1.This Act may be cited as the
Small Business Start-up Savings
Accounts Act of 2011
.
2.Establishment of
Small Business Start-Up Savings Accounts
(a)Chapter 77 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new section:
7529.Small Business
Start-Up Savings Accounts
(a)An individual or an
eligible small business may enter into an agreement with the Secretary to
establish a small business start-up savings account.
(b)Small business
start-Up savings accountFor
purposes of this section, the term small business start-up savings
account means a trust created or organized in the United States for the
benefit of the account beneficiary, but only if the written governing
instrument creating the trust meets the following requirements:
(1)Except as provided in subsection (d)(3) in
the case of a rollover contribution, no contribution will be accepted unless it
is in cash, and contributions will not be accepted for the taxable year on
behalf of any account beneficiary in excess of the amount in effect for such
taxable year under subsection (d)(2).
(2)The trustee is a
bank (as defined in section 408(n)) or such other person who demonstrates to
the satisfaction of the Secretary that the manner in which such other person
will administer the trust will be consistent with the requirements of this
section.
(3)No part of the
trust funds will be invested in life insurance contracts.
(4)The interest of an
individual in the balance of his account is nonforfeitable.
(5)The assets of the
trust will not be commingled with other property except in a common trust fund
or common investment fund.
(c)For purposes of this section, the term eligible
small business means, with respect to any taxable year, any person
engaged in a trade or business if the average number of employees employed by
such person on business days during the taxable year was 500 or fewer.
(d)Treatment of
contributions
(1)There shall be allowed as a deduction for the taxable
year an amount equal to so much of the account beneficiary’s contributions for
the taxable year to all small business start-up savings accounts maintained for
the benefit of such beneficiary as do not exceed the contribution limitations
in effect for the taxable year under paragraph (2).
(2)
(A)The amount allowable as a deduction under paragraph (1)
with respect to all small business start-up savings accounts maintained for the
benefit of any person shall not exceed the lesser of—
(i)$10,000, or
(ii)$150,000, reduced by the aggregate
contributions by such person for all taxable years with respect to all small
business start-up savings accounts of the taxpayer.
(B)Cost of living
adjustment
(i)In the case of a taxable year beginning after 2011, the
$10,000 amount in subparagraph (A) shall be increased by an amount equal
to—
(I)such dollar
amount, multiplied by
(II)the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined by substituting
calendar year 2010
for calendar year 1992
in
subparagraph (B) thereof.
(ii)If
any amount as adjusted under clause (i) is not a multiple of $500, such amount
shall be rounded to the next lowest multiple of $500.
(3)Rollovers from
retirement plans not allowedUnder regulations prescribed by the
Secretary, a person may make a rollover contribution to a small business
start-up savings account only in the case of a rollover from another small
business start-up savings account.
(4)Treated as
deduction for individuals and corporationsFor purposes of
chapter 1, the deduction allowed under paragraph (1) shall be treated as a
deduction specified in part VI of subchapter B of chapter 1 (relating to
itemized deductions for individuals and corporations).
(e)Treatment of
distributions
(1)
(A)Exclusion of
qualified distributionsAny qualified distribution from a small
business start-up savings account shall not be includible in gross
income.
(B)Inclusion of
other distributionsAny
distribution from a small business start-up savings account which is not a
qualified distribution shall be included in gross income.
(2)For purposes of this subsection, the term
qualified distribution means, with respect to any taxable year,
any payment or distribution from a small business start-up savings
account—
(A)to the extent the
amount of such payment or distribution does not exceed the sum of—
(i)the aggregate
amounts paid or incurred by the taxpayer for such taxable year with respect to
the taxpayer’s trade or business for the purchase of equipment or facilities,
marketing, training, incorporation, and accounting fees, and
(ii)the aggregate
capital contributions of the taxpayer with respect to an eligible small
business for the taxable year (but only to the extent such amounts are used by
such small business for purposes described in clause (i)), and
(B)which, in the case
of a payment or distribution subsequent to the first payment or distribution
from such account (or any predecessor to such account)—
(i)is
made not later than the close of the 5th taxable year beginning after the date
of such first payment or distribution, and
(ii)is made with
respect to the same eligible small business with respect to which such first
payment or distribution was made.
(3)Treatment after
death of account beneficiary
(A)If, by reason of the death of the account beneficiary,
any person acquires the account beneficiary’s interest in a small business
start-up savings account—
(i)such account shall cease to be a small
business start-up savings account as of the date of death, and
(ii)an amount equal
to the fair market value of the assets in such account on such date shall be
includible—
(I)in the case of a
person who is not the estate of such beneficiary, in such person’s gross income
for the taxable year which includes such date, or
(II)in the case of a
person who is the estate of such beneficiary, in such beneficiary’s gross
income for the last taxable year of such beneficiary.
(B)
(i)Reduction of
inclusion for predeath expensesThe amount includible in gross
income under subparagraph (A) shall be reduced by the amounts described in
paragraph (2) which were incurred by the decedent before the date of the
decedent’s death and paid by such person within 1 year after such date.
(ii)Deduction for
estate taxesAn appropriate deduction shall be allowed under
section 691(c) to any person (other than the decedent) with respect to amounts
included in gross income under subparagraph (A)(ii)(I) by such person.
(4)Treatment for
failure to be treated as eligible small businessIf for any
taxable year a taxpayer which holds a small business start-up savings account
as an eligible small business ceases to be an eligible small business—
(A)such account shall
cease to be a small business start-up savings account, and
(B)the balance of
such account shall be treated as paid out for such taxable year in a
distribution which is not a qualified distribution.
(f)
(1)Any deduction or
credit otherwise allowed for the taxable year with respect to amounts described
in subsection (e)(2)(A) shall be reduced by an amount equal to the qualified
distributions attributable to such amounts. The adjusted basis of any property
placed in service for the taxable year shall be reduced by the amount of any
qualified distributions attributable to such property. For purposes of this
paragraph, qualified distributions shall first be treated as attributable to
amounts described in subsection (e)(2)(A), then to property placed in service
for the taxable year.
(2)For purposes of this
section, all persons treated as a single employer under subsection (a) or (b)
of section 52, or subsection (m) or (o) of section 414, shall be treated as one
person.
.
(b)Excise tax on
excess contributions and nonqualified distributionsSubtitle D of
the Internal Revenue Code of 1986 is amended by adding at the end the following
new chapter:
50Small business
start-up savings accounts
Sec. 5000C. Tax on excess contributions
to small business start-up savings accounts.
Sec. 5000D. Tax on nonqualified
distributions from small business start-up savings accounts.
5000C.Tax on excess
contributions to small business start-up savings accounts
(a)In the case of a
small business start-up savings account (within the meaning of section 7529)
there is imposed for each taxable year a tax in an amount equal to 6 percent of
the amount of the excess contributions to such taxpayer’s account (determined
as of the close of the taxable year).
(b)The
amount of tax imposed by subsection (a) shall not exceed 6 percent of the value
of the account (determined as of the close of the taxable year).
(c)For purposes of
this section, in the case of contributions to all small business start-up
savings accounts maintained for the benefit of a person, the term excess
contributions
means the sum of—
(1)the excess (if
any) of—
(A)the amount
contributed to such accounts for the taxable year, over
(B)the amount
allowable as a contribution under section 7529(d)(2)(A) for such taxable year,
and
(2)the amount
determined under this subsection for the preceding taxable year, reduced by the
sum of—
(A)the distributions
out of the accounts for the taxable year, and
(B)the excess (if
any) of—
(i)the maximum amount
allowable as a contribution under section 7529(d)(2)(A) for such taxable year,
over
(ii)the amount
contributed to such accounts for such taxable year.
5000D.Tax on
nonqualified distributions from small business start-up savings
accounts
(a)If for any taxable
year an amount is paid or distributed out of a taxpayer’s small business
start-up savings account, there is imposed for such taxable year a tax in an
amount equal to 10 percent of the portion of such amount which is includible in
the gross income of the taxpayer.
(b)Exception for
disability or deathSubsection (a) shall not apply if the payment
or distribution is made after the account beneficiary becomes disabled within
the meaning of section 72(m)(7) (but only if such beneficiary’s account was
created before becoming so disabled) or dies.
5000E.For prohibited
transactions, see section
4975.
.
(c)
(1)Paragraph (1) of section 4975(e) of such Code is amended
by striking or
at the end of subparagraph (F), by striking the
period at the end of subparagraph and inserting , or
, and by
adding at the end the following new subparagraph:
(H)a small business start-up savings account
(within the meaning of section
7529).
.
(2)Special rule for
ceasing to be a small business start-up savings accountSection
4975(d) of such Code (relating to tax on prohibited transactions) is amended by
adding at the end the following new paragraph:
(7)Special rule for
small business start-up savings accountAn individual for whose benefit a small
business start-up savings account (within the meaning of section 7529) is
established shall be exempt from the tax imposed by this section with respect
to any transaction concerning such account (which would otherwise be taxable
under this section) if, with respect to such transaction, the account ceases to
be a small business start-up savings account by reason of the application of
paragraph (3) or (4) of section 7529(e) to such
account.
.
(d)Deduction
allowed whether or not individual itemizesSubsection (a) of
section 62 of such Code is amended by adding at the end the following new
paragraph:
(22)Contributions
to small business start-up savings accountsThe deduction allowed by section
7529(d)(1)(A).
.
(e)
(1)The table of
chapters for subtitle D such Code is amended by adding at the end the following
new item:
Chapter 50. Small Business Start-Up
Savings
Accounts
.
(2)The table of
sections for chapter 77 of such Code is amended by inserting after the item
relating to section 7528 the following new item:
Sec. 7529. Small Business Start-Up Savings
Accounts.
.
(f)The amendments made by this section shall apply to taxable
years beginning after December 31, 2010.