Congress Extends Temporary Provisions of Small Business Act

On Dec. 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). Among a variety of other matters, the Act includes an extension of favorable tax treatment relating to certain investments in small businesses made on or before Dec. 31, 2010. The deadline for such investments to be eligible to receive favorable tax treatment is now Dec. 31, 2011.

The previously enacted Small Business Jobs and Credit Act of 2010 created a temporary exclusion for 100 percent of any gain recognized on the sale of qualified small business stock (QSBS) acquired after Sept. 27, 2010, and before Jan. 1, 2011. In addition, during this period, the excluded gain is not treated as a preference item for purposes of alternative minimum tax, although other limitations may apply. The Act results in an extension of a potentially significant federal income tax benefit to non-corporate investors, essentially reducing to zero the federal tax rate for capital gains on QSBS to which the change applies.

Read an overview of the QSBS provisions.

If you have questions regarding the Act or QSBS provisions, please contact Kristine Danz or Janice Wilken.