Small Business Jobs Act of 2010

The Small Business Jobs Act of 2010 (H.R. 5297) is a federal law passed by the 111th United States Congress and signed into law by President Barack Obama on September 27, 2010.[1] The law authorizes the creation of the Small Business Lending Fund Program administered by the Treasury Department to make capital investments in eligible institutions, in order to increase the availability of credit for small businesses.[2]

Provisions

The provisions of the Act included:

Developments

Some aspects of the Act's bonus depreciation mechanism were extended and amplified by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, passed and signed into law in December 2010.[3]

Drawbacks

Most angel investors and venture capital groups utilize convertible debt and/or warrants in the majority of their investment arrangements. A major drawback is the exclusion of convertible debt and warrants from the Act. Holders of convertible debt or warrants must convert or exercise the security and hold it for five years in order to qualify for the tax exemption. This negates the purpose of structuring an investment utilizing convertible debt and/or warrants. Therefore, most angel investors and venture capital groups will receive little or no value from this law.

As a part of the Small Business Jobs Act of 2010 the House and Senate passed increased penalties for failure to file a correct information return. The increase in penalties is intended to improve compliance and increase penalty income.

In summary the changes are as follows:

Some banks have replaced their funds from the Troubled Asset Relief Program with funds from the SBLF. This practice has been criticized by the TARP Inspector General and members of Congress, as banks can use it to lift the restrictions imposed by TARP even while reducing their small business lending.[5]

References

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