Small Business and Work Opportunity Act of 2007

Bill: 110-s-349
Sponsor: Sen. Baucus, Max [D-MT]
Introduced: 2007-01-22 in the Senate
Policy area: Taxation
Subjects: Accounting
Administrative procedure
Administrative remedies
Agriculture and Food
Armed Forces and National Security
Bank employees
Capital gains tax
Checks
Citizenship
Commerce
Compensation for victims of crime
Congress
Congressional reporting requirements
Construction costs
Contracts
Corporation taxes
Cost of living adjustments
Crime and Law Enforcement
Criminal investigation
Debt
Department of the Treasury
Depreciation and amortization
Disabled
Due process of law
Economics and Public Finance
Employment agencies
Enterprise zones
Executive compensation
Executive reorganization
Expatriation
Finance and Financial Sector
Fines (Penalties)
Foreign Trade and International Finance
Foreign corporations
Fraud
Gifts
Government Operations and Politics
Governmental investigations
Immigration
Income tax
Indexing (Economic policy)
Insurance
Interest
Internal Revenue Service (IRS)
Inventories
Investments
Labor and Employment
Law
Leases
Legislation
Professions
Profit
Punitive damages
Restaurants
Retail trade
Securities
Small business
Social Welfare
Stockholders
Stocks
Subsidiary corporations
Surety and fidelity
Tax administration
Tax credits
Tax deductions
Tax deferral
Tax exclusion
Tax liens
Tax penalties
Tax refunds
Tax returns
Tax-deferred compensation plans
Taxation of foreign income
Trusts and trustees
Urban affairs
User charges
Veterans' employment
Visas
Wages
Welfare work participation
Whistle blowing
Withholding tax

Summary:
action_date: 2007-01-22
text: 
Small Business and Work Opportunity Act of 2007 - Amends Internal Revenue Code provisions relating to small businesses to: (1) extend through 2010 the increased expensing allowance for small business assets; (2) extend provisions allowing accelerated depreciation for qualified leasehold and restaurant improvement property and to allow accelerated depreciation for improvements to property used in retail businesses; (3) allow certain small businesses to use cash accounting methods and exempt such businesses from the use of inventories; (4) extend through 2012 the work opportunity tax credit and extend such credit to the hiring of residents in certain economically-distressed areas and to certain disabled veterans; and (5) allow certified professional employer organizations to manage employment tax responsibilities for employers. 
 
Revises provisions relating to S corporations involving passive investment income, shareholder eligibility, and stock transfers.
 
Revises tax rules relating to: (1) deductibility of punitive damages and of fines and penalties paid to governments for violations of law; (2) tax rules for the treatment of U.S. citizens and permanent resident aliens who leave the United States to avoid payment of taxes; (3) criminal fines and monetary penalties for underpayment of tax due to fraud or tax shelter activities; (4) collection due process hearings for employment tax liabilities; and (5) the Internal Revenue Service (IRS) whistleblower program.
 
Extends the authorization for charging IRS user fees through FY2016.

action_date: 2007-01-22
text: 

(This measure has not been amended since it was introduced. The summary has been expanded because action occurred on the measure.)

 
Small Business and Work Opportunity Act of 2007 - 
Title I: Small Business Tax Relief Provisions
 - 
Subtitle A: General Provisions 
- (Sec. 101) Amends the Internal Revenue Code to extend through 2010 the increased expensing allowance for small business assets.
 
(Sec. 102) Extends through March 2008 accelerated depreciation of qualified leasehold and restaurant improvement property. Revises the definition of &quot;qualified restaurant property&quot; to eliminate the requirement that improvements to restaurant property must be placed in service more than three years after the original building is placed in service.
 
Allows accelerated depreciation (i.e., 15-year recovery period, using the straight line method) for qualified retail improvement property placed in service before April 1, 2008. Defines &quot;qualified retail improvement property&quot; as improvements to the interior portion of a nonresidential building used as a retail trade or business serving the general public. Excludes as an improvement the enlargement of the building, any elevator or escalator, common area structures, or the internal structural framework of the building. 
 
(Sec. 103) Exempts certain small businesses from the requirement of using the accrual method of accounting (thus permitting such businesses to use a cash method of accounting). Limits such exemption to businesses which have annual gross receipts of not more than $10 million (increased from $5 million). Indexes the gross receipts amount for inflation after 2008. Exempts such small businesses eligible to use cash accounting methods from the requirement to use inventories.
 
(Sec. 104) Extends the work opportunity tax credit through 2012. Expands the veterans eligible for such credit to include veterans with service-connected disabilities incurred after September 10, 2001. Increases the amount of disabled veteran first year wages eligible for the credit from $6,000 to $12,000.
 
Establishes as a new targeted group under such credit designated community residents (in lieu of high risk youth). Requires such residents to be between the ages of 18 and 40 and have a principal place of abode in an empowerment zone, enterprise community, or renewal community. 
 
Modifies the definition of vocational rehabilitation referral for purposes of such credit to include certain individual work plans developed and implemented by an employment network under the Social Security Act. 
 
(Sec. 105) Provides rules for the treatment of certified professional employer organizations as employers for purposes of employment tax liability and other employment tax obligations. Sets forth requirements applicable to certified professional employer organizations, including bond and independent financial review requirements.
 

Subtitle B: Subchapter S Provisions
 - (Sec. 111) Redefines &quot;passive investment income&quot; for purposes of S corporation revocation rules to exclude gains from the sale or exchange of stock or securities as an item of passive investment income.
 
(Sec. 112) Excludes restricted bank director stock from treatment as S corporation stock.
 
(Sec. 113) Sets forth a special accounting rule for banks that become S corporations and that change from the reserve method of accounting for bad debts.
 
(Sec. 114) Revises the tax treatment of sales of stock of wholly-owned subsidiaries of S corporations.
 
(Sec. 115) Sets forth a special rule for the treatment of the pre-1983 accumulated earnings and profits of certain corporations described by the Small Business Jobs Protection Act of 1996.
 
(Sec. 116) Permits a nonresident alien to be a potential current beneficiary of an electing small business trust (ESBT).
 

Title II: Revenue Provisions - 
(Sec. 201) Changes the effective date (to taxable years beginning after December 31, 2006) of certain loss deferral rules applicable to leases entered into with a foreign person or entity on or before March 12, 2004.
 
(Sec. 202) Applies rules treating certain foreign corporations as domestic corporations for tax purposes for inversion transactions (sales or transfers of more than 80% of a domestic corporation's stock or assets to a foreign subsidiary for tax avoidance purposes) occurring after March 20, 2002, and before March 4, 2003.
 
(Sec. 203) Denies a tax deduction for punitive damages paid or incurred resulting from a judgment or settlement of a claim.
 
(Sec. 204) Revises tax rules that deny a tax deduction for fines and penalties paid to a government for the violation of any law to provide that no deduction shall be allowed for any fine or penalty paid (whether by suit, agreement, or otherwise) to, or at the direction of, a government or nongovernmental regulatory entity for a violation or for the investigation or inquiry into a potential violation. 
 
Allows exceptions to the general rule of nondeductibility for: (1) certain restitution payments or payments required to come into compliance with law; (2) court-ordered payments not involving a government or nongovernmental regulatory entity; and (3) amounts paid or incurred as taxes due. 
 
Requires governmental agencies involved in a settlement with a taxpayer to report information about such settlement to the Secretary of the Treasury and the taxpayer, including the amount of the settlement, the amount paid as restitution or remediation of property, and the amount paid to come into compliance with law.
 
(Sec. 205) Sets forth rules for the tax treatment of U.S. citizens and permanent resident aliens (expatriates) who terminate their citizenship or residency to avoid U.S. taxation. Taxes such expatriates on their property as if sold on the day before expatriation at its fair market value. Allows an exclusion of the first $600,000 (adjusted annually for inflation) of such gain.
 
Allows expatriates to elect to continue being taxed as U.S. citizens. Allows a deferral of any tax owed resulting from such election, but requires the posting of adequate security for payment of any deferred amount.
 
Sets forth rules for the tax treatment of retirement plans, interests in trusts, gifts, and inheritances of expatriates.
 
Amends the Immigration and Nationality Act to render inadmissible to the United States (deny reentry to) expatriates who fail to comply with their tax obligations as set forth in this Act. Requires the Secretary of Homeland Security to disclose to the Attorney General whether an expatriate is in compliance.
 
(Sec.206) Limits the annual aggregate amounts which may be deferred under a nonqualified deferred compensation plan.
 
(Sec. 207) Increases criminal fines and prison terms for attempting to evade or defeat tax, willful failure to file tax returns or pay tax, aggravated failure to file tax returns, and making fraud and false statements in connection with a tax return.
 
(Sec. 208) Doubles tax penalties, fines, and interest on underpayments of tax related to tax shelters involving offshore financial arrangements. Allows the Secretary to waive such penalties for certain businesses that use offshore payments in the ordinary course of business.
 
(Sec. 209) Increases the penalty for tendering a bad check or money order for payment of tax.
 
(Sec. 210) Sets forth requirements for regulations governing contingent payment convertible debt instruments.
 
(Sec. 211) Extends the authorization for charging Internal Revenue Service (IRS) user fees through FY2016. 
 
(Sec. 212) Allows tax levies for federal employment taxes without pre-levy collection due process hearings.
 
(Sec. 213) Modifies requirements for the IRS whistleblower program. Reduces from $2 million to $20,000 the required amount of tax in dispute for granting whistleblower awards.
 
Establishes in the IRS a Whistleblower Office and authorizes appropriations. Requires the Secretary to report to Congress on its establishment and operation.
 
Authorizes the Tax Court to adopt rules to preserve the confidentiality of whistleblowers who appeal awards.
 
(Sec. 214) Redefines &quot;covered employee&quot; for purposes of the limitation on the tax deduction for excessive employee remuneration.


Legislative actions:
action_date: 2007-01-22
text: Placed on Senate Legislative Calendar under General Orders. Calendar No. 10.
action_date: 2007-01-22
text: Committee on Finance. Original measure reported to Senate by Senator Baucus. With written report No. 110-1. Additional views filed.
action_date: 2007-01-22
text: Committee on Finance. Original measure reported to Senate by Senator Baucus. With written report No. 110-1. Additional views filed.
action_date: 2007-01-22
text: Introduced in Senate
action_date: 2007-01-17
text: Committee on Finance ordered to be reported an original measure.