I 

111TH CONGRESS 

2D SESSION H. R. 5318 

To amend the Internal Revenue Code of 1986 to waive the 10-percent penalty 

on early distributions from individual retirement plans for small business 

investments. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 14, 2010 

Mr. GINGREY of Georgia (for himself, Mr. PENCE, Mr. BARTLETT, Mr. 

BISHOP of Utah, Mrs. BLACKBURN, Mr. FRANKS of Arizona, Ms. GRANGER, Mr. HALL of Texas, Mrs. LUMMIS, Mr. MARCHANT, Mr. MCCLINTOCK, Mr. PITTS, and Mr. POSEY) 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 waive 

the 10-percent penalty on early distributions from individual retirement plans for small business investments. 

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 Invest5 ment Penalty Relief Act of 2010’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 


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1 (1) In March 2010, the Department of Labor 

2 reported approximately 15 million people out of 

3 work, thereby making the national unemployment 

4 rate at 9.7 percent. 

5 (2) Small businesses account for approximately 

6 25 million, or 99.7 percent, of employers in the 

7 United States. 

8 (3) In the last 15 years, small businesses have 

9 accounted for approximately 22 million new jobs, or 

10 roughly 93 percent of the net new jobs created. 

11 (4) Since the commencement of the financial 

12 crisis, small businesses have been denied loans, seen 

13 credit lines curtailed, and have lost access to venture 

14 capital and securities markets. 

15 SEC. 3. WAIVER OF 10-PERCENT PENALTY ON SMALL BUSI16 NESS DISTRIBUTIONS. 

17 Paragraph (2) of section 72(t) of the Internal Rev18 enue Code of 1986 is amended by adding at the end the 

19 following new subparagraph: 

20 ‘‘(H) SMALL BUSINESS DISTRIBUTIONS.— 

21 ‘‘(i) IN GENERAL.—Any payment or 

22 distribution to the individual during 2010 

23 or 2011 to the extent that for the taxable 

24 year such amount does not exceed the less25 er of— 


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1 ‘‘(I) the small business invest2 ment of the individual for the taxable 

3 year, or 

4 ‘‘(II) the lesser of $10,000, or 25 

5 percent of the nonforefeitable value of 

6 the plan at the beginning of the tax7 able year. 

8 ‘‘(ii) SMALL BUSINESS INVEST9 MENT.—For purposes of this subpara10 graph, the term ‘small business invest11 ment’ means, with respect to a qualified 

12 small business, an amount equal to the 

13 basis of property which— 

14 ‘‘(I) is placed in service during 

15 the taxable year, 

16 ‘‘(II) is used in the trade or busi17 ness of the taxpayer, and 

18 ‘‘(III) is subject to the allowance 

19 for depreciation provided in section 

20 167 or is real property used in such 

21 trade or business. 

22 ‘‘(iii) QUALIFIED SMALL BUSINESS.— 

23 For purposes of this subparagraph— 

24 ‘‘(I) IN GENERAL.—The term 

25 ‘qualified small business’ means any 


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1 trade or business the gross receipts of 

2 which for the preceding taxable year 

3 did not exceed $20,000,000 or which 

4 employed not more than 50 full-time 

5 employees during the preceding tax6 able year. 

7 ‘‘(II) FULL-TIME.—An employee 

8 shall be considered full-time if such 

9 employee is employed at least 30 

10 hours per week for 20 or more cal11 endar weeks in the taxable year. 

12 ‘‘(III) CONTROLLED GROUPS.— 

13 For purposes of subclause (I), all per14 sons treated as a single employer 

15 under subsection (a) or (b) of section 

16 52 or subsection (m) or (o) of section 

17 414 shall be treated as a single trade 

18 or business. 

19 ‘‘(iv) RELATED PERSONS.—A person 

20 shall be treated as related to another per21 son if the relationship between such per22 sons would result in the disallowance of 

23 losses under section 267 or 707(b).’’. 

Æ 


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