I 

112TH CONGRESS 

2D SESSION H. R. 4643 

To amend the Internal Revenue Code of 1986 to expand the availability 

of the cash method of accounting for small businesses, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 25, 2012 

Mr. BERG (for himself and Mr. THOMPSON of California) 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 expand 

the availability of the cash method of accounting 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 ‘‘Small Business Tax 

5 Simplification Act’’. 

6 SEC. 2. CLARIFICATION OF CASH ACCOUNTING RULES FOR 

7 SMALL BUSINESS. 

8 (a) CASH ACCOUNTING PERMITTED.— 

9 (1) IN GENERAL.—Section 446 of the Internal 

10 Revenue Code of 1986 (relating to general rule for 


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1 methods of accounting) is amended by adding at the 

2 end the following new subsection: 

3 ‘‘(g) CERTAIN SMALL BUSINESS TAXPAYERS PER4 MITTED TO USE CASH ACCOUNTING METHOD WITHOUT

5 LIMITATION.— 

6 ‘‘(1) IN GENERAL.—An eligible taxpayer shall 

7 not be required to use an accrual method of account8 ing for any taxable year. 

9 ‘‘(2) ELIGIBLE TAXPAYER.—For purposes of 

10 this subsection, a taxpayer is an eligible taxpayer 

11 with respect to any taxable year if— 

12 ‘‘(A) for all prior taxable years beginning 

13 after December 31, 2011, the taxpayer (or any 

14 predecessor) met the gross receipts test of sec15 tion 448(c), and 

16 ‘‘(B) the taxpayer is not subject to section 

17 447 or 448.’’. 

18 (2) EXPANSION OF GROSS RECEIPTS TEST.— 

19 (A) IN GENERAL.—Paragraph (3) of sec20 tion 448(b) of such Code (relating to entities 

21 with gross receipts of not more than 

22 $5,000,000) is amended by striking 

23 ‘‘$5,000,000’’ in the text and in the heading 

24 and inserting ‘‘$10,000,000’’. 


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1 (B) CONFORMING AMENDMENTS.—Section 

2 448(c) of such Code is amended— 

3 (i) by striking ‘‘$5,000,000’’ each 

4 place it appears in the text and in the 

5 heading of paragraph (1) and inserting 

6 ‘‘$10,000,000’’, and 

7 (ii) by adding at the end the following 

8 new paragraph: 

9 ‘‘(4) INFLATION ADJUSTMENT.—In the case of 

10 any taxable year beginning in a calendar year after 

11 2012, the dollar amount contained in subsection 

12 (b)(3) and paragraph (1) of this subsection shall be 

13 increased by an amount equal to— 

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

15 ‘‘(B) the cost-of-living adjustment deter16 mined under section 1(f)(3) for the calendar 

17 year in which the taxable year begins, by sub18 stituting ‘calendar year 2011’ for ‘calendar year 

19 1992’ in subparagraph (B) thereof. 

20 If any amount as adjusted under this subparagraph 

21 is not a multiple of $100,000, such amount shall be 

22 rounded to the nearest multiple of $100,000.’’. 

23 (b) CLARIFICATION OF INVENTORY RULES FOR

24 SMALL BUSINESS.— 


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1 (1) IN GENERAL.—Section 471 of the Internal 

2 Revenue Code of 1986 (relating to general rule for 

3 inventories) is amended by redesignating subsection 

4 (c) as subsection (d) and by inserting after sub5 section (b) the following new subsection: 

6 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

7 TO USE INVENTORIES.— 

8 ‘‘(1) IN GENERAL.—A qualified taxpayer shall 

9 not be required to use inventories under this section 

10 for a taxable year. 

11 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

12 INVENTORIES.—If a qualified taxpayer does not use 

13 inventories with respect to any property for any tax14 able year beginning after December 31, 2011, such 

15 property shall be treated as a material or supply 

16 which is not incidental. 

17 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

18 this subsection, the term ‘qualified taxpayer’ 

19 means— 

20 ‘‘(A) any eligible taxpayer (as defined in 

21 section 446(g)(2)), and 

22 ‘‘(B) any taxpayer described in section 

23 448(b)(3).’’. 

24 (2) CONFORMING AMENDMENTS.— 


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1 (A) Subpart D of part II of subchapter E 

2 of chapter 1 of such Code is amended by strik3 ing section 474. 

4 (B) The table of sections for subpart D of 

5 part II of subchapter E of chapter 1 of such 

6 Code is amended by striking the item relating 

7 to section 474. 

8 (c) EFFECTIVE DATE AND SPECIAL RULES.— 

9 (1) IN GENERAL.—The amendments made by 

10 this section shall apply to taxable years beginning 

11 after December 31, 2011. 

12 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

13 the case of any taxpayer changing the taxpayer’s 

14 method of accounting for any taxable year under the 

15 amendments made by this section— 

16 (A) such change shall be treated as initi17 ated by the taxpayer; 

18 (B) such change shall be treated as made 

19 with the consent of the Secretary of the Treas20 ury; and 

21 (C) the net amount of the adjustments re22 quired to be taken into account by the taxpayer 

23 under section 481 of the Internal Revenue Code 

24 of 1986 shall be taken into account over a peVerDate Mar 15 2010 03:02 Apr 28, 2012 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4643.IH H4643

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1 riod (not greater than 4 taxable years) begin2 ning with such taxable year. 

Æ 


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