New Tax Legislation

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A bevy of small-business tax bills were enacted before the holiday break. Here's three you need to know.

Just before Congress adjourned for the holidays, a bevy of tax bills made their way to the President's desk. Here's three small-business owners need to know.

The Tax Increase Prevention Act of 2007 hiked the exemption amounts for the alternative minimum tax, or AMT, for individuals in 2007, keeping more than 20 million taxpayers from owing this tax, which only applies when it is higher than the regular tax. Sole proprietors and owners of pass-through entities -- partnerships, limited liability companies, and S corporations -- take business-generated tax preferences and adjustment into account when computing their personal AMT, so they will see relief. (Caution: Exemption amounts for 2008 are set to revert to substantially lower levels unless Congress takes additional action.)

The Mortgage Forgiveness Debt Relief Act of 2007 is designed primarily to provide tax help for homeowner who refinance their loans and obtain debt relief in the process. It exempts from income the debt relief on qualified home loans.

To help pay for this relief, the failure-to-file penalty for partnership returns is increased from $50 to $85 per partner per month for up to 12 months. The same rule applies to S corporation returns.

The Energy Independence and Security Act of 2007 creates new energy standards for automobiles and home appliances. Important tax provisions were stripped from the Act at the last minute. However, the Act did extend the additional 0.2 percent FUTA surtax, for a total FUTA rate of 6.2 percent. This surtax was originally introduced in the 1970s and had expired at the end of 2007.

What Wasn't Enacted
Congress failed to extend a number of important tax breaks that expired at the end of 2007, including the research credit, the 15-year amortization period for leasehold and restaurant property, and the ability to expense environmental remediation costs.

These and other tax measures will need to be considered by Congress in 2008.