House Passes Small Business Tax Relief Bill

By a vote of 360 to 45, the House on February 16, 2007, passed the Small Business Tax Relief Bill of 2007 (HR 976), designed to be packaged with a minimum wage increase bill (HR 2) passed earlier by the House. The Senate included in its version of HR 2 both the minimum wage increase and a package of $8.3 billion in tax breaks. The much smaller $1.3 billion tax package that makes up the House-passed legislation includes some small business provisions similar to the Senate legislation -- focused on expanding the Code Sec. 179 small business expensing election and the Work Opportunity Credit. Small business provisions unique to the House legislation relate to a tax credit for Social Security taxes on employee tips, would allow some small business credits against the alternative minimum tax, and would allow a husband and wife to operate a business joint venture without being a partnership. Other tax provisions included in the House legislation would deny the lowest capital gain rate to certain qualifying children, suspend interest and penalties if the IRS fails to comply with certain notice requirements, and accelerate some corporate estimated tax payments.

A conference committee will be required to resolve the considerable differences between the House and Senate version of the bills. The Administration has indicated that it prefers the level of small business tax breaks in the Senate version of the legislation, but seems to be expressing some reservations about the level of revenue raisers included.