The Senate approved legislation on Thursday that would provide $12 billion in tax breaks to small businesses, along with a $30 billion lending fund.

Two Republicans, George Voinovich of Ohio and George LeMieux of Florida, crossed party lines to vote for the bill, which passed by a 61 to 38 margin. The bill will now go to the House, which is expected to pass it quickly. An earlier version passed in the House in June by a wide margin.

The bill was introduced in June by Sen. Max Baucus, D-Mont., and Small Business and Entrepreneurship Committee Chair Mary Landrieu, D-La.

“Small businesses are America’s engine of job creation, but the credit crunch has starved them from accessing the capital they need to grow and create jobs,” said Baucus in a statement.  “This bill takes that credit crunch head on and helps small businesses access the capital they need through targeted tax cuts, robust incentives for investment and support for entrepreneurship. This bill helps small businesses and helps get Americans back to work.”

The National Small Business Association applauded passage of the bill. "America's small businesses have been struggling for more than two years now," said NSBA president Todd McCracken. "This legislation comes not a moment too soon and will provide myriad avenues of help for small businesses."

The Small Business Jobs Act would encourage investment in small businesses by allowing investors to exclude 100 percent of the gains from the sale of certain small business stock from their income for tax purposes if the stock is held for more than five years. The legislation also would reduce the tax burden for small businesses by allowing them to carry back general business tax credits to offset their tax burdens from the previous five years.

Small businesses would also be able to count the general business credits against the alternative minimum tax. 

In addition, the legislation would establish a Small Business Lending Fund of $30 billion to provide capital investments to small community banks to increase small business lending.

The fund is limited to only the smallest banks, those that hold less than $10 billion in assets, and the performance-based program would incentivize only those lenders that extend new credit by decreasing the dividend rate banks pay as they increase lending.

The legislation also would establish a State Small Business Credit Initiative to provide $1.5 billion in grants to existing successful state small business programs that help private lenders extend more credit to small businesses.

In addition, the legislation would raise the cap on small business loans to increase lending by $5 billion in the first year after enactment, and refinance commercial real estate debt into long-term, fixed-rate loans, provisions that are expected to be budget neutral and could create or save 200,000 jobs.

The legislation would also build on some initiatives put in place through the Recovery Act, changing the Small Business Administration’s two largest lending programs and its microloan program, which have pumped more than $20 billion into more than 40,000 businesses.  The legislation calls for an extension of these lending provisions through Dec. 31, 2010.

The legislation also would extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75 percent to 90 percent. 

The legislation also would allow taxpayers to write off more of the cost of purchases for their business, such as equipment and machinery, in the year the purchase is made. The legislation also would expand the types of purchases that would qualify for special expensing to include some types of real property, such as leasehold, retail and restaurant improvements. 

In addition, the legislation would double the amount of start-up expenditures that may be deducted by someone starting a small business, making it easier for new businesses to open.

The legislation also would target resources to support the Office of the United States Trade Representative’s small business export promotion and trade enforcement activities to help U.S. small business exports grow in foreign markets and ensure small businesses compete on a level playing field.

The legislation would also improve the Small Business Administration’s trade and export finance programs, elevating the Office of International Trade within the SBA and adding export finance specialists to the SBA’s counseling programs.

The bill would also establish the State Export Promotion Grant Program, which would increase the number of small businesses that export goods to other countries.