Small Business Tax Relief Act

Summary

Creates a lower, graduated corporate tax rate for small C corporations, changes how certain partnership interests granted for services are taxed, adds special tax rules for partners who provide investment management services, increases a deduction for some self-employed taxpayers, and raises the excise tax on corporate stock buybacks. Most provisions take effect for taxable years ending after enactment, with some changes tied to dates after December 31, 2024.

• Establishes a graduated corporate tax for firms with taxable income ≤ $5,000,000: 18% on the first $400,000 and 21% on income above that; all other corporations pay 21%.
• Treats partnership interests transferred for services as taxable on the interest’s liquidation value and deems a Section 83(b) election unless the recipient opts out.
• Creates new statutory special rules for "investment services partnership interests" that recharacterize allocable net capital gains as ordinary income and disqualify related qualified dividend and section 1202 benefits.
• Removes prior section 1061 placement and adds conforming amendments to integrate the new partnership rules, with transitional rules for partnership years that include enactment.
• Increases the excise tax on corporate stock repurchases from 1.0% to 1.5% for repurchases after 2024.
• Enhances a deduction rule for certain self-employed taxpayers with AGI under $400,000 by substituting half of the taxes imposed in the computation (effective for tax years beginning after 2024).
• Imposes additional reporting, valuation, and election responsibilities on partnerships and service recipients, likely increasing compliance burden and IRS guidance needs.
• Mixes small-corporation tax relief with measures that increase taxes or reclassify income for investment managers and raise buyback taxes, creating mixed revenue and distributional effects.