To amend the Internal Revenue Code of 1986 to provide for Start-up Success Accounts.

Summary: Start-Up Success Accounts Act of 2001 - Amends the Internal Revenue Code to allow a limited deduction, to an eligible small business taxpayer during its start-up period, for amounts paid in cash by such a taxpayer to a Start-up Success Account.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Start-Up Success Accounts Act of 
2001''.

SEC. 2. START-UP SUCCESS ACCOUNTS.

    (a) In General.--Subpart C of part II of subchapter E of chapter 1 
of the Internal Revenue Code of 1986 (relating to taxable year for 
which deductions taken) is amended by inserting after section 468B the 
following new section:

``SEC. 468C. START-UP SUCCESS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of a taxpayer which is an 
eligible small business, there shall be allowed as a deduction for any 
taxable year the amount paid in cash by such taxpayer to a Start-up 
Success Account (hereafter in this section also referred to as an `SUSA 
Account').
    ``(b) Limitation.--
            ``(1) In general.--The amount which a taxpayer may pay into 
        the SUSA Account for any taxable year shall not exceed 
        whichever of the following is the least:
                    ``(A) 20 percent of so much of the taxable income 
                of the taxpayer (determined without regard to this 
                section) which is attributable to any trade or 
                business.
                    ``(B) $50,000.
                    ``(C) $100,000, reduced by the aggregate amount 
                paid by the taxpayer (and all related persons) into 
                SUSA accounts for all prior taxable years.
            ``(2) Deduction allowed only during startup period.--No 
        deduction shall be allowed under this section with respect to 
        any eligible small business for any taxable year after the 5th 
        taxable year that such business (or any predecessor) is engaged 
        in a trade or business.
            ``(3) Dollar limitation on controlled groups.--
                    ``(A) In general.--For purposes of paragraph (1)--
                            ``(i) all component members of a controlled 
                        group shall be treated as one taxpayer, and
                            ``(ii) the Secretary shall apportion the 
                        dollar limitations contained in paragraph (1) 
                        among the component members of such controlled 
                        group in such manner as he shall by regulations 
                        prescribe.
                    ``(B) Controlled group defined.--For purposes of 
                subparagraph (A), the term `controlled group' has the 
                meaning given such term by section 1563(a); except 
                that, for such purposes, `more than 50 percent' shall 
                be substituted for `at least 80 percent' each place it 
                appears in section 1563(a)(1).
            ``(4) Partnerships and s corporations.--In the case of a 
        partnership, the limitation under paragraph (1) shall apply 
        with respect to the partnership and each partner. A similar 
        rule shall apply in the case of an S corporation and its 
        shareholders.
            ``(5) Related persons.--For purposes of paragraph (1)(C), a 
        person (hereinafter in this paragraph referred to as the 
        `related person') is related to any person if the related 
        person bears a relationship to such person specified in section 
        267(b) or 707(b)(1), or the related person and such person are 
        engaged in trades or businesses under common control (within 
        the meaning of subsections (a) and (b) of section 52. For 
        purposes of the preceding sentence, in applying section 267(b) 
        or 707(b)(1), `10 percent' shall be substituted for `50 
        percent'.
    ``(c) Eligible Small Business.--
            ``(1) In general.--For purposes of this section, the term 
        `eligible small business' means, with respect to any taxable 
        year, any person actively engaged in a trade or business if for 
        all prior taxable years beginning after December 31, 1999, the 
        taxpayer (or any predecessor) met the $2,000,000 gross receipts 
test of paragraph (2). In the case of a taxpayer to which section 469 
applies, such term shall not include any trade or business which is a 
passive activity (within the meaning of section 469(c)) of the 
taxpayer.
            ``(2) $2,000,000 gross receipts tests.--A person meets the 
        $2,000,000 gross receipts tests of this paragraph for any prior 
        taxable year if such person would meet the test of section 
        448(c) were such section applied by substituting `$2,000,000' 
        for `$5,000,000'.
    ``(d) Start-up Success Account.--For purposes of this section--
            ``(1) In general.--The terms `Start-up Success Account' and 
        `SUSA Account' means a trust created or organized in the United 
        States for the exclusive benefit of an eligible small business, 
        but only if the written governing instrument creating the trust 
        meets the following requirements:
                    ``(A) No contribution will be accepted for any 
                taxable year in excess of the amount allowed as a 
                deduction under subsection (a) for such year.
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) The assets of the trust consist entirely of 
                cash or of obligations which have adequate stated 
                interest (as defined in section 1274(c)(2)) and which 
                pay such interest not less often than annually.
                    ``(D) All income of the trust is distributed 
                currently to the grantor.
                    ``(E) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Account taxed as grantor trust.--The grantor of an 
        SUSA Account shall be treated for purposes of this title as the 
        owner of such Account and shall be subject to tax thereon in 
        accordance with subpart E of part I of subchapter J of this 
        chapter (relating to grantors and others treated as substantial 
        owners).
    ``(e) Inclusion of Amounts Distributed.--
            ``(1) In general.--Except as provided in paragraph (2), 
        there shall be includible in the gross income of the taxpayer 
        for any taxable year--
                    ``(A) any amount distributed from an SUSA Account 
                of the taxpayer during such taxable year (to the extent 
                not previously included in gross income), and
                    ``(B) any deemed distribution under--
                            ``(i) subsection (f)(1) (relating to 
                        deposits not distributed within 5 years),
                            ``(ii) subsection (f)(2) (relating to 
                        cessation in trade or business), and
                            ``(iii) subparagraph (A) or (B) of 
                        subsection (f)(3) (relating to prohibited 
                        transactions and pledging account as security).
            ``(2) Exceptions.--Gross income shall not include the 
        distribution of any contribution paid during a taxable year to 
        an SUSA Account to the extent that such contribution exceeds 
        the limitation applicable under subsection (b) if requirements 
        similar to the requirements of section 408(d)(4) are met.
            ``(3) Exclusion from self-employment tax.--Amounts included 
        in gross income under this subsection shall not be included in 
        determining net earnings from self-employment under section 
        1402.
    ``(f) Special Rules.--
            ``(1) Tax on deposits in account which are not distributed 
        within 5 years.--
                    ``(A) In general.--If, at the close of any taxable 
                year, there is a nonqualified balance in any SUSA 
                Account--
                            ``(i) there shall be deemed distributed 
                        from such Account during such taxable year an 
                        amount equal to such balance, and
                            ``(ii) the taxpayer's tax imposed by this 
                        chapter for such taxable year shall be 
                        increased by 10 percent of such deemed 
                        distribution.
                The preceding sentence shall not apply if an amount 
                equal to such nonqualified balance is distributed from 
                such Account to the taxpayer before the due date 
                (including extensions) for filing the return of tax 
                imposed by this chapter for such year (or, if earlier, 
                the date the taxpayer files such return for such year).
                    ``(B) Nonqualified balance.--For purposes of 
                subparagraph (A), the term `nonqualified balance' means 
                any balance in the Account on the last day of the 
                taxable year which is attributable to amounts deposited 
in such Account before the 4th preceding taxable year.
                    ``(C) Ordering rule.--For purposes of this 
                paragraph, distributions from an SUSA Account shall be 
                treated as made from deposits in the order in which 
                such deposits were made, beginning with the earliest 
                deposits.
            ``(2) Cessation in trade or business.--At the close of the 
        first disqualification period after a period for which the 
        taxpayer was engaged in the trade or business referred to in 
        subsection (a), there shall be deemed distributed from the SUSA 
        Account (if any) of the taxpayer an amount equal to the balance 
        in such Account at the close of such disqualification period. 
        For purposes of the preceding sentence, the term 
        `disqualification period' means any period of 2 consecutive 
        taxable years for which the taxpayer is not engaged in the 
        trade or business referred to in subsection (a).
            ``(3) Certain rules to apply.--Rules similar to the 
        following rules shall apply for purposes of this section:
                    ``(A) Section 408(e)(2) (relating to loss of 
                exemption of account where individual engages in 
                prohibited transaction).
                    ``(B) Section 408(e)(4) (relating to effect of 
                pledging account as security).
                    ``(C) Section 408(g) (relating to community 
                property laws).
                    ``(D) Section 408(h) (relating to custodial 
                accounts).
            ``(4) Time when payments deemed made.--For purposes of this 
        section, a taxpayer shall be deemed to have made a payment to 
        an SUSA Account on the last day of a taxable year if such 
        payment is made on account of such taxable year and is made 
        within 3\1/2\ months after the close of such taxable year.
    ``(g) Reports.--The trustee of an SUSA Account shall make such 
reports regarding such Account to the Secretary and to the person for 
whose benefit the Account is maintained with respect to contributions, 
distributions, and such other matters as the Secretary may require 
under regulations. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such persons at 
such time and in such manner as may be required by those 
regulations.''.
    (b) Tax on Excess Contributions.--
            (1) Subsection (a) of section 4973 of such Code (relating 
        to tax on certain excess contributions) is amended by striking 
        ``or'' at the end of paragraph (3), by redesignating paragraph 
        (4) as paragraph (5), and by inserting after paragraph (3) the 
        following new paragraph:
            ``(4) an SUSA Account (within the meaning of section 
        468C(d)), or''.
            (2) Section 4973 of such Code is amended by adding at the 
        end the following new subsection:
    ``(g) Excess Contributions to SUSA Accounts.--For purposes of this 
section, in the case of SUSA Accounts (within the meaning of section 
468C(d)), the term `excess contributions' means the amount by which the 
amount contributed for the taxable year to the Account exceeds the 
amount which may be contributed to the Account under section 468C(b) 
for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the SUSA Account in a 
distribution to which section 468C(e)(2)(B) applies shall be treated as 
an amount not contributed.''.
    (c) Tax on Prohibited Transactions.--
            (1) Subsection (c) of section 4975 of such Code (relating 
        to prohibited transactions) is amended by adding at the end the 
        following new paragraph:
            ``(6) Special rule for susa accounts.--A person for whose 
        benefit an SUSA Account (within the meaning of section 468C(d)) 
        is established 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, with 
        respect to such transaction, the account ceases to be an SUSA 
        Account by reason of the application of section 468C(f)(3)(A) 
        to such Account.''.
            (2) Paragraph (1) of section 4975(e) of such Code is 
        amended by redesignating subparagraphs (E) and (F) as 
        subparagraphs (F) and (G), respectively, and by inserting after 
        subparagraph (D) the following new subparagraph:
                    ``(E) an SUSA Account described in section 
                468C(d),''.
    (d) Failure To Provide Reports on SUSA Accounts.--Paragraph (2) of 
section 6693(a) of such Code (relating to failure to provide reports on 
certain tax-favored accounts or annuities) is amended by redesignating 
subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively, 
and by inserting after subparagraph (B) the following new subparagraph:
                    ``(C) section 468C(g) (relating to SUSA 
                Accounts),''.
    (e) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 of such Code is amended by 
inserting after the item relating to section 468B the following new 
item:

                              ``Sec. 468C. Start-up Success 
                                        Accounts.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.