Overview
Title
To amend the Internal Revenue Code of 1986 to establish a State and local general sales tax credit for small businesses.
ELI5 AI
H. R. 10429 is like a magic helper for small shops to save money on their sales, giving them a special money-back offer if they earn $1,000,000 or less. But, this help stops by the end of 2028 and some shops might need extra help to understand how it works exactly.
Summary AI
H. R. 10429, known as the "Brick and Mortar Small Business Tax Credit Act of 2024," seeks to amend the Internal Revenue Code to create a tax credit for small businesses. Specifically, it allows eligible small businesses with gross receipts of $1,000,000 or less to receive a credit equal to 5% of their gross receipts, even if these receipts are not taxed at the state or local level. The credit begins to phase out for businesses earning over $1,000,000 and will no longer be available after December 31, 2028. Additionally, the bill mandates a public awareness campaign to inform small businesses about this tax credit.
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AnalysisAI
General Summary of the Bill
The proposed legislation, known as the "Brick and Mortar Small Business Tax Credit Act of 2024," aims to provide a tax credit specifically for small businesses. This credit, rooted in the Internal Revenue Code of 1986, seeks to offer financial relief in the form of a 5% credit on business gross receipts up to $1,000,000, regardless of whether these receipts are subject to state or local sales tax. The eligibility criteria focus on businesses with gross receipts not exceeding $2,000,000, with a significant portion of sales expected to be conducted in-person. However, there is a notable exception for tax years 2025 and 2026, where any percentage of in-person sales qualifies. The legislation intends to sunset this credit after December 31, 2028.
Summary of Significant Issues
Eligibility Requirements and Exceptions: The eligibility criteria for small businesses include conditions that change for two specific years (2025 and 2026). During these years, the usual requirement for in-person sales constituting a majority of gross receipts is waived. This exception could lead to confusion among business owners and potentially create unequal treatment among businesses spanning these years.
Complex Phaseout Calculation: The bill includes a phaseout of the credit for businesses that have gross receipts exceeding $1,000,000. This complex formula could necessitate professional assistance for small businesses, increasing their administrative burden and costs.
Exclusion of Online Businesses: The definition of "in-person sales" might inadvertently exclude online businesses from this tax relief, potentially disadvantaging small businesses that operate online, which are now a significant part of the modern economy.
Uncertain Long-Term Benefits: The termination clause of the tax credit after 2028 may introduce uncertainty for businesses. Those looking to plan financially over the long term might find it difficult to rely on this credit beyond the sunset date.
Public Awareness Campaign: The need for a $500,000 public awareness campaign to promote the tax credit implies a potential for inefficiency. If not effectively executed, this campaign may be perceived as unnecessary government spending.
Impact on the Public
Broadly, the bill is intended to support small businesses, especially those operating in physical locations, by easing their tax burdens. By doing so, it encourages local economic activity and could stimulate business growth. Consumers might indirectly benefit from these businesses' increased viability and potential expansion.
Impact on Specific Stakeholders
Small Business Owners: The primary beneficiaries of the bill, particularly those operating in physical retail spaces, stand to gain significantly from the proposed tax credit. However, for businesses that operate mainly online, the exclusion from this credit could mean missed opportunities for financial support. In addition, the complexity of the credit calculation and its phased reduction could lead to increased demand for professional tax assistance, burdening some small business owners with additional costs.
Tax and Legal Advisors: These professionals may see increased demand for their services due to the complex language and structure of the credit, particularly in helping businesses calculate their eligibility and potential benefits accurately.
State and Local Governments: There could be implications for state and local budgets, potentially requiring adjustments if the tax credit results in decreased tax revenues from small businesses.
Federal Government and Tax Policy Analysts: The effectiveness and execution of the public awareness campaign warrant scrutiny. Successfully reaching the intended audience can maximize the bill's impact and justify the allocated budget for this campaign. However, if mismanaged, it could lead to criticism over government expenditure.
In conclusion, while the bill holds potential benefits for small businesses, especially those that operate in-person, several complexities and potential inequities need to be considered and addressed. The interplay between encouraging traditional business models and accommodating modern online businesses remains a critical dialogue as policymakers seek to foster economic growth.
Financial Assessment
The "Brick and Mortar Small Business Tax Credit Act of 2024" aims to support small businesses through a credit related to state and local sales taxes. The bill outlines how this financial support is structured and addresses several pertinent issues related to its implementation.
Financial Summary
The bill establishes a State and local general sales tax credit for small businesses, specifically targeting those with gross receipts of $1,000,000 or less. These eligible businesses can claim a credit amounting to 5% of their gross receipts irrespective of whether these receipts are subjected to state or local sales taxes. This incentive begins to reduce (phase out) for businesses whose receipts surpass this $1,000,000 threshold. If a business earns more than this amount, the reduction in credit is calculated proportionately based on their excess earnings beyond $1,000,000. However, the credit will no longer be applicable after December 31, 2028.
Appropriations and Financial Allocations
To support the dissemination of information about this tax credit, the bill authorizes the allocation of $500,000 for a public awareness campaign. This campaign aims to inform small businesses about the availability and benefits of the tax credit, with the funds to be used in the fiscal year 2024.
Analysis of Financial Aspects in Relation to Issues
Firstly, the exemption for the years 2025 and 2026 regarding the requirement for more than 50% of gross receipts from in-person sales could create unequal benefits among businesses. This exemption might allow some businesses to qualify for the credit during this period without meeting the full intent of support, potentially leading to perceptions of unfairness or inconsistency.
Secondly, the complex phaseout calculation for businesses with gross receipts exceeding $1,000,000 could pose an economic challenge. Small businesses may incur additional costs by needing to engage tax professionals to navigate these calculations, which could undermine the financial relief intended by the credit.
Furthermore, the definition of "in-person sales" might inadvertently exclude businesses relying on online sales, a growing segment of the economy. This exclusion could limit the credit's applicability and benefit, potentially disadvantaging contemporary business models that do not operate from a physical storefront.
Additionally, the termination of the credit by the end of 2028 introduces a financial planning challenge for small businesses. Long-term strategies may be disrupted due to the uncertainty surrounding the expiration of this credit, affecting how businesses might forecast their future financial positions.
Finally, the campaign’s budget of $500,000 for raising awareness about the tax credit is substantial. If poorly executed, this might not achieve the desired impact, leading to perceptions of inefficiency or waste in government spending.
In conclusion, while the bill aims to provide financial relief to small businesses, it also presents challenges in terms of fairness, complexity, and applicability of the tax credit, along with potential concerns about the effective use of allocated funds for the awareness campaign.
Issues
The definition of 'eligible small business' includes an exception for the years 2025 and 2026, which removes the requirement for more than 50 percent of gross receipts from in-person sales. This creates unequal treatment between businesses in different years and could lead to confusion and inequality among businesses, as expressed in Sections 2 and 45BB.
The complex phaseout calculation for businesses with gross receipts over $1,000,000 could be challenging for small business owners to understand and manage without professional tax assistance, as detailed in Sections 2 and 45BB(b). This could lead to increased operating costs for businesses needing to hire tax advisors.
The definition of 'in-person sales' as sales transactions at physical locations might exclude online businesses, which could disadvantage modern business models and limit the applicability of the tax credit, as noted in Section 45BB(c)(1)(C).
The termination of the credit after December 31, 2028, introduces uncertainty for small businesses that could benefit from the credit in their long-term financial planning, as stated in Section 45BB(d).
The need for a public awareness campaign, authorized at $500,000, suggests potential inefficiency if the campaign does not effectively reach or impact its intended audience, as mentioned in Section 2(d). This might be perceived as wasteful spending if not adequately executed.
The language regarding aggregation rules could be difficult for small business owners to interpret without legal or tax expertise, potentially causing confusion regarding qualification for the credit as specified in Sections 2 and 45BB(c)(2).
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill states that the official title of the legislation is the “Brick and Mortar Small Business Tax Credit Act of 2024.”
2. State and local general sales tax credit for small businesses Read Opens in new tab
Summary AI
The bill introduces a tax credit for small businesses based on their state and local sales taxes, allowing eligible businesses with gross receipts up to $1,000,000 to receive a 5% credit. It specifies definitions for eligibility, terminates the credit after 2028, and requires a public awareness campaign to inform businesses of the credit's availability.
Money References
- “(a) Allowance of credit.—For purposes of section 38, in the case of an eligible small business, the State and local general sales tax credit determined under this section for the taxable year is an amount equal to 5 percent of so much of the business gross receipts of the taxpayer for the taxable year as do not exceed $1,000,000 (regardless of whether such receipts are subject to a State or local general sales tax).
- “(b) Phaseout of credit.—If the business gross receipts of the taxpayer for the taxable year exceed $1,000,000, the credit otherwise determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this subsection) as— “(1) such excess, bears to “(2) $1,000,000.
- “(c) Definitions and special rules.— “(1) DEFINITIONS.—For purposes of this section— “(A) ELIGIBLE SMALL BUSINESS.— “(i) IN GENERAL.—The term ‘eligible small business’ means any taxpayer for any taxable year if— “(I) the business gross receipts of such taxpayer for such taxable year do not exceed $2,000,000, and “(II) more than 50 percent of such business gross receipts of such taxpayer for such taxable year were generated by in-person sales.
- (3) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administrator $500,000 for fiscal year 2024 to carry out the public awareness campaign under paragraph (1).
45BB. State and local general sales tax credit for small businesses Read Opens in new tab
Summary AI
The section provides a tax credit for small businesses equal to 5% of their business gross receipts up to $1,000,000, with the credit phasing out if receipts exceed $1,000,000, and only businesses with gross receipts under $2,000,000 and primarily from in-person sales qualify. This credit is available until the end of 2028, with special definitions and aggregation rules applied.
Money References
- (a) Allowance of credit.—For purposes of section 38, in the case of an eligible small business, the State and local general sales tax credit determined under this section for the taxable year is an amount equal to 5 percent of so much of the business gross receipts of the taxpayer for the taxable year as do not exceed $1,000,000 (regardless of whether such receipts are subject to a State or local general sales tax).
- (b) Phaseout of credit.—If the business gross receipts of the taxpayer for the taxable year exceed $1,000,000, the credit otherwise determined under subsection (a) shall be reduced by an amount which bears the same ratio to the amount of such credit (determined without regard to this subsection) as— (1) such excess, bears to (2) $1,000,000.
- DEFINITIONS.—For purposes of this section— (A) ELIGIBLE SMALL BUSINESS.— (i) IN GENERAL.—The term “eligible small business” means any taxpayer for any taxable year if— (I) the business gross receipts of such taxpayer for such taxable year do not exceed $2,000,000, and (II) more than 50 percent of such business gross receipts of such taxpayer for such taxable year were generated by in-person sales.