II 

111TH CONGRESS 

1ST SESSION S. 1381 

To amend the Internal Revenue Code of 1986 to provide additional tax 

relief for small businesses, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2009 

Mr. GRASSLEY introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

additional 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; AMENDMENT OF 1986 CODE; 

4 TABLE OF CONTENTS. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Small Business Tax Relief Act of 2009’’. 

7 (b) REFERENCE.—Except as otherwise expressly pro8 vided, whenever in this Act an amendment or repeal is 

9 expressed in terms of an amendment to, or repeal of, a 

10 section or other provision, the reference shall be considVerDate Nov 24 2008 05:57 Jun 26, 2009 Jkt 079200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1381.IS S1381

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1 ered to be made to a section or other provision of the In2 ternal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

5 SEC. 2. PERMANENT INCREASE IN LIMITATIONS ON EX6 PENSING OF CERTAIN DEPRECIABLE BUSI7 NESS ASSETS. 

8 (a) IN GENERAL.—Subsection (b) of section 179 (re9 lating to limitations) is amended— 

10 (1) by striking ‘‘$25,000’’ and all that follows 

11 in paragraph (1) and inserting ‘‘$500,000.’’, 

12 (2) by striking ‘‘$200,000’’ and all that follows 

13 in paragraph (2) and inserting ‘‘$2,000,000’’, 

14 (3) by striking ‘‘after 2007 and before 2011, 

15 the $120,000 and $500,000’’ in paragraph (5)(A) 

16 and inserting ‘‘after 2009, the $500,000 and the 

17 $2,000,000’’, 

18 (4) by striking ‘‘2006’’ in paragraph (5)(A)(ii) 

19 and inserting ‘‘2008’’, and 

20 (5) by striking paragraph (7). 

21 (b) PERMANENT EXPENSING OF COMPUTER SOFT22 WARE.—Section 179(d)(1)(A)(ii) of the Internal Revenue 

23 Code of 1986 (defining section 179 property) is amended 

24 by striking ‘‘and before 2011’’. 


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

2 this section shall apply to taxable years beginning after 

3 December 31, 2008. 

4 SEC. 3. MODIFICATION OF CORPORATE INCOME TAX 

5 RATES. 

6 (a) IN GENERAL.—Paragraph (1) of section 11(b) 

7 (relating to amount of tax) is amended to read as follows: 

8 ‘‘(1) IN GENERAL.—The amount of the tax im9 posed by subsection (a) shall be the sum of— 

10 ‘‘(A) 15 percent of so much of the taxable 

11 income as does not exceed $1,000,000, 

12 ‘‘(B) 25 percent of so much of the taxable 

13 income as exceeds $1,000,000 but does not ex14 ceed $1,500,000, 

15 ‘‘(C) 34 percent of so much of the taxable 

16 income as exceeds $1,500,000 but does not ex17 ceed $10,000,000, and 

18 ‘‘(D) 35 percent of so much of the taxable 

19 income as exceeds $10,000,000. 

20 In the case of a corporation which has taxable in21 come in excess of $2,000,000 for any taxable year, 

22 the amount of tax determined under the preceding 

23 sentence for such taxable year shall be increased by 

24 the lesser of (i) 5 percent of such excess, or (ii) 

25 $235,000. In the case of a corporation which has 


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1 taxable income in excess of $15,000,000, the amount 

2 of the tax determined under the foregoing provisions 

3 of this paragraph shall be increased by an additional 

4 amount equal to the lesser of (i) 3 percent of such 

5 excess, or (ii) $100,000.’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to taxable years beginning after 

8 December 31, 2009. 

9 SEC. 4. GENERAL BUSINESS CREDITS OF ELIGIBLE SMALL 

10 BUSINESSES NOT SUBJECT TO ALTERNATIVE 

11 MINIMUM TAX. 

12 (a) IN GENERAL.—Section 38(c) (relating to limita13 tion based on amount of tax) is amended by redesignating 

14 paragraph (5) as paragraph (6) and by inserting after 

15 paragraph (4) the following new paragraph: 

16 ‘‘(5) SPECIAL RULES FOR ELIGIBLE SMALL

17 BUSINESS CREDITS.— 

18 ‘‘(A) IN GENERAL.—In the case of eligible 

19 small business credits— 

20 ‘‘(i) this section and section 39 shall 

21 be applied separately with respect to such 

22 credits, and 

23 ‘‘(ii) in applying paragraph (1) to 

24 such credits— 


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1 ‘‘(I) the tentative minimum tax 

2 shall be treated as being zero, and 

3 ‘‘(II) the limitation under para4 graph (1) (as modified by subclause 

5 (I)) shall be reduced by the credit al6 lowed under subsection (a) for the 

7 taxable year (other than the eligible 

8 small business credits). 

9 ‘‘(B) ELIGIBLE SMALL BUSINESS CRED10 ITS.—For purposes of this subsection, the term 

11 ‘eligible small business credits’ means the sum 

12 of the credits listed in subsection (b) which are 

13 determined for the taxable year with respect to 

14 an eligible small business. Such credits shall not 

15 be taken into account under paragraph (2), (3), 

16 or (4). 

17 ‘‘(C) ELIGIBLE SMALL BUSINESS.—For 

18 purposes of this subsection, the term ‘eligible 

19 small business’ means, with respect to any tax20 able year— 

21 ‘‘(i) a corporation the stock of which 

22 is not publicly traded, or 

23 ‘‘(ii) a partnership, 

24 which meets the gross receipts test of section 

25 448(c) (by substituting ‘$50,000,000’ for 


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1 ‘$5,000,000’ each place it appears) for the tax2 able year (or, in the case of a sole proprietor3 ship, which would meet the test if such propri4 etorship were a corporation).’’. 

5 (b) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to credits determined in taxable 

7 years beginning after December 31, 2009, and to 

8 carrybacks of such credits. 

9 SEC. 5. GENERAL BUSINESS CREDITS OF ELIGIBLE SMALL 

10 BUSINESSES CARRIED BACK 5 YEARS. 

11 (a) IN GENERAL.—Section 39(a) (relating to 

12 carryback and carryforward of unused credits) is amended 

13 by adding at the end the following new paragraph: 

14 ‘‘(4) 5-YEAR CARRYBACK FOR ELIGIBLE SMALL

15 BUSINESS CREDITS.— 

16 ‘‘(A) IN GENERAL.—Notwithstanding sub17 section (d), in the case of eligible small business 

18 credits— 

19 ‘‘(i) this section shall be applied sepa20 rately from the business credit (other than 

21 the eligible small business credits) or the 

22 marginal oil and gas well production cred23 it, 

24 ‘‘(ii) paragraph (1) shall be applied by 

25 substituting ‘each of the 5 taxable years’ 


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1 for ‘the taxable year’ in subparagraph (A) 

2 thereof, and 

3 ‘‘(iii) paragraph (2) shall be applied— 

4 ‘‘(I) by substituting ‘25 taxable 

5 years’ for ‘21 taxable years’ in sub6 paragraph (A) thereof, and 

7 ‘‘(II) by substituting ‘24 taxable 

8 years’ for ‘20 taxable years’ in sub9 paragraph (B) thereof. 

10 ‘‘(B) ELIGIBLE SMALL BUSINESS CRED11 ITS.—For purposes of this subsection, the term 

12 ‘eligible small business credits’ has the meaning 

13 given such term by section 38(c)(5)(B).’’. 

14 (b) CONFORMING AMENDMENT.—Section 

15 39(a)(3)(A) is amended by inserting ‘‘or the eligible small 

16 business credits’’ after ‘‘credit)’’. 

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

18 this section shall apply to credits arising in taxable years 

19 beginning after December 31, 2009. 

20 SEC. 6. DEDUCTION FOR ELIGIBLE SMALL BUSINESS IN21 COME. 

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

23 is amended to read as follows: 

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

25 deduction an amount equal to the sum of— 


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1 ‘‘(A) 9 percent of the lesser of— 

2 ‘‘(i) the qualified production activities 

3 income of the taxpayer for the taxable 

4 year, or 

5 ‘‘(ii) taxable income (determined with6 out regard to this section) for the taxable 

7 year, and 

8 ‘‘(B) in the case of an eligible small busi9 ness for any taxable year beginning after 2009, 

10 20 percent of the lesser of— 

11 ‘‘(i) the eligible small business income 

12 of the taxpayer for the taxable year, or 

13 ‘‘(ii) taxable income (determined with14 out regard to this section) for the taxable 

15 year.’’. 

16 (b) ELIGIBLE SMALL BUSINESS; ELIGIBLE SMALL

17 BUSINESS INCOME.—Section 199 is amended by adding 

18 at the end the following new subsection: 

19 ‘‘(e) ELIGIBLE SMALL BUSINESS; ELIGIBLE SMALL

20 BUSINESS INCOME.— 

21 ‘‘(1) ELIGIBLE SMALL BUSINESS.—For pur22 poses of this section, the term ‘eligible small busi23 ness’ has the meaning given such term by section 

24 38(c)(5)(C). 

25 ‘‘(2) ELIGIBLE SMALL BUSINESS INCOME.— 


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

2 section, the term ‘eligible small business in3 come’ means the excess of— 

4 ‘‘(i) the income of the eligible small 

5 business which— 

6 ‘‘(I) is attributable to the actual 

7 conduct of a trade or business, 

8 ‘‘(II) is income from sources 

9 within the United States (within the 

10 meaning of section 861), and 

11 ‘‘(III) is not passive income (as 

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

13 ‘‘(ii) the sum of— 

14 ‘‘(I) the cost of goods sold that 

15 are allocable to such income, and 

16 ‘‘(II) other expenses, losses, or 

17 deductions (other than the deduction 

18 allowed under this section), which are 

19 properly allocable to such income. 

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

21 not be treated as income of an eligible small 

22 business for purposes of subparagraph (A): 

23 ‘‘(i) Any income which is attributable 

24 to any property described in section 

25 1400N(p)(3). 


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1 ‘‘(ii) Any income which is attributable 

2 to the ownership or management of any 

3 professional sports team. 

4 ‘‘(iii) Any income which is attributable 

5 to a trade or business described in sub6 paragraph (B) of section 1202(e)(3). 

7 ‘‘(iv) Any income which is attributable 

8 to any property with respect to which 

9 records are required to be maintained 

10 under section 2257 of title 18, United 

11 States Code. 

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

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

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

15 purposes of this paragraph. 

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

17 provided by the Secretary, rules similar to the rules 

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

19 subsection.’’. 

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

21 is amended by striking ‘‘paragraph (1)’’ and inserting 

22 ‘‘paragraph (1)(A)’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2009. 


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1 SEC. 7. REDUCTION IN RECOGNITION PERIOD FOR BUILT2 IN GAINS TAX. 

3 (a) IN GENERAL.—Paragraph (7) of section 1374(d) 

4 (relating to definitions and special rules) is amended to 

5 read as follows: 

6 ‘‘(7) RECOGNITION PERIOD.— 

7 ‘‘(A) IN GENERAL.—The term ‘recognition 

8 period’ means the 5-year period beginning with 

9 the 1st day of the 1st taxable year for which 

10 the corporation was an S corporation. 

11 ‘‘(B) SPECIAL RULE FOR DISTRIBUTIONS

12 TO SHAREHOLDERS.—For purposes of applying 

13 this section to any amount includible in income 

14 by reason of distributions to shareholders pur15 suant to section 593(e), subparagraph (A) shall 

16 be applied without regard to the phrase ‘10- 

17 year’.’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to taxable years beginning after 

20 December 31, 2010. 

21 SEC. 8. CARRYBACK OF NET OPERATING LOSSES OF CER22 TAIN SMALL BUSINESSES ALLOWED FOR 5 

23 YEARS. 

24 Subparagraph (H) of section 172(b)(1) is amended 

25 to read as follows: 


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1 ‘‘(H) 5-YEAR CARRYBACK OF LOSSES OF

2 CERTAIN SMALL BUSINESSES.— 

3 ‘‘(i) IN GENERAL.—In the case of a 

4 net operating loss with respect to any eligi5 ble small business for any taxable year 

6 ending after 2008, or, if applicable, fol7 lowing the taxable year with respect to 

8 which an election was made by such eligi9 ble small business under this subparagraph 

10 (as in effect before the date of the enact11 ment of the Small Business Tax Relief Act 

12 of 2009)— 

13 ‘‘(I) subparagraph (A)(i) shall be 

14 applied by substituting ‘5’ for ‘2’, 

15 ‘‘(II) subparagraph (E)(ii) shall 

16 be applied by substituting ‘4’ for ‘2’, 

17 and 

18 ‘‘(III) subparagraph (F) shall not 

19 apply. 

20 ‘‘(ii) ELIGIBLE SMALL BUSINESS.— 

21 For purposes of clause (i), the term ‘eligi22 ble small business’ has the meaning given 

23 such term by section 38(c)(5)(C).’’. 


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1 SEC. 9. MODIFICATIONS TO EXCLUSION FOR GAIN FROM 

2 CERTAIN SMALL BUSINESS STOCK. 

3 (a) TEMPORARY INCREASE IN EXCLUSION.—Para4 graph (3) of section 1202(a) (relating to exclusion) is 

5 amended to read as follows: 

6 ‘‘(3) SPECIAL RULES FOR STOCK ACQUIRED BE7 FORE 2011.—In the case of qualified small business 

8 stock— 

9 ‘‘(A) acquired after the date of the Amer10 ican Recovery and Reinvestment Tax Act of 

11 2009 and on or before the date of the enact12 ment of the Small Business Tax Relief Act of 

13 2009— 

14 ‘‘(i) paragraph (1) shall be applied by 

15 substituting ‘75 percent’ for ‘50 percent’, 

16 and 

17 ‘‘(ii) paragraph (2) shall not apply, 

18 and 

19 ‘‘(B) acquired after the date of the enact20 ment of the Small Business Tax Relief Act of 

21 2009 and before January 1, 2011— 

22 ‘‘(i) paragraph (1) shall be applied by 

23 substituting ‘100 percent’ for ‘50 percent’, 

24 ‘‘(ii) paragraph (2) shall not apply, 

25 and 


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1 ‘‘(iii) section 57(a)(7) shall not 

2 apply.’’. 

3 (b) INCREASE IN LIMITATION.— 

4 (1) IN GENERAL.—Subparagraph (A) of section 

5 1202(b)(1) (relating to per-issuer limitation on tax6 payer’s eligible gain) is amended by striking 

7 ‘‘$10,000,000’’ and inserting ‘‘$15,000,000’’. 

8 (2) MARRIED INDIVIDUALS.—Subparagraph (A) 

9 of section 1202(b)(3) (relating to treatment of mar10 ried individuals) is amended by striking ‘‘paragraph 

11 (1)(A) shall be applied by substituting ‘$5,000,000’ 

12 for ‘$10,000,000’ ’’ and inserting ‘‘the amount under 

13 paragraph (1)(A) shall be half of the amount other14 wise in effect’’. 

15 (c) MODIFICATION OF DEFINITION OF QUALIFIED

16 SMALL BUSINESS.—Section 1202(d)(1) (defining quali17 fied small business) is amended by striking ‘‘$50,000,000’’ 

18 each place it appears and inserting ‘‘$75,000,000’’. 

19 (d) INFLATION ADJUSTMENTS.—Section 1202 (relat20 ing to partial exclusion for gain from certain small busi21 ness stock) is amended by redesignating subsection (k) as 

22 subsection (l) and by inserting after subsection (j) the fol23 lowing new subsection: 

24 ‘‘(k) INFLATION ADJUSTMENT.— 


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1 ‘‘(1) IN GENERAL.—In the case of any taxable 

2 year beginning after 2009, the $15,000,000 amount 

3 in subsection (b)(1)(A), the $75,000,000 amount in 

4 subsection (d)(1)(A), and the $75,000,000 amount 

5 in subsection (d)(1)(B) shall each be increased by an 

6 amount equal to— 

7 ‘‘(A) such dollar amount, multiplied by 

8 ‘‘(B) the cost of living adjustment deter9 mined under section 1(f)(3) for the calendar 

10 year in which the taxable year begins, deter11 mined by substituting ‘calendar year 2008’ for 

12 ‘calendar year 1992’ in subparagraph (B) 

13 thereof. 

14 ‘‘(2) ROUNDING.—If any amount as adjusted 

15 under paragraph (1) is not a multiple of $1,000,000 

16 such amount shall be rounded to the next lowest 

17 multiple of $1,000,000.’’. 

18 (e) EFFECTIVE DATES.— 

19 (1) EXCLUSION; QUALIFIED SMALL BUSI20 NESS.—The amendments made by subsections (a) 

21 and (c) shall apply to stock acquired after the date 

22 of the enactment of this Act. 

23 (2) LIMITATION; INFLATION ADJUSTMENT.— 

24 The amendments made by subsections (b) and (d) 


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1 shall apply to taxable years ending after the date of 

2 the enactment of this Act. 

3 SEC. 10. DEDUCTION FOR HEALTH INSURANCE COSTS IN 

4 COMPUTING SELF-EMPLOYMENT TAXES. 

5 (a) IN GENERAL.—Section 162(l) (relating to special 

6 rules for health insurance costs of self-employed individ7 uals) is amended by striking paragraph (4) and by redes8 ignating paragraph (5) as paragraph (4). 

9 (b) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

Æ 


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