article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Small Business Tax Relief Act of 2007''. SEC. 2. WORK OPPORTUNITY CREDIT MADE PERMANENT. (a) In General.--Subsection (c) of section 51 of the Internal Revenue Code of 1986 is amended by striking paragraph (4). (b) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after the date of the enactment of this Act. SEC. 3. NEW MARKETS TAX CREDIT MADE PERMANENT. (a) In General.--Subparagraph (D) of section 45D(f)(1) of the Internal Revenue Code of 1986 (relating to national limitation on amount of investments designated) is amended by striking ``for 2006, 2007, and 2008'' and inserting ``for 2006 and each calendar year thereafter''. (b) Effective Date.--The amendment made by this section shall take effect on the date of the enactment of this Act. SEC. 4. QUALIFIED LEASEHOLD IMPROVEMENT PROPERTY AND QUALIFIED RESTAURANT PROPERTY TREATED AS 15-YEAR PROPERTY. (a) In General.--Clauses (iv) and (v) of section 168(e)(3)(E) of the Internal Revenue Code of 1986 are each amended by striking ``placed in service before January 1, 2008''. (b) Effective Date.--The amendments made by this section shall apply to property placed in service after December 31, 2007. SEC. 5. RESEARCH CREDIT. (a) In General.--Section 41 of the Internal Revenue Code of 1986 is amended by striking subsection (h). (b) Conforming Amendment.--Section 45C(b)(1) of such Code (relating to qualified clinical testing expenses) is amended by striking subparagraph (D). (c) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred after December 31, 2007. SEC. 6. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS. (a) In General.--Section 198 is amended by striking subsection (h). (b) Effective Date.--The amendment made by this section shall apply to expenditures paid or incurred after December 31, 2007. SEC. 7. INCREASE IN EXCLUSION OF GAIN FROM QUALIFIED SMALL BUSINESS STOCK. (a) In General.--Paragraph (1) of section 1202(a) of the Internal Revenue Code of 1986 is amended by striking ``50 percent'' and inserting ``62.5 percent''. (b) Empowerment Zone Businesses.--Subparagraph (A) of section 1202(a)(2) is amended-- (1) by striking ``60 percent'' and inserting ``75 percent'', and (2) by striking ``50 percent'' and inserting ``62.5 percent''. (c) Effective Date.--The amendments made by this section shall apply to sales or exchanges of qualified small business stock in taxable years beginning after the date of the enactment of this Act. SEC. 8. QUALIFIED SMALL BUSINESSES ELECTION OF TAXABLE YEAR ENDING IN A MONTH FROM APRIL TO NOVEMBER. (a) In General.--Part I of subchapter E of chapter 1 of the Internal Revenue Code of 1986 (relating to accounting periods) is amended by inserting after section 444 the following new section: ``SEC. 444A. QUALIFIED SMALL BUSINESSES ELECTION OF TAXABLE YEAR ENDING IN A MONTH FROM APRIL TO NOVEMBER. ``(a) General Rule.--A qualified small business may elect to have a taxable year, other than the required taxable year, which ends on the last day of any of the months of April through November (or at the end of an equivalent annual period (varying from 52 to 53 weeks)). ``(b) Years for Which Election Effective.--An election under subsection (a)-- ``(1) shall be made not later than the due date (including extensions thereof) for filing the return of tax for the first taxable year of the qualified small business, and ``(2) shall be effective for such first taxable year or period and for all succeeding taxable years of such qualified small business until such election is terminated under subsection (c). ``(c) Termination.-- ``(1) In general.--An election under subsection (a) shall be terminated on the earliest of-- ``(A) the first day of the taxable year following the taxable year for which the entity fails to meet the gross receipts test, ``(B) the date on which the entity fails to qualify as an S corporation, or ``(C) the date on which the entity terminates. ``(2) Gross receipts test.--For purposes of paragraph (1), an entity fails to meet the gross receipts test if the entity fails to meet the gross receipts test of section 448(c). ``(3) Effect of termination.--An entity with respect to which an election is terminated under this subsection shall determine its taxable year for subsequent taxable years under any other method that would be permitted under subtitle A. ``(4) Income inclusion and deduction rules for period after termination.--If the termination of an election under paragraph (1)(A) results in a short taxable year-- ``(A) items relating to net profits for the period beginning on the day after its last fiscal year-end and ending on the day before the beginning of the taxable year determined under paragraph (4) shall be includible in income ratably over the succeeding 4 taxable years, or (if fewer) the number of taxable years equal to the fiscal years for which the election under this section was in effect, and ``(B) items relating to net losses for such period shall be deductible in the first taxable year after the taxable year with respect to which the election terminated. ``(d) Definitions.--For purposes of this section-- ``(1) Qualified small business.--The term `qualified small business' means an entity-- ``(A)(i) for which an election under section 1362(a) is in effect for the first taxable year or period of such entity and for all subsequent years, or ``(ii) which is treated as a partnership for the first taxable year or period of such entity for Federal income tax purposes, ``(B) which conducts an active trade or business or which would qualify for an election to amortize start- up expenditures under section 195, and ``(C) which is a start-up business. ``(2) Start-up business.--For purposes of paragraph (1)(C), an entity shall be treated as a start-up business so long as not more than 75 percent of the entity is owned by any person who previously conducted a similar trade or business at any time within the 1-year period ending on the date on which such entity is formed. For purposes of the preceding sentence, a person and any other person bearing a relationship to such person specified in section 267(b) or 707(b)(1) shall be treated as one person, and sections 267(b) and 707(b)(1) shall be applied as if section 267(c)(4) provided that the family of an individual consists of the individual's spouse and the individual's children under the age of 21. ``(3) Required taxable year.--The term `required taxable year' has the meaning given to such term by section 444(e). ``(e) Tiered Structures.--The Secretary shall prescribe rules similar to the rules of section 444(d)(3) to eliminate abuse of this section through the use of tiered structures.''. (b) Conforming Amendment.--Section 444(a)(1) of such Code is amended by striking ``section,'' and inserting ``section and section 444A''. (c) Clerical Amendment.--The table of sections for part I of subchapter E of chapter 1 of such Code is amended by inserting after the item relating to section 444 the following new item: ``444A. Qualified small businesses election of taxable year ending in a month from April to November.''. (d) Effective Date.--The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 9. INCREASE IN MAXIMUM NUMBER OF S CORPORATION SHAREHOLDERS. (a) In General.--Subparagraph (A) of section 1361(b)(1) is amended by striking ``100'' and inserting ``150''. (b) Effective Date.--The amendment made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 10. GOVERNMENT CONTRACTS WITH SMALL BUSINESSES NOT SUBJECT TO TAX WITHHOLDING. (a) In General.--Paragraph (2) of section 3402(t) is amended by striking ``and'' at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting ``, and'', and by adding at the end the following new subparagraph: ``(J) to any specified small business.''. (b) Specified Small Business.--Subsection (t) of section 3402 is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: ``(3) Specified small business.--For purposes of this subsection, the term `specified small business' means a corporation or partnership which meets the gross receipts test of section 448(c) for the taxable year prior to the taxable year in which the payment is received (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation).''. (c) Effective Date.--The amendments made by this section shall take effect as if included in section 511 of the Tax Increase Prevention and Reconciliation Act of 2005.
summary: Small Business Tax Relief Act of 2007 - Amends the Internal Revenue Code to: (1) make permanent the work opportunity tax credit, the new markets tax credit, and the tax credit for increasing research activities; (2) make permanent accelerated depreciation of qualified leasehold improvement and restaurant property and expensing of environmental remediation expenditures; (3) increase the partial tax exclusion of gain from sales of certain small business stock for noncorporate business taxpayers and businesses in an empowerment zone; (4) permit certain small businesses to elect taxable years ending between April and November; (5) increase the allowable number of S corporation shareholders from 100 to 150; and (6) exempt certain small businesses from the 3% withholding requirement applicable to payments made to such businesses by government entities.