Econ Stim Small Bus Education Paper


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White Paper that explains the Economic Stimulas Plan for small businesses.

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Econ Stim Small Bus Education Paper

  1. 1. The stimulus plan and your small business Benefits and opportunities to help you operate and grow The $787 billion American Recovery and Reinvestment > Increase in small business expensing. Businesses Act of 2009 includes a number of measures designed to can choose to write off the cost of certain capital help small businesses grow and operate more profitably. expenses immediately rather than follow a depreciation Some of these incentives can be claimed directly, while schedule. As in 2008, small businesses can others are accessible through the Small Business expense up to $250,000 in capital expenditures Administration (SBA). in 2009 (limitations apply after purchasing $800,000 of property). Benefits you can claim directly > More flexibility to claim net operating losses. Net Here are a few of the small business incentives operating losses for 2008 can now be carried back two now available: to five years to offset income in other years and reduce > Extension of bonus depreciation. As in 2008, businesses tax liability. The expanded carryback provision affects will be allowed to recover the costs of capital only 2008 NOLs and applies to small businesses with expenditures made in 2009 more quickly than would average annual gross receipts of $15 million or less. be possible under an ordinary depreciation schedule. Businesses can immediately write off 50% of the cost of > Favorable tax treatment on the sale of qualified small qualifying depreciable property acquired and placed into business stock. Seventy-five percent of the capital gain service in 2009 and, in some cases, in 2010. from the sale of certain small business stock held more than five years can be excluded for tax purposes (typically, a 50% exclusion is allowed). This provision Bonus depreciation allows faster applies to stock issued after Feb. 17, 2009, and write-off of expenses in the first year before Jan. 1, 2011. It is limited to investments by (Assumes $100,000 of qualifying depreciable assets in 2009) individuals and pass-thru entities and does not apply $60,000 to corporations. The tax rate on the remaining gain is 28%. normal schedule > “Targeted groups” incentives expanded to include bonus schedule $50,000 unemployed veterans and disconnected youth. A 40% tax credit is available to employers for the $40,000 first $6,000 of first-year wages paid to members of targeted groups. As a result of the stimulus plan, $30,000 the targeted groups have been expanded to include certified: 1) military veterans who were released from $20,000 active duty during the five-year period prior to their hiring and who received unemployment compensation $10,000 for at least four weeks in the year prior to their hiring; and 2) “disconnected youth,” age 16–24 on the hiring $0 date who have not been regularly employed or have not year 1 year 2 year 3 year 4 year 5 attended school in the past six months and lack basic skills for employment. A business with $100,000 of qualifying depreciable assets in 2009 (on equipment with a five-year straight-line depreciation schedule) would > Temporary reduction of “Built-In Gains” holding period be able to depreciate $60,000 ($50,000 bonus and $10,000 normal for S corporations. Under current law, if a taxable depreciation) in the first year and $10,000 per year in subsequent years. Under straight-line depreciation rules, $20,000 of the value could be corporation converts to an S corporation, the conversion depreciated yearly. itself is not a taxable event. But to avoid paying taxes
  2. 2. on “Built-In Gains” attributed to appreciation before the > Expansion of the SBA’s Microloan program. This program conversion, the S corporation was required to hold the offers technical assistance and loans of up to $35,000 appreciated assets for 10 years. The holding period is for newly established or growing small businesses. now reduced to seven years for sales occurring in the These loans are aimed primarily at low-income 2009 and 2010 tax years. individuals, women and minorities. > Refinancing of some SBA loans. This will put many Opportunities available through the SBA borrowers in a better position to expand their businesses. The stimulus plan also contains funding for the SBA and changes some existing rules to assist more small Talk to your advisor businesses in need of help. How do the provisions of the stimulus package affect your company’s prospects in the current economic climate? Some of the key provisions include: Ask your Ameriprise financial advisor to help you assess > Temporary reduction or elimination of fees on SBA loans how your business can benefit from this legislation and an increase in SBA guarantees of loans. The existing and identify other potential opportunities in today’s SBA maximum guarantee of 85% of the value of loans up challenging environment. to $150,000 will be increased to 90%. > Creation of a new loan program to help small businesses deal with existing debt. The SBA will offer deferred- payment loans of up to $35,000 to qualifying small businesses for payments on an existing qualifying loan. Repayment can be deferred for up to six months, or up to 12 months after the loan is fully disbursed. Neither Ameriprise Financial nor is affiliates or representatives may provide tax or legal advice. Consult your tax advisor or attorney regarding specific issues. Ameriprise Financial is the umbrella marketing name used by two separate and distinct registered broker-dealers of Ameriprise Financial, Inc.: Ameriprise Advisor Services, Inc. and Ameriprise Financial Services, Inc. Investments and financial advisory services are offered through Ameriprise Advisor Services, Inc., Member NYSE/FINRA/SIPC, which is not affiliated with H&R Block, Inc. or any of its affiliates. Investments and financial planning services are offered through Ameriprise Financial Services, Inc., Member FINRA and SIPC. Some products and services described may not be available in all jurisdictions or to all clients. © 2009 Ameriprise Financial, Inc. All rights reserved. 242955 A (4/09)