II 112th CONGRESS 2d Session S. 2271 IN THE SENATE OF THE UNITED STATES March 29, 2012 Mr. Franken (for himself, Ms. Snowe, and Mr. Enzi) 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 extend the time for making S corporation elections, and for other purposes.

1.

Short title

This Act may be cited as the Small Business Election Simplification Act.

2.

Extension of time for making S corporation elections

(a)

In general

Subsection (b) of section 1362 of the Internal Revenue Code of 1986 is amended to read as follows: (b)

When made

(1)

Rules for new corporations

Except as provided in paragraph (2)— (A)

In general

An election under subsection (a) may be made by a small business corporation for any taxable year at any time during the period— (i)beginning on the first day of the taxable year for which made, and (ii)ending on the due date (with extensions) for filing the return for the taxable year. (B)

Certain elections treated as made for next taxable year

If— (i)an election under subsection (a) is made for any taxable year within the period described in subparagraph (A), but (ii)either— (I)on 1 or more days in such taxable year and before the day on which the election was made the corporation did not meet the requirements of subsection (b) of section 1361, or (II)1 or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election, then such election shall be treated as made for the following taxable year.(C)

Election made after due date treated as made for following taxable year

If— (i)a small business corporation makes an election under subsection (a) for any taxable year, and (ii)such election is made after the due date (with extensions) for filing the return for such year and on or before the due date (with extensions) for filing the return for the following taxable year, then such election shall be treated as made for the following taxable year.(2)

Rules for existing C corporations

In the case of any small business corporation which was a C corporation for the taxable year prior to the taxable year for which the election is made under subsection (a), the rules under this paragraph shall apply in lieu of the rules under paragraph (1): (A)

In general

An election under subsection (a) may be made by a small business corporation for any taxable year— (i)at any time during the preceding taxable year, or (ii)at any time during the taxable year and on or before the 15th day of the 3d month of the taxable year. (B)

Certain elections made during 1st 21/2 months treated as made for next taxable year

If— (i)an election under subsection (a) is made for any taxable year during such year and on or before the 15th day of the 3d month of such year, but (ii)either— (I)on 1 or more days in such taxable year and before the day on which the election was made the corporation did not meet the requirements of subsection (b) of section 1361, or (II)1 or more of the persons who held stock in the corporation during such taxable year and before the election was made did not consent to the election, then such election shall be treated as made for the following taxable year.(C)

Election made after 1st 21/2 months treated as made for following taxable year

If— (i)a small business corporation makes an election under subsection (a) for any taxable year, and (ii)such election is made after the 15th day of the 3d month of the taxable year and on or before the 15th day of the 3rd month of the following taxable year, then such election shall be treated as made for the following taxable year.(D)

Taxable years of 21/2 months or less

For purposes of this paragraph, an election for a taxable year made not later than 2 months and 15 days after the first day of the taxable year shall be treated as timely made during such year. (3)

Authority to treat late elections, etc., as timely

If— (A)an election under subsection (a) is made for any taxable year after the date prescribed by this subsection for making such election for such taxable year or no such election is made for any taxable year, and (B)the Secretary determines that there was reasonable cause for the failure to timely make such election, the Secretary may treat such an election as timely made for such taxable year.(4)

Manner of election

Elections may be made at any time as provided in this subsection by filing a form prescribed by the Secretary. For purposes of any election described under paragraph (1), the Secretary shall provide that the election may be made on any timely filed small business corporation return for such taxable year, with the consents of all persons who held stock in the corporation during such taxable year included therewith. (5)

Secretarial authority

The Secretary may prescribe such regulations, rules, or other guidance as may be necessary or appropriate for purposes of applying this subsection. . (b)

Revocations

Paragraph (1) of section 1362(d) of the Internal Revenue Code of 1986 is amended— (1)by striking subparagraph (D) in subparagraph (C) and inserting subparagraphs (D) and (E), and (2)by adding at the end the following new subparagraph: (E)

Authority to treat late revocations as timely

If— (i)a revocation under subparagraph (A) is made for any taxable year after the date prescribed by this paragraph for making such revocation for such taxable year or no such revocation is made for any taxable year, and (ii)the Secretary determines that there was reasonable cause for the failure to timely make such revocation, the Secretary may treat such a revocation as timely made for such taxable year.. (c)

Effective date

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