I 

113TH CONGRESS 

1ST SESSION H. R. 774 

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

start-up savings accounts. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 15, 2013 

Mr. GARDNER (for himself, Mr. COFFMAN, Mrs. LUMMIS, Mr. DENHAM, Mr. 

BENISHEK, Mrs. BLACKBURN, Mr. GOHMERT, Mr. LAMALFA, Mr. 

WALBERG, and Mr. WILSON of South Carolina) 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 2013’’. 


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

2 SAVINGS ACCOUNTS. 

3 (a) IN GENERAL.—Chapter 77 of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new section: 

6 ‘‘SEC. 7529. SMALL BUSINESS START-UP SAVINGS AC7 COUNTS. 

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

9 business may enter into an agreement with the Secretary 

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

11 ‘‘(b) SMALL BUSINESS START-UP SAVINGS AC12 COUNT.—For purposes of this section, the term ‘small 

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

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

15 account beneficiary, but only if the written governing in16 strument creating the trust meets the following require17 ments: 

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

19 the case of a rollover contribution, no contribution 

20 will be accepted unless it is in cash, and contribu21 tions will not be accepted for the taxable year on be22 half of any account beneficiary in excess of the 

23 amount in effect for such taxable year under sub24 section (d)(2). 

25 ‘‘(2) The trustee is a bank (as defined in sec26 tion 408(n)) or such other person who demonstrates 


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1 to the satisfaction of the Secretary that the manner 

2 in which such other person will administer the trust 

3 will be consistent with the requirements of this sec4 tion. 

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

6 in life insurance contracts. 

7 ‘‘(4) The interest of an individual in the bal8 ance of his account is nonforfeitable. 

9 ‘‘(5) The assets of the trust will not be commin10 gled with other property except in a common trust 

11 fund or common investment fund. 

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

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

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

15 or business if the average number of employees employed 

16 by such person on business days during the taxable year 

17 was 500 or fewer. 

18 ‘‘(d) TREATMENT OF CONTRIBUTIONS.— 

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

20 deduction for the taxable year an amount equal to 

21 so much of the account beneficiary’s contributions 

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

23 savings accounts maintained for the benefit of such 

24 beneficiary as do not exceed the contribution limitaVerDate Mar 15 2010 04:42 Feb 28, 2013 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H774.IH H774

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1 tions in effect for the taxable year under paragraph 

2 (2). 

3 ‘‘(2) CONTRIBUTION LIMITATION.— 

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

5 as a deduction under paragraph (1) with re6 spect to all small business start-up savings ac7 counts maintained for the benefit of any person 

8 shall not exceed the lesser of— 

9 ‘‘(i) $10,000, or 

10 ‘‘(ii) $150,000, reduced by the aggre11 gate contributions by such person for all 

12 taxable years with respect to all small busi13 ness start-up savings accounts of the tax14 payer. 

15 ‘‘(B) COST OF LIVING ADJUSTMENT.— 

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

17 taxable year beginning after 2013, the 

18 $10,000 amount in subparagraph (A) shall 

19 be increased by an amount equal to— 

20 ‘‘(I) such dollar amount, multi21 plied by 

22 ‘‘(II) the cost-of-living adjust23 ment determined under section 1(f)(3) 

24 for the calendar year in which the tax25 able year begins, determined by subVerDate Mar 15 2010 04:42 Feb 28, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H774.IH H774

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1 stituting ‘calendar year 2012’ for ‘cal2 endar year 1992’ in subparagraph (B) 

3 thereof. 

4 ‘‘(ii) ROUNDING.—If any amount as 

5 adjusted under clause (i) is not a multiple 

6 of $500, such amount shall be rounded to 

7 the next lowest multiple of $500. 

8 ‘‘(3) ROLLOVERS FROM RETIREMENT PLANS

9 NOT ALLOWED.—Under regulations prescribed by 

10 the Secretary, a person may make a rollover con11 tribution to a small business start-up savings ac12 count only in the case of a rollover from another 

13 small business start-up savings account. 

14 ‘‘(4) TREATED AS DEDUCTION FOR INDIVID15 UALS AND CORPORATIONS.—For purposes of chapter 

16 1, the deduction allowed under paragraph (1) shall 

17 be treated as a deduction specified in part VI of sub18 chapter B of chapter 1 (relating to itemized deduc19 tions for individuals and corporations). 

20 ‘‘(e) TREATMENT OF DISTRIBUTIONS.— 

21 ‘‘(1) TAX TREATMENT.— 

22 ‘‘(A) EXCLUSION OF QUALIFIED DISTRIBU23 TIONS.—Any qualified distribution from a small 

24 business start-up savings account shall not be 

25 includible in gross income. 


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1 ‘‘(B) INCLUSION OF OTHER DISTRIBU2 TIONS.—Any distribution from a small business 

3 start-up savings account which is not a quali4 fied distribution shall be included in gross in5 come. 

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

7 of this subsection, the term ‘qualified distribution’ 

8 means, with respect to any taxable year, any pay9 ment or distribution from a small business start-up 

10 savings account— 

11 ‘‘(A) to the extent the amount of such pay12 ment or distribution does not exceed the sum 

13 of— 

14 ‘‘(i) the aggregate amounts paid or in15 curred by the taxpayer for such taxable 

16 year with respect to the taxpayer’s trade or 

17 business for the purchase of equipment or 

18 facilities, marketing, training, incorpora19 tion, and accounting fees, and 

20 ‘‘(ii) the aggregate capital contribu21 tions of the taxpayer with respect to an eli22 gible small business for the taxable year 

23 (but only to the extent such amounts are 

24 used by such small business for purposes 

25 described in clause (i)), and 


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

2 distribution subsequent to the first payment or 

3 distribution from such account (or any prede4 cessor to such account)— 

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

6 of the 5th taxable year beginning after the 

7 date of such first payment or distribution, 

8 and 

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

10 eligible small business with respect to 

11 which such first payment or distribution 

12 was made. 

13 ‘‘(3) TREATMENT AFTER DEATH OF ACCOUNT

14 BENEFICIARY.— 

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

16 death of the account beneficiary, any person ac17 quires the account beneficiary’s interest in a 

18 small business start-up savings account— 

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

20 small business start-up savings account as 

21 of the date of death, and 

22 ‘‘(ii) an amount equal to the fair mar23 ket value of the assets in such account on 

24 such date shall be includible— 


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1 ‘‘(I) in the case of a person who 

2 is not the estate of such beneficiary, 

3 in such person’s gross income for the 

4 taxable year which includes such date, 

5 or 

6 ‘‘(II) in the case of a person who 

7 is the estate of such beneficiary, in 

8 such beneficiary’s gross income for 

9 the last taxable year of such bene10 ficiary. 

11 ‘‘(B) SPECIAL RULES.— 

12 ‘‘(i) REDUCTION OF INCLUSION FOR

13 PREDEATH EXPENSES.—The amount in14 cludible in gross income under subpara15 graph (A) shall be reduced by the amounts 

16 described in paragraph (2) which were in17 curred by the decedent before the date of 

18 the decedent’s death and paid by such per19 son within 1 year after such date. 

20 ‘‘(ii) DEDUCTION FOR ESTATE

21 TAXES.—An appropriate deduction shall be 

22 allowed under section 691(c) to any person 

23 (other than the decedent) with respect to 

24 amounts included in gross income under 

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


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1 ‘‘(4) TREATMENT FOR FAILURE TO BE TREAT2 ED AS ELIGIBLE SMALL BUSINESS.—If for any tax3 able year a taxpayer which holds a small business 

4 start-up savings account as an eligible small busi5 ness ceases to be an eligible small business— 

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

7 business start-up savings account, and 

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

9 treated as paid out for such taxable year in a 

10 distribution which is not a qualified distribu11 tion. 

12 ‘‘(f) SPECIAL RULES.— 

13 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—Any de14 duction or credit otherwise allowed for the taxable 

15 year with respect to amounts described in subsection 

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

17 the qualified distributions attributable to such 

18 amounts. The adjusted basis of any property placed 

19 in service for the taxable year shall be reduced by 

20 the amount of any qualified distributions attrib21 utable to such property. For purposes of this para22 graph, qualified distributions shall first be treated as 

23 attributable to amounts described in subsection 

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

25 taxable year. 


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

2 this section, all persons treated as a single employer 

3 under subsection (a) or (b) of section 52, or sub4 section (m) or (o) of section 414, shall be treated as 

5 one person.’’. 

6 (b) EXCISE TAX ON EXCESS CONTRIBUTIONS AND

7 NONQUALIFIED DISTRIBUTIONS.—Subtitle D of the Inter8 nal Revenue Code of 1986 is amended by adding at the 

9 end the following new chapter: 

10 ‘‘CHAPTER 50A—SMALL BUSINESS START11 UP SAVINGS ACCOUNTS 

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

accounts. 

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

savings accounts. 

‘‘Sec. 5000F. Cross reference. 

12 ‘‘SEC. 5000D. TAX ON EXCESS CONTRIBUTIONS TO SMALL 

13 BUSINESS START-UP SAVINGS ACCOUNTS. 

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

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

16 7529) there is imposed for each taxable year a tax in an 

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

18 contributions to such taxpayer’s account (determined as 

19 of the close of the taxable year). 

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

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

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

23 year). 


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

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

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

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

5 of— 

6 ‘‘(1) the excess (if any) of— 

7 ‘‘(A) the amount contributed to such ac8 counts for the taxable year, over 

9 ‘‘(B) the amount allowable as a contribu10 tion under section 7529(d)(2)(A) for such tax11 able year, and 

12 ‘‘(2) the amount determined under this sub13 section for the preceding taxable year, reduced by 

14 the sum of— 

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

16 for the taxable year, and 

17 ‘‘(B) the excess (if any) of— 

18 ‘‘(i) the maximum amount allowable 

19 as a contribution under section 

20 7529(d)(2)(A) for such taxable year, over 

21 ‘‘(ii) the amount contributed to such 

22 accounts for such taxable year. 


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1 ‘‘SEC. 5000E. TAX ON NONQUALIFIED DISTRIBUTIONS FROM 

2 SMALL BUSINESS START-UP SAVINGS AC3 COUNTS. 

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

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

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

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

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

9 gross income of the taxpayer. 

10 ‘‘(b) EXCEPTION FOR DISABILITY OR DEATH.—Sub11 section (a) shall not apply if the payment or distribution 

12 is made after the account beneficiary becomes disabled 

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

14 beneficiary’s account was created before becoming so dis15 abled) or dies. 

16 ‘‘SEC. 5000F. CROSS REFERENCE. 

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

18 (c) PROHIBITED TRANSACTIONS.— 

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

20 4975(e) of such Code is amended by striking ‘‘or’’ 

21 at the end of subparagraph (F), by striking the pe22 riod at the end of subparagraph and inserting ‘‘, 

23 or’’, and by adding at the end the following new sub24 paragraph: 

25 ‘‘(H) a small business start-up savings ac26 count (within the meaning of section 7529).’’. 


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1 (2) SPECIAL RULE FOR CEASING TO BE A

2 SMALL BUSINESS START-UP SAVINGS ACCOUNT.— 

3 Section 4975(c) of such Code (relating to tax on 

4 prohibited transactions) is amended by adding at the 

5 end the following new paragraph: 

6 ‘‘(7) SPECIAL RULE FOR SMALL BUSINESS

7 START-UP SAVINGS ACCOUNT.—An individual for 

8 whose benefit a small business start-up savings ac9 count (within the meaning of section 7529) is estab10 lished shall be exempt from the tax imposed by this 

11 section with respect to any transaction concerning 

12 such account (which would otherwise be taxable 

13 under this section) if, with respect to such trans14 action, the account ceases to be a small business 

15 start-up savings account by reason of the application 

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

17 account.’’. 

18 (d) DEDUCTION ALLOWED WHETHER OR NOT INDI19 VIDUAL ITEMIZES.—Subsection (a) of section 62 of such 

20 Code is amended by inserting after paragraph (21) the 

21 following new paragraph: 

22 ‘‘(22) CONTRIBUTIONS TO SMALL BUSINESS

23 START-UP SAVINGS ACCOUNTS.—The deduction al24 lowed by section 7529(d)(1)(A).’’. 

25 (e) CONFORMING AMENDMENTS.— 


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

2 Code is amended by adding at the end the following 

3 new item: 

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

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

5 Code is amended by inserting after the item relating 

6 to section 7528 the following new item: 

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

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2012. 

Æ 


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