Senate Passes Minimum Wage Hike/Small Business Tax Relief Bill

By a vote of 94 to 3, the Senate on February 1, 2007, approved a substitute amendment to HR 2, packaging a minimum wage increase with a set of tax provisions focused on small business tax breaks and a few revenue raisers. The small business tax breaks address expensing of capital expenditures; amortization of leasehold, restaurant and retail improvements; cash accounting rules; and the work opportunity and welfare-to-work tax credits. A half dozen provisions address various perceived problems with the S Corporation rules. The revenue raisers include provisions addressing certain sheltering transactions involving leases and inverted corporations; the treatment of contingent payment convertible debt instruments; the expatriation of individuals; denial of deductions for punitive damages and certain fines and penalties; limits on nonqualified deferred compensation; and increases in a variety of penalties.

The Senate bill, including the tax breaks with an estimated ten-year cost of $8.3 billion, must now be reconciled with the House version of the bill that included only the minimum wage increase. The Administration has indicated that it prefers the Senate version of the legislation.