Incentivize Growth Now In Tomorrow's Entrepreneurs Act of 2015

Summary: Incentivize Growth Now In Tomorrow's Entrepreneurs Act of 2015 This bill creates tax-exempt small business start-up accounts to pay for the start-up expenses (defined as expenses for investigating the creation or acquisition of an active trade or business) of a business that does not employ more than 50 full-time employees during a taxable year. Cash contributions to such accounts are allowed up to the lesser of $10,000 or the amount of compensation includible in the taxpayer's gross income for the taxable year.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Incentivize Growth Now In Tomorrow's 
Entrepreneurs Act of 2015''.

SEC. 2. SMALL BUSINESS START-UP SAVINGS ACCOUNTS.

    (a) In General.--Subchapter F of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new part:

          ``PART IX--SMALL BUSINESS START-UP SAVINGS ACCOUNTS

``Sec. 530A. Small Business Start-Up Savings Accounts.

``SEC. 530A. SMALL BUSINESS START-UP SAVINGS ACCOUNTS.

    ``(a) General Rule.--A small business start-up savings account 
shall be exempt from taxation under this subtitle. Notwithstanding the 
preceding sentence, the small business start-up savings account shall 
be subject to the taxes imposed by section 511 (relating to imposition 
of tax on unrelated business income of charitable organizations).
    ``(b) 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 making qualified 
start-up expenditures of the individual who is the designated 
beneficiary of the trust (and designated as a small business start-up 
savings account at the time created or organized), but only if the 
written governing instrument creating the trust meets the following 
requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (d)(4), no contribution will be 
        accepted unless it is in cash, and contributions will not be 
        accepted if such contribution would result in aggregate 
        contributions for the taxable year not exceeding the lesser 
        of--
                    ``(A) $10,000, or
                    ``(B) an amount equal to the compensation (as 
                defined in section 219(f)(1)) includible in the 
                individual's gross income for such taxable year.
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        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 section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(c) Qualified Start-Up Expenditures.--For purposes of this 
section--
            ``(1) In general.--The term `qualified start-up 
        expenditures' has the meaning given such term by section 195.
            ``(2) Special rule for corporation or partnership 
        interests.--Such term includes the taxpayer's allocable share 
        of qualified start-up expenditures of an entity in which the 
        taxpayer directly holds stock or a capital or profits interest.
            ``(3) Exception.--Such term shall not apply to any 
        expenditures paid or incurred in a taxable year in connection 
        with a trade or business if there is any day during the taxable 
        year on which the number of full-time employees of the trade or 
        business exceeds 50.
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Any distribution shall be includible in 
        the gross income of the distributee in the manner as provided 
        in section 72.
            ``(2) Distributions for qualified start-up expenditures.--
                    ``(A) In general.--No amount shall be includible in 
                gross income under paragraph (1) if the qualified 
                start-up expenditures of the individual during the 
                taxable year are not less than the aggregate 
                distributions during the taxable year.
                    ``(B) Distributions in excess of expenses.--If such 
                aggregate distributions exceed such expenses during the 
                taxable year, the amount otherwise includible in gross 
                income under paragraph (1) shall be reduced by the 
                amount which bears the same ratio to the amount which 
                would be includible in gross income under paragraph (1) 
                (without regard to this subparagraph) as the qualified 
                start-up expenditures bear to such aggregate 
                distributions.
                    ``(C) Disallowance of excluded amounts as 
                deduction, credit, or exclusion.--No deduction, credit, 
                or exclusion shall be allowed to the taxpayer under any 
                other section of this chapter for any qualified start-
                up expenditure to the extent taken into account in 
                determining the amount of the exclusion under this 
                paragraph.
            ``(3) Excess contributions returned before due date of 
        return.--
                    ``(A) In general.--If any excess contribution is 
                contributed for a taxable year to any small business 
                start-up savings account of an individual, paragraph 
                (1) shall not apply to distributions from the small 
                business start-up savings accounts of such individual 
                (to the extent such distributions do not exceed the 
                aggregate excess contributions to all such accounts of 
                such individual for such year) if--
                            ``(i) such distribution is received by the 
                        individual on or before the last day prescribed 
                        by law (including extensions of time) for 
                        filing such individual's return for such 
                        taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
                    ``(B) Excess contribution.--For purposes of 
                subparagraph (A), the term `excess contribution' means 
                any contribution (other than a rollover contribution 
                described in paragraph (4)) which when added to all 
                previous contributions for the taxable year exceeds the 
                amount allowable as a contribution under subsection 
                (b)(1).
            ``(4) Rollover contribution.--Paragraph (1) 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 
        60th day after the day on which the beneficiary receives the 
        payment or distribution. For purposes of this paragraph, rules 
        similar to the rules of section 408(d)(3)(D) shall apply.
            ``(5) 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 (A) of section 71(b)(2) shall not be considered a 
        taxable transfer made by such individual notwithstanding any 
        other provision of this subtitle, and such interest shall, 
        after such transfer, be treated as a small business start-up 
        savings account with respect to which such spouse is the 
        account beneficiary.
            ``(6) Treatment after death of account beneficiary.--
                    ``(A) 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 beneficiary, such account shall be 
                treated as if the spouse were the account beneficiary.
                    ``(B) Other cases.--
                            ``(i) In general.--If, by reason of the 
                        death of the account beneficiary, any person 
                        acquires the account beneficiary's interest in 
                        a small business start-up savings account in a 
                        case to which subparagraph (A) does not apply--
                                    ``(I) such account shall cease to 
                                be a small business start-up savings 
                                account as of the date of death, and
                                    ``(II) an amount equal to the fair 
                                market value of the assets in such 
                                account on such date shall be 
                                includible if such person is not the 
                                estate of such beneficiary, in such 
                                person's gross income for the taxable 
                                year which includes such date, or if 
                                such person is the estate of such 
                                beneficiary, in such beneficiary's 
                                gross income for the last taxable year 
                                of such beneficiary.
                            ``(ii) Special rules.--
                                    ``(I) Reduction of inclusion for 
                                predeath expenses.--The amount 
                                includible in gross income under clause 
                                (i) by any person (other than the 
                                estate) shall be reduced by the amount 
                                of qualified start-up expenditures 
                                which were incurred by the decedent 
                                before the date of the decedent's death 
                                and paid by such person within 1 year 
                                after such date.
                                    ``(II) Deduction for estate 
                                taxes.--An appropriate deduction shall 
                                be allowed under section 691(c) to any 
                                person (other than the decedent or the 
                                decedent's spouse) with respect to 
                                amounts included in gross income under 
                                clause (i) by such person.
    ``(e) Community Property Laws.--This section shall be applied 
without regard to any community property laws.
    ``(f) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if the assets of such 
account are held by a bank (as defined in subsection (n)) or another 
person who demonstrates, to the satisfaction of the Secretary, that the 
manner in which he will administer the account will be consistent with 
the requirements of this section, and if the custodial account would, 
except for the fact that it is not a trust, constitute a small business 
start-up account described in subsection (a). For purposes of this 
title, in the case of a custodial account treated as a trust by reason 
of the preceding sentence, the custodian of such account shall be 
treated as the trustee thereof.
    ``(g) Adjustment for Inflation.--In the case of a taxable year 
beginning after December 31, 2015, the dollar amount in subsection 
(b)(1) shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, determined by substituting `calendar year 2014' for 
        `calendar year 1992' in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is not a 
multiple of $100, such amount shall be rounded to the nearest multiple 
of $100.
    ``(h) 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 is, or is to be, maintained 
with respect to contributions (and the years to which they relate), 
distributions, aggregating $10 or more in any calendar year, and such 
other matters as the Secretary may require. The reports required by 
this subsection--
            ``(1) shall be filed at such time and in such manner as the 
        Secretary prescribes, and
            ``(2) shall be furnished to individuals--
                    ``(A) not later than January 31 of the calendar 
                year following the calendar year to which such reports 
                relate, and
                    ``(B) in such manner as the Secretary prescribes.
    ``(i) Regulations.--The Secretary shall issue such regulations or 
other guidance as may be necessary to carry out this section, including 
for purposes of subsection (c)(2) the making reports by regarding 
qualified start-up expenditures of an entity in which the taxpayer 
directly holds stock or a capital or profits interest.''.
    (b) Tax on Prohibited Transactions.--
            (1) In general.--Paragraph (1) of section 4975(e) of such 
        Code (relating to prohibited transactions) is amended by 
        striking ``or'' at the end of subparagraph (F), by 
        redesignating subparagraph (G) as subparagraph (H), and by 
        inserting after subparagraph (F) the following new 
        subparagraph:
                    ``(G) a small business start-up savings account 
                described in section 530A, or''.
            (2) Special rule.--Subsection (c) of section 4975 of such 
        Code is amended by adding at the end of subsection (c) the 
        following new paragraph:
            ``(7) 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 
        (which would otherwise be taxable under this section) if 
        section 530A(d)(1) applies with respect to such transaction or 
        if such transaction is a qualified start-up expenditure (as 
        defined in section 530A(c)).''.
    (c) Failure To Provide Reports on Small Business Start-Up Savings 
Accounts.--Paragraph (2) of section 6693(a) of such Code is amended by 
striking ``and'' at the end of subparagraph (D), by striking the period 
at the end of subparagraph (E) and inserting ``, and'', and by adding 
at the end the following new subparagraph:
                    ``(F) section 530A(h) (relating to small business 
                start-up savings accounts).''.
    (d) Excess Contributions.--Section 4973 of such Code is amended by 
adding at the end the following new subsection:
    ``(i) Excess Contributions to Small Business Start-Up Savings 
Accounts.--For purposes of this section, in the case of contributions 
to a small business start-up savings account (within the meaning of 
section 530A(b)), the term `excess contributions' means the sum of--
            ``(1) the excess (if any) of--
                    ``(A) the amount contributed for the taxable year 
                to such accounts (other than a rollover contribution 
                described in section 530A(d)(4)), over
                    ``(B) the amount allowable as a contribution under 
                section 530A(b)(1), 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 the maximum amount 
                allowable as a contribution under sections 530A(b)(1) 
                for the taxable year over the amount contributed to the 
                accounts for the taxable year.
        For purposes of this subsection, any contribution which is 
        distributed from a small business start-up savings account in a 
        distribution described in section 530A(d)(3) shall be treated 
        as an amount not contributed.''.
    (e) Clerical Amendment.--The table of contents for subchapter F of 
chapter 1 of such Code is amended by adding at the end the following 
new item:

         ``Part IX. Small Business Start-Up Savings Accounts''.

    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.