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On May 25^th, the President signed the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA). Passed in conjunction with legislation to continue funding the war in Iraq and to raise the minimum wage, the tax-related provisions are designed in part to provide benefits to small businesses likely to be hit hard by the $2.10 per hour increase in the minimum wage.

Following are a sampling of key provisions affecting businesses and individuals, as well as Gulf Opportunity Zone (GO Zone) incentives and other areas of tax law.

Businesses:

• The Section 179 election to expense property in its initial year (rather than depreciate it) is extended through 2010 and increased from $100,000 to $125,000, effective for years beginning after 2006. The expense deduction begins to phase out if more than $500,000 of eligible property is placed in service during the year (up from $400,000). These amounts will be adjusted for inflation annually.

• The Work Opportunity tax credit, which had been set to expire December 31, 2007, is extended until September 30, 2011. This credit is available to businesses that hire employees from targeted groups of individuals, such as veterans, ex-felons, high-risk youth, and food stamp and supplemental security income recipients. The new law expands this list to include disabled veterans and individuals in parishes (or counties) that have suffered significant population losses. By hiring a target employee, a business can receive a 40% tax credit for the first $6,000 paid to the worker.

• The individual and corporate alternative minimum tax (AMT) limits on the use of certain credits are waived, effective for years after 2006 (taxable years beginning after December 31, 2006) as well as carryback of these credits. This applies to the Work Opportunity credit and the credit for taxes paid on employee tips.

• The legislation also includes certain S corporation and pension provisions that are generally too technical to cover in this article.

GO Zone Incentives:

The Small Business and Work Opportunity Tax Act (SBWOTA) extends several tax incentives designated for the Gulf Opportunity Zone (GO Zone):

• The increased Section 179 expense election, which is generally doubled for qualifying property, is extended through 2008.

• The low-income housing tax credit for GO Zone housing is extended through 2010.

• Tax-exempt bond financing for GO Zone property is expanded to include expenses for all repairs and reconstruction. The provision applies to owner financing provided after May 25, 2007, and before 2011.

Individuals:

The new law also affects some individual taxpayers. The “kiddie tax,” which subjects children (and now young adults) to tax on most unearned income at their parents’ marginal tax bracket, had recently been expanded to include those under age 18 (up from age 14). Now, SBWOTA broadens that rule to include those who qualify as dependents because they are either under age 19, or under age 24 and a full-time student, if their income doesn’t exceed one half of the amount needed for their support.

Your tax advisor should be contacted for other details that may affect you and to determine whether any of these changes affect your tax planning strategy.

Ronnie Stamper is a Certified Public Accountant and partner with the firm of Hannis T. Bourgeois, LLP. He is the managing partner of the Construction Industry division and has 34 years of experience in public accounting. He can be reached at (225) 928-4770 or rstamper@htbcpa.com.