House to Vote on Small Biz Tax BillApril 17, 2012
House Majority Leader Eric Cantor (R-Va.) along with House Ways And Means Committee Chairman Dave Camp (R-Mich.) introduced a narrow tax cut measure aimed at reducing small-business tax rates for the next year. The House is scheduled to take-up the bill later this week.
The Small Business Tax Cut Act (H.R. 9), was introduced on March 21 and will allow businesses with fewer than 500 employees to take a tax deduction equal to 20 percent—for one year—of their active business income. The deduction would apply to business owners who pay their taxes at either the individual–which comoses the majority of small businesse–or corporate level.
A number of eligibility conditions exist, including limitations on how much can be deducted for those claiming the credit. Under the bill, small businesses with 499 or fewer employees would be able to deduct up to 20 percent of their qualified domestic business income of the taxpayer for the taxable year, or taxable income for the taxable year, whichever is less. However, a taxpayer’s deduction for any taxable year may not exceed 50 percent of certain W-2 wages of the qualified small business.
The bill would make the deduction far more available than a version introduced in 2010, which had dozens of exclusions including professional sports teams, accounting firms, actuarial firms, financial services, brokerage firms, and gambling and animal racing property. Cantor also opted to use the U.S. Small Business Administration’s definition of a small business to determine who should qualify for the tax cut: “any employer engaged in a trade or business if such employer had fewer than 500 full-time equivalent employees for either calendar year 2010 or 2011.”
According to a draft of the legislation, the only restriction retained from 2010 is a prohibition for producers of pornographic books, magazines, periodicals, films, videotapes, and digital images as defined in Section 2257 of title 18, U.S. Code.
The legislation was considered in the House Ways and Means Committee prior to the April district work period and passed favorably 21-14. Thus, it was placed on the House floor calendar for action this week.