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Obama Proposes Extending Small Business Tax Cuts Permanently

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As first reported on Accounting Today online, at: http://www.accountingtoday.com/news/Obama-Proposes-Extending-Small-Business-Tax-Cuts-Permanently-57104-1.html?ET=webcpa:e1266:206946a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=WebCPA_Daily_013111 

Washington, D.C. (January 31, 2011)

By Michael Cohn

The Obama administration proposed permanently eliminating capital gains taxes on some types of small business investments held for over five years.

The White House announced the tax cut extension Monday as part of a group of proposals aimed at encouraging small business entrepreneurship. The capital gains exemption extends a provision of last year’s Small Business Jobs Act that is set to expire this December.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 provides a 100-percent exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years.  The amount of gain eligible for the exclusion is limited to the greater of $10 million or ten times the taxpayer’s basis in the stock. This provision applies to qualified small business stock issued after Dec. 31, 2010, and before Jan. 1, 2012.  The administration’s fiscal year 2012 budget proposal would make this provision permanent, increasing private sector investment in small businesses.

“Entrepreneurs embody the promise of America: the belief that if you have a good idea and are willing to work hard and see it through, you can succeed in this country,” said Obama. “And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs. That’s why we’re launching Startup America, a national campaign to help win the future by knocking down barriers in the path of men and women in every corner of this country hoping to take a chance, follow a dream, and start a business.”

Other proposals from the administration as part of its budget plan include an expansion of the New Markets Tax Credit, which aims to encourage more small businesses and entrepreneurs in disadvantaged communities. The Treasury Department plans to simplify the rules for small businesses to access up to $5 billion in tax credits for private investment in lower-income communities.

The Treasury Department will host a March 2011 conference to explore access to capital for small businesses. A broad range of options to help small businesses access the capital they need to expand and grow will be discussed at the conference, according to the White House, and more details on the conference will be released in the coming weeks.

The administration also highlighted a new Startup America initiative led by America Online co-founder Steve Case. Intel and IBM also announced new investments in small businesses, while Facebook will be hosting Startup Days events at cities across the U.S.

The Network for Teaching Entrepreneurship, a nonprofit that provides a first-class entrepreneurship education for at-risk high school students from low-income communities, is launching new programs supporting young entrepreneurs and their teachers. Ernst & Young LLP will honor NFTE youth entrepreneurs at regional Ernst & Young Entrepreneur of the Year Award galas across the country to bring attention to the next generation of young entrepreneurs.

The Small Business Administration will also direct $2 billion in existing guarantee authority over the next five years to match private sector investment funding for startups and small firms in underserved communities, as well as seed and early-stage investing in firms with high growth potential, through its Small Business Investment Company program.

Together, the SBA and the Department of Energy will boost their mentorship for cleantech startups, while the Veterans Administration is launching new training programs for veterans who want to start new businesses.

The Department of Commerce will expand the i6 Challenge to help foster the commercialization of clean technologies. The Commerce Department is also finalizing a plan to allow entrepreneurs to request faster review of their patents, an initiative that should lower patent pendency times overall and speed the deployment of new ideas to the marketplace.