I 

117TH CONGRESS 

1ST SESSION H. R. 1450 

To amend the Internal Revenue Code of 1986 to provide emergency savings 

accounts for small businesses. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 1, 2021 

Mr. CLOUD (for himself, Mrs. HINSON, Mr. LAMALFA, and Mr. OWENS) 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 provide 

emergency savings accounts for small businesses. 

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 Emer5 gency Savings Accounts Act of 2021’’. 

6 SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO SMALL BUSI7 NESS EMERGENCY SAVINGS ACCOUNTS. 

8 (a) IN GENERAL.—Part VI of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 


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1 itemized deductions for individuals and corporations) is 

2 amended by adding at the end the following new section: 

3 ‘‘SEC. 200. SMALL BUSINESS EMERGENCY SAVINGS AC4 COUNTS. 

5 ‘‘(a) DEDUCTION ALLOWED.—In the case of a eligi6 ble business, there shall be allowed as a deduction for the 

7 taxable year an amount equal to the aggregate amount 

8 paid during such taxable year by such business to a small 

9 business emergency savings account of such business. 

10 ‘‘(b) LIMITATION.—The amount allowed as a deduc11 tion under subsection (a) to any business for any taxable 

12 year shall not exceed the lesser of— 

13 ‘‘(1) 25 percent of the wages (as defined in sec14 tion 3121(a)) paid by the eligible business during 

15 such taxable year, or 

16 ‘‘(2) the greater of— 

17 ‘‘(A) zero, or 

18 ‘‘(B) the maximum amount which when 

19 added to the balance of such account (as deter20 mined at the end of such taxable year but with21 out regard to contributions made during such 

22 taxable year) would not result in such balance 

23 (as so determined) to exceed 150 percent of 

24 wages (as defined in section 3121(a)) paid by 

25 the eligible business during such taxable year. 


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1 ‘‘(c) ELIGIBLE BUSINESS.—For purposes of this sec2 tion, the term ‘eligible business’ means any person if— 

3 ‘‘(1) such person carries on any trade or busi4 ness in the United States (other than the trade or 

5 business of being an employee), and 

6 ‘‘(2) the average number of full-time employees 

7 (as determined for purposes of determining whether 

8 an employer is an applicable large employer for pur9 poses of section 4980H(c)(2)) employed by such em10 ployer during the taxable year does not exceed 500. 

11 ‘‘(d) SMALL BUSINESS EMERGENCY SAVINGS AC12 COUNT.—For purposes of this section— 

13 ‘‘(1) IN GENERAL.—The term ‘small business 

14 emergency savings account’ means a trust created or 

15 organized in the United States as a small business 

16 emergency savings account exclusively for the pur17 pose of paying the qualified disaster and public 

18 health emergency expenses of the account bene19 ficiary, but only if the written governing instrument 

20 creating the trust meets the following requirements: 

21 ‘‘(A) Except in the case of a rollover con22 tribution described in subsection (f)(5), no con23 tribution will be accepted unless it is in cash. 

24 ‘‘(B) The trustee is a bank (as defined in 

25 section 408(n)), an insurance company (as deVerDate Sep 11 2014 21:27 Apr 16, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1450.IH H1450

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1 fined in section 816), or another person who 

2 demonstrates to the satisfaction of the Sec3 retary that the manner in which such person 

4 will administer the trust will be consistent with 

5 the requirements of this section. 

6 ‘‘(C) No part of the trust assets will be in7 vested in life insurance contracts. 

8 ‘‘(D) The assets of the trust will not be 

9 commingled with other property except in a 

10 common trust fund or common investment 

11 fund. 

12 ‘‘(E) The interest of account beneficiary in 

13 the balance in the account is nonforfeitable. 

14 ‘‘(2) QUALIFIED DISASTER AND PUBLIC

15 HEALTH EMERGENCY EXPENSES.—The term ‘quali16 fied disaster and public health emergency expenses’ 

17 means— 

18 ‘‘(A) disaster loss replacement expenses, 

19 ‘‘(B) disaster recovery operations expenses, 

20 and 

21 ‘‘(C) public health emergency expenses. 

22 ‘‘(3) DISASTER LOSS REPLACEMENT EX23 PENSES.—The term ‘disaster loss replacement ex24 penses’ means any expense paid or incurred in the 

25 ordinary course of a trade or business of the eligible 


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1 business to replace or repair casualty losses totaling 

2 $3,000 or more resulting from a federally declared 

3 disaster. 

4 ‘‘(4) DISASTER RECOVERY OPERATIONS EX5 PENSES.—The term ‘disaster recovery operations ex6 penses’ means the following amounts if paid or in7 curred in the ordinary course of a trade or business 

8 of the eligible business while the declaration with re9 spect to a federally declared disaster is in effect: 

10 ‘‘(A) Wages (as defined in section 3121(a)) 

11 and taxes imposed under section 3111. 

12 ‘‘(B) Unemployment insurance contribu13 tions. 

14 ‘‘(C) Health care costs. 

15 ‘‘(D) Rent, lease, or mortgage costs, in16 cluding property taxes. 

17 ‘‘(E) Utilities. 

18 ‘‘(5) PUBLIC HEALTH EMERGENCY EX19 PENSES.—The term ‘public health emergency ex20 penses’ means amounts described in subparagraphs 

21 (A) through (E) of paragraph (4) if paid or incurred 

22 in the ordinary course of a trade or business of the 

23 eligible business while a public health emergency 

24 declaration is in effect. 


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1 ‘‘(6) FEDERALLY DECLARED DISASTER.—The 

2 term ‘federally declared disaster’ has the meaning 

3 given such term by section 165(i)(5). 

4 ‘‘(7) PUBLIC HEALTH EMERGENCY DECLARA5 TION.—The term ‘public health emergency declara6 tion’ means any declaration of a public health emer7 gency by the Secretary of Health and Human Serv8 ices under section 319 of the Public Health Service 

9 Act (42 U.S.C. 247d). 

10 ‘‘(8) ACCOUNT BENEFICIARY.—The term ‘ac11 count beneficiary’ means the eligible business on 

12 whose behalf the small business emergency savings 

13 account was established. 

14 ‘‘(e) TREATMENT OF ACCOUNT.— 

15 ‘‘(1) IN GENERAL.—A small business emer16 gency savings account is exempt from taxation under 

17 this subtitle unless such account has ceased to be a 

18 small business emergency savings account. Notwith19 standing the preceding sentence, any such account is 

20 subject to the taxes imposed by section 511 (relating 

21 to imposition of tax on unrelated business income of 

22 charitable, etc. organizations). 

23 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 

24 to the rules of paragraphs (2) and (4) of section 

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1 ings accounts, and any amount treated as distrib2 uted under such rules shall be treated as not used 

3 to pay qualified disaster and public health emer4 gency expenses. 

5 ‘‘(f) TAX TREATMENT OF DISTRIBUTIONS.— 

6 ‘‘(1) AMOUNTS USED FOR QUALIFIED DISASTER

7 AND PUBLIC HEALTH EMERGENCY EXPENSES.—Any 

8 amount paid or distributed out of a small business 

9 emergency savings account which is used exclusively 

10 to pay qualified disaster and public health emer11 gency expenses of any account beneficiary shall not 

12 be includible in gross income. 

13 ‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR

14 QUALIFIED DISASTER AND PUBLIC HEALTH EMER15 GENCY EXPENSES.—Any amount paid or distributed 

16 out of a small business emergency savings account 

17 which is not used exclusively to pay the qualified dis18 aster and public health emergency expenses of the 

19 account beneficiary shall be included in the gross in20 come of such beneficiary. 

21 ‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE22 FORE DUE DATE OF RETURN.— 

23 ‘‘(A) IN GENERAL.—If any excess con24 tribution is contributed for a taxable year to 

25 any small business emergency savings account 


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1 of an eligible business, paragraph (2) shall not 

2 apply to distributions from the small business 

3 emergency savings accounts of such eligible 

4 business (to the extent such distributions do not 

5 exceed the aggregate excess contributions to all 

6 such accounts of such eligible business for such 

7 year) if— 

8 ‘‘(i) such distribution is received by 

9 the eligible business on or before the last 

10 day prescribed by law (including extensions 

11 of time) for filing such eligible business’s 

12 return for such taxable year, and 

13 ‘‘(ii) such distribution is accompanied 

14 by the amount of net income attributable 

15 to such excess contribution. 

16 Any net income described in clause (ii) shall be 

17 included in the gross income of the eligible busi18 ness for the taxable year in which it is received. 

19 ‘‘(B) EXCESS CONTRIBUTION.—For pur20 poses of subparagraph (A), the term ‘excess 

21 contribution’ means any contribution (other 

22 than a rollover contribution described in para23 graph (5)) which is not deductible under this 

24 section. 


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1 ‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT

2 USED FOR QUALIFIED DISASTER AND PUBLIC

3 HEALTH EMERGENCY EXPENSES.— 

4 ‘‘(A) IN GENERAL.—The tax imposed by 

5 this chapter on the account beneficiary for any 

6 taxable year in which there is a payment or dis7 tribution from a small business emergency sav8 ings account of such beneficiary which is includ9 ible in gross income under paragraph (2) shall 

10 be increased by 20 percent of the amount which 

11 is so includible. 

12 ‘‘(B) EXCEPTION FOR DISABILITY OR

13 DEATH.—If the eligible business is an indi14 vidual, subparagraph (A) shall not apply if the 

15 payment or distribution is made after the ac16 count beneficiary becomes disabled within the 

17 meaning of section 72(m)(7) or dies. 

18 ‘‘(5) ROLLOVER CONTRIBUTION.—An amount is 

19 described in this paragraph as a rollover contribu20 tion if it meets the requirements of subparagraphs 

21 (A) and (B). 

22 ‘‘(A) IN GENERAL.—Paragraph (2) shall 

23 not apply to any amount paid or distributed 

24 from a small business emergency savings ac25 count to the account beneficiary to the extent 


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1 the amount received is paid into a small busi2 ness emergency savings account for the benefit 

3 of such beneficiary not later than the 60th day 

4 after the day on which the beneficiary receives 

5 the payment or distribution. 

6 ‘‘(B) LIMITATION.—This paragraph shall 

7 not apply to any amount described in subpara8 graph (A) received by an eligible business from 

9 a small business emergency savings account if, 

10 at any time during the 1-year period ending on 

11 the day of such receipt, such eligible business 

12 received any other amount described in sub13 paragraph (A) from a small business emergency 

14 savings account which was not includible in the 

15 small business’s gross income because of the 

16 application of this paragraph. 

17 ‘‘(g) COST-OF-LIVING ADJUSTMENT.— 

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

19 year beginning in a calendar year after 2021, the 

20 $3,000 amount in subsection (d)(3) shall be in21 creased by an amount equal to— 

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

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar 

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1 mined by substituting ‘calendar year 2020’ for 

2 ‘calendar year 2016’ in subparagraph (A)(ii) 

3 thereof. 

4 ‘‘(2) ROUNDING.—If any increase under para5 graph (1) is not a multiple of $50, such increase 

6 shall be rounded to the nearest multiple of $50. 

7 ‘‘(h) SPECIAL RULES.— 

8 ‘‘(1) DENIAL OF DEDUCTION TO DEPEND9 ENTS.—No deduction shall be allowed under this 

10 section to any individual with respect to whom a de11 duction under section 151 is allowable to another 

12 taxpayer for a taxable year beginning in the cal13 endar year in which such individual’s taxable year 

14 begins. 

15 ‘‘(2) TAXABLE YEAR MUST BE FULL TAXABLE

16 YEAR.—Except in the case of a taxable year closed 

17 by reason of the death of an individual who is an eli18 gible business, no deduction shall be allowed under 

19 this section in the case of a taxable year covering a 

20 period of less than 12 months. 

21 ‘‘(3) CERTAIN RULES TO APPLY.—Rules similar 

22 to the following rules shall apply for purposes of this 

23 section: 

24 ‘‘(A) Section 219(d)(2) (relating to no de25 duction for rollovers). 


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1 ‘‘(B) Section 219(f)(3) (relating to time 

2 when contributions deemed made). 

3 ‘‘(C) Section 219(f)(5) (relating to em4 ployer payments). 

5 ‘‘(D) Section 408(g) (relating to commu6 nity property laws). 

7 ‘‘(E) Section 408(h) (relating to custodial 

8 accounts). 

9 ‘‘(F) Section 223(f)(7) (relating to transfer 

10 of account incident to divorce). 

11 ‘‘(G) Section 223(f)(8) (relating to treat12 ment after death of account beneficiary). 

13 ‘‘(4) DENIAL OF DOUBLE BENEFIT.—No deduc14 tion shall be allowed under this chapter for any 

15 qualified disaster and public health emergency ex16 penses with respect to which any payment or dis17 tribution is excluded from gross income under sub18 section (f)(1). 

19 ‘‘(i) REPORTS.—The Secretary may require the trust20 ee of a small business emergency savings account to make 

21 such reports regarding such account to the Secretary and 

22 to the account beneficiary with respect to contributions, 

23 distributions, the return of excess contributions, and such 

24 other matters as the Secretary determines appropriate.’’. 


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1 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI2 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Section 62(a) 

3 of such Code is amended by inserting after paragraph (21) 

4 the following new paragraph: 

5 ‘‘(22) SMALL BUSINESS EMERGENCY SAVINGS

6 ACCOUNTS.—In the case of an individual who is an 

7 eligible business, the deduction allowed by section 

8 200.’’. 

9 (c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973 

10 of such Code (relating to tax on excess contributions to 

11 certain tax-favored accounts and annuities) is amended— 

12 (1) by striking ‘‘or’’ at the end of subsection 

13 (a)(5), by inserting ‘‘or’’ at the end of subsection 

14 (a)(6), and by inserting after subsection (a)(6) the 

15 following new paragraph: 

16 ‘‘(7) a small business emergency savings ac17 count (within the meaning of section 220(d)),’’; and 

18 (2) by adding at the end the following new sub19 section: 

20 ‘‘(i) EXCESS CONTRIBUTIONS TO SMALL BUSINESS

21 EMERGENCY SAVINGS ACCOUNTS.—For purposes of this 

22 section, in the case of small business emergency savings 

23 accounts (within the meaning of section 220(d)), the term 

24 ‘excess contributions’ means the sum of— 


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1 ‘‘(1) the aggregate amount contributed for the 

2 taxable year to the accounts (other than a rollover 

3 contribution described in section 220(f)(5)) which is 

4 not allowable as a deduction under section 220 for 

5 such year, and 

6 ‘‘(2) the amount determined under this sub7 section for the preceding taxable year, reduced by 

8 the sum of— 

9 ‘‘(A) the distributions out of the accounts 

10 which were included in gross income under sec11 tion 220(f)(2), and 

12 ‘‘(B) the excess (if any) of— 

13 ‘‘(i) the maximum amount allowable 

14 as a deduction under section 220(b) for 

15 the taxable year, over 

16 ‘‘(ii) the amount contributed to the 

17 accounts for the taxable year. 

18 For purposes of this subsection, any contribu19 tion which is distributed out of the small busi20 ness emergency savings account in a distribu21 tion to which section 220(f)(3) applies shall be 

22 treated as an amount not contributed.’’. 

23 (d) FAILURE TO PROVIDE REPORTS ON SMALL

24 BUSINESS EMERGENCY SAVINGS ACCOUNTS.—Section 

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1 paragraphs (D), (E), and (F) as subparagraphs (E), (F), 

2 and (G), respectively, and by inserting after subparagraph 

3 (C) the following new subparagraph: 

4 ‘‘(D) section 220(i) (relating to small busi5 ness emergency savings accounts),’’. 

6 (e) CLERICAL AMENDMENT.—The table of sections 

7 for part VI of subchapter B of chapter 1 of such Code 

8 is amended by adding at the end the following: 

‘‘Sec. 200. Small business emergency savings accounts.’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 2020. 

Æ 


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