Small Business Tax Relief Act

Summary

Creates a new small-corporation graduated corporate tax schedule for companies with taxable income up to $5 million, slows certain partnership tax preferences for service providers and investment managers, adjusts the tax treatment of partnership interests transferred for services (including a deemed election rule), changes the formula used to compute certain state and local tax deductions for some lower-income self-employed taxpayers, and raises the excise tax on corporate stock repurchases from 1.0% to 1.5%. Most changes take effect for taxable years ending after enactment or for transactions after December 31, 2024, as specified.

• Creates a two‑tier corporate tax rate for corporations with taxable income ≤ $5,000,000: 18% on the first $400,000 and 21% thereafter.
• Treats the fair market value of partnership interests transferred for services as a hypothetical liquidation value and by default deems an 83(b) election unless the recipient opts out.
• Establishes a new statutory regime that recharacterizes capital gains and certain dispositions tied to investment‑management partnership interests as ordinary income or loss.
• Removes preferential tax treatment (qualified dividends and QSBS exclusion) for amounts allocated to designated investment‑services partnership interests.
• Adds conforming changes in partnership provisions and special effective‑date rules for partnerships around enactment.
• Amends the computation of certain state and local tax deductions for taxpayers with AGI under $400,000 by changing the referenced fractional rule.
• Increases the excise tax on corporate stock repurchases from 1.0% to 1.5% for buybacks after Dec 31, 2024.
• Most substantive changes take effect for taxable years ending after enactment or for transactions after Dec 31, 2024, and will require guidance to implement detailed allocation and reporting rules.