I 

112TH CONGRESS 

1ST SESSION H. R. 1180 

To amend the Internal Revenue Code of 1986 to establish small business 

start-up savings accounts. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 17, 2011 

Mr. GARDNER (for himself, Mr. PAUL, Mr. PITTS, Mr. PEARCE, and Mr. 

COFFMAN of Colorado) 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 establish 

small business start-up savings accounts. 

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 Start5 up Savings Accounts Act of 2011’’. 

6 SEC. 2. ESTABLISHMENT OF SMALL BUSINESS START-UP 

7 SAVINGS ACCOUNTS. 

8 (a) IN GENERAL.—Chapter 77 of the Internal Rev9 enue Code of 1986 is amended by adding at the end the 

10 following new section: 


smartinez on DSKB9S0YB1PROD with BILLS
2 

•HR 1180 IH

1 ‘‘SEC. 7529. SMALL BUSINESS START-UP SAVINGS AC2 COUNTS. 

3 ‘‘(a) IN GENERAL.—An individual or an eligible small 

4 business may enter into an agreement with the Secretary 

5 to establish a small business start-up savings account. 

6 ‘‘(b) SMALL BUSINESS START-UP SAVINGS AC7 COUNT.—For purposes of this section, the term ‘small 

8 business start-up savings account’ means a trust created 

9 or organized in the United States for the benefit of the 

10 account beneficiary, but only if the written governing in11 strument creating the trust meets the following require12 ments: 

13 ‘‘(1) Except as provided in subsection (d)(3) in 

14 the case of a rollover contribution, no contribution 

15 will be accepted unless it is in cash, and contribu16 tions will not be accepted for the taxable year on be17 half of any account beneficiary in excess of the 

18 amount in effect for such taxable year under sub19 section (d)(2). 

20 ‘‘(2) The trustee is a bank (as defined in sec21 tion 408(n)) or such other person who demonstrates 

22 to the satisfaction of the Secretary that the manner 

23 in which such other person will administer the trust 

24 will be consistent with the requirements of this sec25 tion. 


smartinez on DSKB9S0YB1PROD with BILLS
3 

•HR 1180 IH

1 ‘‘(3) No part of the trust funds will be invested 

2 in life insurance contracts. 

3 ‘‘(4) The interest of an individual in the bal4 ance of his account is nonforfeitable. 

5 ‘‘(5) The assets of the trust will not be commin6 gled with other property except in a common trust 

7 fund or common investment fund. 

8 ‘‘(c) ELIGIBLE SMALL BUSINESS.—For purposes of 

9 this section, the term ‘eligible small business’ means, with 

10 respect to any taxable year, any person engaged in a trade 

11 or business if the average number of employees employed 

12 by such person on business days during the taxable year 

13 was 500 or fewer. 

14 ‘‘(d) TREATMENT OF CONTRIBUTIONS.— 

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

16 deduction for the taxable year an amount equal to 

17 so much of the account beneficiary’s contributions 

18 for the taxable year to all small business start-up 

19 savings accounts maintained for the benefit of such 

20 beneficiary as do not exceed the contribution limita21 tions in effect for the taxable year under paragraph 

22 (2). 

23 ‘‘(2) CONTRIBUTION LIMITATION.— 

24 ‘‘(A) IN GENERAL.—The amount allowable 

25 as a deduction under paragraph (1) with reVerDate Mar 15 2010 03:39 Mar 22, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1180.IH H1180

smartinez on DSKB9S0YB1PROD with BILLS
4 

•HR 1180 IH

1 spect to all small business start-up savings ac2 counts maintained for the benefit of any person 

3 shall not exceed the lesser of— 

4 ‘‘(i) $10,000, or 

5 ‘‘(ii) $150,000, reduced by the aggre6 gate contributions by such person for all 

7 taxable years with respect to all small busi8 ness start-up savings accounts of the tax9 payer. 

10 ‘‘(B) COST OF LIVING ADJUSTMENT.— 

11 ‘‘(i) IN GENERAL.—In the case of a 

12 taxable year beginning after 2011, the 

13 $10,000 amount in subparagraph (A) shall 

14 be increased by an amount equal to— 

15 ‘‘(I) such dollar amount, multi16 plied by 

17 ‘‘(II) the cost-of-living adjust18 ment determined under section 1(f)(3) 

19 for the calendar year in which the tax20 able year begins, determined by sub21 stituting ‘calendar year 2010’ for ‘cal22 endar year 1992’ in subparagraph (B) 

23 thereof. 

24 ‘‘(ii) ROUNDING.—If any amount as 

25 adjusted under clause (i) is not a multiple 


smartinez on DSKB9S0YB1PROD with BILLS
5 

•HR 1180 IH

1 of $500, such amount shall be rounded to 

2 the next lowest multiple of $500. 

3 ‘‘(3) ROLLOVERS FROM RETIREMENT PLANS

4 NOT ALLOWED.—Under regulations prescribed by 

5 the Secretary, a person may make a rollover con6 tribution to a small business start-up savings ac7 count only in the case of a rollover from another 

8 small business start-up savings account. 

9 ‘‘(4) TREATED AS DEDUCTION FOR INDIVID10 UALS AND CORPORATIONS.—For purposes of chapter 

11 1, the deduction allowed under paragraph (1) shall 

12 be treated as a deduction specified in part VI of sub13 chapter B of chapter 1 (relating to itemized deduc14 tions for individuals and corporations). 

15 ‘‘(e) TREATMENT OF DISTRIBUTIONS.— 

16 ‘‘(1) TAX TREATMENT.— 

17 ‘‘(A) EXCLUSION OF QUALIFIED DISTRIBU18 TIONS.—Any qualified distribution from a small 

19 business start-up savings account shall not be 

20 includible in gross income. 

21 ‘‘(B) INCLUSION OF OTHER DISTRIBU22 TIONS.—Any distribution from a small business 

23 start-up savings account which is not a quali24 fied distribution shall be included in gross in25 come. 


smartinez on DSKB9S0YB1PROD with BILLS
6 

•HR 1180 IH

1 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes 

2 of this subsection, the term ‘qualified distribution’ 

3 means, with respect to any taxable year, any pay4 ment or distribution from a small business start-up 

5 savings account— 

6 ‘‘(A) to the extent the amount of such pay7 ment or distribution does not exceed the sum 

8 of— 

9 ‘‘(i) the aggregate amounts paid or in10 curred by the taxpayer for such taxable 

11 year with respect to the taxpayer’s trade or 

12 business for the purchase of equipment or 

13 facilities, marketing, training, incorpora14 tion, and accounting fees, and 

15 ‘‘(ii) the aggregate capital contribu16 tions of the taxpayer with respect to an eli17 gible small business for the taxable year 

18 (but only to the extent such amounts are 

19 used by such small business for purposes 

20 described in clause (i)), and 

21 ‘‘(B) which, in the case of a payment or 

22 distribution subsequent to the first payment or 

23 distribution from such account (or any prede24 cessor to such account)— 


smartinez on DSKB9S0YB1PROD with BILLS
7 

•HR 1180 IH

1 ‘‘(i) is made not later than the close 

2 of the 5th taxable year beginning after the 

3 date of such first payment or distribution, 

4 and 

5 ‘‘(ii) is made with respect to the same 

6 eligible small business with respect to 

7 which such first payment or distribution 

8 was made. 

9 ‘‘(3) TREATMENT AFTER DEATH OF ACCOUNT

10 BENEFICIARY.— 

11 ‘‘(A) IN GENERAL.—If, by reason of the 

12 death of the account beneficiary, any person ac13 quires the account beneficiary’s interest in a 

14 small business start-up savings account— 

15 ‘‘(i) such account shall cease to be a 

16 small business start-up savings account as 

17 of the date of death, and 

18 ‘‘(ii) an amount equal to the fair mar19 ket value of the assets in such account on 

20 such date shall be includible— 

21 ‘‘(I) in the case of a person who 

22 is not the estate of such beneficiary, 

23 in such person’s gross income for the 

24 taxable year which includes such date, 

25 or 


smartinez on DSKB9S0YB1PROD with BILLS
8 

•HR 1180 IH

1 ‘‘(II) in the case of a person who 

2 is the estate of such beneficiary, in 

3 such beneficiary’s gross income for 

4 the last taxable year of such bene5 ficiary. 

6 ‘‘(B) SPECIAL RULES.— 

7 ‘‘(i) REDUCTION OF INCLUSION FOR

8 PREDEATH EXPENSES.—The amount in9 cludible in gross income under subpara10 graph (A) shall be reduced by the amounts 

11 described in paragraph (2) which were in12 curred by the decedent before the date of 

13 the decedent’s death and paid by such per14 son within 1 year after such date. 

15 ‘‘(ii) DEDUCTION FOR ESTATE

16 TAXES.—An appropriate deduction shall be 

17 allowed under section 691(c) to any person 

18 (other than the decedent) with respect to 

19 amounts included in gross income under 

20 subparagraph (A)(ii)(I) by such person. 

21 ‘‘(4) TREATMENT FOR FAILURE TO BE TREAT22 ED AS ELIGIBLE SMALL BUSINESS.—If for any tax23 able year a taxpayer which holds a small business 

24 start-up savings account as an eligible small busi25 ness ceases to be an eligible small business— 


smartinez on DSKB9S0YB1PROD with BILLS
9 

•HR 1180 IH

1 ‘‘(A) such account shall cease to be a small 

2 business start-up savings account, and 

3 ‘‘(B) the balance of such account shall be 

4 treated as paid out for such taxable year in a 

5 distribution which is not a qualified distribu6 tion. 

7 ‘‘(f) SPECIAL RULES.— 

8 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—Any de9 duction or credit otherwise allowed for the taxable 

10 year with respect to amounts described in subsection 

11 (e)(2)(A) shall be reduced by an amount equal to 

12 the qualified distributions attributable to such 

13 amounts. The adjusted basis of any property placed 

14 in service for the taxable year shall be reduced by 

15 the amount of any qualified distributions attrib16 utable to such property. For purposes of this para17 graph, qualified distributions shall first be treated as 

18 attributable to amounts described in subsection 

19 (e)(2)(A), then to property placed in service for the 

20 taxable year. 

21 ‘‘(2) AGGREGATION RULE.—For purposes of 

22 this section, all persons treated as a single employer 

23 under subsection (a) or (b) of section 52, or sub24 section (m) or (o) of section 414, shall be treated as 

25 one person.’’. 


smartinez on DSKB9S0YB1PROD with BILLS
10 

•HR 1180 IH

1 (b) EXCISE TAX ON EXCESS CONTRIBUTIONS AND

2 NONQUALIFIED DISTRIBUTIONS.—Subtitle D of the Inter3 nal Revenue Code of 1986 is amended by adding at the 

4 end the following new chapter: 

5 ‘‘CHAPTER 50—SMALL BUSINESS START6 UP SAVINGS ACCOUNTS 

‘‘Sec. 5000C. Tax on excess contributions to small business start-up savings accounts. 

‘‘Sec. 5000D. Tax on nonqualified distributions from small business start-up 

savings accounts. 

7 ‘‘SEC. 5000C. TAX ON EXCESS CONTRIBUTIONS TO SMALL 

8 BUSINESS START-UP SAVINGS ACCOUNTS. 

9 ‘‘(a) IN GENERAL.—In the case of a small business 

10 start-up savings account (within the meaning of section 

11 7529) there is imposed for each taxable year a tax in an 

12 amount equal to 6 percent of the amount of the excess 

13 contributions to such taxpayer’s account (determined as 

14 of the close of the taxable year). 

15 ‘‘(b) LIMITATION.—The amount of tax imposed by 

16 subsection (a) shall not exceed 6 percent of the value of 

17 the account (determined as of the close of the taxable 

18 year). 

19 ‘‘(c) EXCESS CONTRIBUTIONS.—For purposes of this 

20 section, in the case of contributions to all small business 

21 start-up savings accounts maintained for the benefit of a 

22 person, the term ‘excess contributions’ means the sum 

23 of— 


smartinez on DSKB9S0YB1PROD with BILLS
11 

•HR 1180 IH

1 ‘‘(1) the excess (if any) of— 

2 ‘‘(A) the amount contributed to such ac3 counts for the taxable year, over 

4 ‘‘(B) the amount allowable as a contribu5 tion under section 7529(d)(2)(A) for such tax6 able year, and 

7 ‘‘(2) the amount determined under this sub8 section for the preceding taxable year, reduced by 

9 the sum of— 

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

11 for the taxable year, and 

12 ‘‘(B) the excess (if any) of— 

13 ‘‘(i) the maximum amount allowable 

14 as a contribution under section 

15 7529(d)(2)(A) for such taxable year, over 

16 ‘‘(ii) the amount contributed to such 

17 accounts for such taxable year. 

18 ‘‘SEC. 5000D. TAX ON NONQUALIFIED DISTRIBUTIONS FROM 

19 SMALL BUSINESS START-UP SAVINGS AC20 COUNTS. 

21 ‘‘(a) IN GENERAL.—If for any taxable year an 

22 amount is paid or distributed out of a taxpayer’s small 

23 business start-up savings account, there is imposed for 

24 such taxable year a tax in an amount equal to 10 percent 


smartinez on DSKB9S0YB1PROD with BILLS
12 

•HR 1180 IH

1 of the portion of such amount which is includible in the 

2 gross income of the taxpayer. 

3 ‘‘(b) EXCEPTION FOR DISABILITY OR DEATH.—Sub4 section (a) shall not apply if the payment or distribution 

5 is made after the account beneficiary becomes disabled 

6 within the meaning of section 72(m)(7) (but only if such 

7 beneficiary’s account was created before becoming so dis8 abled) or dies. 

9 ‘‘SEC. 5000E. CROSS REFERENCE. 

10 ‘‘For prohibited transactions, see section 4975.’’. 

11 (c) PROHIBITED TRANSACTIONS.— 

12 (1) IN GENERAL.—Paragraph (1) of section 

13 4975(e) of such Code is amended by striking ‘‘or’’ 

14 at the end of subparagraph (F), by striking the pe15 riod at the end of subparagraph and inserting ‘‘, 

16 or’’, and by adding at the end the following new sub17 paragraph: 

18 ‘‘(H) a small business start-up savings ac19 count (within the meaning of section 7529).’’. 

20 (2) SPECIAL RULE FOR CEASING TO BE A

21 SMALL BUSINESS START-UP SAVINGS ACCOUNT.— 

22 Section 4975(d) of such Code (relating to tax on 

23 prohibited transactions) is amended by adding at the 

24 end the following new paragraph: 


smartinez on DSKB9S0YB1PROD with BILLS
13 

•HR 1180 IH

1 ‘‘(7) SPECIAL RULE FOR SMALL BUSINESS

2 START-UP SAVINGS ACCOUNT.—An individual for 

3 whose benefit a small business start-up savings ac4 count (within the meaning of section 7529) is estab5 lished shall be exempt from the tax imposed by this 

6 section with respect to any transaction concerning 

7 such account (which would otherwise be taxable 

8 under this section) if, with respect to such trans9 action, the account ceases to be a small business 

10 start-up savings account by reason of the application 

11 of paragraph (3) or (4) of section 7529(e) to such 

12 account.’’. 

13 (d) DEDUCTION ALLOWED WHETHER OR NOT INDI14 VIDUAL ITEMIZES.—Subsection (a) of section 62 of such 

15 Code is amended by adding at the end the following new 

16 paragraph: 

17 ‘‘(22) CONTRIBUTIONS TO SMALL BUSINESS

18 START-UP SAVINGS ACCOUNTS.—The deduction al19 lowed by section 7529(d)(1)(A).’’. 

20 (e) CONFORMING AMENDMENTS.— 

21 (1) The table of chapters for subtitle D such 

22 Code is amended by adding at the end the following 

23 new item: 

‘‘CHAPTER 50. SMALL BUSINESS START-UP SAVINGS ACCOUNTS’’. 


smartinez on DSKB9S0YB1PROD with BILLS
14 

•HR 1180 IH

1 (2) The table of sections for chapter 77 of such 

2 Code is amended by inserting after the item relating 

3 to section 7528 the following new item: 

‘‘Sec. 7529. Small Business Start-Up Savings Accounts.’’. 

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

5 this section shall apply to taxable years beginning after 

6 December 31, 2010. 

Æ 


smartinez on DSKB9S0YB1PROD with BILLS