S. 2680 — Introduced in Senate

II 113th CONGRESS 2d Session S. 2680 IN THE SENATE OF THE UNITED STATES July 29, 2014 Mr. Pryor (for himself and Mr. Walsh) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To direct the Secretary of Commerce to establish a voluntary program under which manufacturers may have products certified as meeting the standards of labels that indicate to consumers the extent to which the products are manufactured in the United States, to amend the Internal Revenue Code of 1986 to allow a credit against income tax for equity investments in small business concerns, to establish small business savings accounts, and for other purposes. 1. Short title This Act may be cited as the Buy it in America Act. 2. America Star Program (a) In general The Secretary of Commerce shall establish a voluntary program, to be known as the America Star Program, under which manufacturers may have products certified as meeting the standards of labels that indicate to consumers the extent to which the products are manufactured in the United States. (b) Establishment of labels (1) In general Not later than 2 years after the date of the enactment of this Act, the Secretary shall, by rule— (A) design America Star labels that are consistent with public perceptions of the meaning of descriptions of the extent to which a product is manufactured in the United States; and (B) specify the standards that a product shall meet in order to bear a particular America Star label. (c) Certification of products (1) Application procedures A manufacturer that wishes to have a product certified as meeting the standards of an America Star label may apply to the Secretary for certification in accordance with such procedures as the Secretary shall establish by rule. (2) Action by Secretary Not later than such time after receiving an application for certification under paragraph (1) as the Secretary determines reasonable by rule, the Secretary shall— (A) determine whether the product described in the application meets the standards of the requested America Star label; (B) if the product meets such standards, certify the product; and (C) notify the manufacturer of the determination and whether the product has been certified. (d) Monitoring; withdrawal of certification (1) Monitoring The Secretary shall conduct such monitoring and compliance review as the Secretary considers necessary— (A) to detect violations of subsection (f); and (B) to ensure that products certified as meeting the standards of America Star labels continue to meet such standards. (2) Withdrawal of certification (A) On initiative of secretary If the Secretary determines that a product certified as meeting the standards of an America Star label no longer meets such standards, the Secretary shall— (i) notify the manufacturer of the determination and any corrective action that would enable the product to meet such standards; and (ii) if the manufacturer does not take such action within such time after receiving notification under clause (i) as the Secretary determines reasonable by rule, the Secretary shall withdraw the certification of the product and notify the manufacturer of the withdrawal. (B) At request of manufacturer At the request of the manufacturer of a product, the Secretary shall withdraw the certification of the product and notify the manufacturer of the withdrawal. (e) Consultation (1) Required consultation with Federal Trade Commission In establishing America Star labels and operating the America Star Program, the Secretary shall consult with the Federal Trade Commission to ensure consistency with the requirements enforced by the Commission with respect to representations of the extent to which products are manufactured in the United States. (2) Sense of Congress on consultation with private-sector companies It is the sense of Congress that, in establishing America Star labels and operating the America Star Program, the Secretary should consult with private-sector companies that have developed labeling programs to verify or certify to consumers the extent to which products are manufactured in the United States. (f) Prohibited conduct Unless a certification by the Secretary that a product meets the standards of an America Star label is in effect, a person may not— (1) place such label on such product; (2) use such label in any marketing materials for such product; or (3) in any other way represent that such product meets, or is certified as meeting, the standards of such label. (g) Enforcement (1) Enforcement by Federal Trade Commission (A) Referral The Secretary may refer to the Federal Trade Commission any person who the Secretary determines has violated subsection (f). (B) Unfair or deceptive act or practice A violation of subsection (f) shall be treated as a violation of a rule defining an unfair or deceptive act or practice described under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)). (C) Powers of Commission The Federal Trade Commission shall enforce subsection (f) in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this section. (2) Ineligibility (A) In general Except as provided in subparagraph (C), if the Secretary determines that a manufacturer— (i) has made a false statement to the Secretary in connection with the America Star Program; (ii) knowing, or having reason to know, that a product does not meet the standards of an America Star label— (I) has placed such label on such product; (II) has used such label in any marketing materials for such product; or (III) in any other way has represented that such product meets or is certified as meeting the standards of such label; or (iii) has otherwise violated the purposes of the America Star Program; the Secretary may not, for a period of 5 years after the conduct described in clause (i), (ii), or (iii), certify the product to which such conduct relates as meeting the standards of an America Star label. (B) Effect on existing certification In the case of a product with respect to which, at the time of the determination of the Secretary under subparagraph (A), there is in effect a certification by the Secretary that the product meets the standards of an America Star label— (i) if the product continues to meet such standards, the Secretary may either withdraw the certification or allow the certification to continue in effect, as the Secretary considers appropriate; and (ii) if the product no longer meets such standards, the Secretary shall withdraw the certification. (C) Waiver Notwithstanding subparagraph (A), the Secretary may waive or reduce the period referred to in such subparagraph if the Secretary determines that the waiver or reduction is in the best interests of the America Star Program. (h) Administrative appeal (1) Expedited appeals procedure The Secretary shall establish an expedited administrative appeals procedure under which persons may appeal an action of the Secretary under this section that— (A) adversely affects such person; or (B) is inconsistent with the America Star Program. (2) Appeal of final decision A final decision of the Secretary under paragraph (1) may be appealed to the United States district court for the district in which the person is located. (i) Offsetting collections (1) In general The Secretary may collect reasonable fees from— (A) manufacturers that apply for certification of products as meeting the standards of America Star labels; and (B) manufacturers of products for which such certifications are in effect. (2) Account The fees collected under paragraph (1) shall be credited to the account that incurs the cost of the certification services provided under this section. (3) Use The fees collected under paragraph (1) shall be available to the Secretary, without further appropriation or fiscal-year limitation, to pay the expenses of the Secretary incurred in providing certification services under this section. (j) Definitions In this section: (1) America star label The term America Star label means a label described in subsection (a) and established by the Secretary under subsection (b)(1). (2) America star program The term America Star Program means the voluntary labeling program established under this section. (3) Secretary The term Secretary means the Secretary of Commerce. 3. Angel investment tax credit (a) In general Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 30E. Angel investment tax credit (a) Allowance of credit There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 25 percent of the qualified equity investments made by a qualified investor during the taxable year. (b) Qualified equity investment For purposes of this section— (1) In general The term qualified equity investment means any equity investment in a qualified small business entity if— (A) such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash, and (B) such investment is designated for purposes of this section by the qualified small business entity. (2) Equity investment The term equity investment means— (A) any form of equity, including a general or limited partnership interest, common stock, preferred stock (other than nonqualified preferred stock as defined in section 351(g)(2)), with or without voting rights, without regard to seniority position and whether or not convertible into common stock or any form of subordinate or convertible debt, or both, with warrants or other means of equity conversion, and (B) any capital interest in an entity which is a partnership. (3) Redemptions A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection. (c) Qualified small business entity For purposes of this section— (1) In general The term qualified small business entity means any domestic corporation or partnership if such corporation or partnership is certified by the Secretary under subsection (h) and— (A) is a small business (as defined in section 41(b)(3)(D)(iii)), (B) has its headquarters as the principal place of business in the United States, (C) is principally engaged in a qualified high technology trade or business, (D) has been in operation in the United States for not more than 10 consecutive years as of the date of the qualified equity investment, (E) employs less than 100 full-time equivalent employees as defined in section 45R(d)(2)(A) as of the date of such investment, (F) has more than 50 percent of the employees performing substantially all of their services in the United States as of the date of such investment, (G) at least 80 percent (by value) of the assets of such corporation or partnership are used by such corporation or partnership in the active conduct of 1 or more qualified high technology trades or businesses, and (H) has equity investments designated for purposes of this paragraph. (2) Determination of use of assets (A) In general For purposes of paragraph (1)(G), assets used in activities described in subparagraph (B) shall be treated as used in the active conduct of a qualified high technology trade or business. Any determination under this subparagraph shall be made without regard to whether a corporation or partnership has any gross income from such activities at the time of the determination. (B) Activities An activity is described in this section if such activity is in connection with a future qualified high technology trade or business and such activity is— (i) a start-up activity described in section 195(c)(1)(A), or (ii) an activity resulting in the payment or incurring of qualified research expenses (as defined in section 41(b)). (3) Designation of equity investments For purposes of paragraph (1)(H), an equity investment shall not be treated as designated if such designation would result in the aggregate amount which may be taken into account under this section with respect to qualified equity investments in a qualified small business entity exceeds— (A) $10,000,000, taking into account the total amount of all qualified equity investments made by all taxpayers for the taxable year and all preceding taxable years, (B) $2,000,000, taking into account the total amount of all qualified equity investments made by all taxpayers for such taxable year, and (C) $1,000,000, taking into account the total amount of all qualified equity investments made by the taxpayer for such taxable year. (4) Qualified high technology trade or business For purposes of this section, the term qualified high technology trade or business is a high technology trade or business which is related to— (A) advanced materials, nanotechnology, or precision manufacturing, (B) aerospace, aeronautics, or defense, (C) biotechnology or pharmaceuticals, (D) electronics, semiconductors, software, or computer technology, (E) energy, environment, or clean technologies, (F) forest products or agricultural sciences, (G) information technology, communication technology, digital media, opto-electronics or photonics, (H) life sciences or medical sciences, (I) marine technology or aquaculture, (J) manufacturing, processing, or assembling innovative technology products, (K) transportation, or (L) any other high technology trade or business as determined by the Secretary. (d) Qualified investor For purposes of this section— (1) In general The term qualified investor means an accredited investor, as defined by the Securities and Exchange Commission, investor network, or investor fund who review new or proposed businesses for potential investment. (2) Investor network The term investor network means a group of accredited investors organized for the sole purpose of making qualified equity investments. (3) Investor fund (A) In general The term investor fund means a corporation that for the applicable taxable year is treated as an S corporation or a general partnership, limited partnership, limited liability partnership, trust, or limited liability company and which for the applicable taxable year is not taxed as a corporation. (B) Allocation of credit (i) In general Except as provided in clause (ii), the credit allowed under subsection (a) shall be allocated to the shareholders or partners of the investor fund in proportion to their ownership interest or as specified in the fund's organizational documents. (ii) Single member limited liability company If the investor fund is a single member limited liability company that is disregarded as an entity separate from its owner, the credit allowed under subsection (a) may be claimed by such limited liability company's owner, if such owner is a person subject to the tax under this title. (4) Exclusion The term qualified investor does not include— (A) a person controlling at least 50 percent of the qualified small business entity, (B) an employee of such entity, or (C) any bank, bank and trust company, insurance company, trust company, national bank, savings association or building and loan association for activities that are a part of its normal course of business. (e) National limitation on amount of investments designated (1) In general There is an angel investment tax credit limitation of $100,000,000 for each year of the investment period. (2) Investment period The investment period is calendar years 2015 through 2019. (3) Allocation of limitation The limitation under paragraph (1) shall be allocated by the Secretary among qualified small business entities selected by the Secretary. (4) Carryover of unused limitation If the angel investment tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (3) for such year, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2022. (f) Application with other credits (1) Business credit treated as part of general business credit Except as provided in paragraph (2), the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)). (2) Personal credit (A) In general In the case of an individual who elects the application of this paragraph, for purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year. (B) Carryforward of unused credit If the credit allowable under subsection (a) by reason of subparagraph (A) exceeds the limitation imposed by section 26(a) for such taxable year, reduced by the sum of the credits allowable under subpart A (other than this section) for such taxable year, such excess shall be carried to each of the succeeding 20 taxable years to the extent that such unused credit may not be taken into account under subsection (a) by reason of subparagraph (A) for a prior taxable year because of such limitation. (g) Special rules (1) Related parties For purposes of this section— (A) In general All related persons shall be treated as 1 person. (B) Related persons A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b). (2) Basis For purposes of this subtitle, the basis of any investment with respect to which a credit is allowable under this section shall be reduced by the amount of such credit so allowed. This subsection shall not apply for purposes of sections 1202, 1397B, and 1400B. (3) Recapture The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified equity investment which is held by the taxpayer less than 3 years, except that no benefit shall be recaptured in the case of— (A) transfer of such investment by reason of the death of the taxpayer, (B) transfer between spouses, (C) transfer incident to the divorce (as defined in section 1041) of such taxpayer, or (D) a transaction to which section 381(a) applies (relating to certain acquisitions of the assets of one corporation by another corporation). (h) Regulations For purposes of this section— (1) In general Not later than 180 days after the date of enactment of this section, the Secretary shall prescribe regulations to— (A) certify qualified small business entities, (B) prevent the abuse of the purposes of this section, (C) impose appropriate reporting requirements and metric for measuring the effectiveness of the tax credit, including the impact of the tax credit on domestic job creation, and (D) apply the provisions of this section to newly formed entities. (2) Certification and selection criteria The regulations for certifying qualified small business entities shall require the following: (A) Certification (i) Application for tax credit Each applicant for certification as a qualified small business entity shall submit an application containing such information as the Secretary may require. (ii) Time to meet criteria for certification Each applicant for certification shall have 1 year from the date of acceptance by the Secretary of the application during which to provide to the Secretary evidence that the requirements of the certification have been met. (B) Selection criteria In determining which applicants to certify under this paragraph, the Secretary— (i) shall take into consideration only those applicants where there is a reasonable expectation of commercial viability, and (ii) shall take into consideration which applicants— (I) will provide the greatest domestic job creation (both direct and indirect) during the tax credit period, and (II) have the greatest potential for technological innovation and commercial deployment. . (b) Credit made part of general business credit Subsection (b) of section 38 of the Internal Revenue Code of 1986 is amended in paragraph (35), by striking plus, in paragraph (36), by striking the period at the end and inserting , plus, and by adding at the end the following new paragraph: (37) the portion of the angel investment tax credit to which section 30E(f)(1) applies. . (c) Conforming amendments Section 1016(a) of the Internal Revenue Code of 1986 is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by inserting after paragraph (37) the following new paragraph: (38) to the extent provided in section 30E(g)(2). . (d) Clerical amendment The table of sections for subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: Sec. 30E. Angel investment tax credit. . (e) Effective date The amendments made by this section shall apply to investments made after December 31, 2013, in taxable years ending after such date. (f) GAO report Not later than two years after the date of enactment of this Act, the Comptroller General of the United States, pursuant to an audit of the angel investment tax credit program established under section 30E of the Internal Revenue Code of 1986 (as added by subsection (a)), shall report to Congress on such program, including— (1) the implementation of the regulations promulgated by the Secretary, (2) the amount of tax credits allocated to qualified small business entities in the prior year, and (3) the effectiveness of the tax credit in increasing domestic job creation by the qualified small businesses that receive the tax credit. 4. Permanent full exclusion applicable to qualified small business stock (a) In general Paragraph (4) of section 1202(a) of the Internal Revenue Code of 1986 is amended by striking and before January 1, 2014. (b) Conforming amendments (1) Section 1202(a) of such Code, as amended by subsection (a), is amended by striking paragraphs (2) and (3) and by redesignating paragraph (4) as paragraph (2). (2) Section 1202(a)(2) of such Code, as redesignated by paragraph (1), is amended by adding and at the end of subparagraph (A), by striking subparagraph (B), and by redesignating subparagraph (C) as subparagraph (B). (3) Section 1223(13) of such Code is amended by striking 1202(a)(2),. (4) The heading for section 1202 of such Code is amended by striking Partial exclusion for gain and inserting Exclusion of certain gain. (5) The item relating to section 1202 in the table of sections for part I of subchapter P of chapter 1 of such Code is amended by striking Partial exclusion for gain and inserting Exclusion of certain gain. (c) Effective date The amendments made by this section apply to stock acquired after December 31, 2013. 5. Establishment of small business startup savings accounts (a) In general Subpart A of part I of subchapter D of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 408A the following new section: 408B. Small business startup savings accounts (a) General rule Except as provided in this section, a Small Business Startup Savings Account shall be treated for purposes of this title in the same manner as an individual retirement plan. (b) Small business startup savings account For purposes of this title, the term Small Business Startup Savings Account means an individual retirement account (as defined in section 409(a)) which is designated at the time of establishment of the plan as a Small Business Startup Savings Account. Such designation shall be made in such manner as the Secretary may prescribe. (c) Treatment of contributions (1) No deduction allowed No deduction shall be allowed under section 219 for a contribution to a Small Business Startup Savings Account. (2) Contribution limit (A) In general The aggregate amount of contributions for any taxable year to all Small Business Startup Savings Accounts maintained for the benefit of an individual shall not exceed $10,000. (B) Aggregate limitation The aggregate of the amounts which may be taken into account under subparagraph (A) for all taxable years with respect to all Small Business Startup Savings Accounts maintained for the benefit of an individual shall not exceed $150,000. (C) Cost-of-living adjustment The Secretary shall adjust annually the $10,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under section 415(d); except that the base period shall be the calendar quarter beginning July 1, 2014, and any increase which is not a multiple of $500 shall be rounded to the next lowest multiple of $500. (3) Contributions permitted after age 70½ Contributions to a Small Business Startup Savings Account may be made even after the individual for whom the account is maintained has attained age 70½. (4) Rollovers from retirement plans not allowed A taxpayer shall not be allowed to make a qualified rollover contribution to a Small Business Startup Savings Account from any qualified retirement plan (as defined in section 4974(c)). (d) Distribution rules For purposes of this title— (1) Qualified distributions (A) In general Any qualified distribution from a Small Business Startup Savings Account shall not be includible in gross income. (B) Qualified distribution defined For purposes of this subsection, the term qualified distribution means any payment or distribution made for operating capital, the purchase of equipment or facilities, marketing, training, incorporation, and accounting fees. (C) Limitations on qualified distributions All qualified distributions from a Small Business Startup Savings Account— (i) shall be limited to a single business, and (ii) must be disbursed not later than the last day of the 5th taxable year beginning after the initial disbursement. (2) Nonqualified distributions (A) In general In applying section 72 to any distribution from a Small Business Startup Savings Account which is not a qualified distribution, such distribution shall be treated as made from contributions to the Small Business Startup Savings Account to the extent that such distribution, when added to all previous distributions from the Small Business Startup Savings Account, does not exceed the aggregate amount of contributions to the Small Business Startup Savings Account. (B) Treatment of amounts remaining in account Any remaining amount in a Small Business Startup Savings Account following the date described in paragraph (1)(A)(ii) shall be treated as distributed during the taxable year following such date and such distribution shall not be treated as a qualified distribution. . (b) Excess contributions Section 4973 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: (h) Excess contributions to small business startup savings accounts For purposes of this section, in the case of contributions to all Small Business Startup Savings Accounts (within the meaning of section 408B(b)) maintained for the benefit of an individual, 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 408B(c)(2) 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 408B(c)(2) for such taxable year, over (ii) the amount contributed to such accounts for such taxable year. . (c) Conforming amendment The table of sections for subpart A of part I of subchapter D of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 408A the following new item: Sec. 408B. Small Business Startup Savings Accounts. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2013.