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President Signs into Law Small Business Tax Relief, Minimum Wage Increase
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May 30, 2007 - On May 25, President Bush signed into law the war supplemental funding bill that also includes two provisions directly affecting businesses: a $2.10 increase in the federal minimum wage, and a $4.8 billion package of tax relief aimed mostly at offsetting the wage hike costs for small businesses.
The new law phases in the $7.25 minimum wage in three stages over the next two years; beginning 60 days from enactment, the current $5.15 hourly minimum goes to $5.85. A year after that initial boost, the minimum will rise to $6.55 and, a year after that, to $7.25.
The $4.8 billion business tax relief package was contained in the law largely to address small business concerns that the costs of increasing the minimum wage will translate into lost jobs and lost expansion unless offset.
The provision that most benefits small business increases the 2007 Section 179 expensing allowances – the amount small businesses can immediately write off on equipment purchases – from $112,000 to $125,000. It also increases the total amount of qualifying equipment that can be purchased during 2007 to receive the benefit, from $450,000 to $500,000. (Total purchases over $500,000 will reduce, dollar for dollar, the amount of the tax write-off).
Both the $125,000 expensing and the $500,000 limit will be indexed for inflation after 2007 and before 2011, when the law would have to be renewed.
Other business tax relief provisions contained in the new law include a three-and-a-half year extension of the work opportunity tax credit (WOTC), several modifications to the standards that allow a small business to qualify for S corporation treatment, and a waiver of individual and corporate alternative minimum tax (AMT) limits on the WOTC and the tip credit.
Find out about AMT's Government Relations priorities to strengthen U.S. manufacturing.
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