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103D CONGRESS

2D SESSION H. R. 4201

To amend the Internal Revenue Code of 1986 to provide incentives for

the creation of jobs and business opportunities by individuals and small

businesses through reduction of the social security tax burden on small

employers and the self-employed.

IN THE HOUSE OF REPRESENTATIVES

APRIL 13, 1994

Mr. MARTINEZ introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

incentives for the creation of jobs and business opportunities by individuals and small businesses through reduction of the social security tax burden on small employers

and the self-employed.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Job Creation and Busi5 ness Equity Act of 1994’’.

6 SEC. 2. FINDINGS.

7 Congress finds that—
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1 (1) the vast majority of jobs created in the

2 United States over the past quarter century are in

3 new, small businesses created through the entre4 preneurial skills of individuals who take the risks of

5 business development;

6 (2) current tax laws in the United States, while

7 well designed for the long-term protection of Amer8 ican businesses and workers, are often the major

9 reason that new or emerging businesses fail or are

10 restricted in the pace of their growth and job

11 creation;

12 (3) providing special tax deferrals, suspensions

13 and other rules for new or emerging businesses will

14 enhance the creation of jobs throughout the economy

15 over the next decade;

16 (4) current tax incentives offered to small busi17 nesses or proposed with respect to those businesses

18 do not deal with the direct costs associated with em19 ploying workers, or do so in a manner that does not

20 always support long-term employment activities, es21 pecially for targeted populations; and

22 (5) tax based incentives that are specifically

23 linked to the development of jobs in new small busi24 nesses are the best kinds of incentives that can be
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1 offered to entrepreneurs who are willing to develop

2 those jobs.

3 SEC. 3. AMENDMENT TO SECTION 1402.

4 (a) Section 1402 of the Internal Revenue Code of

5 1986 is amended by adding a new subsection (l) at the

6 end thereof, to read as follows:

7 ‘‘(l) SPECIAL RULE FOR NEW BUSINESSES.—For

8 purposes of this chapter—

9 ‘‘(1) a new business shall be defined as a sole10 proprietorship or partnership whose owners would be

11 treated as self-employed under this chapter, where

12 the principal owners of the business have not en13 gaged in self-employment activities for more than 3

14 years out of the 10 years immediately preceding the

15 year for which such determination is made under

16 this section; and

17 ‘‘(2) the owners, and each of them, where a

18 partnership is involved, of a new business, as defined

19 in paragraph (1), shall be exempt from tax under

20 this subtitle until the self-employment income, as de21 fined in subsection (b) of this section, exceeds

22 $25,000 for each owner.’’

23 (b) This section shall be effective for businesses cre24 ated on or after January 1, 1994, and for tax periods be-
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1 ginning on or after that date and shall continue in effect

2 until December 31, 1999.

3 SEC. 4. AMENDMENT TO SECTION 3111.

4 (a) Section 3111 of the Internal Revenue Code of

5 1986 is amended by adding a new subsection (d) at the

6 end thereof, to read as follows:

7 ‘‘(d) SPECIAL RULE FOR NEW BUSINESS EMPLOY8 ERS.—For purposes of this chapter—

9 ‘‘(1) a new business employer shall be defined

10 as a sole-proprietorship, partnership, or corporation

11 where the principal owners of the business have not,

12 directly as individuals, partners in arrangements

13 with others or as owners of a corporation, engaged

14 in commercial or other activities that involve the em15 ployment of other persons (other than as household

16 employees) for more than 3 years out of 10 years

17 immediately preceding the year for which such deter18 mination is made under this section; and

19 ‘‘(2) the new business employer, and each of

20 them, where a partnership is involved, as defined in

21 paragraph (1), shall be exempt from tax on employ22 ers under this subchapter until the gross value of

23 wages (including any self-employment income, as de24 fined in subsection (b) of section 1401 for each

25 owner of the business) shall exceed $100,000.’’
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1 (b) This section shall be effective for businesses cre2 ated on or after January 1, 1994, and for tax periods be3 ginning on or after that date and shall continue in effect

4 until December 31, 1999.

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