Small Business Tax Relief Act

Small Business Tax Relief Act This bill reduces the federal corporate income tax rate for certain small businesses, increases the federal tax deduction for self-employment taxes, modifies the taxation of carried interest, and increases the federal excise tax on stock buybacks. For corporations with taxable income that does not exceed $5 million, the bill reduces the income tax rate on the portion of the corporation's taxable income that does not exceed $400,000 to 18% (currently 21%). The bill increases the tax deduction for self-employment taxes for individuals with an adjusted gross income of less than $400,000 to 75% (from 50%) of such taxes paid. Under the bill, net capital gain and loss attributable to carried interest is taxed at ordinary income tax rates. (Carried interest is currently taxed at capital gains tax rates, which may be lower than applicable ordinary income tax rates. Carried interest is the share of profits received by the general partner in a private equity firm or hedge fund from the assets managed by that general partner.) The bill treats as ordinary the money (or fair market value of property) received by a partner in a sale or exchange of carried interest, requires distributions of carried interest by a partnership in exchange for interest in other partnership property to be recognized ordinary gain, and imposes self-employment taxes on carried interest income. Finally, the bill increases the excise tax on stock buybacks to 1.5% (from 1%) of the repur