I 111th CONGRESS 2d Session H. R. 5691 IN THE HOUSE OF REPRESENTATIVES July 1, 2010 Mr. Hoekstra 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 a credit for investment in new or expanding small businesses.

1.

Credit for qualified small business investments

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25D the following new section:

25E.

Qualified small business investments

(a)

In general

In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle an amount equal to 20 percent of the amount paid or incurred for qualified small business investments during the taxable year. (b)

Qualified small business investment

For purposes of this section— (1)

In general

The term qualified small business investment means any stock in a domestic corporation acquired by the taxpayer at its original issue (directly or through an underwriter) or any capital or profits interest in a domestic partnership acquired by the taxpayer from the partnership if— (A)such stock or interest was is acquired solely in exchange for cash, (B)either— (i)such corporation or partnership (including any predecessor thereof) has been in existence of less than 2 years as of such acquisition, or (ii)such corporation or partnership had at least a 10 percent growth rate for each of 2 taxable years of the corporation or partnership preceding the taxable year in which acquisition occurs, and (C)the corporation or partnership satisfies the requirements of subparagraphs (A) and (B) of section 1202(d)(1) with respect to such issuance (determined by substituting corporation or partnership for corporation therein). (2)

Growth rate

For purposes of paragraph (1)(B)(ii), the growth rate of any corporation or partnership for any taxable year is the ratio (expressed as a percentage) of— (A)the excess of— (i)the gross receipts of such corporation or partnership for such taxable year, over (ii)the gross receipts of such corporation or partnership for the preceding taxable year, divided by (B)the amount described in subparagraph (A)(ii). (c)

Recapture of credit in case of failure To satisfy holding period requirement

In the case of the disposition of any qualified small business investment during the 7-year period beginning on the date that such investment is acquired by the taxpayer, the tax imposed under this subtitle with respect to the taxpayer for the taxable year in which such disposition occurs shall be increased by the amount of the credit allowed under this section with respect to such investment plus interest determined at the underpayment rate.

. (b)

Clerical amendment

The table of sections of such subpart is amended by inserting after the item relating to section 25D the following new item: Sec. 25E. Qualified small business investments. . (c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.