I 

113TH CONGRESS 

1ST SESSION H. R. 815 

To amend the Internal Revenue Code of 1986 to make certain dividends 

and distributions paid to individuals from certain small businesses exempt 

from tax to the extent of the increased wages of the small business. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 25, 2013 

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 make 

certain dividends and distributions paid to individuals 

from certain small businesses exempt from tax to the 

extent of the increased wages of the small business. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. EXEMPTION FOR CERTAIN DISTRIBUTIONS OF 

4 SMALL BUSINESSES TO EXTENT OF IN5 CREASED WAGES. 

6 (a) IN GENERAL.—Part III of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 is amended 

8 by inserting before section 140 the following new section: 


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1 ‘‘SEC. 139F. INCREASED-WAGE DISTRIBUTIONS OF SMALL 

2 BUSINESSES. 

3 ‘‘(a) APPLICATION TO CORPORATIONS.— 

4 ‘‘(1) IN GENERAL.—In the case of a distribu5 tion to an individual from a corporation which is a 

6 small business concern, gross income shall not in7 clude any increased-wage exempt-dividend. 

8 ‘‘(2) INCREASED-WAGE EXEMPT-DIVIDEND.— 

9 For purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—The term ‘increased11 wage exempt-dividend’ means any dividend 

12 properly designated as an increased-wage ex13 empt-dividend under subparagraph (B). 

14 ‘‘(B) DESIGNATION.—A corporation which 

15 is a small business concern may designate any 

16 dividend paid by such corporation as an in17 creased-wage exempt-dividend to the extent that 

18 the aggregate amount of the dividends so des19 ignated for any taxable year does not exceed the 

20 wage increase amount for such taxable year. 

21 ‘‘(b) APPLICATION TO PARTNERSHIPS.— 

22 ‘‘(1) IN GENERAL.—In the case of a distribu23 tion to an individual from a partnership which is a 

24 small business concern— 

25 ‘‘(A) no gain shall be recognized on any in26 creased-wage partnership distribution, and 


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1 ‘‘(B) in the case of an increased-wage part2 nership distribution with respect to which no 

3 gain is recognized under section 731(a)(2), no 

4 reduction shall be made to the adjusted basis to 

5 the partner of his interest in the partnership 

6 under section 733(1). 

7 ‘‘(2) INCREASED-WAGE PARTNERSHIP DIS8 TRIBUTION.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘increased10 wage partnership distribution’ means any cash 

11 distribution from the partnership to a partner 

12 which is properly designated as an increased13 wage partnership distribution under subpara14 graph (B). 

15 ‘‘(B) DESIGNATION.—A partnership which 

16 is a small business concern may designate any 

17 cash distribution as an increased-wage partner18 ship distribution to the extent that the aggre19 gate amount of the distributions so designated 

20 for any taxable year does not exceed the wage 

21 increase amount for such taxable year. 

22 ‘‘(c) WAGE INCREASE AMOUNT.—For purposes of 

23 this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘wage increase 

2 amount’ means, with respect to any corporation or 

3 partnership for any taxable year, the sum of— 

4 ‘‘(A) the excess (if any) of— 

5 ‘‘(i) the aggregate qualified wages 

6 paid or incurred by the corporation or 

7 partnership for such taxable year, over 

8 ‘‘(ii) the aggregate qualified wages 

9 paid or incurred by the corporation or 

10 partnership for the preceding taxable year, 

11 plus 

12 ‘‘(B) any increased-wage exempt-dividends 

13 or increased-wage partnership distributions re14 ceived by such corporation or partnership dur15 ing such taxable year. 

16 ‘‘(2) QUALIFIED WAGES.—The term ‘qualified 

17 wages’ has the meaning which would be given such 

18 term by section 3121(a) if paragraph (1) thereof 

19 were applied by treating the contribution and benefit 

20 base as being equal to $50,000. 

21 ‘‘(3) AGGREGATION RULE.—All persons treated 

22 as a single employer under subsection (a) or (b) of 

23 section 52 shall be treated as one person for pur24 poses of this subsection. 


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1 ‘‘(4) TREATMENT OF PREDECESSORS.—Any 

2 reference in this subsection to a corporation or part3 nership shall include a reference to any predecessor 

4 of such corporation or partnership. 

5 ‘‘(d) SMALL BUSINESS CONCERN.—For purposes of 

6 this section, the term ‘small business concern’ has the 

7 meaning given such term by section 3 of the Small Busi8 ness Act.’’. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Section 1(h)(11)(B)(ii) of such Code is 

11 amended by striking ‘‘and’’ at the end of subclause 

12 (II), by striking the period at the end of subclause 

13 (III) and inserting ‘‘, and’’, and by adding at the 

14 end the following new subclause: 

15 ‘‘(IV) any increased-wage ex16 empt-dividend (as defined in section 

17 139F).’’. 

18 (2) The table of sections for part III of sub19 chapter B of chapter 1 of such Code is amended by 

20 inserting before the item relating to section 140 the 

21 following new item: 

‘‘Sec. 139F. Increased-wage distributions.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2012. 

Æ 


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