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More Federal Minimum Wage Tax Breaks

June 7th, 2007 Posted by Mark

By the way, while we are looking at the details of the federal minimum wage law, we should not just forget about some of the other tax breaks out there in the law. I had already mentioned the one regarding the tax write offs for capital investments—and how they are being expanded in both the amount you can write off and how long into the future you can write them off the year that your purchase the capital investment items.

But some of the other tax breaks included in the new federal minimum wage law include one that expands and extends the work opportunity tax credit. There is also a new determination included in the new federal minimum wage law on credit when employers pay certain taxes when it comes to employees getting cash tips.

Another tax law change made specifically to try to help the smaller employers in the United States includes a waiver on the alternative minimum tax limits and credit for both individuals and for corporations. This is for again regarding how and when employees have to pay taxes on the tips that they earn during, say, a stint as a waitress or a bartender or some other heavily cash tipped business. There is also a movement in the new federal minimum wage bill to try to simplify how the family business tax is done.

Some other tax breaks in the new federal minimum wage law have to do with how employers in the Gulf States can try to come back from the damages and set backs they suffered during the hurricanes of 2005, such as Hurricane Katrina and Hurricane Rita. These employers, thanks to the tax break package in the federal minimum wage law, get an extension to the increased expensing law that they also got after the hurricanes—again, allowing them to write off more of their investments into rebuilding and growing their businesses.

For the Gulf States region, the new federal minimum wage law also includes Section 8222, which is an extension and an expansion of how credit rules are done for low income families, as well as special tax exempt bonds that can be used to try to rebuild and repair facilities damaged by the hurricanes. To make sure all of these Gulf Coast tax breaks work, the Government Accountability Office will do a study on the region and the effects if the tax breaks, according to the Section 8224 of the new federal minimum wage law.

Need any more details on the tax break package? Sure, why not, right? Well, the new federal minimum wage law also contains a stipulation that the capital gains of any so called S corporation does not get counted as passive investment income, as well as the treatment of shares for bank directors. There are also new special rules included here for banks that requires them to change the way they do reserving when they become an S corporation. Add to that list a new way that S corporations must also treat the sale of an interest in one of their subsidiary companies.

The provisions of the new federal minimum wage also eliminate all of the earnings and profits that corporations got before 1983, and allows small business trusts to buy stock in S corporations and deduct the interest expenses that they get through their new debt. Does any or all of this make any sense to you? For an S corporation it should, as I think it was what I was talking about before, where the law makers were finding ways to give less taxes to small employers and make it up with more tax changes to larger employers.