[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3841 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 3841

 To amend the Internal Revenue Code of 1986 to provide tax relief for 
               small businesses, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 21, 2005

Mr. Manzullo (for himself, Mr. Gohmert, Mr. Bartlett of Maryland, Mrs. 
     Kelly, Mr. Poe, Mr. Akin, Mr. McCotter, and Mr. King of Iowa) 
 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 provide tax relief 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. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Employer Tax 
Relief Act of 2005''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
                          TITLE I--TAX RELIEF

Sec. 101. SECA tax deduction for health insurance costs.
Sec. 102. Repeal of Federal unemployment surtax.
Sec. 103. Increase in expense treatment for small businesses.
Sec. 104. Increased deduction for business meal expenses.
Sec. 105. Alternative minimum tax.
Sec. 106. Credit for expenses for long-term training of employees in 
                            highly skilled small business trades.
Sec. 107. Permanent extension of work opportunity credit and Welfare-
                            to-Work credit.
Sec. 108. Increase in contribution limits applicable to simple 
                            retirement accounts.
Sec. 109. Recovery period for depreciation of replacement roof systems, 
                            qualified leasehold improvement properties, 
                            and qualified restaurant properties.
                      TITLE II--TAX SIMPLIFICATION

Sec. 201. Depreciation modifications.
Sec. 202. Simplification of estimated tax rules.
Sec. 203. Qualified joint ventures operated by husband and wife as co-
                            owners.
Sec. 204. Increase in Self-Employment exemption amount.
Sec. 205. Standard home office deduction.
           TITLE III--S CORPORATION REFORM AND SIMPLIFICATION

Sec. 301. Treatment of bank director shares.
Sec. 302. Extension of time for making s corporation elections.
                     TITLE IV--TAXPAYER PROTECTIONS

Sec. 401. Taxpayer's right to have an IRS examination take place at 
                            another site.
Sec. 402. Relief from penalties for deposits of taxes made on a timely 
                            basis but not in the prescribed manner.

                          TITLE I--TAX RELIEF

SEC. 101. SECA TAX DEDUCTION FOR HEALTH INSURANCE COSTS.

    (a) In General.--Subsection (l) of section 162 (relating to special 
rules for health insurance costs of self-employed individuals) is 
amended by striking paragraph (4) and by redesignating paragraph (5) as 
paragraph (4).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.
    (c) Social Security Trust Funds Held Harmless.--There are hereby 
appropriated (out of any money in the Treasury not otherwise 
appropriated) for each fiscal year to each fund under the Social 
Security Act an amount equal to the reduction in the transfers to such 
fund for such fiscal year by reason of the amendment made by this 
section.

SEC. 102. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.

    (a) In General.--Section 3301 (relating to rate of Federal 
unemployment tax) is amended--
            (1) by striking ``2007'' and inserting ``2005'', and
            (2) by striking ``2008'' and inserting ``2006''.
    (b) Effective Date.--The amendment made by this section shall apply 
to calendar years beginning after December 31, 2005.

SEC. 103. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

    (a) In General.--Section 179(b)(1) (relating to dollar limitation) 
is amended by striking ``$25,000 ($100,000 in the case of taxable years 
beginning after 2002 and before 2008)'' and inserting ``$100,000''.
    (b) Expansion of Phase-Out of Limitation.--Section 179(b)(2) is 
amended by striking ``$200,000 ($400,000 in the case of taxable years 
beginning after 2002 and before 2008)'' and inserting ``$400,000''.
    (c) Inflation Adjustments.--Section 179(b)(5)(A) (relating to 
inflation adjustments) is amended by striking ``and before 2008''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 104. INCREASED DEDUCTION FOR BUSINESS MEAL EXPENSES.

    (a) In General.--Section 274(n)(1) (relating to only 50 percent of 
meal and entertainment expenses allowed as deduction) is amended by 
striking ``50 percent'' in the text and inserting ``the allowable 
percentage''.
    (b) Allowable Percentage.--Section 274(n) is amended by 
redesignating paragraphs (2) and (3) as paragraphs (3) and (4), 
respectively, and by inserting after paragraph (1) the following new 
paragraph:
            ``(2) Allowable percentage.--For purposes of paragraph (1), 
        the allowable percentage is--
                    ``(A) in the case of amounts for items described in 
                paragraph (1)(B), 50 percent, and
                    ``(B) in the case of expenses for food or 
                beverages, 80 percent.''.
    (c) Conforming Amendments.--
            (1) The heading for subsection (n) of section 274 is 
        amended by striking ``50 Percent'' and inserting ``Limited 
        Percentages''.
            (2) Subparagraph (A) of section 274(n)(4), as redesignated 
        by this section, is amended by striking ``paragraph (1)'' and 
        inserting ``paragraph (2)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 105. ALTERNATIVE MINIMUM TAX.

    (a) Repeal of Alternative Minimum Tax on Individuals.--
            (1) In general.--Section 55(a) (relating to alternative 
        minimum tax) is amended by adding at the end the following new 
        flush sentence:
``For purposes of this title, the tentative minimum tax on any taxpayer 
other than a corporation for any taxable year beginning after December 
31, 2009, shall be zero.''.
            (2) Reduction of tax on individuals prior to repeal.--
        Section 55 is amended by adding at the end the following new 
        subsection:
    ``(f) Phaseout of Tax on Individuals.--
            ``(1) In general.--The tax imposed by this section on a 
        taxpayer other than a corporation for any taxable year 
        beginning after December 31, 2005, and before January 1, 2010, 
        shall be the applicable percentage of the tax which would be 
        imposed but for this subsection.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage shall be determined in 
        accordance with the following table:

``For taxable years beginning                            The applicable
    in calendar year--                                  percentage is--
        2006...................................................     80 
        2007...................................................     60 
        2008...................................................     40 
        2009...................................................  20.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.
    (b) Nonrefundable Personal Credits Fully Allowed Against 
Alternative Minimum Tax.--
            (1) In general.--Section 26(a) (relating to limitation 
        based on amount of tax) is amended to read as follows:
    ``(a) Limitation Based on Amount of Tax.--The aggregate amount of 
credits allowed by this subpart for the taxable year shall not exceed 
the sum of--
            ``(1) the taxpayer's regular tax liability for the taxable 
        year reduced by the foreign tax credit allowable under section 
        27(a), and
            ``(2) the tax imposed by section 55(a) for the taxable 
        year.''.
            (2) Conforming amendments.--
                    (A) Section 23(b) is amended by striking paragraph 
                (4).
                    (B) Section 24(b) is amended by striking paragraph 
                (3).
                    (C) Section 25B is amended by striking subsection 
                (g).
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.
    (c) Expansion of the Exemption From the Alternative Minimum Tax for 
Small Corporations.--
            (1) In general.--Section 55(e)(1)(A) (relating to exemption 
        for small corporations) is amended to read as follows:
                    ``(A) $10,000,000 gross receipts test.--The 
                tentative minimum tax of a corporation shall be zero 
                for any taxable year if the corporation's average 
                annual gross receipts for all 3-taxable-year periods 
                ending before such taxable year does not exceed 
                $10,000,000. For purposes of the preceding sentence, 
                only taxable years beginning after December 31, 200s, 
                shall be taken into account.''.
            (2) Gross receipts test for first 3-year period.--Section 
        55(e)(1)(B) is amended to read as follows:
                    ``(B) $7,500,000 gross receipts test for first 3-
                year period.--Subparagraph (A) shall be applied by 
                substituting `$7,500,000' for `$10,000,000' for the 
                first 3-taxable-year period (or portion thereof) of the 
                corporation which is taken into account under 
                subparagraph (A).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.

SEC. 106. CREDIT FOR EXPENSES FOR LONG-TERM TRAINING OF EMPLOYEES IN 
              HIGHLY SKILLED SMALL BUSINESS TRADES.

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

``SEC. 45N. EXPENSES FOR LONG-TERM TRAINING OF EMPLOYEES IN HIGHLY 
              SKILLED SMALL BUSINESS TRADES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small business employer, the highly skilled trades training credit 
determined under this section for the taxable year is $15,000 for each 
employee having a qualified training year ending with or within such 
taxable year (whether or not such employee is an employee of the 
taxpayer as of the close of such taxable year).
    ``(b) Definitions.--For purposes of this section--
            ``(1) Small business employer.--
                    ``(A) In general.--The term `small business 
                employer' means, with respect to any taxable year, any 
                employer who employed an average of 250 or fewer 
                employees on business days during such taxable year.
                    ``(B) Controlled groups.--For purposes of 
                subparagraph (A), all persons treated as a single 
                employer under subsection (b), (c), (m), or (o) of 
                section 414 shall be treated as a single employer.
            ``(2) Qualified training year.--
                    ``(A) In general.--The term `qualified training 
                year' means each year during the training period in 
                which the employee received at least 1,500 hours of 
                training (including on-the-job training and training at 
                multi-employer training facilities) from the taxpayer 
                (or any predecessor) under a qualified training program 
                as an apprentice in any highly skilled trade.
                    ``(B) Highly skilled trades.--For purposes of 
                subparagraph (A), the term `highly skilled trades' 
                means--
                            ``(i) precision machinists,
                            ``(ii) die makers,
                            ``(iii) mold makers,
                            ``(iv) tool and die designers,
                            ``(v) heating, ventilating, air 
                        conditioning, refrigeration, and roofing 
                        contractors,
                            ``(vi) the trade of masonry,
                            ``(vii) plumbers,
                            ``(viii) pipefitters,
                            ``(ix) patternmakers,
                            ``(x) foundry technicians,
                            ``(xi) electricians,
                            ``(xii) recreational marine production and 
                        design workers,
                            ``(xiii) 2-way radio technicians, and
                            ``(xiv) other highly skilled trades 
                        specified in regulations prescribed by the 
                        Secretary.
                Such term shall not include any trade if the customary 
                apprenticeship period for such trade is less than 2 
                years.
                    ``(C) Qualified training program.--
                            ``(i) In general.--The term `qualified 
                        training program' means a written plan of study 
                        and training for individuals in, or entering 
                        into, highly skilled trades.
                            ``(ii) Description of programs.--A plan 
                        under clause (i) must be a program described in 
                        one of the following subclauses:
                                    ``(I) An apprenticeship program 
                                registered and certified with the 
                                Secretary of Labor under section 1 of 
                                the National Apprenticeship Act (29 
                                U.S.C. 50).
                                    ``(II) A program licensed, 
                                registered, or certified by the 
                                workforce investment board or 
                                apprenticeship agency or council of a 
                                State or administered in compliance 
                                with apprenticeship laws of a State.
                                    ``(III) A program conducted by a 
                                vocational or technical education 
                                school, community college, or 
                                industrial or trade training 
                                organization.
                                    ``(IV) A program which conforms to 
                                apprentice training programs developed 
                                or administered by an employer trade 
                                group or committee.
                                    ``(V) An industry sponsored or 
                                administered program which is clearly 
                                identified and commonly recognized 
                                within an industry and which meets the 
                                requirements of clause (iii).
                            ``(iii) Requirements.--A program meets the 
                        requirements of this clause if such program--
                                    ``(I) is accessible to individuals 
                                without discrimination on the basis of 
                                race, sex, color, religion, or national 
                                origin,
                                    ``(II) provides an overview of the 
                                trade, including the history and modern 
                                developments in such trade,
                                    ``(III) provides related 
                                instruction of the fundamental, 
                                intermediate, and advanced skills, 
                                techniques, and materials of the trade,
                                    ``(IV) provides training in math, 
                                measurement, and blueprint reading 
                                skills, if such skills are required in 
                                the trade,
                                    ``(V) provides training on trade 
                                specific tools and equipment,
                                    ``(VI) provides on-the-job training 
                                which allows performance of work under 
                                close supervision of an instructor or 
                                skilled worker, and
                                    ``(VII) provides periodic review 
                                and evaluation of participants to 
                                demonstrate proficiency in skills, 
                                including the use of tests and 
                                assessment of individual and group 
                                projects.
            ``(3) Training period.--The term `training period' means, 
        with respect to an employee, the period--
                    ``(A) beginning on the date that the employee 
                begins employment with the taxpayer as an apprentice in 
                the highly skilled trade, and
                    ``(B) ending on the earlier of--
                            ``(i) the date that such apprenticeship 
                        with the employer ends, or
                            ``(ii) the date which is 4 years after the 
                        date referred to in subparagraph (A).
    ``(c) Coordination With Other Credits.--The amount of credit 
otherwise allowable under sections 51(a) and 1396(a) with respect to 
any employee shall be reduced by the credit allowed by this section 
with respect to such employee.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38 is amended by striking ``plus'' at the end of paragraph 
(25), by striking the period at the end of paragraph (26) and inserting 
``, plus'', and by adding at the end the following new paragraph:
            ``(27) in the case of a small business employer (as defined 
        in section 45N(b)), the highly skilled trades training credit 
        determined under section 45N(a).''.
    (c) Denial of Double Benefit.--Section 280C is amended by adding at 
the end the following new subsection:
    ``(e) Credit for Training Expenses for Employees in Highly Skilled 
Small Business Trades.--No deduction shall be allowed for that portion 
of the expenses otherwise allowable as a deduction for the taxable year 
which is equal to the amount of the credit determined for the taxable 
year under section 45N(a).''.
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``Sec. 45N. Expenses for long-term training of employees in highly 
                            skilled small business trades.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in the taxable years ending after 
the date of the enactment of this Act.

SEC. 107. PERMANENT EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-
              TO-WORK CREDIT.

    (a) Work Opportunity Credit.--
            (1) In general.--Section 51(c) is amended by striking 
        paragraph (4).
            (2) Conforming amendment.--Section 51A(a)(5)(A) is amended 
        by striking ``, without regard to paragraph (4) thereof''.
    (b) Welfare-to-Work Credit.--Section 51A is amended by striking 
subsection (f).
    (c) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work the employer after December 31, 
2005.

SEC. 108. INCREASE IN CONTRIBUTION LIMITS APPLICABLE TO SIMPLE 
              RETIREMENT ACCOUNTS.

    (a) In General.--Subparagraph (E) of section 408(p)(2) is amended 
to read as follows:
                    ``(E) Applicable dollar amount.--For purposes of 
                subparagraph (A)(ii), the applicable dollar amount for 
                any year beginning in any calendar year is the 
                applicable dollar amount determined under section 
                402(g)(1)(B) for taxable years beginning in such 
                calendar year.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2005.

SEC. 109. RECOVERY PERIOD FOR DEPRECIATION OF REPLACEMENT ROOF SYSTEMS, 
              QUALIFIED LEASEHOLD IMPROVEMENT PROPERTIES, AND QUALIFIED 
              RESTAURANT PROPERTIES.

    (a) Replacement Roof Systems.--Subparagraph (E) of section 
168(e)(3) (relating to classification of certain property) is amended 
by striking ``and'' at the end of clause (v), by striking the period at 
the end of clause (vi), and inserting ``, and'', and by adding at the 
end the following new clause:
                            ``(vii) any roof system which is installed 
                        on a building after such building is placed in 
                        service by the taxpayer.''.
    (b) Requirement to Use Straight Line Method.--
            (1) In general.--Paragraph (3) of section 168(b) (relating 
        to property to which straight line method applies) is amended 
        by adding after subparagraph (H) the following new 
        subparagraph:
                    ``(I) Property described in subsection 
                (e)(3)(E)(vii).''.
            (2) Conforming amendment.--Subparagraph (A) of section 
        168(b)(2) of such Code is amended by inserting ``(other than 
        property described in subsection (e)(3)(E)(vii))'' before the 
        comma at the end.
    (c) Qualified Leasehold Improvement Properties and Qualified 
Restaurant Properties.--Subparagraph (E) of section 168(e)(3) (relating 
to classification of certain property) is amended--
            (1) in clause (iv) by striking ``placed in service before 
        January 1, 2006'', and
            (2) in clause (v) by striking ``placed in service before 
        January 1, 2006''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005.

                      TITLE II--TAX SIMPLIFICATION

SEC. 201. DEPRECIATION MODIFICATIONS.

    (a) Computer Software Eligible for Expensing.--
            (1) In general.--The heading and first sentence of section 
        179(d)(1) (relating to section 179 property) are amended to 
        read as follows:
            ``(1) Section 179 property.--For purposes of this section, 
        the term `section 179 property' means property--
                    ``(A) which is--
                            ``(i) tangible property to which section 
                        168 applies, or
                            ``(ii) computer software (as defined in 
                        section 197(e)(3)(B)) to which section 167 
                        applies,
                    ``(B) which is section 1245 property (as defined in 
                section 1245(a)(3)), and
                    ``(C) which is acquired by purchase for use in the 
                active conduct of a trade or business.''.
            (2) No computer software included as section 197 
        intangible.--
                    (A) In general.--Section 197(e)(3)(A) is amended to 
                read as follows:
                    ``(A) In general.--Any computer software.''.
                    (B) Conforming amendment.--Section 167(f)(1)(B) is 
                amended by striking ``; except that such term shall not 
                include any such software which is an amortizable 
                section 197 intangible''.
    (b) 2-Year Applicable Recovery Period for Depreciation of Computers 
and Peripheral Equipment.--
            (1) In general.--Section 168(c) (relating to applicable 
        recovery period) is amended by adding at the end the following 
        flush sentence:
``In the case of 5-year property which is a computer or peripheral 
equipment, the applicable recovery period shall be 2 years.''.
            (2) Conforming amendments.--
                    (A) Section 168(g)(3)(C) (relating to alternative 
                depreciation system for certain property) is amended to 
                read as follows:
                    ``(C) Qualified technological equipment.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), in the case of any qualified 
                        technological equipment, the recovery period 
                        used for purposes of paragraph (2) shall be 5 
                        years.
                            ``(ii) Computers or peripheral equipment.--
                        In the case of any computer or peripheral 
                        equipment, the recovery period used for 
                        purposes of paragraph (2) shall be 2 years.''.
                    (B) Section 168(j)(2) (relating to depreciation of 
                property on Indian reservations) is amended by adding 
                at the end the following flush sentence:
``In the case of 5-year property which is a computer or peripheral 
equipment, the applicable recovery period shall be 1 year.''.
                    (C) Section 467(e)(3)(A) (relating to certain 
                payments for the use of property or services) is 
                amended by adding at the end the following flush 
                sentence:
``In the case of 5-year property which is a computer or peripheral 
equipment, the applicable recovery period shall be 2 years.''.
    (c) 2-Year Depreciation Period for Computer Software.--Section 
167(f)(1)(A) is amended by striking ``36 months'' and inserting ``24 
months''.
    (d) Adjustments on Depreciation Limits for Luxury Automobiles.--
            (1) In general.--Section 280F(a)(1)(A) (relating to 
        limitation on amount of depreciation for luxury automobiles) is 
        amended--
                    (A) by striking ``$2,560'' in clause (i) and 
                inserting ``$6,000'';
                    (B) by striking ``$4,100'' in clause (ii) and 
                inserting ``$9,600'';
                    (C) by striking ``$2,450'' in clause (iii) and 
                inserting ``$5,760''; and
                    (D) by striking ``$1,475'' in clause (iv) and 
                inserting ``$3,460''.
            (2) Conforming amendments.--
                    (A) Section 280F(a)(1)(B)(ii) (relating to 
                disallowed deductions allowed for years after recovery 
                period) is amended by striking ``$1,475'' each place 
                that it appears and inserting ``$3,460''.
                    (B) Section 280F(d)(7) is amended--
                            (i) in subparagraph (A) by striking 
                        ``1988'' and inserting ``2006'', and
                            (ii) in subparagraph (B)(i)(II) by striking 
                        ``1987'' and inserting ``2005''.
    (e) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2005.

SEC. 202. SIMPLIFICATION OF ESTIMATED TAX RULES.

    (a) In General.--Section 6654(d)(1) (relating to failure by an 
individual to pay estimated income tax) is amended by striking 
subparagraph (C).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 203. QUALIFIED JOINT VENTURES 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.

SEC. 204. INCREASE IN SELF-EMPLOYMENT EXEMPTION AMOUNT.

    (a) In General.--Paragraph (2) of section 1402(b) (defining self-
employment income) is amended by striking ``$400'' and inserting 
``$1,000''.
    (b) Adjustment for Inflation.--Section 1402 (definitions relating 
to self-employment income) is amended by adding at the end the 
following new subsection:
    ``(l) Adjustment for Inflation.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 2006, the $1,000 amount 
        contained in subsection (b)(2) shall be increased by an amount 
        equal to--
                    ``(A) $1,000, 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 
                2005' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(2) Rounding.--If any increase determined under paragraph 
        (1) is not a multiple of $10, such increase shall be rounded to 
        the next lowest multiple of $10.''.
    (c) Return Requirements.--Section 6017 (relating to self-employment 
tax returns) is amended by striking ``of $400 or more'' and inserting 
``of an amount which equals or exceeds the amount in effect under 
section 1402(b)(2)''.
    (d) Conforming Amendments.--
            (1) Paragraphs (3) and (4) of section 1402(e) are each 
        amended by striking ``of $400 or more'' and inserting ``which 
        equals or exceeds the amount in effect for the taxable year 
        under subsection (b)(2)''.
            (2) Subsection (h) of section 1402 is amended by striking 
        ``$400'' and inserting ``the amount in effect for the taxable 
        year under subsection (b)(2)''.
            (3) Subparagraph (B) of section 1402(j)(2) is amended to 
        read as follows:
                    ``(B) Floor.--In applying paragraph (2) of 
                subsection (b) to church employee income, `$200' shall 
                be substituted for the amount in effect for the taxable 
                year under such paragraph (2) (as adjusted by 
                subsection (l)).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 205. STANDARD HOME OFFICE DEDUCTION.

    (a) In General.--Section 280A(c) is amended by adding at the end 
the following new paragraph:
            ``(7) Standard home office deduction.--
                    ``(A) In general.--The deductions allowable by this 
                chapter by reason of being attributed to a use referred 
                to in paragraph (5) (before the application of 
                paragraph (5)) shall not be less than the lesser of--
                            ``(i) $2,500, or
                            ``(ii) the gross income of the trade or 
                        business in which such use occurs.
                    ``(B) Inflation adjustment.--In the case of any 
                taxable year beginning in a calendar year after 2006, 
                the $2,500 amount contained in subparagraph (A)(i) 
                shall be increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for the 
                        calendar year in which the taxable year begins, 
                        determined by substituting `calendar year 2054' 
                        for `calendar year 1992' in subparagraph (B) 
                        thereof.
                Any increase determined under the preceding sentence 
                shall be rounded to the nearest multiple of $50.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2005.

           TITLE III--S CORPORATION REFORM AND SIMPLIFICATION

SEC. 301. TREATMENT OF BANK DIRECTOR SHARES.

    (a) In General.--Section 1361 (defining S corporation) is amended 
by adding at the end the following new subsection:
    ``(f) Restricted Bank Director Stock.--
            ``(1) In general.--Restricted bank director stock shall not 
        be taken into account as outstanding stock of the S corporation 
        in applying this subchapter (other than section 1368(f)).
            ``(2) Restricted bank director stock.--For purposes of this 
        subsection, the term `restricted bank director stock' means 
        stock in a bank (as defined in section 581), a bank holding 
        company (within the meaning of section 2(a) of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1841(a))), or a financial 
        holding company (within the meaning of section 2(p) of such 
        Act), registered with the Federal Reserve System, if such 
        stock--
                    ``(A) is required to be held by an individual under 
                applicable Federal or State law in order to permit such 
                individual to serve as a director, and
                    ``(B) is subject to an agreement with such bank or 
                company (or a corporation which controls (within the 
                meaning of section 368(c)) such bank or company) 
                pursuant to which the holder is required to sell back 
                such stock (at the same price as the individual 
                acquired such stock) upon ceasing to hold the office of 
                director.
            ``(3) Cross reference.--For treatment of certain 
        distributions with respect to restricted bank director stock, 
        see section 1368(f).''.
    (b) Distributions.--Section 1368 (relating to distributions) is 
amended by adding at the end the following new subsection:
    ``(f) Restricted Bank Director Stock.--If a director receives a 
distribution (not in part or full payment in exchange for stock) from 
an S corporation with respect to any restricted bank director stock (as 
defined in section 1361(f)), the amount of such distribution--
            ``(1) shall be includible in gross income of the director, 
        and
            ``(2) shall be deductible by the corporation for the 
        taxable year of such corporation in which or with which ends 
        the taxable year in which such amount in included in the gross 
        income of the director.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 302. EXTENSION OF TIME FOR MAKING S CORPORATION ELECTIONS.

    (a) In General.--Subsection (b) of section 1362 (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,
        then 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 amendment made by this section shall apply 
to elections for taxable years beginning after December 31, 2005.

                     TITLE IV--TAXPAYER PROTECTIONS

SEC. 401. TAXPAYER'S RIGHT TO HAVE AN IRS EXAMINATION TAKE PLACE AT 
              ANOTHER SITE.

    (a) In General.--Section 7605(a) (relating to time and place of 
examination) is amended to read as follows:
    ``(a) Time and Place.--
            ``(1) In general.--The time and place of examination 
        pursuant to the provisions of section 6420(e)(2), 6421(g)(2), 
        6427(j)(2), or 7602 shall be such time and place as may be 
        fixed by the Secretary and as are reasonable under the 
        circumstances. In the case of a summons under authority of 
        paragraph (2) of section 7602, or under the corresponding 
        authority of section 6420(e)(2), 6421(g)(2), or 6427(j)(2), the 
        date fixed for appearance before the Secretary shall not be 
        less than 10 days from the date of the summons.
            ``(2) Limitation.--Upon request of a taxpayer, the 
        Secretary shall conduct any examination described in paragraph 
        (1) at a location other than the taxpayer's residence or place 
        of business, if such location is reasonably accessible to the 
        Secretary and the taxpayer's original books and records 
        pertinent to the examination are available at such location.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to examinations occurring after the date of the enactment of this Act.

SEC. 402. 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.
                                 <all>