[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1863 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1863

 To amend the Internal Revenue Code of 1986 to provide an incentive to 
 small businesses to establish and maintain qualified pension plans by 
allowing a credit against income taxes for contributions to, and start-
                         up costs of, the plan.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 4, 1999

  Mr. Baucus introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide an incentive to 
 small businesses to establish and maintain qualified pension plans by 
allowing a credit against income taxes for contributions to, and start-
                         up costs of, the plan.

    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 Pension Start-up 
Incentive Act''.

SEC. 2. CREDIT FOR SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS AND START-
              UP COSTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45D. SMALL EMPLOYER PENSION PLAN CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan credit determined 
under this section for any taxable year is an amount equal to the sum 
of--
            ``(1) 50 percent of the qualified employer contributions of 
        the taxpayer for the taxable year, and
            ``(2) the qualified start-up costs paid or incurred by the 
        taxpayer during the taxable year.
    ``(b) Limitations.--
            ``(1) Limits on contributions.--For purposes of subsection 
        (a)(1)--
                    ``(A) qualified employer contributions may only be 
                taken into account for each of the first 5 taxable 
                years ending after the date the employer establishes 
                the qualified employer plan to which the contribution 
                is made, and
                    ``(B) the amount of the qualified employer 
                contributions taken into account with respect to any 
                qualified employee for any such taxable year shall not 
                exceed 3 percent of the compensation (as defined in 
                section 414(s)) of the qualified employee for such 
                taxable year.
            ``(2) Limits on start-up costs.--The amount of the credit 
        determined under subsection (a)(2) for any taxable year shall 
        not exceed--
                    ``(A) $500 for each of the first, second, and third 
                taxable years ending after the date the employer 
                established the qualified employer plan to which such 
                costs relate, and
                    ``(B) zero for each taxable year thereafter.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible employer.--
                    ``(A) In general.--The term `eligible employer' 
                means, with respect to any year, an employer which has 
                no more than--
                            ``(i) for purposes of subsection (a)(1), 50 
                        employees, and
                            ``(ii) for purposes of subsection (a)(2), 
                        100 employees,
                who received at least $5,000 of compensation from the 
                employer for the preceding year.
                    ``(B) 2-year grace period.--An eligible employer 
                who establishes and maintains a qualified employer plan 
                for 1 or more years and who fails to be an eligible 
                employer for any subsequent year shall be treated as an 
                eligible employer for the 2 years following the last 
                year the employer was an eligible employer.
                    ``(C) Requirement for new qualified employer 
                plans.--Such term shall not include an employer if the 
                employer (or any predecessor employer) established or 
                maintained a qualified employer plan with respect to 
                which contributions were made, or benefits were 
                accrued, for service in the 3 taxable years ending 
                prior to the first taxable year in which the credit 
                under this section is allowed.
            ``(2) Qualified employer contributions.--
                    ``(A) In general.--The term `qualified employer 
                contributions' means, with respect to any taxable year, 
                any employer contributions made on behalf of a 
                qualified employee to a qualified employer plan for a 
                plan year ending with or within the taxable year.
                    ``(B) Employer contributions.--The term `employer 
                contributions' shall not include any elective deferral 
                (within the meaning of section 402(g)(3)).
            ``(3) Qualified employee.--The term `qualified employee' 
        means an individual who--
                    ``(A) is eligible to participate in the qualified 
                employer plan to which the employer contributions are 
                made, and
                    ``(B) is not a highly compensated employee (within 
                the meaning of section 414(q)) for the year for which 
                the contribution is made.
            ``(4) Qualified start-up costs.--The term `qualified start-
        up costs' means any ordinary and necessary expenses of an 
        eligible employer which are paid or incurred in connection 
        with--
                    ``(A) the establishment or maintenance of a 
                qualified employer plan in which qualified employees 
                are eligible to participate, and
                    ``(B) providing educational information to 
                employees regarding participation in such plan and the 
                benefits of establishing an investment plan.
            ``(5) Qualified employer plan.--The term `qualified 
        employer plan' has the meaning given such term in section 
        4972(d).
    ``(d) Special Rules.--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person. All qualified employer plans of an employer shall be 
        treated as 1 qualified employer plan.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowable under this chapter for any qualified start-up costs 
        or qualified employer contributions for which a credit is 
        determined under subsection (a).
            ``(3) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of the Internal Revenue Code of 1986 (defining current year 
business credit) is amended by striking ``plus'' at the end of 
paragraph (11), by striking the period at the end of paragraph (12) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(13) in the case of an eligible employer (as defined in 
        section 45D(c)), the small employer pension plan credit 
        determined under section 45D(a).''.
    (c) Conforming Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

                              ``Sec. 45D. Small employer pension plan 
                                        credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred or contributions made in connection 
with qualified employer plans established after December 31, 1999.
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