Small Business Pension Start-Up Credit Act of 1998

Summary: Small Business Pension Start-Up Credit Act of 1998 - Amends the Internal Revenue Code to permit a three-year business credit of 50 percent of small employer pension plan start-up costs, with a limit of $1000 for the first year and $500 for each of the second and third years.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Pension Start-Up 
Credit Act of 1998''.

SEC. 2. CREDIT FOR PENSION PLAN START-UP COSTS OF SMALL EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by adding at the end the following new section:

``SEC. 45D. SMALL EMPLOYER PENSION PLAN START-UP COSTS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan start-up cost credit 
determined under this section for any taxable year is an amount equal 
to 50 percent of the qualified start-up costs paid or incurred by the 
taxpayer during the taxable year.
    ``(b) Dollar Limitation.--The amount of the credit determined under 
this section for any taxable year shall not exceed--
            ``(1) $1,000 for the first taxable year ending after the 
        date the employer established the qualified employer plan to 
        which such costs relate,
            ``(2) $500 for each of the second and third taxable years 
        ending after such date, and
            ``(3) zero for each taxable year thereafter.
    ``(c) Eligible Employer.--For purposes of this section,
            ``(1) In general.--The term `eligible employer' has the 
        meaning given such term by section 408(p)(2)(C)(i).
            ``(2) Employers maintaining qualified plans during 1997 not 
        eligible.--Such term shall not include an employer if such 
        employer (or any predecessor employer) maintained a qualified 
        plan (as defined in section 408(p)(2)(D)(ii)) with respect to 
        which contributions were made, or benefits were accrued, for 
        service in 1997. If only individuals other than employees 
        described in subparagraph (A) or (B) of section 410(b)(3) are 
        eligible to participate in the qualified employer plan referred 
        to in subsection (d)(1), then the preceding sentence shall be 
        applied without regard to any qualified plan in which only 
        employees so described are eligible to participate.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Qualified start-up costs.--
                    ``(A) In general.--The term `qualified start-up 
                costs' means any ordinary and necessary expenses of an 
                eligible employer which--
                            ``(i) are paid or incurred in connection 
                        with the establishment of a qualified employer 
                        plan in which at least 2 individuals are 
                        eligible to participate, and
                            ``(ii) are of a nonrecurring nature.
                    ``(B) Plan must be established before january 1, 
                2001.--Such term shall not include any expense in 
                connection with a plan established after December 31, 
                2000.
            ``(2) Qualified employer plan.--The term `qualified 
        employer plan' has the meaning given to such term by section 
        4972(d).
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowable under this chapter for any qualified start-up costs 
        for which a credit is determined under subsection (a).
            ``(3) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code (defining current year business credit) is amended 
by striking ``plus'' at the end of paragraph (11), by striking the 
period at the end of paragraph (12) and inserting ``, plus'', and by 
adding at the end the following new paragraph:
            ``(13) in the case of an eligible employer (as defined in 
        section 45D(c)), the small employer pension plan start-up cost 
        credit determined under section 45D(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) No carryback of small employer pension plan start-up 
        cost credit before effective date.--No portion of the unused 
        business credit for any taxable year which is attributable to 
        the small employer pension plan start-up cost credit determined 
        under section 45D may be carried back to a taxable year ending 
        on or before the date of the enactment of section 45D.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 45D. Small employer pension plan 
                                        start-up costs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred in taxable years ending after the date 
of the enactment of this Act.