The American Families and Jobs Act, a SEMA-supported legislative package comprised of three bills (the Tax Cuts for Working Families Act, the Small Business Jobs Act, and the Build It in America Act), has passed in the U.S. House of Representatives. 

• Included in the bill are key provisions that will benefit automotive aftermarket businesses, including 100 percent bonus depreciation for qualified property, expanded small business expensing to $2.5 million, and the restoration of immediate expensing for Research and Development (R&D) for tax years 2021 through 2025. The bill would also create full expensing for machines and equipment. 

The American Families and Jobs Act now awaits consideration on the floor of the U.S. House of Representatives. 

The Small Business Jobs Act includes multiple provisions designed to help small businesses navigate price increases, worker shortages, and supply-chain failures by cutting IRS red tape, expanding jobs and investment, and supporting rural communities. Below are key provisions:

Expands Sec. 179 small business expensing to $2.5 million.

• The provision builds on the current $1 million cap under Sec. 179 of the tax code and increases the maximum amount a taxpayer may expense to $2.5 million, reduced by $4 million. The proposal applies to property placed in service in taxable years beginning after December 31, 2023. 
• Sec. 179 allows a taxpayer to expense the cost of qualifying property rather than to recover such costs through tax depreciation deductions, subject to limitation. Qualifying property is defined as tangible personal property, off-the-shelf computer software, and qualified real property that is purchased for use in the active conduct of a trade or business. 

Increases the general 1099 reporting threshold to $5,000.

• Currently, business owners must send tax forms to contractors that provide more than $600 of work to their business. 
• This provision offers relief for small businesses by increasing the reporting threshold for subcontract labor from $600 to $5,000.

Expands tax incentives to investors in startups organized as "S Corporations."

• Currently, IRC 1202 tax benefits are available only to investors in startups organized as "C Corporations," leaving out "S Corporations," which represent nearly half of all U.S. business entities. The bill includes "S Corporations" in this incentive program.
• The provision expands the exclusion from qualified small business stock under IRC 1202 by modifying the holding period by providing a new 50 percent exclusion for stock held at least three years and a 75 percent exclusion for stock held at least four years. Stock held for at least five years would continue to be eligible for a 100 percent exclusion. It also expands qualification to "S Corporations" and allows investors to add their holding period for qualified convertible debt to the holding period required to qualify for the exclusion.

Establishes rural opportunity zones.

• Provides for temporary deferral of inclusion in gross income for capital gains reinvested in a qualified rural opportunity fund and the permanent exclusion of capital gains from the sale or exchange of an investment in the qualified rural opportunity fund, following the structure of opportunity zones created in the Tax Cuts and Jobs Act (P.L. 115-97).
• It defines a qualified rural opportunity fund as an investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified rural opportunity zone property that holds at least 90 percent of its assets in qualified rural opportunity zone property.

The Build It in America Act would revive a set of tax breaks for companies' research spending, interest expenses, and equipment purchases while also reinstituting a cap on the number of clean vehicle tax credits. All three policies help lower corporate tax bills but lapsed last year as part of a larger, planned wind-down from the 2017 tax overhaul. Below are key provisions: 

Restores immediate expensing for R&D for tax years 2021 through 2025.

• Currently, businesses must deduct R&D expenses over five years for research done in the United States and over 15 years for research outside the United States.
• The provision delays the date when taxpayers must begin deducting their research or experimental costs over five- and 15-year periods until the taxable year 2026.

Allows mid-sized businesses to fully deduct interest expenses.

• Starting in 2022, employers have faced a more restrictive limit on the amount of business interest that they can deduct each year. Instead of using "earnings before interest, taxes, depreciation, and amortization," companies can only deduct interest expenses only up to 30 percent of their "earnings before interest and taxes" currently. 

Creates 100 percent expensing for machines and equipment to help U.S. businesses hire workers and expand manufacturing.

• Currently, businesses can only deduct 80 percent of the cost of equipment, machinery, and vehicles, with the rest of the deduction claimed over the life of each asset. 

Extends 100 percent bonus depreciation for qualified property placed in service after December 31, 2022, and before January 1, 2026.

• Extends 100 percent bonus depreciation for qualified property placed in service after December 31, 2022, and before January 1, 2026.