of the SBJA by Congress, many small to medium sized businesses will not have this AMT limitation applied to general business credits generated in 2010.

Congress has defined the businesses that can take advantage of this AMT change as being the sole proprietorships, partnerships, and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.

Immediate Tax Relief 

These two provisions will provide the immediate tax relief needed by many small to medium sized businesses to help them succeed in today’s economy.  It is noteworthy that these provisions will apply to the Research and Development Tax Credit when it is passed later this year, thereby allowing many taxpayers to take advantage of this credit that previously were unable to due to a lack of utilization.

Free Webinar

In response to this great opportunity, Paradigm Partners is offering a series of Free Webinars to highlight the benefits to small to mid-sized manufacturers.

To view a schedule and register for one of these webinars, click the link below:

http://www.paradigmlp.com/UserFiles/file/WebRegSBJA.html