[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2373 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 2373

  To amend the Internal Revenue Code of 1986 to provide for Start-up 
                           Success Accounts.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 29, 1999

 Mr. DeMint (for himself and Mr. Baird) 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 for Start-up 
                           Success 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 ``Start-Up Success Accounts Act of 
1999''.

SEC. 2. START-UP SUCCESS ACCOUNTS.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
of the Internal Revenue Code of 1986 (relating to taxable year for 
which deductions taken) is amended by inserting after section 468B the 
following new section:

``SEC. 468C. START-UP SUCCESS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible small 
business, there shall be allowed as a deduction for any taxable year 
the amount paid in cash by the taxpayer during the taxable year to a 
Start-up Success Account (hereafter in this section also referred to as 
an `SUSA Account').
    ``(b) Limitation.--
            ``(1) In general.--The amount which a taxpayer may pay into 
        the SUSA Account for any taxable year shall not exceed the 
        lesser of--
                    ``(A) 20 percent of so much of the taxable income 
                of the taxpayer (determined without regard to this 
                section) which is attributable (determined in the 
                manner applicable under section 1301) to a trade or 
                business, or
                    ``(B) $200,000.
            ``(2) Deduction allowed only during startup period.--No 
        deduction shall be allowed under this section for any taxable 
        year after the 5th taxable year that the taxpayer (or any 
        predecessor) is engaged in a trade or business.
    ``(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 for all prior taxable 
years beginning after December 31, 1999, the taxpayer (or any 
predecessor) met the $5,000,000 gross receipts test of section 448(c).
    ``(d) Start-Up Success Account.--For purposes of this section--
            ``(1) In general.--The terms `Start-Up Success Account' and 
        `SUSA Account' mean a trust created or organized in the United 
        States for the exclusive benefit of the taxpayer, but only if 
        the written governing instrument creating the trust meets the 
        following requirements:
                    ``(A) No contribution will be accepted for any 
                taxable year in excess of the amount allowed as a 
                deduction under subsection (a) for such year.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust consist entirely of 
                cash or of obligations which have adequate stated 
                interest (as defined in section 1274(c)(2)) and which 
                pay such interest not less often than annually.
                    ``(D) All income of the trust is distributed 
                currently to the grantor.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Account taxed as grantor trust.--The grantor of an 
        SUSA Account shall be treated for purposes of this title as the 
        owner of such Account and shall be subject to tax thereon in 
        accordance with subpart E of part I of subchapter J of this 
        chapter (relating to grantors and others treated as substantial 
        owners).
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from an SUSA Account 
                of the taxpayer during such taxable year (to the extent 
                not previously included in gross income), and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 5 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in trade or business), and
                            ``(iii) subparagraph (A) or (B) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Gross income shall not include the 
        distribution of any contribution paid during a taxable year to 
        an SUSA Account to the extent that such contribution exceeds 
        the limitation applicable under subsection (b) if requirements 
        similar to the requirements of section 408(d)(4) are met.
            ``(3) Exclusion from self-employment tax.--Amounts included 
        in gross income under this subsection shall not be included in 
        determining net earnings from self-employment under section 
        1402.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 5 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any SUSA 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
                in such Account before the 4th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from an SUSA Account shall be 
                treated as made from deposits in the order in which 
                such deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in trade or business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in the trade or business referred to in 
        subsection (a), there shall be deemed distributed from the SUSA 
        Account (if any) of the taxpayer an amount equal to the balance 
        in such Account at the close of such disqualification period. 
        For purposes of the preceding sentence, the term 
        `disqualification period' means any period of 2 consecutive 
        taxable years for which the taxpayer is not engaged in the 
        trade or business referred to in subsection (a).
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(B) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(C) Section 408(g) (relating to community 
                property laws).
                    ``(D) Section 408(h) (relating to custodial 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to 
        an SUSA Account on the last day of a taxable year if such 
        payment is made on account of such taxable year and is made 
        within 3\1/2\ months after the close of such taxable year.
            ``(5) Individual.--For purposes of this section, the term 
        `individual' shall not include an estate or trust.
    ``(g) Reports.--The trustee of an SUSA Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by those 
regulations.''.
    (b) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 of such Code (relating 
        to tax on certain excess contributions) is amended by striking 
        ``or'' at the end of paragraph (3), by redesignating paragraph 
(4) as paragraph (5), and by inserting after paragraph (3) the 
following new paragraph:
            ``(4) an SUSA Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 of such Code is amended by adding at the 
        end the following new subsection:
    ``(g) Excess Contributions to SUSA Accounts.--For purposes of this 
section, in the case of SUSA Accounts (within the meaning of section 
468C(d)), the term `excess contributions' means the amount by which the 
amount contributed for the taxable year to the Account exceeds the 
amount which may be contributed to the Account under section 468C(b) 
for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the SUSA Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''.
    (c) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 of such Code (relating 
        to prohibited transactions) is amended by adding at the end the 
        following new paragraph:
            ``(6) Special rule for susa accounts.--A person for whose 
        benefit an SUSA Account (within the meaning of section 468C(d)) 
        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 an SUSA 
        Account by reason of the application of section 468C(f)(3)(A) 
        to such Account.''.
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended by redesignating subparagraphs (E) and (F) as 
        subparagraphs (F) and (G), respectively, and by inserting after 
        subparagraph (D) the following new subparagraph:
                    ``(E) an SUSA Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on SUSA Accounts.--Paragraph (2) of 
section 6693(a) of such Code (relating to failure to provide reports on 
certain tax-favored accounts or annuities) is amended by redesignating 
subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, 
and by inserting after subparagraph (B) the following new subparagraph:
                    ``(C) section 468C(g) (relating to SUSA 
                Accounts),''.
    (e) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 of such Code is amended by 
inserting after the item relating to section 468B the following new 
item:

                              ``Sec. 468C. Start-up Success 
                                        Accounts.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>