Assignment of small business pension plan startup credits

(a)

In general

Section 45E of the Internal Revenue Code of 1986, as amended by section 2, is amended by adding at the end the following new subsection:

(h)

Credit for eligible service providers

(1)

In general

In the case of an eligible entity that provides services with respect to an eligible employer plan, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount determined under paragraph (2) for each of the first 3 credit years with respect to such plan, provided that the requirements of this subsection are satisfied. (2)

Amount of credit

(A)

In general

The amount of the credit allowed under this subsection for any taxable year shall be equal to the credit that would have been allowable to the eligible employer under subsection (a) for such taxable year (determined without regard to subsection (f)), subject to the limitations of subsection (b). (B)

Determination of credit years

For purposes of this subsection, the term credit year means, with respect to a plan, the taxable year of the eligible entity which includes the date that the eligible employer plan becomes effective with respect to the eligible employer and the two taxable years immediately following such taxable year. (3)

Eligible entity

For purposes of this subsection, the term eligible entity means, with respect to the plan for which the credit is allowed under subsection (a), an entity that— (A)with respect to the plan, provides services that generate qualified startup costs; (B)reduces the amount of fees that would otherwise be charged to the eligible employer for such services by an amount not less than the credit determined under paragraph (2) for the taxable year; and (C)obtains the certification described in paragraph (4) prior to claiming the credit. (4)

Employer certification

The certification described in this paragraph is a written certification that— (A)is made by the eligible employer not later than the date on which the services generating the qualified startup costs for the plan for which the credit is allowed under subsection (a) are provided; and (B)includes— (i)the number of employees of the eligible employer who are not highly compensated employees (as defined in section 414(q)) and who are eligible to participate in the eligible employer plan maintained by the eligible employer as of the date such plan is established; (ii)that neither the employer nor any predecessor established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for the qualified employer plan; (iii)that the employer will not claim a tax credit for qualified start up costs with respect to the plan for any taxable year; (iv)that the employer has not provided a certification to any other service provider for purposes of claiming tax credits with respect to the plan; and (v)such other information as the Secretary may require in published regulations. (5)

Coordination with credit to employer

No credit shall be allowed under subsection (a) to an eligible employer with respect to a plan for which a credit is allowed under this subsection to an eligible entity with respect to such plan. (6)

Tax treatment of payments

With respect to the reduction in fees described in paragraph (3)(B), such payment— (A)shall not be includible in the gross income of the employer, and (B)with respect to the eligible entity, shall not be deductible under this title. (7)

Certain other requirements

The tax credit allowed to an eligible entity under paragraph (1) will not be reduced in taxable years following the first credit year due to a change in the number of employees of the eligible employer described in subparagraph (b)(1)(B)(i). (8)

Recapture

If the amount received by an eligible entity with respect to a qualified plan is greater than the credit under subsection (a) that would otherwise (but for this subsection) be allowable to such employer with respect to such qualified plan, for example because the employer is not an eligible employer or incorrectly certifies the number of employees under (4)(B)(i), the tax imposed on such eligible entity under this chapter for the taxable year in which the credit is received with respect to such qualified plan shall be increased by the amount by which the credit received exceeds the amount that would otherwise (but for this subsection) be allowable to such employer.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2026.