[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 2246 Introduced in Senate (IS)]







106th CONGRESS
  2d Session
                                S. 2246

  To amend the Internal Revenue Code of 1986 to clarify that certain 
  small businesses are permitted to use the cash method of accounting 
               even if they use merchandise or inventory.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 9, 2000

Mr. Bond (for himself and Mr. Grassley) 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 clarify that certain 
  small businesses are permitted to use the cash method of accounting 
               even if they use merchandise or inventory.

    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 Tax Accounting 
Simplification Act of 2000''.

SEC. 2. 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 Business Taxpayers Permitted To Use Cash Accounting 
Method Without Limitation.--Notwithstanding any other provision of law, 
a taxpayer shall not be required to use an accrual method of accounting 
for any taxable year, if the average annual gross receipts of such 
taxpayer (or any predecessor) for the 3-year-period ending with the 
preceding 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).''.
    (b) Clarification of Inventory Rules for Small Business.--Section 
471 of the Internal Revenue Code of 1986 (relating to general rule for 
inventories) is amended by redesignating subsection (c) as subsection 
(d) and by inserting after subsection (b) the following new subsection:
    ``(c) Small Business Service Providers Not Required To Use 
Inventories.--A taxpayer shall not be required to use inventories under 
this section for a taxable year if the amounts paid for merchandise 
sold during the preceding taxable year were less than 50 percent of the 
gross receipts received during such preceding taxable year. For 
purposes of this subsection, gross receipts for any taxable year shall 
be reduced by returns and allowances made during such year.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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