[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2087 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2087

 To amend the Internal Revenue Code of 1986 to provide tax relief for 
               small businesses, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 9, 1999

 Mr. Talent (for himself, Mr. McCrery, Mr. English, Mrs. Bono, and Mr. 
   DeMint) 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 provide tax relief for 
               small businesses, and for other purposes.

    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 Employer Tax Relief Act of 
1999''.

 SEC. 2. DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED 
              INDIVIDUALS INCREASED.

    (a) In General.--Paragraph (1) of section 162(l) of the Internal 
Revenue Code of 1986 (relating to special rules for health insurance 
costs of self-employed individuals) is amended to read as follows:
            ``(1) Allowance of deduction.--In the case of an individual 
        who is an employee within the meaning of section 401(c)(1), 
        there shall be allowed as a deduction under this section an 
        amount equal to the amount paid during the taxable year for 
        insurance which constitutes medical care for the taxpayer, the 
        taxpayer's spouse, and dependents.''.
    (b) Clarification of Limitations on Other Coverage.--The first 
sentence of section 162(l)(2)(B) of the Internal Revenue Code of 1986 
is amended to read as follows: ``Paragraph (1) shall not apply to any 
taxpayer for any calendar month for which the taxpayer participates in 
any subsidized health plan maintained by any employer (other than an 
employer described in section 401(c)(4)) of the taxpayer or the spouse 
of the taxpayer.''.

SEC. 3. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR MEAL AND 
              ENTERTAINMENT EXPENSES.

    Subsection (n) of section 274 of the Internal Revenue Code of 1986 
(relating to only 50 percent of meal and entertainment expenses allowed 
as deduction) is amended by adding at the end the following new 
paragraph:
            ``(4) Special rule for small businesses.--
                    ``(A) In general.--In the case of any taxpayer 
                which is a small business, paragraph (1) shall be 
                applied by substituting `the applicable percentage (as 
                defined in paragraph (3)(B))' for `50 percent'.
                    ``(B) Small business.--For purposes of this 
                paragraph, the term `small business' means, with 
                respect to expenses paid or incurred during any taxable 
                year--
                            ``(i) any C corporation which meets the 
                        requirements of section 55(e)(1) for such year, 
                        and
                            ``(ii) any S corporation, partnership, or 
                        sole proprietorship which would meet such 
                        requirements if it were a C corporation.''.

 SEC. 4. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

    Paragraph (1) of section 179(b) of the Internal Revenue Code of 
1986 (relating to dollar limitation) is amended to read as follows:
            ``(1) Dollar limitation.--The aggregate cost which may be 
        taken into account under subsection (a) for any taxable year 
        shall not exceed $35,000.''.

 SEC. 5. REDUCTION OF MAXIMUM INCOME TAX RATE FOR SMALL BUSINESS 
              TAXPAYERS.

    Section 1 of the Internal Revenue Code of 1986 (relating to tax 
imposed) is amended by adding at the end the following new subsection:
    ``(i) Tax Rate on Certain Small Business Income.--
            ``(1) In general.--Except as provided in paragraph (4), if 
        a small business taxpayer has taxable income for any taxable 
        year to which this subsection applies, then the tax imposed by 
        this section shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by qualified 
                        small business income, or
                            ``(ii) the amount of taxable income taxed 
                        at a rate below 34 percent, plus
                    ``(B) a tax of 34 percent of qualified small 
                business income in excess of the taxable income that is 
                subject to tax under subparagraph (A).
            ``(2) Taxable small business income.--For purposes of this 
        subsection--
                    ``(A) Qualified small business income.--The term 
                `qualified small business income' means taxable income 
                of a small business to the extent such income does not 
                exceed $5,000,000.
                    ``(B) Taxable small business income.--The term 
                `taxable small business income' means, with respect to 
                any taxable year, the taxable income of the taxpayer 
                for such year attributable to the active conduct of any 
                trade or business of an eligible small business.
                    ``(D) Eligible small business.--The term `eligible 
                small business' means an S corporation, partnership, 
                limited liability company or sole proprietorship, 
                except that such term does not include a personal 
                service corporation (as defined in section 469(j)(2)) 
                unless such corporation is a qualified personal service 
                corporation (as defined in section 448(d)(2)).
            ``(3) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this section, including regulations preventing the 
        characterization of income for purposes of compensation or 
        personal use as qualified small business income.''.

SEC. 6. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.

    (a) In General.--The text of section 3301 of the Internal Revenue 
Code of 1986 is amended to read as follows:
    ``There is hereby imposed on every employer (as defined in section 
3306(a)) for each calendar year an excise tax, with respect to having 
individuals in his employ, equal to 6.0 percent of the total wages (as 
defined in section 3306(b)) paid by him during the calendar year with 
respect to employment (as defined in section 3306(c)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to calendar years beginning after the date of the enactment of 
this Act.

SEC. 7. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL BUSINESS.

    Section 446 of the Internal Revenue Code of 1986 (relating to 
general rule for methods of accounting) is amended by adding at the end 
the following new subsection:
    ``(g) Small Taxpayers Permitted To Use Cash Accounting Method 
Without Limitation.--A taxpayer shall not be required to use an accrual 
method of accounting for any taxable year by reason of using 
merchandise or inventory, if the average annual gross receipts of such 
taxpayer (or any predecessor) for the 3-year-period ending with such 
prior taxable year does not exceed $5,000,000. The rules of paragraphs 
(2) and (3) of section 448(c) shall apply for purposes of the preceding 
sentence. In the case of a C corporation or a partnership which has a C 
corporation as a partner, the first sentence of this subsection shall 
apply only if such C corporation or partnership meets the requirements 
of section 448(b)(3).''

SEC. 8. EFFECTIVE DATE.

    Except as otherwise provided in this Act, the amendments made by 
this Act shall apply to taxable years beginning after the date of the 
enactment of this Act.
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