The Small Business Jobs Act of 2010 is a federal law

Federal law

Federal law is the body of law created by the federal government of a country. A federal government is formed when a group of political units, such as states or provinces join together in a federation, surrendering their individual sovereignty and many powers to the central government while...

 passed by the 111th United States Congress

111th United States Congress

The One Hundred Eleventh United States Congress was the meeting of the legislative branch of the United States federal government from January 3, 2009 until January 3, 2011. It began during the last two weeks of the George W. Bush administration, with the remainder spanning the first two years of...

 and signed into law by President

President of the United States

The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....

 Barack Obama

Barack Obama

Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...

 on September 27, 2010. The law authorizes the creation of the Small Business Lending Fund Program administered by the Treasury Department to make capital investments in eligible institutions, in order to increase the availability of credit for small businesses.

Provisions

The provisions of the Act included:

• Establishes the creation of a $30 billion lending program for community banks with assets less than $10 billion.

• Increases limits on how much money a company can borrow under various Small Business Administration loan programs.

• Provides $12 billion in tax cuts, including a 100% exclusion of capital gains taxes on small business investments.

• Allows for small businesses to carry back general business tax credits to offset the tax burden from the previous five years. Small businesses also will be able to use these credits against the Alternative Minimum Tax.

• Boosts the tax deduction for start-up expenses to $10,000, for small business owners who spend $60,000 or less to start their business.

• Allows cell phone costs to be deducted or depreciated like other business property.

• Allows business owners to deduct the cost of health insurance incurred during 2010 for themselves and their family members in the calculation of their 2010 self-employment tax.

• Introduces a new requirement for owners of rental property to file information returns (form 1099) reporting certain payments made to suppliers of services

Developments

Some aspects of the Act's bonus depreciation mechanism were extended and amplified by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 , was passed by the United States Congress on December 16, 2010 and signed into law by President Barack Obama on December 17, 2010....

, passed and signed into law in December 2010.

Drawbacks

Most angel investors and venture capital groups utilize convertible debt and/or warrants in the majority of their investment arrangements. A major drawback is the exclusion of convertible debt and warrants from the Act. Holders of convertible debt or warrants must convert or exercise the security and hold it for five years in order to qualify for the tax exemption. This negates the purpose of structuring an investment utilizing convertible debt and/or warrants. Therefore, most angel investors and venture capital groups will receive little or no value from this law.