,,ii  #aafth ,,congress  #ast ,session  
,s4 #cacf  ,,in ,,the ,,senate ,,of     
,,the ,,united ,,states  ,december #ai1 
#bjai,mr4 ,gardner 7for himself and ,mr4
 ,peters7 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 establish small business    
start-up savings accounts4  #a4 ,short  
title ,this ,act may be cited as the    
,small ,business ,start-up ,savings     
,accounts ,act of #bjai4  #b4           
,establishment of ,small ,business      
,start-,up ,savings ,accounts  7a7 ,in  
general ,chapter #gg of the ,internal   
,revenue ,code of #aihf is amended by   
adding at the end the following new     
section3  #gecj4 ,small ,business       
,start-,up ,savings ,accounts  7a7 ,in  
general ,an individual or an eligible   
small business may establish a small    
business start-up savings account4  7b7 
,small business start-,up savings       
account ,for purposes of this section1  

the term small business start-up savings
 account means a trust created or       
organized in the ,united ,states for the
 benefit of the account beneficiary1 but
 only if the written governing          
instrument creating the trust meets the 
following requirements3  7#a7 ,except as
 provided in subsection 7d77#c7 in the  
case of a rollover contribution1 no     
contribution will be accepted unless it 
is in cash1 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 7d77#b74  
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
 interest of an individual in the       

balance of his account is               
nonforfeitable4  7#e7 ,the assets of the
 trust will not be commingled with other
 property except in a common trust fund 
or common investment fund4  7c7         
,eligible small business ,for purposes  
of this section1 the term eligible small
 business means1 with respect to any    
taxable year1 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 #ejj or fewer4  7d7 ,treatment of   
contributions  7#a7 ,in general ,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 7#b74  
7#b7 ,contribution limitation  7,a7 ,in 
general ,the amount allowable as a      

deduction under paragraph 7#a7 with     
respect to all small business start-up  
savings accounts maintained for the     
benefit of any person shall not exceed  
the lesser of--  7i7 #aj1jjj1 or  7ii7  
#aej1jjj1 reduced by the aggregate      
contributions by such person for all    
taxable years with respect to all small 
business start-up savings accounts of   
the taxpayer4  7,b7 ,cost of living     
adjustment  7i7 ,in general ,in the case
 of a taxable year beginning after      
#bjbj1 the #aj1jjj amount in            
subparagraph 7,a7 shall be increased by 
an amount equal to--  7,i7 such dollar  
amount1 multiplied by  7,,ii7 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 #bjai for calendar year   
#aiib in subparagraph 7,a77ii7 thereof4 
7ii7 ,rounding ,if any amount as        
adjusted under clause 7i7 is not a      
multiple of #ejj1 such amount shall be  

rounded to the next lowest multiple of  
#ejj4  7#c7 ,rollovers from retirement  
plans not allowed ,under regulations    
prescribed by the ,secretary1 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 
account4  7#d7 ,treated as deduction for
 individuals and corporations ,for      
purposes of chapter #a1 the deduction   
allowed under paragraph 7#a7 shall be   
treated as a deduction specified in part
 ,,vi of subchapter ,b of chapter #a    
7relating to itemized deductions for    
individuals and corporations74  7e7     
,treatment of distributions  7#a7 ,tax  
treatment  7,a7 ,exclusion of qualified 
distributions ,any qualified            
distribution from a small business      
start-up savings account shall not be   
includible in gross income4  7,b7       
,inclusion of other distributions ,any  
distribution from a small business      
start-up savings account which is not a 

qualified distribution shall be included
 in gross income4  7#b7 ,qualified      
distribution ,for purposes of this      
subsection1 the term qualified          
distribution means1 with respect to any 
taxable year1 any payment or            
distribution from a small business      
start-up savings account--  7,a7 to the 
extent the amount of such payment or    
distribution does not exceed the sum    
of--  7i7 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 facilities1    
marketing1 training1 incorporation1 and 
accounting fees1 and  7ii7 the aggregate
 capital contributions of the taxpayer  
with respect to an eligible small       
business for the taxable year 7but only 
to the extent such amounts are used by  
such small business for purposes        
described in clause 7i771 and  7,b7     
which1 in the case of a payment or      
distribution subsequent to the first    

payment or distribution from such       
account 7or any predecessor to such     
account7--  7i7 is made not later than  
the close of the #eth taxable year      
beginning after the date of such first  
payment or distribution1 and  7ii7 is   
made with respect to the same eligible  
small business with respect to which    
such first payment or distribution was  
made4  7#c7 ,treatment after death of   
account beneficiary  7,a7 ,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--  7i7 such account shall cease 
to be a small business start-up savings 
account as of the date of death1 and    
7ii7 an amount equal to the fair market 
value of the assets in such account on  
such date shall be includible--  7,i7 in
 the case of a person who is not the    
estate of such beneficiary1 in such     
person's gross income for the taxable   
year which includes such date1 or       

7,,ii7 in the case of a person who is   
the estate of such beneficiary1 in such 
beneficiary's gross income for the last 
taxable year of such beneficiary4  7,b7 
,special rules  7i7 ,reduction of       
inclusion for predeath expenses ,the    
amount includible in gross income under 
subparagraph 7,a7 shall be reduced by   
the amounts described in paragraph 7#b7 
which were incurred by the decedent     
before the date of the decedent's death 
and paid by such person within #a year  
after such date4  7ii7 ,deduction for   
estate taxes ,an appropriate deduction  
shall be allowed under section #fia7;c7 
to any person 7other than the decedent7 
with respect to amounts included in     
gross income under subparagraph         
7,a77ii77,i7 by such person4  7#d7      
,treatment for failure to be treated as 
eligible small business ,if 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--  7,a7   

such account shall cease to be a small  
business start-up savings account1 and  
7,b7 the balance of such account shall  
be treated as paid out for such taxable 
year in a distribution which is not a   
qualified distribution4  7f7 ,special   
rules  7#a7 ,denial of double benefit   
,any deduction or credit otherwise      
allowed for the taxable year with       
respect to amounts described in         
subsection 7e77#b77;,a7 shall be reduced
 by an amount equal to the qualified    
distributions attributable to such      
amounts4 ,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 property4 ,for     
purposes of this paragraph1 qualified   
distributions shall first be treated as 
attributable to amounts described in    
subsection 7e77#b77;,a71 then to        
property placed in service for the      
taxable year4  7#b7 ,aggregation rule   
,for purposes of this section1 all      

persons treated as a single employer    
under subsection 7a7 or 7b7 of section  
#eb1 or subsection 7m7 or 7o7 of section
 #dad1 shall be treated as one person4  
4  7b7 ,excise tax on excess            
contributions and nonqualified          
distributions ,subtitle ,d of the       
,internal ,revenue ,code of #aihf is    
amended by adding at the end the        
following new chapter3  #ej;,a ,small   
business start-up savings accounts      
,sec4 #ejjj;,d4 ,tax on excess          
contributions to small business start-up
 savings accounts4,sec4 #ejjj;,e4 ,tax  
on nonqualified distributions from small
 business start-up savings              
accounts4,sec4 #ejjj;,f4 ,cross         
reference4  #ejjj;,d4 ,tax on excess    
contributions to small business start-up
 savings accounts  7a7 ,in general ,in  
the case of a small business start-up   
savings account 7within the meaning of  
section #gecj7 there is imposed for each
 taxable year a tax in an amount equal  
to #f percent of the amount of the      

excess contributions to such taxpayer's 
account 7determined as of the close of  
the taxable year74  7b7 ,limitation ,the
 amount of tax imposed by subsection 7a7
 shall not exceed #f percent of the     
value of the account 7determined as of  
the close of the taxable year74  7c7    
,excess contributions ,for purposes of  
this section1 in the case of            
contributions to all small business     
start-up savings accounts maintained for
 the benefit of a person1 the term      
excess contributions means the sum of-- 
7#a7 the excess 7if any7 of--  7,a7 the 
amount contributed to such accounts for 
the taxable year1 over  7,b7 the amount 
allowable as a contribution under       
section #gecj7;d77#b77;,a7 for such     
taxable year1 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--  7i7 the  
maximum amount allowable as a           

contribution under section              
#gecj7;d77#b77;,a7 for such taxable     
year1 over  7ii7 the amount contributed 
to such accounts for such taxable year4 
#ejjj;,e4 ,tax on nonqualified          
distributions from small business       
start-up savings accounts  7a7 ,in      
general ,if for any taxable year an     
amount is paid or distributed out of a  
taxpayer's small business start-up      
savings account1 there is imposed for   
such taxable year a tax in an amount    
equal to #aj percent of the portion of  
such amount which is includible in the  
gross income of the taxpayer4  7b7      
,exception for disability or death      
,subsection 7a7 shall not apply if the  
payment or distribution is made after   
the account beneficiary becomes disabled
 within the meaning of section          
#gb7m77#g7 7but only if such            
beneficiary's account was created before
 becoming so disabled7 or dies4         
#ejjj;,f4 ,cross reference ,for         
prohibited transactions1 see section    

#dige4  4  7c7 ,prohibited transactions 
7#a7 ,in general ,paragraph 7#a7 of     
section #dige7;e7 of such ,code is      
amended by striking or at the end of    
subparagraph 7,f71 by striking the      
period at the end of subparagraph and   
inserting 1 or1 and by adding at the end
 the following new subparagraph3  7,h7 a
 small business start-up savings account
 7within the meaning of section #gecj74 
4  7#b7 ,special rule for ceasing to be 
a small business start-up savings       
account ,section #dige7;c7 of such ,code
 7relating to tax on prohibited         
transactions7 is amended by adding at   
the end the following new paragraph3    
7#g7 ,special rule for small business   
start-up savings account ,an individual 
for whose benefit a small business      
start-up savings account 7within the    
meaning of section #gecj7 is established
 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 if1 with respect to such  
transaction1 the account ceases to be a 
small business start-up savings account 
by reason of the application of         
paragraph 7#c7 or 7#d7 of section       
#gecj7;e7 to such account4  4  7d7      
,deduction allowed whether or not       
individual itemizes ,subsection 7a7 of  
section #fb of such ,code is amended by 
inserting after paragraph 7#ba7 the     
following new paragraph3  7#bb7         
,contributions to small business        
start-up savings accounts ,the deduction
 allowed by section #gecj7;d77#a77;,a74 
4  7e7 ,conforming amendments  7#a7 ,the
 table of chapters for subtitle ,d of   
such ,code is amended by adding at the  
end the following new item3  ,chapter   
#ej;,a4 ,small ,business ,start-,up     
,savings ,accounts  4  7#b7 ,the table  
of sections for chapter #gg of such     
,code is amended by inserting after the 
item relating to section #gebi the      
following new item3  ,sec4 #gecj4 ,small
 ,business ,start-,up ,savings          

,accounts4  4  7f7 ,effective date ,the 
amendments made by this section shall   
apply to taxable years beginning after  
,december #ca1 #bjai4