109 HR 3629 IH: Taking Care of Small Business Tax Simplification Act of 2005 U.S. House of Representatives 2005-07-29 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 3629 IN THE HOUSE OF REPRESENTATIVES July 29, 2005 Mr. Doggett (for himself, Ms. Velázquez, Mr. Lewis of Georgia, Mr. Becerra, Mr. Emanuel, Mr. Baca, Mr. Brown of Ohio, Mr. Cardoza, Mr. Case, Mr. Chandler, Mr. Filner, Mr. Gene Green of Texas, Mr. Grijalva, Ms. Herseth, Mr. McGovern, Ms. Millender-McDonald, Mrs. Napolitano, Mr. Sherman, Mr. Moore of Kansas, Mr. Holt, Mr. Thompson of California, and Mr. Davis of Illinois) 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 allow the subchapter S election to be made on a return filed before the due date with extensions, to reduce the payroll deposit penalties for failures to make deposits in the prescribed manner, and to allow a married couple who operates a unincorporated business as co-owners to file separate self-employment tax returns.

1.

Short title

This Act may be cited as the Taking Care of Small Business Tax Simplification Act of 2005.

2.

Subchapter S election permitted on return filed before due date with extensions

(a)

In general

Subsection (b) of section 1362 of the Internal Revenue Code of 1986 (relating to when subchapter S election made) is amended to read as follows: (b)

When made

(1)

In general

An election under subsection (a) may be made by a small business corporation for any taxable year at any time during the period— (A)beginning on the first day of the preceding taxable year, and (B)ending on the due date (with extensions) for filing the return for the taxable year. (2)

Certain elections treated as made for next taxable year

If— (A)an election under subsection (a) is made for any taxable year within the period described in paragraph (1), but (B)either— (i)on 1 or more days in such taxable year before the day on which the election was made the corporation did not meet the requirements of subsection (b) of section 1361, or (ii)1 or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election,then such election shall be treated as made for the following taxable year. (3)

Election made after due date treated as made for following taxable year

If— (A)a small business corporation makes an election under subsection (a) for any taxable year, and (B)such election is made after the due date (with extensions) for filling the return for such year,hen such election shall be treated as made for the following taxable year. (4)

Authority to treat late elections, etc., as timely

If— (A)an election under subsection (a) is made for any taxable year (determined without regard to paragraph (3)) after the date prescribed by this subsection for making such election for such taxable year or no such election is made for any taxable year, and (B)the Secretary determines that there was reasonable cause for the failure to timely make such election,the Secretary may treat such an election as timely made for such taxable year (and paragraph (3) shall not apply). (b)

Revocations

Subparagraph (C) of section 1362(d)(1) of such Code is amended to read as follows: (C)

When effective

Except as provided in subparagraph (D)— (i)a revocation made on or before the due date (with extensions) for filing the return for a taxable year shall be effective on the 1st day of such taxable year unless the revocation specifies that it is to take effect on the 1st day of the taxable year in which made, and (ii) a revocation made during a taxable year but after the due date (with extensions) for filing the return for the preceding taxable year shall be effective on the 1st day of the taxable year.. (c)

Effective date

The amendments made by this section shall apply to elections for taxable years beginning after the date of the enactment of this Act.

3.

Relief from penalties for deposits of taxes made on a timely basis but not in the prescribed manner

(a)

In general

Section 6656 of the Internal Revenue Code of 1986 (relating to failure to make deposits of taxes) is amended by redesignating subsection  (e) as subsection (f) and by inserting after subsection (d) the following new subsection: (e)

Relief from penalties for deposits of taxes made on a timely basis but not in the prescribed manner

The Secretary may abate all or any portion of the penalty imposed by subsection (a) on the failure to make a deposit in the manner prescribed by the Secretary if— (1)the deposit was made not later than the date prescribed therefor, and (2) such failure was due to reasonable cause and not willful neglect.The applicable percentage under subsection (b) shall not exceed 2 percent in the case of any failure with respect to which the requirements of paragraphs (1) and (2) are met.. (b)

Conforming amendment

Subparagraph (A) of section 6656(b)(1) of such Code is amended by striking subparagraph (B) and inserting subparagraph (B) and subsection (e). (c)

Effective Date

The amendments made by this section shall apply to deposits required to be made after the date of the enactment of this Act.

4.

Unincorporated businesses operated by husband and wife as co-owners

(a)

In general

Section 761 of the Internal Revenue Code of 1986 (defining terms for purposes of partnerships) is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection: (f)

Qualified joint venture

(1)

In general

In the case of a qualified joint venture conducted by a husband and wife who file a joint return for the taxable year, for purposes of this title— (A)such joint venture shall not be treated as a partnership, (B)all items of income, gain, loss, deduction, and credit shall be divided between the spouses in accordance with their respective interests in the venture, and (C)each spouse shall take into account such spouse’s respective share of such items as if they were attributable to a trade or business conducted by such spouse as a sole proprietor. (2)

Qualified joint venture

For purposes of paragraph (1), the term qualified joint venture means any joint venture involving the conduct of a trade or business if— (A)the only members of such joint venture are a husband and wife, (B)both spouses materially participate (within the meaning of section 469(h) without regard to paragraph (5) thereof) in such trade or business, and (C)both spouses elect the application of this subsection.. (b)

Net earnings from self-Employment

(1)Subsection (a) of section 1402 of such Code (defining net earnings from self-employment) is amended by striking and at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting ; and, and by inserting after paragraph (16) the following new paragraph: (17)notwithstanding the preceding provisions of this subsection, each spouse’s share of income or loss from a qualified joint venture shall be taken into account as provided in section 761(f) in determining net earnings from self-employment of such spouse.. (2)Subsection (a) of section 211 of the Social Security Act (defining net earnings from self-employment) is amended by striking and at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting ; and, and by inserting after paragraph (16) the following new paragraph: (17)Notwithstanding the preceding provisions of this subsection, each spouse’s share of income or loss from a qualified joint venture shall be taken into account as provided in section 761(f) of the Internal Revenue Code of 1986 in determining net earnings from self-employment of such spouse.. (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act .