July 23, 2004 -- The House of Representatives voted unanimously for legislation that keeps a tax benefit for small business investments in place. In a separate vote, the House passed a bill that would allow more individuals and businesses to use simpler tax forms.
The 424-0 vote extended a tax break through 2007 for small businesses that allows them to deduct up to $100,000 for qualified capital investments. Had the benefit expired, the maximum deductible amount would have fallen to $25,000 in 2006. The estimated cost of the bill is $1.2 billion over the next ten years.
The bill would also preserve the cash accounting method for small businesses. Under current law, companies with less than $5 million in annual gross receipts are permitted to use the cash method of accounting. The legislation would adjust this level for inflation. A bill was recently introduced into the Senate that would raise the limit to $10 million.
A separate bill passed by the House would expand access to simpler tax forms for individuals. Taxpayers earning up to $100,000 would be permitted to use the less complicated 1040EZ form when filing their taxes. Currently, only those earning $50,000 or less can use the form.
Maintaining the small business investment deduction for only two years is part of an ongoing battle over how long President Bush's 2003 tax cuts should be extended. Republicans have been split on the duration and whether the cost needs to be offset by raising revenue in other areas. Republicans in the Senate have been pushing for only a two-year extension. Republican leaders in the House are backing five years.
President Bush, while aiming to make the cuts permanent, has been asking that the child tax credit, a tax break for married couples and an expansion of the 10 percent tax bracket be extended for five years. He had hoped for a congressional vote before the summer hiatus, but could only get backing for two years. Those issues will be revisited in September.