[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1180 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 1180
To amend the Internal Revenue Code of 1986 to establish small business
start-up savings accounts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 17, 2011
Mr. Gardner (for himself, Mr. Paul, Mr. Pitts, Mr. Pearce, and Mr.
Coffman of Colorado) introduced the following bill; which was referred
to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish small business
start-up savings accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Start-up Savings
Accounts Act of 2011''.
SEC. 2. ESTABLISHMENT OF SMALL BUSINESS START-UP SAVINGS ACCOUNTS.
(a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
``SEC. 7529. SMALL BUSINESS START-UP SAVINGS ACCOUNTS.
``(a) In General.--An individual or an eligible small business may
enter into an agreement with the Secretary to establish a small
business start-up savings account.
``(b) Small Business Start-Up Savings Account.--For purposes of
this section, the term `small business start-up savings account' means
a trust created or organized in the United States for the benefit of
the account beneficiary, but only if the written governing instrument
creating the trust meets the following requirements:
``(1) Except as provided in subsection (d)(3) in the case
of a rollover contribution, no contribution will be accepted
unless it is in cash, and contributions will not be accepted
for the taxable year on behalf of any account beneficiary in
excess of the amount in effect for such taxable year under
subsection (d)(2).
``(2) The trustee is a bank (as defined in section 408(n))
or such other person who demonstrates to the satisfaction of
the Secretary that the manner in which such other person will
administer the trust will be consistent with the requirements
of this section.
``(3) No part of the trust funds will be invested in life
insurance contracts.
``(4) The interest of an individual in the balance of his
account is nonforfeitable.
``(5) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(c) Eligible Small Business.--For purposes of this section, the
term `eligible small business' means, with respect to any taxable year,
any person engaged in a trade or business if the average number of
employees employed by such person on business days during the taxable
year was 500 or fewer.
``(d) Treatment of Contributions.--
``(1) In general.--There shall be allowed as a deduction
for the taxable year an amount equal to so much of the account
beneficiary's contributions for the taxable year to all small
business start-up savings accounts maintained for the benefit
of such beneficiary as do not exceed the contribution
limitations in effect for the taxable year under paragraph (2).
``(2) Contribution limitation.--
``(A) In general.--The amount allowable as a
deduction under paragraph (1) with respect to all small
business start-up savings accounts maintained for the
benefit of any person shall not exceed the lesser of--
``(i) $10,000, or
``(ii) $150,000, reduced by the aggregate
contributions by such person for all taxable
years with respect to all small business start-
up savings accounts of the taxpayer.
``(B) Cost of living adjustment.--
``(i) In general.--In the case of a taxable
year beginning after 2011, the $10,000 amount
in subparagraph (A) shall be increased by an
amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under section
1(f)(3) for the calendar year in which
the taxable year begins, determined by
substituting `calendar year 2010' for
`calendar year 1992' in subparagraph
(B) thereof.
``(ii) Rounding.--If any amount as adjusted
under clause (i) is not a multiple of $500,
such amount shall be rounded to the next lowest
multiple of $500.
``(3) Rollovers from retirement plans not allowed.--Under
regulations prescribed by the Secretary, a person may make a
rollover contribution to a small business start-up savings
account only in the case of a rollover from another small
business start-up savings account.
``(4) Treated as deduction for individuals and
corporations.--For purposes of chapter 1, the deduction allowed
under paragraph (1) shall be treated as a deduction specified
in part VI of subchapter B of chapter 1 (relating to itemized
deductions for individuals and corporations).
``(e) Treatment of Distributions.--
``(1) Tax treatment.--
``(A) Exclusion of qualified distributions.--Any
qualified distribution from a small business start-up
savings account shall not be includible in gross
income.
``(B) Inclusion of other distributions.--Any
distribution from a small business start-up savings
account which is not a qualified distribution shall be
included in gross income.
``(2) Qualified distribution.--For purposes of this
subsection, the term `qualified distribution' means, with
respect to any taxable year, any payment or distribution from a
small business start-up savings account--
``(A) to the extent the amount of such payment or
distribution does not exceed the sum of--
``(i) the aggregate amounts paid or
incurred by the taxpayer for such taxable year
with respect to the taxpayer's trade or
business for the purchase of equipment or
facilities, marketing, training, incorporation,
and accounting fees, and
``(ii) the aggregate capital contributions
of the taxpayer with respect to an eligible
small business for the taxable year (but only
to the extent such amounts are used by such
small business for purposes described in clause
(i)), and
``(B) which, in the case of a payment or
distribution subsequent to the first payment or
distribution from such account (or any predecessor to
such account)--
``(i) is made not later than the close of
the 5th taxable year beginning after the date
of such first payment or distribution, and
``(ii) is made with respect to the same
eligible small business with respect to which
such first payment or distribution was made.
``(3) Treatment after death of account beneficiary.--
``(A) In general.--If, by reason of the death of
the account beneficiary, any person acquires the
account beneficiary's interest in a small business
start-up savings account--
``(i) such account shall cease to be a
small business start-up savings account as of
the date of death, and
``(ii) an amount equal to the fair market
value of the assets in such account on such
date shall be includible--
``(I) in the case of a person who
is not the estate of such beneficiary,
in such person's gross income for the
taxable year which includes such date,
or
``(II) in the case of a person who
is the estate of such beneficiary, in
such beneficiary's gross income for the
last taxable year of such beneficiary.
``(B) Special rules.--
``(i) Reduction of inclusion for predeath
expenses.--The amount includible in gross
income under subparagraph (A) shall be reduced
by the amounts described in paragraph (2) which
were incurred by the decedent before the date
of the decedent's death and paid by such person
within 1 year after such date.
``(ii) Deduction for estate taxes.--An
appropriate deduction shall be allowed under
section 691(c) to any person (other than the
decedent) with respect to amounts included in
gross income under subparagraph (A)(ii)(I) by
such person.
``(4) Treatment for failure to be treated as eligible small
business.--If for any taxable year a taxpayer which holds a
small business start-up savings account as an eligible small
business ceases to be an eligible small business--
``(A) such account shall cease to be a small
business start-up savings account, and
``(B) the balance of such account shall be treated
as paid out for such taxable year in a distribution
which is not a qualified distribution.
``(f) Special Rules.--
``(1) Denial of double benefit.--Any deduction or credit
otherwise allowed for the taxable year with respect to amounts
described in subsection (e)(2)(A) shall be reduced by an amount
equal to the qualified distributions attributable to such
amounts. The adjusted basis of any property placed in service
for the taxable year shall be reduced by the amount of any
qualified distributions attributable to such property. For
purposes of this paragraph, qualified distributions shall first
be treated as attributable to amounts described in subsection
(e)(2)(A), then to property placed in service for the taxable
year.
``(2) Aggregation rule.--For purposes of this section, all
persons treated as a single employer under subsection (a) or
(b) of section 52, or subsection (m) or (o) of section 414,
shall be treated as one person.''.
(b) Excise Tax on Excess Contributions and Nonqualified
Distributions.--Subtitle D of the Internal Revenue Code of 1986 is
amended by adding at the end the following new chapter:
``CHAPTER 50--SMALL BUSINESS START-UP SAVINGS ACCOUNTS
``Sec. 5000C. Tax on excess contributions to small business start-up
savings accounts.
``Sec. 5000D. Tax on nonqualified distributions from small business
start-up savings accounts.
``SEC. 5000C. TAX ON EXCESS CONTRIBUTIONS TO SMALL BUSINESS START-UP
SAVINGS ACCOUNTS.
``(a) In General.--In the case of a small business start-up savings
account (within the meaning of section 7529) there is imposed for each
taxable year a tax in an amount equal to 6 percent of the amount of the
excess contributions to such taxpayer's account (determined as of the
close of the taxable year).
``(b) Limitation.--The amount of tax imposed by subsection (a)
shall not exceed 6 percent of the value of the account (determined as
of the close of the taxable year).
``(c) Excess Contributions.--For purposes of this section, in the
case of contributions to all small business start-up savings accounts
maintained for the benefit of a person, the term `excess contributions'
means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed to such accounts for
the taxable year, over
``(B) the amount allowable as a contribution under
section 7529(d)(2)(A) for such taxable year, and
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distributions out of the accounts for the
taxable year, and
``(B) the excess (if any) of--
``(i) the maximum amount allowable as a
contribution under section 7529(d)(2)(A) for
such taxable year, over
``(ii) the amount contributed to such
accounts for such taxable year.
``SEC. 5000D. TAX ON NONQUALIFIED DISTRIBUTIONS FROM SMALL BUSINESS
START-UP SAVINGS ACCOUNTS.
``(a) In General.--If for any taxable year an amount is paid or
distributed out of a taxpayer's small business start-up savings
account, there is imposed for such taxable year a tax in an amount
equal to 10 percent of the portion of such amount which is includible
in the gross income of the taxpayer.
``(b) Exception for Disability or Death.--Subsection (a) shall not
apply if the payment or distribution is made after the account
beneficiary becomes disabled within the meaning of section 72(m)(7)
(but only if such beneficiary's account was created before becoming so
disabled) or dies.
``SEC. 5000E. CROSS REFERENCE.
``For prohibited transactions, see section 4975.''.
(c) Prohibited Transactions.--
(1) In general.--Paragraph (1) of section 4975(e) of such
Code is amended by striking ``or'' at the end of subparagraph
(F), by striking the period at the end of subparagraph and
inserting ``, or'', and by adding at the end the following new
subparagraph:
``(H) a small business start-up savings account
(within the meaning of section 7529).''.
(2) Special rule for ceasing to be a small business start-
up savings account.--Section 4975(d) of such Code (relating to
tax on prohibited transactions) is amended by adding at the end
the following new paragraph:
``(7) Special rule for small business start-up savings
account.--An individual for whose benefit a small business
start-up savings account (within the meaning of section 7529)
is established shall be exempt from the tax imposed by this
section with respect to any transaction concerning such account
(which would otherwise be taxable under this section) if, with
respect to such transaction, the account ceases to be a small
business start-up savings account by reason of the application
of paragraph (3) or (4) of section 7529(e) to such account.''.
(d) Deduction Allowed Whether or Not Individual Itemizes.--
Subsection (a) of section 62 of such Code is amended by adding at the
end the following new paragraph:
``(22) Contributions to small business start-up savings
accounts.--The deduction allowed by section 7529(d)(1)(A).''.
(e) Conforming Amendments.--
(1) The table of chapters for subtitle D such Code is
amended by adding at the end the following new item:
``Chapter 50. Small Business Start-Up Savings Accounts''.
(2) The table of sections for chapter 77 of such Code is
amended by inserting after the item relating to section 7528
the following new item:
``Sec. 7529. Small Business Start-Up Savings Accounts.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2010.
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