U.S. House passes Small Business Tax Fairness Act

Earlier this month, the House of Representatives approved by a vote of 257-169 a broad-based tax initiative providing tax relief for tens of thousands of small businesses and their employees, according to a press release from the Ways and Means Committee.

The plan also helps self-employed people with their health care costs while strengthening pension plans for 70 million middle-income American workers.

"The Small Business Tax Fairness Act aims to help the diesel engine of our economy and the job-creation factory of our country America's small businesses. And that's why it was right to pass this plan ... to help more Americans get health insurance, to give millions of Americans a safer retirement, to help small business continue to create jobs and economic growth, and to put a nail in the coffin of one of the worst taxes in America today, the death tax," said Ways and Means Chairman Bill Archer, R-Texas, in the release.

Following is a summary of the provisions of HR 3832, The Small Business Tax Fairness Act of 2000.

Health insurance. Accelerate the 100 percent health insurance deduction for the self-employed. Effective date: 2001.

Small business. Increase the amount of equipment eligible for expensing to $30,000 from $19,000 and phase up from 50 percent to 60 percent the business meal deduction. Effective date: 2001.

Death tax relief. Reduce the top estate tax rate of 55 percent to 50 percent by 2002, and reduce all rates by 1 percentage point per year in 2003 and 2004. Repeal the 5 percent bubble. Convert the unified credit into a true exemption. Modify the generation-skipping tax. Effective date: Phase in beginning in 2001.

Income housing and bond volume cap. Increase and expand the low-income housing tax credit and accelerate scheduled increase in the state bond volume caps. Effective date: Phase in beginning in 2001.

Pension modernization. Phase in increased contribution limits on pre-tax salary (i.e., 401 (k)) contributions from $10,000 to $14,000. Add catch-up provisions for workers 50 and older. Increase pension portability by permitting rollovers among plans and faster vesting schedules for employer matching contributions. Effective date: 2001.

Distressed communities. Create 15 new renewal communities (at least three must be in rural areas) with targeted, pro-growth tax initiatives to create jobs, encourage personal savings, foster home ownership and clean up neighborhoods on former industrial sites so new business can grow. Effective date: 2001.

Installment method of accounting. Reinstate the installment method of accounting for accrual basis taxpayers. As many as 260,000 businesses a year could be negatively impacted if the prior law is not restored. Effective date: The provision would be effective for sales or other dispositions on or after Dec. 17, 1999.