The Recovery Act invested millions in new projects that are improving our infrastructue, repairing homes, and much more. But it also provided millions in direct benefits for families, students, businesses, investors, and more including more than $288 million in various forms of tax relief. Guidance on how to access each of those benefits is below.
The Recovery Act changed a number of tax rules to benefit small businesses, some of which applied to 2008 returns but most of which were relevant for 2009 and even 2010 returns. One major change was an extended net operating loss carryback, which allows businesses to apply a net operating loss during this economic recession to income in prior years. The carryback was subsequently expanded again by additional legislation and can now be applied up to five years previous, rather than the original two. The loss must have occurred from operations between December 31, 2007 and January 1, 2010. Other provisions included an extended bonus depreciation and increased section 179 deduction, as well as a tax credit for businesses who hire returning veterans and certain youth workers.
To encourage investment in small businesses, the Recovery Act also raised the eligible percentage of capital gains from small business stock investments that are exempt from taxation from 50 percent to 75 percent. This provision applies to stocks issued between the February 17, 2009 and December 31, 2010; investors still must hold the stock for five years. The law also repealed Treasury Department Notice 2008-23, which liberalized rules in the tax code that are intended to prevent taxpayers that acquire companies from claiming losses that were incurred by the acquired company prior to the taxpayerâ€™s ownership of the company. It changed a rule for taxable corporations that convert into an S corporation, temporarily reducing the asset holding period from ten years to seven years occurring in 2009 and 2010.
Finally, the Recovery Act enacted seven tax or bond provisions related to energy efficiency and renewable energy that are relevant to businesses. The IRS has a list of these provisions.
Clarification on the "Making Work Pay" tax credit withholding rates can be found in this PDF, and information on the Recovery Act COBRA subsidy can be found here.