Certain Tax Provisions in the Small Business Jobs Act of 2010: Changes to Roth 401(k) Accounts, Extension of 50% Bonus Depreciation, Small Business Relief and Information Reporting and Penalty Provisions Included in Bill Passed By House and Senate

Sullivan & Cromwell LLP - September 24, 2010

The House of Representatives and the Senate recently passed the Small Business Jobs Act of 2010 (the “Bill”). The Bill is likely to be signed by the President within the week. The Bill includes provisions (i) allowing, in limited circumstances, participants in 401(k) and certain other defined contributions retirement plans to “roll over” distributions from their pre-tax account balances into designated “Roth” accounts under the same plan, (ii) extending rules permitting businesses to immediately write off 50% of the costs of certain capital expenditures to 2010, (iii) modifying the sourcing rule on guarantee fees, (iv) reducing the period that an S corporation previously converted from a C corporation must hold appreciated assets to avoid a corporate-level tax for a certain taxable year, (v) modifying the penalty for failing to disclose a reportable transaction so that the penalty is proportionate to the underlying tax savings, (vi) increasing the expensing limitations on Section 179 expenses, (vii) creating new information reporting requirements for persons receiving rental income from real property, and (viii) increasing certain penalties relating to information returns.