II 

110TH CONGRESS 

1ST SESSION S. 1214 

To amend the Internal Revenue Code of 1986 to modify the partial exclusion 

for gain from certain small business stocks. 

IN THE SENATE OF THE UNITED STATES 

APRIL 25, 2007 

Mr. KERRY (for himself and Ms. SNOWE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the partial exclusion for gain from certain small business 

stocks. 

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 ‘‘Invest in Small Busi5 ness Act of 2007’’. 

6 SEC. 2. INCREASED EXCLUSION AND OTHER MODIFICA7 TIONS APPLICABLE TO QUALIFIED SMALL 

8 BUSINESS STOCK. 

9 (a) INCREASED EXCLUSION.— 


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•S 1214 IS

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

2 1202(a) of the Internal Revenue Code of 1986 (re3 lating partial exclusion for gain from certain small 

4 business stock) is amended to read as follows: 

5 ‘‘(1) IN GENERAL.—Gross income shall not in6 clude 75 percent of any gain from the sale or ex7 change of qualified small business stock held for 

8 more than 4 years.’’. 

9 (2) EMPOWERMENT ZONE BUSINESSES.—Sub10 paragraph (A) of section 1202(a)(2) of such Code is 

11 amended— 

12 (A) by striking ‘‘60 percent’’ and inserting 

13 ‘‘100 percent’’, and 

14 (B) by striking ‘‘50 percent’’ and inserting 

15 ‘‘75 percent’’. 

16 (3) RULE RELATING TO STOCK HELD AMONG

17 MEMBERS OF CONTROLLED GROUP.—Subsection (c) 

18 of section 1202 of such Code is amended by adding 

19 at the end the following new paragraph: 

20 ‘‘(4) STOCK HELD AMONG MEMBERS OF 25-PER21 CENT CONTROLLED GROUP NOT ELIGIBLE.— 

22 ‘‘(A) IN GENERAL.—Stock of a member of 

23 a 25-percent controlled group shall not be treat24 ed as qualified small business stock while held 

25 by another member of such group. 


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•S 1214 IS

1 ‘‘(B) 25-PERCENT CONTROLLED GROUP.— 

2 For purposes of subparagraph (A), the term 

3 ‘25-percent controlled group’ means any con4 trolled group of corporations as defined in sec5 tion 1563(a)(1), except that— 

6 ‘‘(i) ‘more than 25 percent’ shall be 

7 substituted for ‘at least 80 percent’ each 

8 place it appears in section 1563(a)(1), and 

9 ‘‘(ii) section 1563(a)(4) shall not 

10 apply.’’. 

11 (4) CONFORMING AMENDMENTS.—Subsections 

12 (b)(2), (g)(2)(A), and (j)(1)(A) of section 1202 of 

13 such Code are each amended by striking ‘‘5 years’’ 

14 and inserting ‘‘4 years’’. 

15 (b) REPEAL OF MINIMUM TAX PREFERENCE.— 

16 (1) IN GENERAL.—Subsection (a) of section 57 

17 of the Internal Revenue Code of 1986 (relating to 

18 items of tax preference) is amended by striking 

19 paragraph (7). 

20 (2) TECHNICAL AMENDMENT.—Subclause (II) 

21 of section 53(d)(1)(B)(ii) of such Code is amended 

22 by striking ‘‘, (5), and (7)’’ and inserting ‘‘and (5)’’. 

23 (c) REPEAL OF 28 PERCENT CAPITAL GAINS RATE

24 ON QUALIFIED SMALL BUSINESS STOCK.— 


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•S 1214 IS

1 (1) IN GENERAL.—Subparagraph (A) of section 

2 1(h)(4) of the Internal Revenue Code of 1986 is 

3 amended to read as follows: 

4 ‘‘(A) collectibles gain, over’’. 

5 (2) CONFORMING AMENDMENTS.— 

6 (A) Section 1(h) of such Code is amended 

7 by striking paragraph (7). 

8 (B)(i) Section 1(h) of such Code is amend9 ed by redesignating paragraphs (8), (9), (10), 

10 (11), (12), and (13) as paragraphs (7), (8), (9), 

11 (10), (11), and (12), respectively. 

12 (ii) Sections 163(d)(4)(B), 854(b)(5), 

13 857(c)(2)(D) of such Code are each amended 

14 by striking ‘‘section 1(h)(11)(B)’’ and inserting 

15 ‘‘section 1(h)(10)(B)’’. 

16 (iii) The following sections of such Code 

17 are each amended by striking ‘‘section 

18 1(h)(11)’’ and inserting ‘‘section 1(h)(10)’’: 

19 (I) Section 301(f)(4). 

20 (II) Section 306(a)(1)(D). 

21 (III) Section 584(c). 

22 (IV) Section702(a)(5). 

23 (V) Section 854(a). 

24 (VI) Section 854(b)(2). 


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•S 1214 IS

1 (iv) The heading of section 857(c)(2) is 

2 amended by striking ‘‘1(h)(11)’’ and inserting 

3 ‘‘1(h)(10)’’. 

4 (d) INCREASE AGGREGATE ASSET LIMITATION FOR

5 QUALIFIED SMALL BUSINESSES.— 

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

7 1202(d) of the Internal Revenue Code of 1986 (re8 lating to qualified small business) is amended by 

9 striking ‘‘$50,000,000’’ each place it appears and in10 serting ‘‘$100,000,000’’. 

11 (2) INFLATION ADJUSTMENT.—Section 1202(d) 

12 of such Code is amended by adding at the end the 

13 following new paragraph: 

14 ‘‘(4) INFLATION ADJUSTMENT.— 

15 ‘‘(A) IN GENERAL.—In the case of any 

16 taxable year beginning in a calendar year after 

17 2007, each of the $100,000,000 dollar amounts 

18 in paragraph (1) shall be increased by an 

19 amount equal to— 

20 ‘‘(i) such dollar amount, multiplied by 

21 ‘‘(ii) the cost-of-living adjustment de22 termined under section 1(f)(3) for the cal23 endar year in which the taxable year be24 gins, determined by substituting ‘calendar 


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•S 1214 IS

1 year 2006’ for ‘calendar year 1992’ in sub2 paragraph (B) thereof. 

3 ‘‘(B) ROUNDING.—If any amount as ad4 justed under subparagraph (A) is not a multiple 

5 of $1,000, such amount shall be rounded to the 

6 next lowest multiple of $100.’’. 

7 (e) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—The amendments made by 

9 this section apply to stock issued after December 31, 

10 2007. 

11 (2) SPECIAL RULE FOR STOCK ISSUED BEFORE

12 DECEMBER 31, 2007.—The amendments made by 

13 subsections (a), (b), and (c) shall apply to sales or 

14 exchanges— 

15 (A) made after December 31, 2007, 

16 (B) of stock issued before such date, 

17 (C) by a taxpayer other than a corpora18 tion. 

Æ 


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