Small Business Jobs Act: General Business Credits

The Small Business Jobs Act of 2010 provides several tax benefits to small businesses. The law became effective on September 27th and the liberalization of general business tax credits is one of the noteworthy components.

If your business qualified for general business credits (GBC) in 2010, you may be able to carry back these credits for up to five years or carry them forward for up to 20 years. Businesses that have average annual receipts of less than $50 million and are not publicly traded qualify for the additional carry back.

Some of the most common types of GBCs are the Research & Development, Work Opportunity, and Investment Credits. It is important to note that the tax credits must first be carried back to the earliest year with sufficient tax liability to absorb the credit and the credit must have been an allowed GBC in that tax year. Meaning, if the Work Opportunity Credit was a viable GBC in 2006, you can carry back your 2010 Work Opportunity Credit and apply it to your 2006 income tax liability.

In addition to the availability of the extended carry back period, small business partners and shareholders can use 2010 GBCs to offset both regular and alternative minimum tax (AMT). Prior year limits to the usage of GBCs are not applicable in 2010, resulting in a significant benefit to small business owners.