S 364

112th CONGRESS
1st Session

S. 364

To amend the Internal Revenue Code of 1986 to establish a new Small Business Savings Account.

IN THE SENATE OF THE UNITED STATES

February 16, 2011

Mr. PRYOR (for himself, Mr. BROWN of Massachusetts, and Mr. KOHL) 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 establish a new Small Business Savings Account.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. ESTABLISHMENT OF SMALL BUSINESS 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:

`SEC. 408B. SMALL BUSINESS SAVINGS ACCOUNTS.

    `(a) General Rule- Except as provided in this section, a Small Business Savings Account shall be treated for purposes of this title in the same manner as an individual retirement plan.

    `(b) Small Business Savings Account- For purposes of this title, the term `Small Business Savings Account' means a tax preferred savings plan which is designated at the time of establishment of the plan as a Small Business 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 Savings Account.

      `(2) CONTRIBUTION LIMIT-

        `(A) IN GENERAL- The aggregate amount of contributions for any taxable year to all Small Business 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 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, 2011, 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 70 1/2 - Contributions to a Small Business Savings Account may be made even after the individual for whom the account is maintained has attained age 70 1/2 .

      `(4) ROLLOVERS FROM RETIREMENT PLANS NOT ALLOWED- A taxpayer shall not be allowed to make a qualified rollover contribution to a Small Business Savings Account from any qualified retirement plan (as defined in section 4974(c)).

    `(d) Distribution Rules- For purposes of this title--

      `(1) GENERAL RULES-

        `(A) LIMITATIONS ON DISTRIBUTIONS- All qualified distributions from a Small Business 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.

        `(B) EXCLUSIONS FROM GROSS INCOME- Any qualified distribution from a Small Business Savings Account shall not be includible in gross income.

      `(2) QUALIFIED DISTRIBUTION- 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.

      `(3) NONQUALIFIED DISTRIBUTIONS-

        `(A) IN GENERAL- In applying section 72 to any distribution from a Small Business Savings Account which is not a qualified distribution, such distribution shall be treated as made from contributions to the Small Business Savings Account to the extent that such distribution, when added to all previous distributions from the Small Business Savings Account, does not exceed the aggregate amount of contributions to the Small Business Savings Account.

        `(B) TREATMENT OF AMOUNTS REMAINING IN ACCOUNT- Any remaining amount in a Small Business 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.

      `(4) ROLLOVERS TO A ROTH IRA- Subject to the application of the treatment of contributions in section 408A(c), distributions from a Small Business Savings Account may be rolled over into a Roth IRA.'.

    (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 Savings Accounts- For purposes of this section, in the case of contributions to all Small Business 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 Savings Accounts.'.

    (d) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2010.

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