[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3761 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 3761

    To amend the Internal Revenue Code of 1986 to permit individual 
 retirement accounts to be used as security for certain business loans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 2, 1994

  Ms. Byrne 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 permit individual 
 retirement accounts to be used as security for certain business loans.

    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 Empowerment Act''.

SEC. 2. USE OF INDIVIDUAL RETIREMENT ACCOUNTS AS SECURITY FOR CERTAIN 
              BUSINESS LOANS.

    (a) General Rule.--Paragraph (4) of section 408(e) of the Internal 
Revenue Code of 1986 (relating to effect of pledging account as 
security) is amended to read as follows:
            ``(4) Effect of pledging account as security.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit an individual 
                retirement account is established, that individual uses 
                the account or any portion thereof as security for a 
                loan, the portion so used is treated as distributed to 
                that individual.
                    ``(B) Exception for certain business loans.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply to the use of an individual 
                        retirement account (or any portion thereof) as 
                        security for a qualified business loan and 
                        nothing in subsection (a)(4) shall be construed 
                        to prohibit such use.
                            ``(ii) Qualified business loan.--For 
                        purposes of clause (i), the term `qualified 
                        business loan' means any indebtedness incurred 
                        by the individual in connection with--
                                    ``(I) the commencement of a new 
                                trade or business by the individual or 
                                the expansion of an existing trade or 
                                business, or
                                    ``(II) the acquisition of property 
                                to be used in the conduct of a trade or 
                                business by the individual.
                            ``(iii) Waiver of penalty in case of 
                        default.--If--
                                    ``(I) an individual retirement 
                                account (or portion thereof) was used 
                                as security for a qualified business 
                                loan, and
                                    ``(II) as a result of a default on 
                                such loan there is a distribution from 
                                such account required under the 
                                security interest,
                        no additional tax shall be imposed under 
                        section 72(t) on such distribution.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

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