NEW YORK (CNNMoney.com) -- One week after the Senate passed a $42 billion bill aimed at helping small businesses, the House voted Thursday to send the bill to President Obama's desk.
The measure, which passed the House in a 237 to 187 vote, is aimed at creating 500,000 jobs, according to a Senate summary of the bill. The Small Business Jobs Act also is intended to make credit more available for Main Street and enacts about $12 billion in tax breaks.
The president will sign the bill into law on Monday.
"The small business jobs bill passed today will help provide loans and cut taxes for millions of small business owners without adding a dime to our nation's deficit," said Obama in a statement.
Not only is Obama under pressure to create jobs, but he started talking about getting cheap capital to small businesses nearly a year ago.
The House first passed a version of the legislation about 3 months ago, but the bill met stiff Republican opposition in the Senate. After months of debate and significant pressure from the White House, the Senate finally passed the bill in a 61 to 38 vote last week.
The president chided Congress for the politicking even as he celebrated the passage. "After months of partisan obstruction and needless delay, I'm grateful that Democrats and a few Republicans came together to support this common-sense plan to put Americans back to work," he said.
The Financial Services Roundtable, a group of the nation's largest financial institutions, supports the bill. "Small businesses are the linchpin of our nation's economic growth and well-being," said Steve Bartlett, president of the Roundtable.
Republicans have largely opposed the bill: The votes in both the House and the Senate have fallen nearly on party lines.
"Unfortunately, this bill does nothing to help end the uncertainty that is crippling job creation and hurting small businesses," said House Republican Leader John Boehner, R-Ohio. "Instead it puts taxpayers on the hook for even more bailouts."
What is in the bill: The Small Business Jobs Act authorizes the creation of a $30 billion fund run by the Treasury Department that would deliver ultra-cheap capital to banks with less than $10 billion in assets.
The idea is that community banks do the lion's share of lending to small businesses, and pumping capital into them will get money in the hands of Main Street businesses.
Another provision aims to increase the flow of capital by providing $1.5 billion in grants to state lending programs that in turn support loans to small businesses. The state programs have proven themselves to be efficient, targeted and effective, but with many states struggling to balance their budgets, the programs are going broke.
The bill would also provide a slew of tax breaks that will cost $12 billion over a decade, according to a preliminary estimate from the Joint Committee on Taxation. The breaks aim to encourage small businesses to purchase new equipment, to incentivize venture capital firms to invest in small businesses, and to motivate entrepreneurs to start their own business.
Another provision of the legislation increases the loan limits on government-backed loans. It also extends the popular loan sweeteners for Small Business Administration loans through the end of the year. The sweeteners, initiated with the 2009 Recovery Act, have been a ,stimulus success story, and small businesses have been in line waiting for more funding.
There are quite a few tax breaks, but here is a rundown of five that have the potential to be game changers for the small businesses that are affected:
100% exclusion of capital gains: The bill would eliminate capital gains taxes on investments in qualifying small businesses.
To qualify for the tax break, a small business needs to be a C corporation - sorry, LLCs and S-corps - with assets of less than $50 million. The investor must buy the stock at "original issue," meaning it's purchased directly from the company, and has to hold it for at least five years.
Carry back provision extended to 5 years: When a business books a profit, it pays income tax on its earnings. But if the business then turns a loss in later years, tax rules allow the business to "carry back" its loss and deduct the money from earlier profits.
By filing an amended tax return for the earlier, profitable year, the business can claim an immediate refund on the taxes it paid. The bill allows certain small businesses to extend the carryback for 5 years.
Increase of Section 179: To motivate companies to go spend money on equipment, "Section 179" of the tax code allows businesses to write off capital expenditures immediately, putting cash in a company's pocket quickly.
Thanks to the Recovery Act, businesses can write off up to $250,000 worth of equipment through 2009. This bill extends the benefit through 2011 and the maximum increases to $500,000.
Bonus depreciation extension: Businesses can also opt to recover the cost of capital expenditures by writing off a bit of the cost of the purchase over a number of years, following a depreciation schedule.
Temporarily, businesses can front-load that deduction by writing off 50% of capital expenditures made in 2008 and 2009. This bill extends that first-year depreciation for qualifying property that is put in service in 2010.
Help for start-ups: Currently, entrepreneurs can deduct up to $5,000 in start-up expenses. That amount is reduced by the amount that the start-up's expenses exceed $50,000. The bill would increase the deduction to $10,000 for 2010, and the deduction would be reduced by the amount that an entrepreneur exceeds $60,000.
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