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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1381 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Business Tax 
Relief Act of 2009''.
    (b) Reference.--Except as otherwise expressly provided, whenever in 
this Act an amendment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

SEC. 2. PERMANENT INCREASE IN LIMITATIONS ON EXPENSING OF CERTAIN 
              DEPRECIABLE BUSINESS ASSETS.

    (a) In General.--Subsection (b) of section 179 (relating to 
limitations) is amended--
            (1) by striking ``$25,000'' and all that follows in 
        paragraph (1) and inserting ``$500,000.'',
            (2) by striking ``$200,000'' and all that follows in 
        paragraph (2) and inserting ``$2,000,000'',
            (3) by striking ``after 2007 and before 2011, the $120,000 
        and $500,000'' in paragraph (5)(A) and inserting ``after 2009, 
        the $500,000 and the $2,000,000'',
            (4) by striking ``2006'' in paragraph (5)(A)(ii) and 
        inserting ``2008'', and
            (5) by striking paragraph (7).
    (b) Permanent Expensing of Computer Software.--Section 
179(d)(1)(A)(ii) of the Internal Revenue Code of 1986 (defining section 
179 property) is amended by striking ``and before 2011''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 3. MODIFICATION OF CORPORATE INCOME TAX RATES.

    (a) In General.--Paragraph (1) of section 11(b) (relating to amount 
of tax) is amended to read as follows:
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) shall be the sum of--
                    ``(A) 15 percent of so much of the taxable income 
                as does not exceed $1,000,000,
                    ``(B) 25 percent of so much of the taxable income 
                as exceeds $1,000,000 but does not exceed $1,500,000,
                    ``(C) 34 percent of so much of the taxable income 
                as exceeds $1,500,000 but does not exceed $10,000,000, 
                and
                    ``(D) 35 percent of so much of the taxable income 
                as exceeds $10,000,000.
        In the case of a corporation which has taxable income in excess 
        of $2,000,000 for any taxable year, the amount of tax 
        determined under the preceding sentence for such taxable year 
        shall be increased by the lesser of (i) 5 percent of such 
        excess, or (ii) $235,000. In the case of a corporation which 
        has taxable income in excess of $15,000,000, the amount of the 
        tax determined under the foregoing provisions of this paragraph 
        shall be increased by an additional amount equal to the lesser 
        of (i) 3 percent of such excess, or (ii) $100,000.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2009.

SEC. 4. GENERAL BUSINESS CREDITS OF ELIGIBLE SMALL BUSINESSES NOT 
              SUBJECT TO ALTERNATIVE MINIMUM TAX.

    (a) In General.--Section 38(c) (relating to limitation based on 
amount of tax) is amended by redesignating paragraph (5) as paragraph 
(6) and by inserting after paragraph (4) the following new paragraph:
            ``(5) Special rules for eligible small business credits.--
                    ``(A) In general.--In the case of eligible small 
                business credits--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to such 
                        credits, and
                            ``(ii) in applying paragraph (1) to such 
                        credits--
                                    ``(I) the tentative minimum tax 
                                shall be treated as being zero, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the eligible 
                                small business credits).
                    ``(B) Eligible small business credits.--For 
                purposes of this subsection, the term `eligible small 
                business credits' means the sum of the credits listed 
                in subsection (b) which are determined for the taxable 
                year with respect to an eligible small business. Such 
                credits shall not be taken into account under paragraph 
                (2), (3), or (4).
                    ``(C) Eligible small business.--For purposes of 
                this subsection, the term `eligible small business' 
                means, with respect to any taxable year--
                            ``(i) a corporation the stock of which is 
                        not publicly traded, or
                            ``(ii) a partnership,
                which meets the gross receipts test of section 448(c) 
                (by substituting `$50,000,000' for `$5,000,000' each 
                place it appears) for the taxable year (or, in the case 
                of a sole proprietorship, which would meet the test if 
                such proprietorship were a corporation).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to credits determined in taxable years beginning after December 
31, 2009, and to carrybacks of such credits.

SEC. 5. GENERAL BUSINESS CREDITS OF ELIGIBLE SMALL BUSINESSES CARRIED 
              BACK 5 YEARS.

    (a) In General.--Section 39(a) (relating to carryback and 
carryforward of unused credits) is amended by adding at the end the 
following new paragraph:
            ``(4) 5-year carryback for eligible small business 
        credits.--
                    ``(A) In general.--Notwithstanding subsection (d), 
                in the case of eligible small business credits--
                            ``(i) this section shall be applied 
                        separately from the business credit (other than 
                        the eligible small business credits) or the 
                        marginal oil and gas well production credit,
                            ``(ii) paragraph (1) shall be applied by 
                        substituting `each of the 5 taxable years' for 
                        `the taxable year' in subparagraph (A) thereof, 
                        and
                            ``(iii) paragraph (2) shall be applied--
                                    ``(I) by substituting `25 taxable 
                                years' for `21 taxable years' in 
                                subparagraph (A) thereof, and
                                    ``(II) by substituting `24 taxable 
                                years' for `20 taxable years' in 
                                subparagraph (B) thereof.
                    ``(B) Eligible small business credits.--For 
                purposes of this subsection, the term `eligible small 
                business credits' has the meaning given such term by 
                section 38(c)(5)(B).''.
    (b) Conforming Amendment.--Section 39(a)(3)(A) is amended by 
inserting ``or the eligible small business credits'' after ``credit)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to credits arising in taxable years beginning after December 31, 
2009.

SEC. 6. DEDUCTION FOR ELIGIBLE SMALL BUSINESS INCOME.

    (a) In General.--Paragraph (1) of section 199(a) is amended to read 
as follows:
            ``(1) In general.--There shall be allowed as a deduction an 
        amount equal to the sum of--
                    ``(A) 9 percent of the lesser of--
                            ``(i) the qualified production activities 
                        income of the taxpayer for the taxable year, or
                            ``(ii) taxable income (determined without 
                        regard to this section) for the taxable year, 
                        and
                    ``(B) in the case of an eligible small business for 
                any taxable year beginning after 2009, 20 percent of 
                the lesser of--
                            ``(i) the eligible small business income of 
                        the taxpayer for the taxable year, or
                            ``(ii) taxable income (determined without 
                        regard to this section) for the taxable 
                        year.''.
    (b) Eligible Small Business; Eligible Small Business Income.--
Section 199 is amended by adding at the end the following new 
subsection:
    ``(e) Eligible Small Business; Eligible Small Business Income.--
            ``(1) Eligible small business.--For purposes of this 
        section, the term `eligible small business' has the meaning 
        given such term by section 38(c)(5)(C).
            ``(2) Eligible small business income.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible small business income' means the 
                excess of--
                            ``(i) the income of the eligible small 
                        business which--
                                    ``(I) is attributable to the actual 
                                conduct of a trade or business,
                                    ``(II) is income from sources 
                                within the United States (within the 
                                meaning of section 861), and
                                    ``(III) is not passive income (as 
                                defined in section 904(d)(2)(B)), over
                            ``(ii) the sum of--
                                    ``(I) the cost of goods sold that 
                                are allocable to such income, and
                                    ``(II) other expenses, losses, or 
                                deductions (other than the deduction 
                                allowed under this section), which are 
                                properly allocable to such income.
                    ``(B) Exceptions.--The following shall not be 
                treated as income of an eligible small business for 
                purposes of subparagraph (A):
                            ``(i) Any income which is attributable to 
                        any property described in section 1400N(p)(3).
                            ``(ii) Any income which is attributable to 
                        the ownership or management of any professional 
                        sports team.
                            ``(iii) Any income which is attributable to 
                        a trade or business described in subparagraph 
                        (B) of section 1202(e)(3).
                            ``(iv) Any income which is attributable to 
                        any property with respect to which records are 
                        required to be maintained under section 2257 of 
                        title 18, United States Code.
                    ``(C) Allocation rules, etc.--Rules similar to the 
                rules of paragraphs (2), (3), (4)(D), and (7) of 
                subsection (c) shall apply for purposes of this 
                paragraph.
            ``(3) Special rules.--Except as otherwise provided by the 
        Secretary, rules similar to the rules of subsection (d) shall 
        apply for purposes of this subsection.''.
    (c) Conforming Amendment.--Section 199(a)(2) is amended by striking 
``paragraph (1)'' and inserting ``paragraph (1)(A)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 7. REDUCTION IN RECOGNITION PERIOD FOR BUILT-IN GAINS TAX.

    (a) In General.--Paragraph (7) of section 1374(d) (relating to 
definitions and special rules) is amended to read as follows:
            ``(7) Recognition period.--
                    ``(A) In general.--The term `recognition period' 
                means the 5-year period beginning with the 1st day of 
                the 1st taxable year for which the corporation was an S 
                corporation.
                    ``(B) Special rule for distributions to 
                shareholders.--For purposes of applying this section to 
                any amount includible in income by reason of 
                distributions to shareholders pursuant to section 
                593(e), subparagraph (A) shall be applied without 
                regard to the phrase `10-year'.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2010.

SEC. 8. CARRYBACK OF NET OPERATING LOSSES OF CERTAIN SMALL BUSINESSES 
              ALLOWED FOR 5 YEARS.

    Subparagraph (H) of section 172(b)(1) is amended to read as 
follows:
                    ``(H) 5-year carryback of losses of certain small 
                businesses.--
                            ``(i) In general.--In the case of a net 
                        operating loss with respect to any eligible 
                        small business for any taxable year ending 
                        after 2008, or, if applicable, following the 
                        taxable year with respect to which an election 
                        was made by such eligible small business under 
                        this subparagraph (as in effect before the date 
                        of the enactment of the Small Business Tax 
                        Relief Act of 2009)--
                                    ``(I) subparagraph (A)(i) shall be 
                                applied by substituting `5' for `2',
                                    ``(II) subparagraph (E)(ii) shall 
                                be applied by substituting `4' for `2', 
                                and
                                    ``(III) subparagraph (F) shall not 
                                apply.
                            ``(ii) Eligible small business.--For 
                        purposes of clause (i), the term `eligible 
                        small business' has the meaning given such term 
                        by section 38(c)(5)(C).''.

SEC. 9. MODIFICATIONS TO EXCLUSION FOR GAIN FROM CERTAIN SMALL BUSINESS 
              STOCK.

    (a) Temporary Increase in Exclusion.--Paragraph (3) of section 
1202(a) (relating to exclusion) is amended to read as follows:
            ``(3) Special rules for stock acquired before 2011.--In the 
        case of qualified small business stock--
                    ``(A) acquired after the date of the American 
                Recovery and Reinvestment Tax Act of 2009 and on or 
                before the date of the enactment of the Small Business 
                Tax Relief Act of 2009--
                            ``(i) paragraph (1) shall be applied by 
                        substituting `75 percent' for `50 percent', and
                            ``(ii) paragraph (2) shall not apply, and
                    ``(B) acquired after the date of the enactment of 
                the Small Business Tax Relief Act of 2009 and before 
                January 1, 2011--
                            ``(i) paragraph (1) shall be applied by 
                        substituting `100 percent' for `50 percent',
                            ``(ii) paragraph (2) shall not apply, and
                            ``(iii) section 57(a)(7) shall not 
                        apply.''.
    (b) Increase in Limitation.--
            (1) In general.--Subparagraph (A) of section 1202(b)(1) 
        (relating to per-issuer limitation on taxpayer's eligible gain) 
        is amended by striking ``$10,000,000'' and inserting 
        ``$15,000,000''.
            (2) Married individuals.--Subparagraph (A) of section 
        1202(b)(3) (relating to treatment of married individuals) is 
        amended by striking ``paragraph (1)(A) shall be applied by 
        substituting `$5,000,000' for `$10,000,000''' and inserting 
        ``the amount under paragraph (1)(A) shall be half of the amount 
        otherwise in effect''.
    (c) Modification of Definition of Qualified Small Business.--
Section 1202(d)(1) (defining qualified small business) is amended by 
striking ``$50,000,000'' each place it appears and inserting 
``$75,000,000''.
    (d) Inflation Adjustments.--Section 1202 (relating to partial 
exclusion for gain from certain small business stock) is amended by 
redesignating subsection (k) as subsection (l) and by inserting after 
subsection (j) the following new subsection:
    ``(k) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2009, the $15,000,000 amount in subsection 
        (b)(1)(A), the $75,000,000 amount in subsection (d)(1)(A), and 
        the $75,000,000 amount in subsection (d)(1)(B) shall each be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost of living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2008' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $1,000,000 such amount shall be 
        rounded to the next lowest multiple of $1,000,000.''.
    (e) Effective Dates.--
            (1) Exclusion; qualified small business.--The amendments 
        made by subsections (a) and (c) shall apply to stock acquired 
        after the date of the enactment of this Act.
            (2) Limitation; inflation adjustment.--The amendments made 
        by subsections (b) and (d) shall apply to taxable years ending 
        after the date of the enactment of this Act.

SEC. 10. DEDUCTION FOR HEALTH INSURANCE COSTS IN COMPUTING SELF-
              EMPLOYMENT TAXES.

    (a) In General.--Section 162(l) (relating to special rules for 
health insurance costs of self-employed individuals) is amended by 
striking paragraph (4) and by redesignating paragraph (5) as paragraph 
(4).
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
                                 <all>
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