When the 111th Congress adjourned for the election recess, they left behind a Mt. Everest of unfinished legislation not the least of which was passing a Federal budget for a fiscal year that started 6 weeks ago. As with that challenging mountain, some legislative initiatives will succumb to storms and avalanches along the way.
With the voters sending a resounding message about government spending and regulatory intrusion into their lives, will this Congress pick up where they left off, or will they listen to the Sherpas’ collective voices and descend back to base camp to rethink which mountains they really want to climb?
Here is a quick run-down of important tax planning issues affecting small business that remain to be decided:
- Extension of the Bush personal income tax cuts for all or some or none. (This disproportionately affects small business owners because most include business income on their personal tax returns since they are structured as LLC’s, Subchapter S corps, Partnerships or Sole Proprietorships which are not independent tax-paying entities.)
- Earned income tax credit reduction.
- Credit for employer-provided child care.
- AMT (alternative minimum tax) modifications.
- Limitation on itemized deductions.
- Deductions for employer-provided educational assistance.
- Deductions for employer-provided mass transit and parking benefits.
- Reduction in education savings account contributions.
- Special rules for qualified small business stock.
- Reduction in S Corp. built-in gains tax.
- Inheritance tax reduction or elimination.
- Qualified family-owned business deduction.
There are dozens more provisions expiring on 12/31/10, but these twelve are critical to financial planning for small business owners.
Of course, there are other wish list items that the 111th Congress may decide to push through in their last gasp to conquer their mountain, notably “Cap and Tax” and “Card Check” legislation, both of which will have an outsized effect on small business.
Assuming Congress breaks for weekends, Thanksgiving and Christmas, they have a total of 34 working days to accomplish what they couldn’t in 10+ months. The bets are on the table about what will and won’t be accomplished, but perhaps professional mountain climbers can provide advice: when you try to tackle too much with a fierce wind in your face, you may find yourself out of oxygen and rolling downhill.