,,ii #aacth ,,congress #b;d ,session ,s4 #bgbd ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #ca1 #bjad ,mr4 ,udall of ,new ,mexico introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for the tax treatment of small business start-up savings accounts4 #a4 ,short title ,this ,act may be cited as the ,incentivize ,growth ,now ,in ,tomorrow's ,entrepreneurs ,act of #bjad4 #b4 ,small ,business ,start-,up ,savings ,accounts 7a7 ,in general ,part ,,viii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by redesignating section #bbd as section #bbe and inserting after section #bbc the following new section3 #bbd4 ,small ,business ,start-up ,savings ,accounts 7a7 ,allowance of deduction ,in the case of an individual1 there shall be allowed as a deduction for the taxable year an amount equal to amount of contributions made to the small-business start-up savings account of such individual4 7b7 ,limitation based on adjusted gross income ,the amount of the deduction allowed under subsection 7a7 for any taxable year shall be reduced 7but not below zero7 by an amount equal to the excess of-- 7#a7 the taxpayer's adjusted gross income for such taxable year1 over 7#b7 #aej1jjj 7#cjj1jjj in the case of a joint return74 7c7 ,small business start-,up savings account ,the term small business start-up savings account means a trust created or organized in the ,united ,states exclusively for the purpose of paying the eligible costs of the individual who is the designated beneficiary of the trust 7and designated as a small business start-up savings account at the time created or organized71 but only if the written governing instrument creating the trust meets the following requirements3 7#a7 ,except in the case of a rollover contribution described in subsection 7e77#d71 no contribution will be accepted unless it is in cash1 and contributions will not be accepted if such contribution would result in-- 7,a7 aggregate contributions for the taxable year exceeding the lesser of-- 7i7 #aj1jjj1 or 7ii7 an amount equal to the compensation 7as defined in section #bai7;f77#a77 includible in the individual's gross income for such taxable year1 or 7,b7 aggregate contributions to all small business start-up savings account of the individual for such taxable year and all prior taxable years exceeding #aej1jjj4 7#b7 ,the trustee is a bank 7as defined in section #djh7n77 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 section4 7#c7 ,no part of the trust funds will be invested in life insurance contracts4 7#d7 ,the assets of the trust will not be commingled with other property except in a common trust fund or common investment fund4 7#e7 ,contributions may be made even after the individual for whom the account is maintained has attained age #gj4 7d7 ,tax treatment of accounts 7#a7 ,in general ,a small business start-up savings account shall be exempt from taxation under this subtitle4 ,notwithstanding the preceding sentence1 the small business start-up savings account shall be subject to the taxes imposed by section #eaa 7relating to imposition of tax on unrelated business income of charitable organizations74 7#b7 ,account terminations ,rules similar to the rules of paragraphs 7#b7 and 7#d7 of section #djh7;e7 shall apply to small business start-up savings accounts1 and any amount treated as distributed under such rules shall be treated as not used to pay for eligible costs4 7e7 ,tax treatment of distributions 7#a7 ,qualified distributions 7,a7 ,in general ,any qualified distribution from a small business start-up savings account shall not be included in gross income4 7,b7 ,qualified distribution ,for purposes of this section1 the term qualified distribution means the amount of any payment or distribution made from a small business savings account-- 7i7 to the extent that such distribution does not exceed the eligible costs paid or incurred by the taxpayer during the taxable year if the distribution1 and 7ii7 which is made not later than the last day of the #eth taxable year beginning after the initial distribution from the small business start-up savings account4 ,for purposes of clause 7i71 a taxpayer shall be treated as having paid or incurred the taxpayer's allocable share of eligible costs of any entity in which the taxpayer directly holds stock or a capital or profits interest4 7,c7 ,eligible costs 7i7 ,in general ,for purposes of this section1 the term eligible costs means costs paid or incurred by the taxpayer with respect to the designated business of the taxpayer for operating capital1 the purchase of equipment or facilities1 marketing1 training1 incorporation1 and accounting fees4 7ii7 ,designated business ,for purposes of clause 7i71 the term designated business means any single business of the taxpayer which-- 7,i7 employs #ej or fewer full-time employees on all days during the taxable year1 and 7,,ii7 is designated by the taxpayer for purposes of this section4 ,any designation made under subclause 7,,ii71 once made1 may not be revoked4 7,d7 ,disallowance of excluded amounts as deduction1 credit1 or exclusion ,no deduction1 credit1 or exclusion shall be allowed to the taxpayer under any other section of this chapter for any qualified distribution to the extent taken into account in determining the amount of the exclusion under this paragraph4 7#b7 ,nonqualified distributions 7,a7 ,in general ,any amount paid or distributed out of a small business start-up savings account which is not a qualified distribution1 including any amount paid out pursuant to a termination of such an account1 shall be included in the gross income of the taxpayer as provided in section #gb4 7,b7 ,treatment of amounts remaining in account ,any remaining amount in a small business start-up savings account following the date described in paragraph 7#a77;,b77ii7 shall be treated as distributed during the taxable year following such date and such distribution shall not be treated as a qualified distribution4 7,c7 ,additional tax 7i7 ,in general ,the tax imposed by this chapter on the account beneficiary for any taxable year in which there is a payment or distribution from a small business start-up savings account of such beneficiary which is includible in income under subparagraph 7,a7 shall be increased by #aj percent of the amount which is so includible4 7ii7 ,exception ,clause 7i7 shall not apply if the payment or distribution is made after the account beneficiary becomes disabled within the meaning of section #gb7m77#g7 or dies4 7#c7 ,excess contributions returned before due date of return 7,a7 ,in general ,if any excess contribution is contributed for a taxable year to any small business start-up savings account of an individual1 paragraph 7#b7 shall not apply to distributions from the small business start-up savings accounts of such individual 7to the extent such distributions do not exceed the aggregate excess contributions to all such accounts of such individual for such year7 if-- 7i7 such distribution is received by the individual on or before the last day prescribed by law 7including extensions of time7 for filing such individual's return for such taxable year1 and 7ii7 such distribution is accompanied by the amount of net income attributable to such excess contribution4 7,b7 ,excess contribution ,for purposes of subparagraph 7,a71 the term excess contribution means any contribution 7other than a rollover contribution described in paragraph 7#d77 which when added to all previous contributions for the taxable year exceeds the amount allowable as a contribution under subsection 7b77#a74 7#d7 ,rollover contribution ,paragraph 7#b7 shall not apply to any amount paid or distributed from a small business start-up savings account to the account beneficiary to the extent the amount received is paid into a small business start-up savings account for the benefit of such beneficiary not later than the #fjth day after the day on which the beneficiary receives the payment or distribution4 ,for purposes of this paragraph1 rules similar to the rules of section #djh7;d77#c77;,d7 shall apply4 7#e7 ,transfer of account incident to divorce ,the transfer of an individual's interest in a small business start-up savings account to an individual's spouse or former spouse under a divorce or separation instrument described in subparagraph 7,a7 of section #ga7;b77#b7 shall not be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle1 and such interest shall1 after such transfer1 be treated as a small business start-up savings account with respect to which such spouse is the account beneficiary4 7#f7 ,treatment after death of account beneficiary 7,a7 ,treatment if designated beneficiary is spouse ,if the account beneficiary's surviving spouse acquires such beneficiary's interest in a small business start-up savings account by reason of being the designated beneficiary of such account at the death of the account beneficiary1 such account shall be treated as if the spouse were the account beneficiary4 7,b7 ,other cases 7i7 ,in general ,if1 by reason of the death of the account beneficiary1 any person acquires the account beneficiary's interest in a small business start-up savings account in a case to which subparagraph 7,a7 does not apply-- 7,i7 such account shall cease to be a small business start-up savings account as of the date of death1 and 7,,ii7 an amount equal to the fair market value of the assets in such account on such date shall be includible1 if such person is not the estate of such beneficiary1 in such person's gross income for the taxable year which includes such date1 or if such person is the estate of such beneficiary1 in such beneficiary's gross income for the last taxable year of such beneficiary4 7ii7 ,special rules 7,i7 ,reduction of inclusion for predeath expenses ,the amount includible in gross income under clause 7i7 by any person 7other than the estate7 shall be reduced by the amount of qualified distributions which were paid or incurred by the decedent before the date of the decedent's death and paid by such person within #a year after such date4 7,,ii7 ,deduction for estate taxes ,an appropriate deduction shall be allowed under section #fia7;c7 to any person 7other than the decedent or the decedent's spouse7 with respect to amounts included in gross income under clause 7i7 by such person4 7f7 ,community property laws ,this section shall be applied without regard to any community property laws4 7g7 ,adjustment for inflation ,in the case of a taxable year beginning after ,december #ca1 #bjad1 of the dollar amount in subsection 7b77#a7 and each of the dollar amounts in subsection 7c77#a7 shall be increased by an amount equal to-- 7#a7 such dollar amount1 multiplied by 7#b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #ajj1 such amount shall be rounded to the nearest multiple of #ajj4 7h7 ,reports ,the trustee of a small business start-up savings account shall make such reports regarding such account to the ,secretary and to the individual for whom the account is1 or is to be1 maintained with respect to contributions 7and the years to which they relate71 distributions1 aggregating #aj or more in any calendar year1 and such other matters as the ,secretary may require4 ,the reports required by this subsection-- 7#a7 shall be filed at such time and in such manner as the ,secretary prescribes1 and 7#b7 shall be furnished to individuals-- 7,a7 not later than ,january #ca of the calendar year following the calendar year to which such reports relate1 and 7,b7 in such manner as the ,secretary prescribes4 7i7 ,regulations ,the ,secretary shall issue such regulations or other guidance as may be necessary to carry out this section1 including for purposes of subsection 7e77#a77;,b77i7 the making reports by regarding eligible costs of an entity in which the taxpayer directly holds stock or a capital or profits interest4 4 7b7 ,deduction allowed whether or not individual itemizes deductions ,section #fb7;a7 of the ,internal ,revenue ,code of #aihf is amended by inserting after paragraph 7#ba7 the following new paragraph3 7#bb7 ,small business start-up savings accounts ,the deduction allowed by section #bbd4 4 7c7 ,tax on prohibited transactions 7#a7 ,in general ,paragraph 7#a7 of section #dige7;e7 of the ,internal ,revenue ,code of #aihf is amended by striking or at the end of subparagraph 7,f71 by redesignating subparagraph 7,g7 as subparagraph 7,h71 and by inserting after subparagraph 7,f7 the following new subparagraph3 7,g7 a small business start-up savings account described in section #bbd1 or 4 7#b7 ,special rule ,subsection 7c7 of section #dige of such ,code is amended by adding at the end of subsection 7c7 the following new paragraph3 7#g7 ,special rule for small business start-up savings accounts ,an individual for whose benefit a small business start-up savings account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account 7which would otherwise be taxable under this section7 if section #bbd7;e77#b7 applies with respect to such transaction4 4 7d7 ,failure ,to ,provide ,reports on ,small ,business ,start-,up ,savings ,accounts ,paragraph 7#b7 of section #ffic7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of subparagraph 7,d71 by striking the period at the end of subparagraph 7,e7 and inserting 1 and1 and by adding at the end the following new subparagraph3 7,f7 section #bbd7;h7 7relating to small business start-up savings accounts74 4 7e7 ,excess contributions ,section #digc7;b7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7h7 ,excess contributions to small business start-,up savings accounts ,for purposes of this section1 in the case of contributions to a small business start-up savings account 7within the meaning of section #bbd7;c771 the term excess contributions means the sum of-- 7#a7 the excess 7if any7 of-- 7,a7 the amount contributed for the taxable year to such accounts 7other than a rollover contribution described in section #bbd7;e77#d771 over 7,b7 the amount allowable as a contribution under section #bbd7;c77#a71 and 7#b7 the amount determined under this subsection for the preceding taxable year1 reduced by the sum of-- 7,a7 the distributions out of the accounts for the taxable year1 and 7,b7 the excess 7if any7 of the maximum amount allowable as a contribution under sections #bbd7;c77#a7 for the taxable year over the amount contributed to the accounts for the taxable year4 ,for purposes of this subsection1 any contribution which is distributed from a small business start-up savings account in a distribution described in section #bbd7;e77#c7 shall be treated as an amount not contributed4 4 7f7 ,clerical amendment ,the table of contents for part ,,viii of subchapter ,b of chapter #a of such ,code is amended by redesignating the item relating to section #bbd as relating to section #bbe and by inserting after the item relating to section #bbc the following new item3 ,sec4 #bbd4 ,small ,business ,start-,up ,savings ,accounts4 4 7g7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4