Each New Year brings thoughts of new and exciting times yet to be experienced. I know from both a business and personal perspective, I enjoy looking forward to working with new clients, creating new opportunities and from a personal perspective, enjoying the time I have with my boys as they tackle new challenges (even if those challenges are part of third grade and first grade).
Congress has their own challenges to manage as they tackle new bills to hopefully strengthen our economy. On one side, each elected official has their local constituency of voters, many who struggle in this economy without a job; on the other side, they have large companies that support their candidacy and lobby for tax incentives that benefit their business.
What about the small business down the street that doesn’t have the time, know-how or funds to get time with his or her local legislators?
2010 was a very good year for the small business tax incentives. For the first time since the research tax credit was enacted, changes in the law (when it was extended) allowed it to be used against alternative minimum tax (AMT) if your company met the definition of “small business.” This small change had a huge impact for thousands of small businesses across the United States but was only a one year change. In 2011, the research and development tax credit (along with other tax credits under Section 38 of the Internal Revenue Code) reverted back to their original status that could not be used to offset AMT.
Was This Change Successful?
The bigger question is whether or not the change to allow Section 38 tax credits to be used against AMT helped the economy and had the impact that Congress wanted. Since we haven’t seen any statistics on the reduced taxes as compared to job growth, I don’t think we can answer that question.
Reinstating Section 38 Credits to be used against AMT
I hear virtually every legislator that stands before an audience say that America is founded and survives on the back of small business. I thought that in 2010 we were beginning to see some actions that demonstrate belief in the words we hear. Now, we are again faced with renewing the many expiring tax cuts that are important to American small business. Congress has an opportunity to follow words with actions. Let’s hope both sides of the aisle recognize that we as voters and Americans are watching.
What say you my friends?
How can small business owners communicate better with legislators?
What tax incentives do you think are most important to small business?
What are your company’s expectations for 2012?
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Randy Eickhoff, CPA is President of Acena Consulting. With more than 20 years of tax and consulting experience, Randy focused on helping companies successfully document and secure tax incentives throughout the US. He has been a long-time speaker nationally as well as conducted numerous training sessions on R&D tax credits and other US tax incentives.