[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2675 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2675

 To amend the Internal Revenue Code of 1986 to expand the availability 
 of the cash method of accounting for small businesses, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 15, 2004

   Ms. Snowe 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 expand the availability 
 of the cash method of accounting 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. CLARIFICATION OF CASH ACCOUNTING RULES FOR SMALL BUSINESS.

    (a) Cash Accounting Permitted.--
            (1) In general.--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) Certain Small Business Taxpayers Permitted To Use Cash 
Accounting Method Without Limitation.--
            ``(1) In general.--An eligible taxpayer shall not be 
        required to use an accrual method of accounting for any taxable 
        year.
            ``(2) Eligible taxpayer.--For purposes of this subsection, 
        a taxpayer is an eligible taxpayer with respect to any taxable 
        year if--
                    ``(A) for all prior taxable years beginning after 
                December 31, 2003, the taxpayer (or any predecessor) 
                met the gross receipts test of section 448(c), and
                    ``(B) the taxpayer is not subject to section 447 or 
                448.''.
            (2) Expansion of gross receipts test.--
                    (A) In general.--Paragraph (3) of section 448(b) of 
                such Code (relating to entities with gross receipts of 
                not more than $5,000,000) is amended by striking 
                ``$5,000,000'' in the text and in the heading and 
                inserting ``$10,000,000''.
                    (B) Conforming amendments.--Section 448(c) of such 
                Code is amended--
                            (i) by striking ``$5,000,000'' each place 
                        it appears in the text and in the heading of 
                        paragraph (1) and inserting ``$10,000,000'', 
                        and
                            (ii) by adding at the end the following new 
                        paragraph:
            ``(4) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2005, the dollar amount 
        contained in subsection (b)(3) and paragraph (1) of this 
        subsection shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, by substituting `calendar year 
                2004' for `calendar year 1992' in subparagraph (B) 
                thereof.
                If any amount as adjusted under this subparagraph is 
                not a multiple of $100,000, such amount shall be 
                rounded to the nearest multiple of $100,000.''.
    (b) Clarification of Inventory Rules for Small Business.--
            (1) In general.--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 Taxpayers Not Required To Use Inventories.--
            ``(1) In general.--A qualified taxpayer shall not be 
        required to use inventories under this section for a taxable 
        year.
            ``(2) Treatment of taxpayers not using inventories.--If a 
        qualified taxpayer does not use inventories with respect to any 
        property for any taxable year beginning after December 31, 
        2003, such property shall be treated as a material or supply 
        which is not incidental.
            ``(3) Qualified taxpayer.--For purposes of this subsection, 
        the term `qualified taxpayer' means--
                    ``(A) any eligible taxpayer (as defined in section 
                446(g)(2)), and
                    ``(B) any taxpayer described in section 
                448(b)(3).''.
            (2) Conforming amendments.--
                    (A) Subpart D of part II of subchapter E of chapter 
                1 of such Code is amended by striking section 474.
                    (B) The table of sections for subpart D of part II 
                of subchapter E of chapter 1 of such Code is amended by 
                striking the item relating to section 474.
    (c) Effective Date and Special Rules.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2003.
            (2) Change in method of accounting.--In the case of any 
        taxpayer changing the taxpayer's method of accounting for any 
        taxable year under the amendments made by this section--
                    (A) such change shall be treated as initiated by 
                the taxpayer;
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury; and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account over a period (not greater than 4 taxable 
                years) beginning with such taxable year.

SEC. 2. TRANSFER OF UNEMPLOYMENT EXPERIENCE UPON TRANSFER OR 
              ACQUISITION OF A BUSINESS.

    (a) In General.--Section 303 of the Social Security Act (42 U.S.C. 
503) is amended by adding at the end the following:
    ``(k)(1) For purposes of subsection (a), the unemployment 
compensation law of a State must provide--
            ``(A) that if an employer transfers its business to another 
        employer, and both employers are (at the time of transfer) 
        under substantially common ownership, management, or control, 
        then the unemployment experience attributable to the 
        transferred business shall also be transferred to (and combined 
        with the unemployment experience attributable to) the employer 
        to whom such business is so transferred,
            ``(B) that unemployment experience shall not, by virtue of 
        the transfer of a business, be transferred to the person 
        acquiring such business if--
                    ``(i) such person is not otherwise an employer at 
                the time of such acquisition, and
                    ``(ii) the State agency finds that such person 
                acquired the business solely or primarily for the 
                purpose of obtaining a lower rate of contributions,
            ``(C) that unemployment experience shall (or shall not) be 
        transferred in accordance with such regulations as the 
        Secretary of Labor may prescribe to ensure that higher rates of 
        contributions are not avoided through the transfer or 
        acquisition of a business,
            ``(D) that meaningful civil and criminal penalties are 
        imposed with respect to--
                    ``(i) persons that knowingly violate or attempt to 
                violate those provisions of the State law which 
                implement subparagraph (A) or (B) or regulations under 
                subparagraph (C), and
                    ``(ii) persons that knowingly advise another person 
                to violate those provisions of the State law which 
                implement subparagraph (A) or (B) or regulations under 
                subparagraph (C), and
            ``(E) for the establishment of procedures to identify the 
        transfer or acquisition of a business for purposes of this 
        subsection.
    ``(2) For purposes of this subsection--
            ``(A) the term `unemployment experience', with respect to 
        any person, refers to such person's experience with respect to 
        unemployment or other factors bearing a direct relation to such 
        person's unemployment risk;
            ``(B) the term `employer' means an employer as defined 
        under the State law;
            ``(C) the term `business' means a trade or business (or an 
        identifiable and segregable part thereof);
            ``(D) the term `contributions' has the meaning given such 
        term by section 3306(g) of the Internal Revenue Code of 1986;
            ``(E) the term `knowingly' means having actual knowledge of 
        or acting with deliberate ignorance of or reckless disregard 
        for the prohibition involved; and
            ``(F) the term `person' has the meaning given such term by 
        section 7701(a)(1) of the Internal Revenue Code of 1986.''.
    (b) Study and Reporting Requirements.--
            (1) Study.--The Secretary of Labor shall conduct a study of 
        the implementation of the provisions of section 303(k) of the 
        Social Security Act (as added by subsection (a)) to assess the 
        status and appropriateness of State actions to meet the 
        requirements of such provisions.
            (2) Report.--Not later than July 15, 2006, the Secretary of 
        Labor shall submit to the Congress a report that contains the 
        findings of the study required by paragraph (1) and 
        recommendations for any Congressional action that the Secretary 
        considers necessary to improve the effectiveness of section 
        303(k) of the Social Security Act.
    (c) Effective Date.--The amendment made by subsection (a) shall, 
with respect to a State, apply to certifications for payments (under 
section 302(a) of the Social Security Act) in rate years beginning 
after the end of the 26-week period beginning on the first day of the 
first regularly scheduled session of the State legislature beginning on 
or after the date of the enactment of this Act.
    (d) Definitions.--For purposes of this section--
            (1) the term ``State'' includes the District of Columbia, 
        the Commonwealth of Puerto Rico, and the Virgin Islands;
            (2) the term ``rate year'' means the rate year as defined 
        in the applicable State law; and
            (3) the term ``State law'' means the unemployment 
        compensation law of the State, approved by the Secretary of 
        Labor under section 3304 of the Internal Revenue Code of 1986.

SEC. 3. USE OF NEW HIRE INFORMATION TO ASSIST IN ADMINISTRATION OF 
              UNEMPLOYMENT COMPENSATION PROGRAMS.

    Section 453(j) of the Social Security Act (42 U.S.C. 653(j)) is 
amended by adding at the end the following:
            ``(7) Information comparisons and disclosure to assist in 
        administration of unemployment compensation programs.--
                    ``(A) In general.--If, for purposes of 
                administering an unemployment compensation program 
                under Federal or State law, a State agency responsible 
                for the administration of such program transmits to the 
                Secretary the names and social security account numbers 
                of individuals, the Secretary shall disclose to such 
                State agency information on such individuals and their 
                employers maintained in the National Directory of New 
                Hires, subject to this paragraph.
                    ``(B) Condition on disclosure by the secretary.--
                The Secretary shall make a disclosure under 
                subparagraph (A) only to the extent that the Secretary 
                determines that the disclosure would not interfere with 
                the effective operation of the program under this part.
                    ``(C) Use and disclosure of information by state 
                agencies.--
                            ``(i) In general.--A State agency may not 
                        use or disclose information provided under this 
                        paragraph except for purposes of administering 
                        a program referred to in subparagraph (A).
                            ``(ii) Information security.--The State 
                        agency shall have in effect data security and 
                        control policies that the Secretary finds 
                        adequate to ensure the security of information 
                        obtained under this paragraph and to ensure 
                        that access to such information is restricted 
                        to authorized persons for purposes of 
                        authorized uses and disclosures.
                            ``(iii) Penalty for misuse of 
                        information.--An officer or employee of the 
                        State agency who fails to comply with this 
                        subparagraph shall be subject to the sanctions 
                        under subsection (l)(2) to the same extent as 
                        if such officer or employee was an officer or 
                        employee of the United States.
                    ``(D) Procedural requirements.--State agencies 
                requesting information under this paragraph shall 
                adhere to uniform procedures established by the 
                Secretary governing information requests and data 
                matching under this paragraph.
                    ``(E) Reimbursement of costs.--The State agency 
                shall reimburse the Secretary, in accordance with 
                subsection (k)(3), for the costs incurred by the 
                Secretary in furnishing the information requested under 
                this paragraph.''.
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