I 

111TH CONGRESS 

1ST SESSION H. R. 1763 

To provide tax relief for small businesses, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 26, 2009 

Mr. LATTA (for himself and Mr. CANTOR) introduced the following bill; which 

was referred to the Committee on Ways and Means 

A BILL 

To provide tax relief for small businesses, and for other 

purposes. 

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 ‘‘Responsible Reinvest5 ment Act of 2009’’. 

6 SEC. 2. ESTATE TAX REPEAL MADE PERMANENT. 

7 Section 901 of the Economic Growth and Tax Relief 

8 Reconciliation Act of 2001 shall not apply to title V of 

9 such Act. 

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1 SEC. 3. INCREASED EXPENSING FOR SMALL BUSINESS. 

2 (a) DOLLAR LIMITATION.—Paragraph (1) of section 

3 179(b) of the Internal Revenue Code of 1986 (relating to 

4 dollar limitation) is amended by striking ‘‘$25,000 

5 ($125,000 in the case of taxable years beginning after 

6 2006 and before 2011)’’ and inserting ‘‘$500,000’’. 

7 (b) INCREASE IN QUALIFYING INVESTMENT AT

8 WHICH PHASEOUT BEGINS.—Paragraph (2) of section 

9 179(b) of such Code (relating to reduction in limitation) 

10 is amended by striking ‘‘$200,000 ($500,000 in the case 

11 of taxable years beginning after 2006 and before 2011)’’ 

12 and inserting ‘‘$500,000’’. 

13 (c) INFLATION ADJUSTMENTS.—Section 

14 179(b)(5)(A) of such Code (relating to inflation adjust15 ments) is amended— 

16 (1) by striking ‘‘and before 2011’’, and 

17 (2) by striking ‘‘$125,000 and’’. 

18 (d) REVOCATION OF ELECTION.—Section 179(c)(2) 

19 of such Code (relating to election irrevocable) is amended 

20 by striking ‘‘and before 2011’’. 

21 (e) COMPUTER SOFTWARE.—Clause (ii) of section 

22 179(d)(1)(A) of such Code is amended by striking ‘‘and 

23 before 2011’’. 

24 (f) EFFECTIVE DATE.—The amendments made by 

25 this section shall apply to taxable years beginning after 

26 December 31, 2009. 

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1 SEC. 4. ACCELERATED DEPRECIATION FOR MANUFAC2 TURING AND AGRICULTURAL PROPERTY. 

3 (a) IN GENERAL.—The table contained in section 

4 168(c) of the Internal Revenue Code of 1986 is amended 

5 by inserting before the row relating to 3-year property the 

6 following new row: 

Any qualified manufacturing or agricultural property ................ 1 year 

7 (b) QUALIFIED MANUFACTURING OR AGRICULTURAL

8 PROPERTY.—Subsection (e) of section 168 of such Code 

9 is amended by adding at the end the following new para10 graph: 

11 ‘‘(9) QUALIFIED MANUFACTURING OR AGRICUL12 TURAL PROPERTY.—The term ‘qualified manufac13 turing or agricultural property’ means any tangible 

14 personal property which is used in the trade or busi15 ness of manufacturing or agriculture.’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to property placed in service after 

18 the date of the enactment of this Act. 

19 SEC. 5. DEDUCTION FOR QUALIFIED SMALL BUSINESS IN20 COME. 

21 (a) IN GENERAL.—Paragraph (1) of section 199(a) 

22 of the Internal Revenue Code of 1986 is amended to read 

23 as follows: 

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1 ‘‘(1) IN GENERAL.—There shall be allowed as a 

2 deduction an amount equal to the sum of— 

3 ‘‘(A) 9 percent of the lesser of— 

4 ‘‘(i) the qualified production activities 

5 income of the taxpayer for the taxable 

6 year, or 

7 ‘‘(ii) taxable income (determined with8 out regard to this section) for the taxable 

9 year, and 

10 ‘‘(B) in the case of a qualified small busi11 ness for a taxable year beginning in 2009 or 

12 2010, 20 percent of the lesser of— 

13 ‘‘(i) the qualified small business in14 come of the taxpayer for the taxable year, 

15 or 

16 ‘‘(ii) taxable income (determined with17 out regard to this section) for the taxable 

18 year.’’. 

19 (b) QUALIFIED SMALL BUSINESS; QUALIFIED SMALL

20 BUSINESS INCOME.—Section 199 of such Code is amend21 ed by adding at the end the following new subsection: 

22 ‘‘(e) QUALIFIED SMALL BUSINESS; QUALIFIED

23 SMALL BUSINESS INCOME.— 

24 ‘‘(1) QUALIFIED SMALL BUSINESS.— 

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1 ‘‘(A) IN GENERAL.—For purposes of this 

2 section, the term ‘qualified small business’ 

3 means any taxpayer for any taxable year if the 

4 annual average number of employees employed 

5 by such taxpayer during such taxable year was 

6 500 or fewer. 

7 ‘‘(B) AGGREGATION RULE.—For purposes 

8 of subparagraph (A), any person treated as a 

9 single employer under subsection (a) or (b) of 

10 section 52 (applied without regard to section 

11 1563(b)) or subsection (m) or (o) of section 

12 414 shall be treated as 1 taxpayer for purposes 

13 of this subsection. 

14 ‘‘(C) SPECIAL RULE.—If a taxpayer is 

15 treated as a qualified small business for any 

16 taxable year, the taxpayer shall not fail to be 

17 treated as a qualified small business for any 

18 subsequent taxable year solely because the num19 ber of employees employed by such taxpayer 

20 during such subsequent taxable year exceeds 

21 500. The preceding sentence shall cease to 

22 apply to such taxpayer in the first taxable year 

23 in which there is an ownership change (as de24 fined by section 382(g) in respect of a corpora25 tion, or by applying principles analogous to 

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1 such ownership change in the case of a tax2 payer that is a partnership) with respect to the 

3 stock (or partnership interests) of the taxpayer. 

4 ‘‘(2) QUALIFIED SMALL BUSINESS INCOME.— 

5 ‘‘(A) IN GENERAL.—For purposes of this 

6 section, the term ‘qualified small business in7 come’ means the excess of— 

8 ‘‘(i) the income of the qualified small 

9 business which— 

10 ‘‘(I) is attributable to the actual 

11 conduct of a trade or business, 

12 ‘‘(II) is income from sources 

13 within the United States (within the 

14 meaning of section 861), and 

15 ‘‘(III) is not passive income (as 

16 defined in section 904(d)(2)(B)), over 

17 ‘‘(ii) the sum of— 

18 ‘‘(I) the cost of goods sold that 

19 are allocable to such income, and 

20 ‘‘(II) other expenses, losses, or 

21 deductions (other than the deduction 

22 allowed under this section), which are 

23 properly allocable to such income. 

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1 ‘‘(B) EXCEPTIONS.—The following shall 

2 not be treated as income of a qualified small 

3 business for purposes of subparagraph (A): 

4 ‘‘(i) Any income which is attributable 

5 to any property described in section 

6 1400N(p)(3). 

7 ‘‘(ii) Any income which is attributable 

8 to the ownership or management of any 

9 professional sports team. 

10 ‘‘(iii) Any income which is attributable 

11 to a trade or business described in sub12 paragraph (B) of section 1202(e)(3). 

13 ‘‘(iv) Any income which is attributable 

14 to any property with respect to which 

15 records are required to be maintained 

16 under section 2257 of title 18, United 

17 States Code. 

18 ‘‘(C) ALLOCATION RULES, ETC.—Rules 

19 similar to the rules of paragraphs (2), (3), 

20 (4)(D), and (7) of subsection (c) shall apply for 

21 purposes of this paragraph. 

22 ‘‘(3) SPECIAL RULES.—Except as otherwise 

23 provided by the Secretary, rules similar to the rules 

24 of subsection (d) shall apply for purposes of this 

25 subsection.’’. 

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1 (c) CONFORMING AMENDMENT.—Section 199(a)(2) 

2 of such Code is amended by striking ‘‘paragraph (1)’’ and 

3 inserting ‘‘paragraph (1)(A)’’. 

4 (d) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2008. 

7 SEC. 6. SMALL BUSINESS MODIFICATIONS RELATED TO 

8 HEALTH INSURANCE, HEALTH SAVINGS AC9 COUNTS, AND SIMPLIFIED EMPLOYEE PEN10 SIONS. 

11 (a) HEALTH INSURANCE DEDUCTION ALLOWED IN

12 DETERMINING SELF-EMPLOYMENT TAX.—Section 162(l) 

13 of the Internal Revenue Code of 1986 (relating to special 

14 rules for health insurance costs of self-employed individ15 uals) is amended by striking paragraph (4) (relating to 

16 deduction not allowed for self-employment tax purposes) 

17 and redesignating paragraph (5) as paragraph (4). 

18 (b) HEALTH SAVINGS ACCOUNT CONTRIBUTIONS AL19 LOWED IN DETERMINING SELF-EMPLOYMENT TAX.— 

20 Subsection (a) of section 1402 of such Code is amended 

21 by redesignating paragraphs (16) and (17) as paragraphs 

22 (17) and (18) and by inserting after paragraph (15) the 

23 following new paragraph: 

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1 ‘‘(16) the deduction provided by section 223 

2 with respect to amounts paid to a health savings ac3 count of the individual shall be allowed;’’. 

4 (c) SIMPLIFIED EMPLOYEE PENSIONS.— 

5 (1) INCREASE IN LIMITATION ON DEDUCTION

6 FOR CONTRIBUTIONS.—Subparagraph (C) of section 

7 404(h)(1) of such Code is amended by inserting 

8 ‘‘(100 percent in the case of an owner-employee as 

9 defined in section 401(c)(3))’’ after ‘‘25 percent’’ 

10 both places it appears. 

11 (2) MODIFICATION ON LIMITATION ON CON12 TRIBUTIONS.—Subsection (j) of section 408 of such 

13 Code is amended by adding at the end the following: 

14 ‘‘For purposes of applying the preceding sentence, 

15 net earnings from self-employment shall be deter16 mined without any reduction under section 

17 1402(a)(12).’’ 

18 (3) CONTRIBUTIONS ALLOWED IN DETER19 MINING SELF-EMPLOYMENT TAX.—Subsection (a) of 

20 section 1402 of such Code (as amended by sub21 section (b)) is amended by redesignating paragraphs 

22 (17) and (18) as paragraphs (18) and (19) and by 

23 inserting after paragraph (16) the following new 

24 paragraph: 

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1 ‘‘(17) the deduction provided by section 404 

2 with respect to amounts paid to a simplified em3 ployee pension of the individual shall be allowed;’’. 

4 (d) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to taxable years beginning after 

6 the date of the enactment of this Act. 

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