I 111th CONGRESS 1st Session H. R. 1763 IN THE HOUSE OF REPRESENTATIVES March 26, 2009 Mr. Latta (for himself and Mr. Cantor) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To provide tax relief for small businesses, and for other purposes.

1.

Short title

This Act may be cited as the Responsible Reinvestment Act of 2009.

2.

Estate tax repeal made permanent

Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to title V of such Act.

3.

Increased expensing for small business

(a)

Dollar limitation

Paragraph (1) of section 179(b) of the Internal Revenue Code of 1986 (relating to dollar limitation) is amended by striking $25,000 ($125,000 in the case of taxable years beginning after 2006 and before 2011) and inserting $500,000. (b)

Increase in qualifying investment at which phaseout begins

Paragraph (2) of section 179(b) of such Code (relating to reduction in limitation) is amended by striking $200,000 ($500,000 in the case of taxable years beginning after 2006 and before 2011) and inserting $500,000. (c)

Inflation adjustments

Section 179(b)(5)(A) of such Code (relating to inflation adjustments) is amended— (1)by striking and before 2011, and (2)by striking $125,000 and. (d)

Revocation of election

Section 179(c)(2) of such Code (relating to election irrevocable) is amended by striking and before 2011. (e)

Computer software

Clause (ii) of section 179(d)(1)(A) of such Code is amended by striking and before 2011. (f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.

4.

Accelerated depreciation for manufacturing and agricultural property

(a)

In general

The table contained in section 168(c) of the Internal Revenue Code of 1986 is amended by inserting before the row relating to 3-year property the following new row: Any qualified manufacturing or agricultural property1 year (b)

Qualified manufacturing or agricultural property

Subsection (e) of section 168 of such Code is amended by adding at the end the following new paragraph: (9)

Qualified manufacturing or agricultural property

The term qualified manufacturing or agricultural property means any tangible personal property which is used in the trade or business of manufacturing or agriculture. . (c)

Effective date

The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

5.

Deduction for qualified small business income

(a)

In general

Paragraph (1) of section 199(a) of the Internal Revenue Code of 1986 is amended to read as follows: (1)

In general

There shall be allowed as a deduction an amount equal to the sum of— (A)9 percent of the lesser of— (i)the qualified production activities income of the taxpayer for the taxable year, or (ii)taxable income (determined without regard to this section) for the taxable year, and (B)in the case of a qualified small business for a taxable year beginning in 2009 or 2010, 20 percent of the lesser of— (i)the qualified small business income of the taxpayer for the taxable year, or (ii)taxable income (determined without regard to this section) for the taxable year. . (b)

Qualified small business; qualified small business income

Section 199 of such Code is amended by adding at the end the following new subsection: (e)

Qualified small business; qualified small business income

(1)

Qualified small business

(A)

In general

For purposes of this section, the term qualified small business means any taxpayer for any taxable year if the annual average number of employees employed by such taxpayer during such taxable year was 500 or fewer. (B)

Aggregation rule

For purposes of subparagraph (A), any person treated as a single employer under subsection (a) or (b) of section 52 (applied without regard to section 1563(b)) or subsection (m) or (o) of section 414 shall be treated as 1 taxpayer for purposes of this subsection. (C)

Special rule

If a taxpayer is treated as a qualified small business for any taxable year, the taxpayer shall not fail to be treated as a qualified small business for any subsequent taxable year solely because the number of employees employed by such taxpayer during such subsequent taxable year exceeds 500. The preceding sentence shall cease to apply to such taxpayer in the first taxable year in which there is an ownership change (as defined by section 382(g) in respect of a corporation, or by applying principles analogous to such ownership change in the case of a taxpayer that is a partnership) with respect to the stock (or partnership interests) of the taxpayer. (2)

Qualified small business income

(A)

In general

For purposes of this section, the term qualified small business income means the excess of— (i)the income of the qualified small business which— (I)is attributable to the actual conduct of a trade or business, (II)is income from sources within the United States (within the meaning of section 861), and (III)is not passive income (as defined in section 904(d)(2)(B)), over (ii)the sum of— (I)the cost of goods sold that are allocable to such income, and (II)other expenses, losses, or deductions (other than the deduction allowed under this section), which are properly allocable to such income. (B)

Exceptions

The following shall not be treated as income of a qualified small business for purposes of subparagraph (A): (i)Any income which is attributable to any property described in section 1400N(p)(3). (ii)Any income which is attributable to the ownership or management of any professional sports team. (iii)Any income which is attributable to a trade or business described in subparagraph (B) of section 1202(e)(3). (iv)Any income which is attributable to any property with respect to which records are required to be maintained under section 2257 of title 18, United States Code. (C)

Allocation rules, etc

Rules similar to the rules of paragraphs (2), (3), (4)(D), and (7) of subsection (c) shall apply for purposes of this paragraph. (3)

Special rules

Except as otherwise provided by the Secretary, rules similar to the rules of subsection (d) shall apply for purposes of this subsection. . (c)

Conforming amendment

Section 199(a)(2) of such Code is amended by striking paragraph (1) and inserting paragraph (1)(A). (d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

6.

Small business modifications related to health insurance, health savings accounts, and simplified employee pensions

(a)

Health insurance deduction allowed in determining self-employment tax

Section 162(l) of the Internal Revenue Code of 1986 (relating to special rules for health insurance costs of self-employed individuals) is amended by striking paragraph (4) (relating to deduction not allowed for self-employment tax purposes) and redesignating paragraph (5) as paragraph (4). (b)

Health savings account contributions allowed in determining self-employment tax

Subsection (a) of section 1402 of such Code is amended by redesignating paragraphs (16) and (17) as paragraphs (17) and (18) and by inserting after paragraph (15) the following new paragraph: (16)the deduction provided by section 223 with respect to amounts paid to a health savings account of the individual shall be allowed; . (c)

Simplified employee pensions

(1)

Increase in limitation on deduction for contributions

Subparagraph (C) of section 404(h)(1) of such Code is amended by inserting (100 percent in the case of an owner-employee as defined in section 401(c)(3)) after 25 percent both places it appears. (2)

Modification on limitation on contributions

Subsection (j) of section 408 of such Code is amended by adding at the end the following: For purposes of applying the preceding sentence, net earnings from self-employment shall be determined without any reduction under section 1402(a)(12). (3)

Contributions allowed in determining self-employment tax

Subsection (a) of section 1402 of such Code (as amended by subsection (b)) is amended by redesignating paragraphs (17) and (18) as paragraphs (18) and (19) and by inserting after paragraph (16) the following new paragraph: (17)the deduction provided by section 404 with respect to amounts paid to a simplified employee pension of the individual shall be allowed; . (d)

Effective date

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