[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2111 Introduced in Senate (IS)]








109th CONGRESS
  1st Session
                                S. 2111

  To amend the Internal Revenue Code of 1986 to provide a credit for 
small business employee training expenses, to increase the exclusion of 
capital gains from small business stocks, to extend expensing for small 
                  businesses, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           December 15, 2005

   Mr. Bayh 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 provide a credit for 
small business employee training expenses, to increase the exclusion of 
capital gains from small business stocks, to extend expensing 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.

    This Act may be cited as the ``Small Business Growth Initiative Act 
of 2005''.

SEC. 2. CREDIT FOR EMPLOYEE TRAINING EXPENSES OF SMALL BUSINESSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45N. SMALL BUSINESS EMPLOYEE TRAINING EXPENSES.

    ``(a) In General.--
            ``(1) Allowance of credit.--For purposes of section 38, in 
        the case of an eligible small business employer, the small 
        business employee training credit determined under this section 
        for the taxable year is an amount equal to so much of the 
        qualified training expenses paid or incurred by the eligible 
        small business employer with respect to qualified employees as 
        exceeds the base amount.
            ``(2) Base amount.--For purposes of paragraph (1)--
                    ``(A) In general.--The base amount is an amount 
                equal to the average amount of qualified training 
                expenses paid or incurred by the eligible small 
                business employer with respect to all qualified 
                employees for the 3 preceding taxable years.
                    ``(B) Special rule for new businesses.--
                            ``(i) Businesses with at least 1 taxable 
                        year.--In the case of an eligible small 
                        business employer which has at least 1 full 
                        preceding taxable year but fewer than 3 
                        preceding taxable years, the base amount shall 
                        be the amount of qualified training expenses 
                        paid or incurred by such employer with respect 
                        to all qualified employees during the preceding 
                        taxable year.
                            ``(ii) Start-up year.--In the case of an 
                        eligible small business employer which does not 
                        have any full preceding taxable years, the base 
                        amount shall be zero.
    ``(b) Limitations.--
            ``(1) Per employee limitation.--The amount of the credit 
        allowed under subsection (a) for any taxable year with respect 
        to any qualified employee shall not exceed $1,000 ($500 in the 
        case of an eligible small business to which subsection 
        (a)(2)(B)(ii) applies).
            ``(2) Number of employees.--Not more than 5 qualified 
        employees may be taken into account under subsection (a) for 
        any taxable year.
    ``(c) Eligible Small Business Employer.--
            ``(1) In general.--The term `eligible small business 
        employer' means, with respect to any calendar year, an employer 
        who employed an average of at least 2 but not more than 100 
        employees on business days during the preceding taxable year.
            ``(2) Exception.--Such term shall not include any employer 
        who is a physician or whose principal business is providing 
        legal, accounting, engineering, architectural, or similar 
        services.
    ``(d) Qualified Training Expenses.--For purposes of this section, 
the term `qualified training expenses' means expenses paid or incurred 
for the training of a qualified employee to a person who is an eligible 
provider of training services within the meaning of section 122 of the 
Workforce Investment Act of 1998.
    ``(e) Qualified Employee.--For purposes of this section, the term 
`qualified employee' means an individual who has been employed by the 
eligible small business employer on a full-time basis for at least 6 
months and who is not any of the following:
            ``(1) A highly compensated employee (within the meaning of 
        section 414(q)).
            ``(2) A physician or a veterinarian.
            ``(3) An individual participating in an apprenticeship or a 
        specialty trade skills development program associated with a 
        specialty trade contractor as specified in subsection 238 of 
        the North American Industry Classification System (as in effect 
        on the date of the enactment of this section).''.
    (b) Credit Made Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 is amended by striking ``and'' 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) the small business employee training credit 
        determined under section 45N(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

``Sec. 45N. Small business employee training credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to expenditures incurred after December 31, 2005.

SEC. 3. INCREASED EXCLUSION AND OTHER MODIFICATIONS APPLICABLE TO 
              QUALIFIED SMALL BUSINESS STOCK.

    (a) Increased Exclusion.--
            (1) In general.--Subsection (a) of section 1202 of the 
        Internal Revenue Code of 1986 (relating to 50-percent exclusion 
        for gain from certain small business stock) is amended to read 
        as follows:
    ``(a) Exclusion.--Gross income shall not include any gain from the 
sale or exchange of qualified small business stock held for more than 3 
years.''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 1(h)(4) of such 
                Code is amended to read as follows:
                    ``(A) collectibles gain, over''.
                    (B) Section 1(h) of such Code is amended by 
                striking paragraph (7).
                    (C)(i) Section 1(h) of such Code is amended by 
                redesignating paragraphs (8), (9), (10), (11), (12), 
                and (13) as paragraphs (7), (8), (9), (10), (11), and 
                (12), respectively.
                    (ii) Sections 163(d)(4)(B), 854(b)(5), 857(c)(2)(D) 
                of such Code are each amended by striking ``section 
                1(h)(11)(B)'' and inserting ``section 1(h)(10)(B)''.
                    (iii) The following sections in 301(f)(4) of such 
                Code are each amended by striking ``section 1(h)(11)'' 
                and inserting ``section 1(h)(10)'':
                            (I) Section 301(f)(4).
                            (II) Section 306(a)(1)(D).
                            (III) Section 584(c).
                            (IV) Section702(a)(5).
                            (V) Section 854(a).
                            (VI) Section 854(b)(2).
                    (iv) The heading of section 857(c)(2) is amended by 
                striking ``1(h)(11)'' and inserting ``1(h)(10)''.
                    (D) Subsection (c) of section 1202 of such Code is 
                amended by adding at the end the following new 
                paragraph:
            ``(4) Stock held among members of controlled group not 
        eligible.--Stock of a member of a parent-subsidiary controlled 
        group (as defined in subsection (d)(3)) shall not be treated as 
        qualified small business stock while held by another member of 
        such group.''.
                    (E) Subsections (g)(2)(A) and (j)(1)(A) of section 
                1202 of such Code are each amended by striking ``5 
                years'' and inserting ``3 years''.
                    (F) The heading for section 1202 of such Code is 
                amended by striking ``partial''.
                    (G) The table of sections for part I of subchapter 
                P of chapter 1 of such Code is amended by striking 
                ``Partial exclusion'' in the item relating to section 
                1202 and inserting ``Exclusion''.
    (b) Repeal of Minimum Tax Preference.--
            (1) In general.--Subsection (a) of section 57 of the 
        Internal Revenue Code of 1986 (relating to items of tax 
        preference) is amended by striking paragraph (7).
            (2) Technical amendment.--Subclause (II) of section 
        53(d)(1)(B)(ii) of such Code is amended by striking ``, (5), 
        and (7)'' and inserting ``and (5)''.
    (c) Repeal of Per-Issuer Limitation.--Section 1202(b) of the 
Internal Revenue Code of 1986 (relating to per-issuer limitations on 
taxpayer's eligible gain) is repealed.
    (d) Other Modifications.--
            (1) Repeal of working capital limitation.--Section 
        1202(e)(6) of the Internal Revenue Code of 1986 (relating to 
        working capital) is amended--
                    (A) in subparagraph (B), by striking ``2 years'' 
                and inserting ``5 years''; and
                    (B) by striking the last sentence.
            (2) Exception from redemption rules where business 
        purpose.--Section 1202(c)(3) of such Code (relating to certain 
        purchases by corporation of its own stock) is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Waiver where business purpose.--A purchase of 
                stock by the issuing corporation shall be disregarded 
                for purposes of subparagraph (B) if the issuing 
                corporation establishes that there was a business 
                purpose for such purchase and one of the principal 
                purposes of the purchase was not to avoid the 
                limitations of this section.''.
    (e) Qualified Trade or Business.--Section 1202(e)(3) of the 
Internal Revenue Code of 1986 (defining qualified trade or business) is 
amended by inserting ``and'' at the end of subparagraph (C), by 
striking ``, and'' at the end of subparagraph (D) and inserting a 
period, and by striking subparagraph (E).
    (f) Effective Dates.--The amendments made by this section apply to 
stock issued after December 31, 2005.

SEC. 4. EXTENSION OF INCREASED EXPENSING FOR SMALL BUSINESS.

    Subsections (b), (c), and (d) of section 179 are each amended by 
striking ``2008'' each place it appears and inserting ``2011''.

SEC. 5. SBIR AND STTR PROGRAM EXPENDITURES.

    (a) SBIR Program Expenditures.--Section 9(f)(1) of the Small 
Business Act (15 U.S.C. 638(f)(1)) is amended by striking subparagraphs 
(A) through (C) and inserting the following:
                    ``(A) not less than 2.5 percent of such budget in 
                fiscal year 2006;
                    ``(B) not less than 3.0 percent of such budget in 
                fiscal year 2007;
                    ``(C) not less than 3.5 percent of such budget in 
                fiscal year 2008;
                    ``(D) not less than 4.0 percent of such budget in 
                fiscal year 2009;
                    ``(E) not less than 4.5 percent of such budget in 
                fiscal year 2010; and
                    ``(F) not less than 5.0 percent of such budget in 
                fiscal year 2011 and each fiscal year thereafter,''.
    (b) STTR Program Expenditures.--Section 9(n)(1)(B) of the Small 
Business Act (15 U.S.C. 638(n)(1)(B)) is amended by striking clauses 
(i) and (ii) and inserting the following:
                            ``(i) not less than 0.3 percent in fiscal 
                        year 2006;
                            ``(ii) not less than 0.36 percent in fiscal 
                        year 2007;
                            ``(iii) not less than 0.42 percent in 
                        fiscal year 2008;
                            ``(iv) not less than 0.48 percent in fiscal 
                        year 2009;
                            ``(v) not less than 0.54 percent in fiscal 
                        year 2010;
                            ``(vi) not less than 0.6 percent in fiscal 
                        year 2011 and each fiscal year thereafter.''.

SEC. 6. EXPANSION OF CREDIT FOR SMALL EMPLOYER PENSION PLAN STARTUP 
              COSTS.

    (a) In General.--Paragraph (1) of section 45E(b) of the Internal 
Revenue Code of 1986 is amended by striking ``$500'' and inserting 
``$1,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2005.
                                 <all>