[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3872 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 3872

    To amend the Internal Revenue Code of 1986 to allow loans from 
   individual retirement plans for qualified small business capital 
                                assets.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 22, 2005

 Mr. Fortenberry 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 loans from 
   individual retirement plans for qualified small business capital 
                                assets.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. LOANS FROM INDIVIDUAL RETIREMENT PLANS FOR QUALIFIED SMALL 
              BUSINESS CAPITAL ASSETS.

    (a) Exemption From Prohibited Transaction Rules.--Section 4975 of 
the Internal Revenue Code of 1986 (relating to tax on prohibited 
transactions) is amended by redesignating subsections (h) and (i) as 
subsections (i) and (j), respectively, and by inserting after 
subsection (g) the following new subsection:
    ``(h) Special Rule for Loans for Qualified Small Business Capital 
Assets.--
            ``(1) In general.--The prohibitions provided in subsection 
        (c) shall not apply to any qualified small business loan from 
        an individual retirement plan to the individual for whose 
        benefit the plan is maintained to the extent that such loan 
        (when added to the outstanding balance of all other such loans) 
        does exceed the lesser of--
                    ``(A) $50,000, reduced by the excess (if any) of--
                            ``(i) the highest outstanding balance of 
                        such loans during the 1-year period ending on 
                        the day before the date on which such loan was 
                        made, over
                            ``(ii) the outstanding balance of such 
                        loans on the date on which such loan was made, 
                        or
                    ``(B) the greater of--
                            ``(i) one-half of the amount available for 
                        distribution under the plan, or
                            ``(ii) $10,000.
            ``(2) Qualified small business loan.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified small 
                business loan' means a loan the proceeds of which are 
                used by the individual for whose benefit the individual 
                retirement plan is established to acquire qualified 
                small business capital assets.
                    ``(B) Qualified small business capital assets.--The 
                term `qualified small business capital assets' means--
                            ``(i) stock in a domestic corporation 
                        acquired by the taxpayer at its original issue,
                            ``(ii) any capital or profits interest in a 
                        domestic partnership acquired by the taxpayer 
                        from the partnership, and
                            ``(iii) tangible property acquired by the 
                        taxpayer substantially all of the use of which 
                        is in a trade or business of the taxpayer,
                but only if the taxpayer is an active participant in 
                such trade or business or, in the case of interests in 
                a corporation or partnership described in clauses (i) 
                and (ii), only if the taxpayer is an active participant 
                in a trade or business of such corporation or 
                partnership.
            ``(3) Requirement that loan be repayable within 5 years.--
        Paragraph (1) shall not apply to any loan unless such loan, by 
        its terms, is required to be repaid within 5 years.
            ``(4) Requirement of level amortization.--Rules similar to 
        the rules of section 72(p)(2)(C) shall apply for purposes of 
        this subsection.''.
    (b) Conforming Amendment.--Subsection (e) of section 408 of such 
Code (relating to tax treatment of accounts and annuities) is amended 
by adding at the end the following new paragraph:
            ``(6) Exception for loans from individual retirement plans 
        for qualified small business capital expenditures.--In the case 
        of a qualified small business loan (as defined in section 
        4975(h)(2)) from an individual retirement plan--
                    ``(A) such plan shall not fail to be treated as an 
                individual retirement plan under paragraph (2) or (3) 
                solely because of such loan, and
                    ``(B) such loan shall not be treated as a 
                distribution from such plan.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to loans made after the date of the enactment of this Act.
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