A bill to amend the Higher Education Act of 1965 to extend the reduced interest rate for Federal Direct Stafford Loans, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stop the Student Loan Interest Rate 
Hike Act of 2012''.

SEC. 2. INTEREST RATE EXTENSION.

    Section 455(b)(7)(D) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(b)(7)(D)) is amended--
            (1) in the matter preceding clause (i), by striking ``and 
        before July 1, 2012,'' and inserting ``and before July 1, 
        2013,''; and
            (2) in clause (v), by striking ``and before July 1, 2012,'' 
        and inserting ``and before July 1, 2013,''.

SEC. 3. EMPLOYMENT TAX TREATMENT OF PROFESSIONAL SERVICE BUSINESSES.

    (a) In General.--Section 1402 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(m) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 which are attributable to such business, 
                        and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary, the applicable 
                shareholder's pro rata share of items referred to in 
                subparagraph (A) shall be increased by the pro rata 
                share of such items of each member of such applicable 
                shareholder's family (within the meaning of section 
                318(a)(1)) who does not provide substantial services 
                with respect to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation which is a partner 
                        in a partnership which is engaged in a 
                        professional service business if substantially 
                        all of the activities of such S corporation are 
                        performed in connection with such partnership, 
                        and
                            ``(ii) any other S corporation which is 
                        engaged in a professional service business if 
                        75 percent or more of the gross income of such 
                        business is attributable to service of 3 or 
                        fewer shareholders of such corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(13) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 or a surviving 
                        spouse (as defined in section 2(a)), $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703) filing a separate 
                        return, half of the dollar amount determined 
                        under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f), and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1).
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this subsection, including regulations which 
        prevent the avoidance of the purposes of this subsection 
        through tiered entities or otherwise.
            ``(6) Cross reference.--For employment tax treatment of 
        wages paid to shareholders of S corporations, see subtitle 
        C.''.
    (b) Conforming Amendment.--Section 211 of the Social Security Act 
is amended by adding at the end the following new subsection:
    ``(l) Special Rules for Professional Service Businesses.--
            ``(1) Shareholders providing services to specified s 
        corporations.--
                    ``(A) In general.--In the case of an applicable 
                shareholder who provides substantial services with 
                respect to a professional service business referred to 
                in subparagraph (C) of a specified S corporation--
                            ``(i) such shareholder shall be treated as 
                        engaged in the trade or business of such 
                        professional service business with respect to 
                        items of income or loss described in section 
                        1366 of the Internal Revenue Code of 1986 which 
                        are attributable to such business, and
                            ``(ii) such shareholder's net earnings from 
                        self-employment shall include such 
                        shareholder's pro rata share of such items of 
                        income or loss, except that in computing such 
                        pro rata share of such items the exceptions 
                        provided in subsection (a) shall apply.
                    ``(B) Treatment of family members.--Except as 
                otherwise provided by the Secretary of the Treasury, 
                the applicable shareholder's pro rata share of items 
                referred to in subparagraph (A) shall be increased by 
                the pro rata share of such items of each member of such 
                applicable shareholder's family (within the meaning of 
                section 318(a)(1) of the Internal Revenue Code of 1986) 
                who does not provide substantial services with respect 
                to such professional service business.
                    ``(C) Specified s corporation.--For purposes of 
                this subsection, the term `specified S corporation' 
                means--
                            ``(i) any S corporation (as defined in 
                        section 1361(a) of the Internal Revenue Code of 
                        1986) which is a partner in a partnership which 
                        is engaged in a professional service business 
                        if substantially all of the activities of such 
                        S corporation are performed in connection with 
                        such partnership, and
                            ``(ii) any other S corporation (as so 
                        defined) which is engaged in a professional 
                        service business if 75 percent or more of the 
                        gross income of such business is attributable 
                        to service of 3 or fewer shareholders of such 
                        corporation.
                    ``(D) Applicable shareholder.--For purposes of this 
                paragraph, the term `applicable shareholder' means any 
                shareholder whose modified adjusted gross income for 
                the taxable year exceeds--
                            ``(i) in the case of a shareholder making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married shareholder 
                        (as defined in section 7703 of such Code) 
                        filing a separate return, half of the dollar 
                        amount determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(2) Partners.--
                    ``(A) In general.--In the case of any partnership 
                which is engaged in a professional service business, 
                subsection (a)(12) shall not apply to any applicable 
                partner who provides substantial services with respect 
                to such professional service business.
                    ``(B) Applicable partner.--For purposes of this 
                paragraph, the term `applicable partner' means any 
                partner whose modified adjusted gross income for the 
                taxable year exceeds--
                            ``(i) in the case of a partner making a 
                        joint return under section 6013 of the Internal 
                        Revenue Code of 1986 or a surviving spouse (as 
                        defined in section 2(a) of such Code), 
                        $250,000,
                            ``(ii) in the case of a married partner (as 
                        defined in section 7703 of such Code) filing a 
                        separate return, half of the dollar amount 
                        determined under clause (i), and
                            ``(iii) in any other case, $200,000.
            ``(3) Professional service business.--For purposes of this 
        subsection, the term `professional service business' means any 
        trade or business (or portion thereof) providing services in 
        the fields of health, law, lobbying, engineering, architecture, 
        accounting, actuarial science, performing arts, consulting, 
        athletics, investment advice or management, or brokerage 
        services.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income as determined under section 62 of the 
        Internal Revenue Code of 1986--
                    ``(A) determined without regard to any deduction 
                allowed under section 164(f) of such Code, and
                    ``(B) increased by the amount excluded from gross 
                income under section 911(a)(1) of such Code.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2012.

SEC. 4. COMPLIANCE PROVISION.

    The budgetary effects of this Act, for the purpose of complying 
with the Statutory Pay-As-You-Go-Act of 2010, shall be determined by 
reference to the latest statement titled ``Budgetary Effects of PAYGO 
Legislation'' for this Act, submitted for printing in the Congressional 
Record by the Chairman of the Senate Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.
                                                       

Summary: Stop the Student Loan Interest Rate Hike Act of 2012 - Amends title IV of the Higher Education Act of 1965 to make the 3.4 interest rate on Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2012, applicable to Direct Stafford loans first disbursed to undergraduate students between July 1, 2011, and July 1, 2013. Amends the Internal Revenue Code and title II of the Social Security Act to require certain shareholders of a subchapter S corporation engaged as a partner in a professional service business to include income or loss attributable to such business in their net earnings from self-employment for employment tax purposes. Restricts such tax treatment to shareholders whose modified adjusted gross income exceeds a specified amount that varies based on their tax filing status. Defines a professional service business as any trade or business providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services.