108th CONGRESS
1st Session
S. 842
To amend the Internal Revenue Code of 1986 to provide tax relief
for small businesses, and for other purposes.
IN THE SENATE OF THE UNITED STATES
April 9, 2003
Mr. KERRY 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 provide tax relief
for small businesses, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE- This Act may be cited as the `Affordable Small Business Stimulus
and Simplification Act of 2003'.
(b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever
in this Act an amendment or repeal is expressed in terms of an amendment to,
or repeal of, a section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 2. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) IN GENERAL- Section 179(b)(1) (relating to dollar limitation) is amended
to read as follows:
`(A) IN GENERAL- The aggregate cost which may be taken into account under
subsection (a) for any taxable year shall not exceed the following applicable
amount:
The applicable
`If the taxable year begins in:
amount is:
2003
$35,000
2004
$36,000
2005
$37,000
2006
$38,000
2007
$39,000
2008 or thereafter
$40,000.
`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in
a calendar year after 2008, the $40,000 amount contained in subparagraph
(A) shall be increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3)
for the calendar year in which the taxable year begins, by substituting
`calendar year 2007' for `calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under this subparagraph is not a multiple of
$500, such amount shall be rounded to the next highest multiple of $500.'.
(b) EXPANSION OF PHASE-OUT OF LIMITATION- Section 179(b)(2) is amended to
read as follows:
`(2) REDUCTION IN LIMITATION-
`(A) IN GENERAL- The limitation under paragraph (1) for any taxable year
shall be reduced (but not below zero) by the amount by which the cost
of section 179 property for which a deduction is allowable (without regard
to this subsection) under subsection (a) for such taxable year exceeds
the following applicable amount:
The applicable
`If the taxable year begins in:
amount is:
2003
$350,000
2004
$360,000
2005
$370,000
2006
$380,000
2007
$390,000
2008 or thereafter
$400,000.
`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in
a calendar year after 2008, the $400,000 amount contained in subparagraph
(A) shall be increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3)
for the calendar year in which the taxable year begins, by substituting
`calendar year 2007' for `calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under this subparagraph is not a multiple of
$5,000, such amount shall be rounded to the next highest multiple of $5,000.'.
(c) TIME OF DEDUCTION- The second sentence of section 179(a) (relating to
election to expense certain depreciable business assets) is amended by inserting
`(or, if the taxpayer elects, the preceding taxable year if the property was
purchased in such preceding year)' after `service'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable
years beginning after December 31, 2003.
SEC. 3. STANDARD DEDUCTION FOR BUSINESS EXPENSES OF SOLE PROPRIETORS.
(a) IN GENERAL- Section 162 (relating to trade or business expenses) is amended
by redesignating subsection (p) as subsection (q) and by inserting after subsection
(o) the following new subsection:
`(p) STANDARD DEDUCTION FOR BUSINESS EXPENSES OF SOLE PROPRIETORS-
`(1) IN GENERAL- For purposes of determining a deduction under subsection
(a), any sole proprietor may elect under this subsection a standard deduction
in lieu of itemizing expenses.
`(2) STANDARD DEDUCTION- For purposes of paragraph (1)--
`(A) IN GENERAL- The standard deduction is equal to $500.
`(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in
a calendar year after 2004, the $500 amount contained in subparagraph
(A) shall be increased by an amount equal to--
`(i) such dollar amount, multiplied by
`(ii) the cost-of-living adjustment determined under section 1(f)(3)
for the calendar year in which the taxable year begins, by substituting
`calendar year 2003'
for `calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under this subparagraph is not a multiple of
$50, such amount shall be rounded to the nearest multiple of $50.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to taxable
years beginning after December 31, 2003.
SEC. 4. MODIFICATIONS OF EXCLUSIONS AND ROLLOVERS OF GAIN ON QUALIFIED SMALL
BUSINESS STOCK.
(a) EXCLUSION OF GAIN ON QUALIFIED SMALL BUSINESS STOCK-
(1) INCREASE IN EXCLUSION PERCENTAGE-
(A) IN GENERAL- Section 1202(a)(1) (relating to exclusion for gain from
certain small business stock) is amended by striking `50 percent' and
inserting `75 percent'.
(B) 100-percent exclusion for critical technology and specialized small
business investment businesses- Section 1202(a) is amended by adding at
the end the following new paragraph:
`(3) CRITICAL TECHNOLOGY AND SPECIALIZED SMALL BUSINESS INVESTMENT BUSINESSES-
`(A) IN GENERAL- In the case of qualified small business stock acquired
after the date of the enactment of this paragraph which is stock in--
`(i) a critical technology corporation, or
`(ii) a corporation which is a specialized small business investment
company (as defined in subsection (c)(2)(B)(ii)),
paragraph (1) shall be applied by substituting `100 percent' for `75 percent'.
`(B) CRITICAL TECHNOLOGY CORPORATION- The term `critical technology corporation'
means a corporation substantially all of the active business activities
of which during substantially all of a taxpayer's holding period of stock
in the corporation are in connection with--
`(i) transportation or homeland security technologies,
`(ii) antiterrorism technologies,
`(iii) technologies enhancing security by improving methods of personal
identification (including biometrics),
`(iv) environmental technologies for pollution minimization, remediation,
or waste management,
`(v) national defense technologies, or
`(vi) energy efficiency or the development of non-fossil based fuel
source technologies.'.
(C) EMPOWERMENT ZONE CONFORMING AMENDMENT- Section 1202(a)(2)(A) is amended--
(i) by striking `60 percent' and inserting `100 percent', and
(ii) by striking `50 percent' and inserting `75 percent'.
(2) DECREASE IN HOLDING PERIOD-
(A) IN GENERAL- Section 1202(a)(1) is amended by striking `5 years' and
inserting `4 years'.
(B) CONFORMING AMENDMENT- Section 1202(j)(1)(A) is amended by striking
`5 years' and inserting `4 years'.
(3) EXCLUSION AVAILABLE TO CORPORATIONS-
(A) IN GENERAL- Subsection (a) of section 1202 (relating to partial exclusion
for gains from certain small business stock) is amended by striking `other
than a corporation'.
(B) TECHNICAL AMENDMENT- Subsection (c) of section 1202 is amended by
adding at the end the following new paragraph:
`(4) STOCK HELD AMONG MEMBERS OF CONTROLLED GROUP NOT ELIGIBLE- Stock of
a member of a parent-subsidiary controlled group (as defined in subsection
(d)(3)) shall not be treated as qualified small business stock while held
by another member of such group.'.
(4) STOCK OF LARGER BUSINESSES ELIGIBLE FOR EXCLUSION-
(A) IN GENERAL- Paragraph (1) of section 1202(d) (defining qualified small
business) is amended by striking `$50,000,000' each place it appears and
inserting `$100,000,000'.
(B) INFLATION ADJUSTMENT- Section 1202(d) (defining qualified small business)
is amended by adding at the end the following:
`(5) INFLATION ADJUSTMENT OF ASSET LIMITATION- In the case of stock issued
in any calendar year after 2004, the $100,000,000 amount contained in paragraph
(1) shall be increased by an amount equal to--
`(A) such dollar amount, multiplied by
`(B) the cost-of-living adjustment determined under section 1(f)(3) for
the calendar year, determined by substituting `calendar year 2003' for
`calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a multiple
of $10,000, such amount shall be rounded to the nearest multiple of $10,000.'.
(b) INCREASE IN PERIOD TO PURCHASE REPLACEMENT STOCK AND QUALIFY FOR ROLLOVER-
(1) IN GENERAL- Section 1045(a)(2) (relating to nonrecognition of gain)
is amended by striking `60-day' and inserting `180-day'.
(2) CONFORMING AMENDMENT- Section 1045(b)(2) is amended by striking `60-day'
and inserting `180-day'.
(1) EXCLUSION- The amendments made by subsection (a) shall apply to stock
issued after the date of the enactment of this Act.
(2) ROLLOVER- The amendment made by subsection (b) shall apply to sales
after the date of the enactment of this Act.
SEC. 5. RECOVERY PERIOD FOR DEPRECIATION OF COMPUTERS AND PERIPHERAL EQUIPMENT
AND COMPUTER SOFTWARE.
(a) RECOVERY PERIOD FOR COMPUTERS-
(A) IN GENERAL- Subparagraph (A) of section 168(e)(3) (relating to 3-year
property) is amended by striking `and' at the end of clause (ii), by striking
the period at the end of clause (iii) and inserting `, and', and by adding
at the end the following new clause:
`(iv) any computers or peripheral equipment (as defined in subsection
(i)(2)(B)).'.
(B) CONFORMING AMENDMENT- Clause (iv) of section 168(e)(3)(B) (relating
to 5-year property) is amended by inserting `(except computers or peripheral
equipment)' before the comma.
(2) 3-YEAR RECOVERY PERIOD UNDER ALTERNATIVE DEPRECIATION SYSTEM FOR TAX-EXEMPT
USE PROPERTY, ETC- Subparagraph (C) of section 168(g)(3) (relating to alternative
depreciation system for certain property) is amended to read as follows:
`(C) QUALIFIED TECHNOLOGICAL EQUIPMENT-
`(i) IN GENERAL- Except as provided in clause (ii), in the case of any
qualified technological equipment, the recovery period used for purposes
of paragraph (2) shall be 5 years.
`(ii) COMPUTERS OR PERIPHERAL EQUIPMENT- In the case of any computer
or peripheral equipment, the recovery period used for purposes of paragraph
(2) shall be 3 years.'.
(b) 24-Month Useful Life for Depreciation of Computer Software- Subparagraph
(A) of section 167(f)(1) (relating to computer software) is amended by striking
`36 months' and inserting `24 months'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to property
placed in service after the date of the enactment of this Act.
SEC. 6. CLARIFICATION OF DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED
INDIVIDUALS.
(a) IN GENERAL- The first sentence of section 162(l)(2)(B) is amended to read
as follows: `Paragraph (1) shall not apply to any taxpayer for any calendar
month for which the taxpayer participates in any subsidized health plan maintained
by any employer (other than an employer described in section 401(c)(4)) of
the taxpayer or the spouse of the taxpayer.'.
(b) EFFECTIVE DATE- The amendments made by this section shall apply to taxable
years beginning after December 31, 2002.
SEC. 7. DISCLOSURE OF TAX INFORMATION TO FACILITATE COMBINED EMPLOYMENT
TAX REPORTING.
Section 6103(d)(5) is amended to read as follows:
`(5) DISCLOSURE FOR COMBINED EMPLOYMENT TAX REPORTING- The Secretary may
disclose taxpayer identity information and signatures to any agency, body,
or commission of any State for the purpose of carrying out with such agency,
body, or commission a combined Federal and State employment tax reporting
program approved by the Secretary. Subsections (a)(2) and (p)(4) and sections
7213 and 7213A shall not apply with respect to disclosures or inspections
made pursuant to this paragraph.'.
SEC. 8. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO INCREASE ALTERNATIVE
MINIMUM TAX LIABILITY.
(a) IN GENERAL- Section 55(c) (defining regular tax) is amended by redesignating
paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following
new paragraph:
`(2) COORDINATION WITH INCOME AVERAGING FOR FARMERS AND FISHERMEN- Solely
for purposes of this section, section 1301 (relating to averaging of farm
and fishing income) shall not apply in computing the regular tax.'.
(b) ALLOWING INCOME AVERAGING FOR FISHERMEN-
(1) IN GENERAL- Section 1301(a) is amended by striking `farming business'
and inserting `farming business or fishing business'.
(2) DEFINITION OF ELECTED FARM INCOME-
(A) IN GENERAL- Clause (i) of section 1301(b)(1)(A) is amended by inserting
`or fishing business' before the semicolon.
(B) CONFORMING AMENDMENT- Subparagraph (B) of section 1301(b)(1) is amended
by inserting `or fishing business' after `farming business' both places
it occurs.
(3) DEFINITION OF FISHING BUSINESS- Section 1301(b) is amended by adding
at the end the following new paragraph:
`(4) FISHING BUSINESS- The term `fishing business' means the conduct of
commercial fishing as defined in section 3 of the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C. 1802).'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable
years beginning after December 31, 2003.
SEC. 9. MODIFICATION OF UNRELATED BUSINESS INCOME LIMITATION ON INVESTMENT
IN CERTAIN DEBT-FINANCED PROPERTIES.
(a) IN GENERAL- Section 514(c)(6) (relating to acquisition indebtedness) is
amended--
(1) by striking `include an obligation' and inserting `include--
(2) by striking the period at the end and inserting `, or', and
(3) by adding at the end the following:
`(B) indebtedness incurred by a small business investment company licensed
under the Small Business Investment Act of 1958 which is evidenced by
a debenture--
`(i) issued by such company under section 303(a) such Act, or
`(ii) held or guaranteed by the Small Business Administration.'.
(b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to acquisitions
made on or after the date of the enactment of this Act.
SEC. 10. EXCLUSION FROM PARTNERSHIP FILING REQUIREMENTS FOR MARRIED COUPLES
AS BUSINESS CO-OWNERS.
(a) IN GENERAL- Section 6031 (relating to return of partnership income) is
amended by adding the following new subsection:
`(f) EXCEPTION FOR MARRIED INDIVIDUALS AS PARTNERSHIP CO-OWNERS- This section
shall not apply to a partnership for any taxable year if--
`(1) all of the capital or profits interests in the partnership are owned
by 2 individuals who are a married couple (as determined under section 7703),
`(2) such individuals elect the application of this subsection for such
taxable year, and
`(3) such individuals file a joint return for all taxable years of such
individuals which include items from such taxable year of the partnership.
The Secretary shall prescribe regulations for the retention of such records
as may be necessary for the administration of this chapter in any case where
an election is made under this subchapter.'.
(b) MARRIED COUPLES AS BUSINESS CO-OWNERS PERMITTED TO FILE SEPARATE SELF-EMPLOYMENT
TAX SCHEDULES- Section 6017 (relating to self-employment tax returns) is amended
by adding the following new sentence: `The preceding sentence shall apply
even if the husband and wife elect, under section 6031(f), to be excluded
from the filing requirements of section 6031.'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.
END
