110 HR 3907 IH: Small Business Tax Relief Act of U.S. House of Representatives 2007-10-18 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 110th CONGRESS 1st Session H. R. 3907 IN THE HOUSE OF REPRESENTATIVES October 18, 2007 Mr. Murphy of Connecticut 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.

1.

Short title

This Act may be cited as the Small Business Tax Relief Act of 2007.

2.

Work opportunity credit made permanent

(a)

In general

Subsection (c) of section 51 of the Internal Revenue Code of 1986 is amended by striking paragraph (4). (b)

Effective date

The amendments made by this section shall apply to amounts paid or incurred to individuals who begin work for the employer after the date of the enactment of this Act.

3.

New markets tax credit made permanent

(a)

In general

Subparagraph (D) of section 45D(f)(1) of the Internal Revenue Code of 1986 (relating to national limitation on amount of investments designated) is amended by striking for 2006, 2007, and 2008 and inserting for 2006 and each calendar year thereafter. (b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act.

4.

Qualified leasehold improvement property and qualified restaurant property treated as 15-year property

(a)

In general

Clauses (iv) and (v) of section 168(e)(3)(E) of the Internal Revenue Code of 1986 are each amended by striking placed in service before January 1, 2008. (b)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2007.

5.

Research credit

(a)

In general

Section 41 of the Internal Revenue Code of 1986 is amended by striking subsection (h). (b)

Conforming amendment

Section 45C(b)(1) of such Code (relating to qualified clinical testing expenses) is amended by striking subparagraph (D). (c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2007.

6.

Expensing of environmental remediation costs

(a)

In general

Section 198 is amended by striking subsection (h). (b)

Effective date

The amendment made by this section shall apply to expenditures paid or incurred after December 31, 2007.

7.

Increase in exclusion of gain from qualified small business stock

(a)

In General

Paragraph (1) of section 1202(a) of the Internal Revenue Code of 1986 is amended by striking 50 percent and inserting 62.5 percent. (b)

Empowerment Zone Businesses

Subparagraph (A) of section 1202(a)(2) is amended— (1)by striking 60 percent and inserting 75 percent, and (2)by striking 50 percent and inserting 62.5 percent. (c)

Effective Date

The amendments made by this section shall apply to sales or exchanges of qualified small business stock in taxable years beginning after the date of the enactment of this Act.

8.

Qualified small businesses election of taxable year ending in a month from April to November

(a)

In general

Part I of subchapter E of chapter 1 of the Internal Revenue Code of 1986 (relating to accounting periods) is amended by inserting after section 444 the following new section:

444A.

Qualified small businesses election of taxable year ending in a month from April to November

(a)

General rule

A qualified small business may elect to have a taxable year, other than the required taxable year, which ends on the last day of any of the months of April through November (or at the end of an equivalent annual period (varying from 52 to 53 weeks)). (b)

Years for which election effective

An election under subsection (a)— (1)shall be made not later than the due date (including extensions thereof) for filing the return of tax for the first taxable year of the qualified small business, and (2)shall be effective for such first taxable year or period and for all succeeding taxable years of such qualified small business until such election is terminated under subsection (c). (c)

Termination

(1)

In general

An election under subsection (a) shall be terminated on the earliest of— (A)the first day of the taxable year following the taxable year for which the entity fails to meet the gross receipts test, (B)the date on which the entity fails to qualify as an S corporation, or (C)the date on which the entity terminates. (2)

Gross receipts test

For purposes of paragraph (1), an entity fails to meet the gross receipts test if the entity fails to meet the gross receipts test of section 448(c). (3)

Effect of termination

An entity with respect to which an election is terminated under this subsection shall determine its taxable year for subsequent taxable years under any other method that would be permitted under subtitle A. (4)

Income inclusion and deduction rules for period after termination

If the termination of an election under paragraph (1)(A) results in a short taxable year— (A)items relating to net profits for the period beginning on the day after its last fiscal year-end and ending on the day before the beginning of the taxable year determined under paragraph (4) shall be includible in income ratably over the succeeding 4 taxable years, or (if fewer) the number of taxable years equal to the fiscal years for which the election under this section was in effect, and (B)items relating to net losses for such period shall be deductible in the first taxable year after the taxable year with respect to which the election terminated. (d)

Definitions

For purposes of this section— (1)

Qualified small business

The term qualified small business means an entity— (A)(i)for which an election under section 1362(a) is in effect for the first taxable year or period of such entity and for all subsequent years, or (ii)which is treated as a partnership for the first taxable year or period of such entity for Federal income tax purposes, (B)which conducts an active trade or business or which would qualify for an election to amortize start-up expenditures under section 195, and (C)which is a start-up business. (2)

Start-up business

For purposes of paragraph (1)(C), an entity shall be treated as a start-up business so long as not more than 75 percent of the entity is owned by any person who previously conducted a similar trade or business at any time within the 1-year period ending on the date on which such entity is formed. For purposes of the preceding sentence, a person and any other person bearing a relationship to such person specified in section 267(b) or 707(b)(1) shall be treated as one person, and sections 267(b) and 707(b)(1) shall be applied as if section 267(c)(4) provided that the family of an individual consists of the individual’s spouse and the individual’s children under the age of 21. (3)

Required taxable year

The term required taxable year has the meaning given to such term by section 444(e). (e)

Tiered structures

The Secretary shall prescribe rules similar to the rules of section 444(d)(3) to eliminate abuse of this section through the use of tiered structures.

. (b)

Conforming amendment

Section 444(a)(1) of such Code is amended by striking section, and inserting section and section 444A. (c)

Clerical amendment

The table of sections for part I of subchapter E of chapter 1 of such Code is amended by inserting after the item relating to section 444 the following new item: 444A. Qualified small businesses election of taxable year ending in a month from April to November. . (d)

Effective date

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

9.

Increase in maximum number of S corporation shareholders

(a)

In general

Subparagraph (A) of section 1361(b)(1) is amended by striking 100 and inserting 150. (b)

Effective date

The amendment made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act.

10.

Government contracts with small businesses not subject to tax withholding

(a)

In general

Paragraph (2) of section 3402(t) is amended by striking and at the end of subparagraph (H), by striking the period at the end of subparagraph (I) and inserting , and, and by adding at the end the following new subparagraph: (J)to any specified small business. . (b)

Specified small business

Subsection (t) of section 3402 is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph: (3)

Specified small business

For purposes of this subsection, the term specified small business means a corporation or partnership which meets the gross receipts test of section 448(c) for the taxable year prior to the taxable year in which the payment is received (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation). . (c)

Effective date

The amendments made by this section shall take effect as if included in section 511 of the Tax Increase Prevention and Reconciliation Act of 2005.