[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1903 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 1903

   To amend the Internal Revenue Code of 1986 to allow certain small 
                  businesses to defer payment of tax.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 28, 2002

Mr. Kerry (for himself, Ms. Snowe, Mr. Lieberman, Mr. Bennett, and Mr. 
   Bingaman) 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 allow certain small 
                  businesses to defer payment of tax.

    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 ``Business Retained Income During 
Growth and Expansion Act of 2002'' or the ``BRIDGE Act of 2002''.

SEC. 2. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL BUSINESSES.

    (a) In General.--Subchapter B of chapter 62 of the Internal Revenue 
Code of 1986 (relating to extensions of time for payment of tax) is 
amended by adding at the end the following new section:

``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR CERTAIN SMALL 
              BUSINESSES.

    ``(a) In General.--An eligible small business may elect to pay the 
tax imposed by chapter 1 in 4 equal installments.
    ``(b) Limitation.--The maximum amount of tax which may be paid in 
installments under this section for any taxable year shall not exceed 
whichever of the following is the least:
            ``(1) The tax imposed by chapter 1 for the taxable year.
            ``(2) The amount contributed by the taxpayer into a BRIDGE 
        Account during such year.
            ``(3) The excess of $250,000 over the aggregate amount of 
        tax for which an election under this section was made by the 
        taxpayer (or any predecessor) for all prior taxable years.
    ``(c) Eligible Small Business.--For purposes of this section--
            ``(1) In general.--The term `eligible small business' 
        means, with respect to any taxable year, any person if--
                    ``(A) such person meets the active business 
                requirements of section 1202(e) throughout such taxable 
                year,
                    ``(B) the taxpayer has gross receipts of 
                $10,000,000 or less for the taxable year,
                    ``(C) the gross receipts of the taxpayer for such 
                taxable year are at least 10 percent greater than the 
                average annual gross receipts of the taxpayer (or any 
                predecessor) for the 2 prior taxable years, and
                    ``(D) the taxpayer uses an accrual method of 
                accounting.
            ``(2) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (2) and (3) of section 448(c) shall apply for 
        purposes of this subsection.
    ``(d) Date for Payment of Installments; Time for Payment of 
Interest.--
            ``(1) Date for payment of installments.--
                    ``(A) In general.--If an election is made under 
                this section for any taxable year, the first 
                installment shall be paid on or before the due date for 
                such installment and each succeeding installment shall 
                be paid on or before the date which is 1 year after the 
                date prescribed by this paragraph for payment of the 
                preceding installment.
                    ``(B) Due date for first installment.--The due date 
                for the first installment for a taxable year shall be 
                whichever of the following is the earliest:
                            ``(i) The date selected by the taxpayer.
                            ``(ii) The date which is 2 years after the 
                        date prescribed by section 6151(a) for payment 
                        of the tax for such taxable year.
            ``(2) Time for payment of interest.--If the time for 
        payment of any amount of tax has been extended under this 
        section--
                    ``(A) Interest for period before due date of first 
                installment.--Interest payable under section 6601 on 
                any unpaid portion of such amount attributable to the 
                period before the due date for the first installment 
                shall be paid annually.
                    ``(B) Interest during installment period.--Interest 
                payable under section 6601 on any unpaid portion of 
                such amount attributable to any period after such 
                period shall be paid at the same time as, and as a part 
                of, each installment payment of the tax.
                    ``(C) Interest in the case of certain 
                deficiencies.--In the case of a deficiency to which 
                subsection (e)(3) applies for a taxable year which is 
                assessed after the due date for the first installment 
                for such year, interest attributable to the period 
                before such due date, and interest assigned under 
                subparagraph (B) to any installment the date for 
                payment of which has arrived on or before the date of 
                the assessment of the deficiency, shall be paid upon 
                notice and demand from the Secretary.
    ``(e) Special Rules.--
            ``(1) Application of limitation to partners and s 
        corporation shareholders.--
                    ``(A) In general.--In applying this section to a 
                partnership which is an eligible small business--
                            ``(i) the election under subsection (a) 
                        shall be made by the partnership,
                            ``(ii) the amount referred to in subsection 
                        (b)(1) shall be the sum of each partner's tax 
                        which is attributable to items of the 
partnership and assuming the highest marginal rate under section 1, and
                            ``(iii) the partnership shall be treated as 
                        the taxpayer referred to in paragraphs (2) and 
                        (3) of subsection (b).
                    ``(B) Overall limitation also applied at partner 
                level.--In the case of a partner in a partnership, the 
                limitation under subsection (b)(3) shall be applied at 
                the partnership and partner levels.
                    ``(C) Similar rules for s corporations.--Rules 
                similar to the rules of subparagraphs (A) and (B) shall 
                apply to shareholders in an S corporation.
            ``(2) Acceleration of payment in certain cases.--
                    ``(A) In general.--If--
                            ``(i) the taxpayer ceases to meet the 
                        requirement of subsection (c)(1)(A), or
                            ``(ii) there is an ownership change with 
                        respect to the taxpayer,
                then the extension of time for payment of tax provided 
                in subsection (a) shall cease to apply, and the unpaid 
                portion of the tax payable in installments shall be 
                paid on or before the due date for filing the return of 
                tax imposed by chapter 1 for the first taxable year 
                following such cessation.
                    ``(B) Ownership change.--For purposes of 
                subparagraph, in the case of a corporation, the term 
                `ownership change' has the meaning given to such term 
                by section 382. Rules similar to the rules applicable 
                under the preceding sentence shall apply to a 
                partnership.
            ``(3) Proration of deficiency to installments.--Rules 
        similar to the rules of section 6166(e) shall apply for 
        purposes of this section.
    ``(f) BRIDGE Account.--For purposes of this section--
            ``(1) In general.--The term `BRIDGE Account' means a trust 
        created or organized in the United States for the exclusive 
        benefit of an eligible small business, 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 
                deferral under subsection (b) 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) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
                    ``(E) Amounts in the trust may be used only--
                            ``(i) as security for a loan to the 
                        business or for repayment of such loan, or
                            ``(ii) to pay the installments under this 
                        section.
            ``(2) Account taxed as grantor trust.--The grantor of a 
        BRIDGE 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).
            ``(3) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to a 
        BRIDGE 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.
    ``(g) Reports.--The Secretary may require such reporting as the 
Secretary determines to be appropriate to carry out this section.
    ``(h) Application of Section.--This section shall apply to taxes 
imposed for taxable years beginning after December 31, 2001, and before 
January 1, 2006.''.
    (b) Priority of Lender.--Subsection (b) of section 6323 of the 
Internal Revenue Code of 1986 (relating to protection for certain 
interests even though notice filed) is amended by adding at the end the 
following new paragraph:
            ``(11) Loans secured by bridge accounts.--With respect to a 
        BRIDGE account (as defined in section 6168(f)) with any bank 
        (as defined in section 408(n)), to the extent of any loan made 
        by such bank without actual notice or knowledge of the 
        existence of such lien, as against such bank, if such loan is 
        secured by such account.''.
    (c) Clerical Amendment.--The table of sections for subchapter B of 
chapter 62 of the Internal Revenue Code of 1986 is amended by adding at 
the end the following new item:

                              ``Sec.  6168. Extension of time for 
                                        payment of tax for certain 
                                        small businesses.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2001.
    (e) Study by General Accounting Office.--
            (1) Study.--In consultation with the Secretary of the 
        Treasury, the Comptroller General of the United States shall 
        undertake a study to evaluate the applicability (including 
        administrative aspects) and impact of the BRIDGE Act of 2001, 
        including how it affects the capital funding needs of 
        businesses under the Act and number of businesses benefiting.
            (2) Report.--Not later than March 31, 2005, the Comptroller 
        General shall transmit to the Committee on Ways and Means of 
        the House of Representatives and the Committee on Finance of 
        the Senate a written report presenting the results of the study 
        conducted pursuant to this subsection, together with such 
        recommendations for legislative or administrative changes as 
        the Comptroller General determines are appropriate.
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