WASHINGTON (AP) - Long-term investors in some small businesses
would escape capital gains taxes under a bill passed by the House
Tuesday as congressional Democrats tried to revive their jobs
The bill would also increase tax deductions for startup expenses
by new small businesses. The House passed the bill on a mostly
party-line vote of 247 to 170.
House Democrats plan to merge the bill with legislation creating
a $30 billion fund for community banks to increase lending to small
businesses. The House could vote on the lending bill as early as
Wednesday, sending the entire package to the Senate.
White House press secretary Robert Gibbs said President Barack
Obama was grateful for the House vote but that he wants Congress to
pass other pending job creation measures and help for cash-strapped
states and the long-term unemployed.
Congressional Democrats started the year with an aggressive
agenda of passing a series of bills designed to create jobs. Many
of the proposals stalled as lawmakers, after hearing from angry
voters, became wary of adding to the federal budget deficit.
The tax provisions passed Tuesday were included in a bill that
passed the House in March but stalled in the Senate. House
Democrats hope the new package will fare better, boosting
investment and lending for small businesses struggling to recover
from the nation's worst recession in decades.
"This is a continuation of our work to spur job creation and to
really improve the quality of life in all of our communities,"
said Rep. Sander Levin, D-Mich., chairman of the House Ways and
Rep. Dave Camp of Michigan, the top Republican on the committee,
said the bill falls short. "While the tax relief in here is
welcome, it's not enough," Camp said.
The tax package would provide about $3.6 billion in tax breaks
over the next decade. The bill includes tax increases that would
offset the tax cuts and pay for the lending bill, so nothing would
be added to the budget deficit.
The break on capital gains taxes would be limited to stock held
for at least five years in small businesses organized as C
corporations, a tax designation often used by large, publicly
traded companies. Investments in most small businesses would not
qualify for the break.
The tax increases include one that would raise $5.3 billion over
the next decade by limiting taxpayers' ability to avoid gift taxes
by setting up trusts known as grantor retained annuity trusts.
Another provision would raise $1.8 billion by prohibiting paper
companies from claiming a biofuel tax credit for producing fuel
from a byproduct in the papermaking process called "crude tall
The lending bill would authorize a fund of up to $30 billion
that would be available to financial institutions with no more than
$10 billion in assets. Banks that tap the fund would issue
preferred stock to the Treasury Department. The stock would have to
be redeemed within 10 years.
Republicans tried to derail the tax bill by adding an unrelated
amendment that would have repealed a major provision of the new
health care law. The amendment, sponsored by Camp, would have
repealed the requirement that most individuals get health
insurance. The amendment failed by a vote of 230 to 187.
The tax bill is H.R. 5486.
The lending bill is H.R. 5297.