On May 25, the President signed into law the Iraq emergency supplemental appropriations bill (P.L. 110-28). The measure carries the Small Business and Work Opportunity Tax Act of 2007 (the Small Business Act).  The President's signature also operated to set the effective date of various provisions of the Small Business Act.  The intent of this legislation is to ease the burden on small businesses of an increase in the minimum wage.

Effective for tax years beginning after December 31, 2006 and before January 1, 2011, the Small Business Act increases both the maximum annual expensing amount under Code Section 179 and the threshold phaseout amount.  Code Section 179 is a provision that allows businesses to expense assets purchased for use in their business.  For tax years beginning in 2007, the practical impact of these changes is to increase the annual expensing limitation from $112,000 to $125,000, and to increase the phaseout amount from $450,000 to $500,000.  An additional change is the added ability to expense “off-the-shelf” software.  

Another recent change is that the Work Opportunity Tax Credit (WOTC) and FICA tip credit can offset 100% of AMT liability.  This new provision is effective for WOTCs and FICA tip credits determined in tax years beginning after December 31, 2006 and to carrybacks of those credits.  The WOTC is extended 44 months to August 31, 2011 for most targeted groups, effective for individuals who begin work for the employer after May 25, 2007. The Small Business Act eases the requirements for, and renames, the WOTC targeted group called “high-risk youths,” is expanded to cover “Ticket to Work” plan participants, and is enhanced for employing certain disabled veterans effective for individuals who begin work for the employer after May 25, 2007.

These provisions are only two of many that are contained in the small business tax package.  If you have further questions about this topic, or would like to inquire more about the other parts of the small business tax package, please contact a member of our professional staff by email at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or by telephone at 785-272-4484.