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Minnesota small businesses will benefit from new federal tax law

Planning for business expansion and startups has to take federal and Minnesota tax laws into consideration. Recent passage of the Protecting Americans from Tax Hikes Act of 2015 preserves many tax deductions and incentives for small businesses instead of merely extending these breaks each year. PATH should help provide some certainty to business formation and growth.

Small businesses will likely benefit from PATH's Section 179 expensing provision. This benefit, which increased the level of expenses businesses can deduct, is retroactive to Jan. 1, 2015 and allows for an immediate deduction of up to $500,000 for qualifying business assets. However, this deduction is phased out for businesses that invest over $2 million of assets in service during a particular year.

The popular research and development credit is now permanent. Businesses that have less than $50 million in gross receipts may claim the credit against the alternative minimum tax credit beginning with the 2016 tax year. Small businesses that have less than $5 million in gross receipts may be able to claim this research and development credit against payroll taxes for up to $250,000 for five years.

PATH extends the first-year 50 percent bonus depreciation through the 2019 tax year. Any business, regardless of size, may continue to depreciate 50 percent of the total cost of qualifying equipment acquired and placed into service during the current year and through 2017.

PATH also addressed other incentives. The reduced five-year built-in-gains period for C-corporations that elect status as S-corporations is now permanent. The 15-year recovery period for qualified property such as leasehold improvements, restaurant improvements, restaurant property and retail improvement property is now permanent. The work opportunity tax credit for businesses that hire certain workers, such as veterans and the long-term unemployed, was extended through 2019.

In addition to market forces, tax laws can impact business profitability and success. Businesses that take advantage of these tax benefits may avoid some of the financial pitfalls of other state and federal regulations.

Source:, "U.S. extends many popular tax provisions," Tom Cooney and Crystal Faulkner, Jan. 6, 2016

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