I

106TH CONGRESS

1ST SESSION H. R. 1021

To amend the Internal Revenue Code of 1986 to allow small employers

a credit against income tax for costs incurred in establishing a qualified

employer plan.

IN THE HOUSE OF REPRESENTATIVES

MARCH 4, 1999

Ms. STABENOW (for herself, Mr. CAMP, Ms. KILPATRICK, Mr. GEJDENSON,

and Mr. FALEOMAVAEGA) 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 allow small

employers a credit against income tax for costs incurred

in establishing a qualified employer plan.

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 ‘‘Small Business Pen5 sion Start-Up Credit Act of 1999’’.

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

7 SMALL EMPLOYERS.

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of
2

•HR 1021 IH

1 1986 (relating to business related credits) is amended by

2 adding at the end the following new section:

3 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN START-UP

4 COSTS.

5 ‘‘(a) GENERAL RULE.—For purposes of section 38,

6 in the case of an eligible employer, the small employer pen7 sion plan start-up cost credit determined under this sec8 tion for any taxable year is an amount equal to 50 percent

9 of the qualified start-up costs paid or incurred by the tax10 payer during the taxable year.

11 ‘‘(b) DOLLAR LIMITATION.—The amount of the cred12 it determined under this section for any taxable year shall

13 not exceed—

14 ‘‘(1) $1,000 for the first taxable year ending

15 after the date the employer established the qualified

16 employer plan to which such costs relate,

17 ‘‘(2) $500 for each of the second and third tax18 able years ending after such date, and

19 ‘‘(3) zero for each taxable year thereafter.

20 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this

21 section—

22 ‘‘(1) IN GENERAL.—The term ‘eligible em23 ployer’ has the meaning given such term by section

24 408(p)(2)(C)(i).
3

•HR 1021 IH

1 ‘‘(2) EMPLOYERS MAINTAINING QUALIFIED

2 PLANS DURING 1998 NOT ELIGIBLE.—Such term

3 shall not include an employer if such employer (or

4 any predecessor employer) maintained a qualified

5 plan (as defined in section 408(p)(2)(D)(ii)) with re6 spect to which contributions were made, or benefits

7 were accrued, for service in 1998. If only individuals

8 other than employees described in subparagraph (A)

9 or (B) of section 410(b)(3) are eligible to participate

10 in the qualified employer plan referred to in sub11 section (d)(1), then the preceding sentence shall be

12 applied without regard to any qualified plan in

13 which only employees so described are eligible to

14 participate.

15 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

16 section—

17 ‘‘(1) QUALIFIED START-UP COSTS.—

18 ‘‘(A) IN GENERAL.—The term ‘qualified

19 start-up costs’ means any ordinary and nec20 essary expenses of an eligible employer which—

21 ‘‘(i) are paid or incurred in connection

22 with the establishment of a qualified em23 ployer plan in which at least 2 individuals

24 are eligible to participate, and

25 ‘‘(ii) are of a nonrecurring nature.
4

•HR 1021 IH

1 ‘‘(B) PLAN MUST BE ESTABLISHED BE2 FORE JANUARY 1, 2002.—Such term shall not

3 include any expense in connection with a plan

4 established after December 31, 2001.

5 ‘‘(2) QUALIFIED EMPLOYER PLAN.—The term

6 ‘qualified employer plan’ has the meaning given to

7 such term by section 4972(d).

8 ‘‘(e) SPECIAL RULES.—For purposes of this

9 section—

10 ‘‘(1) AGGREGATION RULES.—All persons treat11 ed as a single employer under subsection (a) or (b)

12 of section 52, or subsection (n) or (o) of section 414,

13 shall be treated as one person.

14 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de15 duction shall be allowable under this chapter for any

16 qualified start-up costs for which a credit is deter17 mined under subsection (a).

18 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

19 section shall not apply to a taxpayer for any taxable

20 year if such taxpayer elects to have this section not

21 apply for such taxable year.’’.

22 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI23 NESS CREDIT.—Section 38(b) of such Code (defining cur24 rent year business credit) is amended by striking ‘‘plus’’

25 at the end of paragraph (11), by striking the period at
5

•HR 1021 IH

1 the end of paragraph (12) and inserting ‘‘, plus’’, and by

2 adding at the end the following new paragraph:

3 ‘‘(13) in the case of an eligible employer (as de4 fined in section 45D(c)), the small employer pension

5 plan start-up cost credit determined under section

6 45D(a).’’.

7 (c) CONFORMING AMENDMENTS.—

8 (1) Section 39(d) of such Code is amended by

9 adding at the end the following new paragraph:

10 ‘‘(8) NO CARRYBACK OF SMALL EMPLOYER

11 PENSION PLAN START-UP COST CREDIT BEFORE EF12 FECTIVE DATE.—No portion of the unused business

13 credit for any taxable year which is attributable to

14 the small employer pension plan start-up cost credit

15 determined under section 45D may be carried back

16 to a taxable year ending on or before the date of the

17 enactment of section 45D.’’.

18 (2) The table of sections for subpart D of part

19 IV of subchapter A of chapter 1 of such Code is

20 amended by adding at the end the following new

21 item:

‘‘Sec. 45D. Small employer pension plan start-up costs.’’.

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

23 this section shall apply to costs paid or incurred in taxable

24 years ending after the date of the enactment of this Act.

Æ