Veterans Jobs Opportunity Act
The Veterans Jobs Opportunity Act creates a new tax credit designed to encourage veterans (and spouses) to start and operate small businesses in underserved communities. The credit, called the Veteran Small Business Start-Up Credit, is equal to 15% of qualified start-up expenditures paid or incurred in a taxable year for an applicable veteran-owned small business, up to a maximum of $50,000 of such expenditures per year. This means a maximum credit of $7,500 per eligible veteran-owned business per year, for up to two years (the first two years in which ordinary and necessary business expenses are deductible). The program applies only to businesses owned and controlled by veterans or their spouses and located in areas deemed underserved (e.g., HUBZones, empowerment zones, low/moderate income areas, or counties with persistent poverty). The credit is elective and must be claimed in conjunction with the taxpayer’s federal income tax liability, with several guardrails to prevent abuse (such as no double benefit and group control rules). The act also requires periodic evaluation by the Treasury Inspector General for Tax Administration of the program every four years and directs related amendments to the tax code.
Key Points
- 1Establishes a new nonrefundable tax credit (the Veteran Small Business Start-Up Credit) under section 45BB of the Internal Revenue Code, as part of the general business credits.
- 2Credit amount: 15% of qualified start-up expenditures paid or incurred in the taxable year, up to a $50,000 expenditure cap per applicable veteran-owned small business, yielding a maximum credit of $7,500 per year per business.
- 3Eligible business and ownership requirements:
- 4- The business must be a small business owned and controlled by one or more veterans or spouses of veterans.
- 5- The principal place of business must be in an underserved community (as defined in the bill).
- 6- Ownership and control tests require that non-passive conduct of business by veteran(s) or spouse(s) and >50% ownership (by vote/stock or profits/capital interests, depending on entity type) by the veterans/spouses.
- 7Qualified start-up expenditures include startup costs (as defined in the tax code) and amounts paid for real or personal property placed in service in the tax year and used in active business.
- 8Underserved communities include HUBZones, empowerment zones/enterprise communities, areas of low/moderate income, or counties with persistent poverty (as designated by relevant agencies).
- 9Election mechanics and limitations:
- 10- The credit is elective; taxpayers must elect to apply it to the expenditures.
- 11- The credit may be claimed only in the first two tax years in which ordinary and necessary business expenses are deductible under section 162.
- 12- Related party and group rules apply (treated as a single employer for purposes of the credit).
- 13- No double benefit: the property basis must be reduced by the credit amount attributable to that property.
- 14Verification and oversight:
- 15- The Treasury, in consultation with the SBA, must verify eligibility of the veteran-owned small business.
- 16- The Treasury Inspector General for Tax Administration must, every four years, report on the credit’s use, effectiveness, and accountability.
- 17Effective date: The amendments apply to taxable years beginning after enactment of the act.