Small Business Tax Relief Act

This bill would lower the corporate tax rate for small businesses, and it would change how some investment fund managers are taxed. Their share of a fund’s profits would be taxed like regular income, not at the lower capital gains rate . It covers services like advising, managing, buying, or selling assets for investment funds.

Dividends tied to this kind of pay would not get the special lower tax rate, and selling this partnership interest would also be taxed as regular income . The usual tax break for selling certain small‑business stock would not apply here. There’s a narrow exception for returns on a manager’s own invested money, if treated the same as outside investors. Domestic C corporations are excluded from these special rules, and the Treasury can write detailed regulations. A 40% penalty applies for underpaying tax by trying to avoid these rules .

• Who is affected:
  • Small businesses that are corporations
  • People who manage investment funds that hold assets like stocks, real estate, or commodities
• What changes:
  • Lower corporate tax rate for small businesses
  • Fund managers’ profit shares taxed like regular income; related dividends lose the lower rate; selling that interest is taxed as regular income; the small‑business stock exclusion doesn’t apply
• When:
  • After it becomes law; several definitions look at periods after the date of enactment