What Was the Small Business Jobs Act of 2010?

The Small Business Jobs Act of 2010 was enacted on September 27, 2010, as a direct response to the economic challenges of the Great Recession. Its primary purpose was to stimulate the economy by encouraging job creation and business investment within the small business sector. The legislation aimed to achieve these goals by providing targeted tax relief and improving access to capital for small companies across the United States.

Key Tax Relief Provisions

One of the provisions of the Small Business Jobs Act was the extension of 50% bonus depreciation. This allowed businesses to deduct half the cost of certain new property in its first year of service. Later that year, another law temporarily increased this to 100% bonus depreciation for qualified property acquired after September 8, 2010, spurring capital investment.

The Act also enhanced the Section 179 expensing election for the 2010 and 2011 tax years. This deduction permits businesses to treat the cost of qualifying property as an expense. The legislation raised the maximum amount a business could expense to $500,000 and increased the phase-out threshold to $2 million, making the deduction available to more businesses.

Another tax incentive was the temporary 100% exclusion of capital gains from the sale of Qualified Small Business Stock (QSBS). To qualify, the stock must have been acquired from a domestic C corporation with gross assets not exceeding $50 million. The taxpayer also needed to hold the stock for more than five years to eliminate the federal tax liability on the gain.

The law temporarily increased the amount of start-up expenditures that could be deducted in the first year of business to $10,000 for the 2010 tax year. Currently, a business can deduct up to $5,000 in start-up costs, though this benefit is phased out for businesses with total start-up costs exceeding $50,000.

Finally, the Act allowed self-employed individuals to deduct the cost of their health insurance premiums when calculating their self-employment taxes for the 2010 tax year only. The deduction for self-employed health insurance premiums is now taken against gross income for income tax purposes, not against earnings for self-employment tax.

Business Financing and Lending Programs

The Small Business Jobs Act of 2010 established the Small Business Lending Fund (SBLF), a $30 billion fund from the Treasury Department. The SBLF provided low-cost capital to community banks and community development loan funds with less than $10 billion in assets. The program was structured to incentivize new lending, as the dividend rate paid by the bank to the Treasury would decrease as the bank increased its small business lending.

An initiative created by the Act was the State Small Business Credit Initiative (SSBCI). This program allocated federal funds to states to establish or strengthen their own programs designed to support private-sector lending. States could implement various programs, such as capital access programs that create a loan loss reserve pool or collateral support programs that provide cash collateral to a borrower.

The legislation also bolstered the Small Business Administration’s (SBA) loan programs by temporarily increasing their maximum loan sizes. The maximum for the 7(a) loan program was raised to $5 million. For the 504 loan program, used for acquiring fixed assets, the maximum loan amount is generally $5 million but can be increased to $5.5 million for small manufacturers or projects meeting energy efficiency goals.

Changes to Reporting and Deduction Rules

A provision within the Act mandated that individuals receiving rental income would have to issue a Form 1099-MISC to any service provider they paid $600 or more during the tax year. This rule was intended to increase tax compliance but was met with strong opposition from property owners who viewed it as an excessive administrative burden. Due to the criticism, Congress passed legislation in 2011 that eliminated the requirement before it ever took effect.

The Act also simplified tax compliance by addressing the treatment of cellular phones. It removed cell phones and similar telecommunications equipment from the definition of “listed property” under the Internal Revenue Code. Previously, cell phones were subject to strict record-keeping rules to separate business from personal use, but this change allowed their costs to be deducted as an ordinary business expense.

Legacy and Subsequent Tax Law

Many temporary provisions from the Act served as precursors to more permanent changes in U.S. tax law. The concept of 100% bonus depreciation, for instance, was later revived by the Tax Cuts and Jobs Act of 2017. However, this incentive is now being phased out, with the bonus depreciation rate at 40% for 2025 and scheduled for elimination in subsequent years.

Similarly, the enhanced Section 179 expensing limits proved to be an enduring policy. Later legislation made higher expensing limits a permanent feature of the tax code, indexed for inflation. For the 2025 tax year, the maximum amount a business can expense is $1,250,000, with the phase-out threshold beginning at $3,130,000.

The 100% exclusion for gains on Qualified Small Business Stock (QSBS) was also converted to a permanent tax incentive. After the provision in the 2010 Act expired, it was made permanent for stock acquired on or after September 28, 2010, by the PATH Act of 2015. This made the QSBS incentive a long-term tool for encouraging investment.

The State Small Business Credit Initiative (SSBCI) has also shown lasting impact. While the original program concluded, the SSBCI was reauthorized and funded with nearly $10 billion as part of the American Rescue Plan Act of 2021. It is currently an active federal program providing funds to states, territories, and Tribal governments to support small business financing.