II 

108TH CONGRESS 

1ST SESSION S. 1885

To amend the Internal Revenue Code of 1986 to provide tax incentives 

for manufacturing businesses in the United States. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 18, 2003

Mr. DASCHLE (for Mr. KERRY) 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 provide 

tax incentives for manufacturing businesses in the United 

States.

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 ‘‘Manufacturing Job 

5 Production Act of 2003’’. 

6 SEC. 2. TEMPORARY MANUFACTURING JOB CREATION TAX 

7 CREDIT. 

8 (a) IN GENERAL.—Subpart F of part IV of sub9 chapter A of chapter 1 (relating to rules for computing 
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1 work opportunity credit) is amended by inserting after 

2 section 51A the following new section: 

3 ‘‘SEC. 51B. REFUND OF PAYROLL TAXES ATTRIBUTABLE TO 

4 NEW MANUFACTURING EMPLOYEES DURING 

5 2004 AND 2005. 

6 ‘‘(a) GENERAL RULE.—In the case of an employee’s 

7 first taxable year beginning in any applicable calendar 

8 year, the amount of the work opportunity credit deter9 mined under section 51 (without regard to this section) 

10 for the taxable year shall be increased by the increased 

11 manufacturing wages payroll tax rebate amount. 

12 ‘‘(b) APPLICABLE CALENDAR YEAR.—For purposes 

13 of this section, the term ‘applicable calendar year’ means 

14 2004 and 2005. 

15 ‘‘(c) INCREASED MANUFACTURING WAGES PAYROLL

16 TAX REBATE AMOUNT.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘increased manufacturing wages pay19 roll tax rebate amount’ means an amount equal to 

20 the applicable percentage of the excess (if any) of—

21 ‘‘(A) the qualified manufacturing wages 

22 paid or incurred by the employer with respect 

23 to employment during the applicable calendar 

24 year, over 

25 ‘‘(B) the sum of—
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1 ‘‘(i) the qualified manufacturing 

2 wages paid or incurred by the employer 

3 with respect to employment during the pre4 vious calendar year, plus 

5 ‘‘(ii) an amount equal to the amount 

6 determined under clause (i) multiplied by a 

7 percentage equal to the percentage change 

8 in the contribution and benefit base under 

9 section 230 of the Social Security Act from 

10 the applicable calendar year to the pre11 vious calendar year. 

12 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

13 of this subsection, the term ‘applicable percentage’ 

14 means—

15 ‘‘(A) for 2004, 50 percent, and 

16 ‘‘(B) for 2005, 25 percent. 

17 ‘‘(d) OTHER DEFINITIONS AND RULES.—For pur18 poses of this section—

19 ‘‘(1) QUALIFIED MANUFACTURING WAGES.—

20 ‘‘(A) IN GENERAL.—The term ‘qualified 

21 manufacturing wages’ means wages which are 

22 paid by the taxpayer and included under section 

23 263A in the cost of property produced by the 

24 taxpayer. 
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1 ‘‘(B) WAGES.—The term ‘wages’ has the 

2 meaning given such term by section 3121(a), 

3 except that in the case of any employer subject 

4 to tax under chapter 22 with respect to any em5 ployee, the such term includes compensation 

6 within the meaning of section 3231(e). 

7 ‘‘(C) UNITED STATES.—For purposes of 

8 this paragraph, the term ‘United States’ in9 cludes the territories and possessions of the 

10 United States. 

11 ‘‘(2) PREDECESSORS.—Any reference in this 

12 section to an employer shall include a reference to 

13 a predecessor. 

14 ‘‘(3) OTHER RULES.—Rules similar to the rules 

15 of sections 51(k) and 52 shall apply. 

16 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

17 such regulations as may be necessary to carry out this 

18 section, including regulations for the application of this 

19 section in the case of acquisitions and dispositions.’’. 

20 (b) CONFORMING AMENDMENT.—The table of sec21 tions for subpart F of part IV of subchapter A of chapter 

22 1 is amended by inserting after the item relating to section 

23 51A the following new item:

‘‘Sec. 51B. Refund of payroll taxes attributable to new manufacturing employees during 2004 and 2005.’’.
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1 SEC. 3. MODIFICATIONS OF EXCLUSIONS AND ROLLOVERS 

2 OF GAIN ON QUALIFIED SMALL BUSINESS 

3 STOCK. 

4 (a) EXCLUSION OF GAIN ON QUALIFIED SMALL

5 BUSINESS STOCK.—

6 (1) INCREASE IN EXCLUSION PERCENTAGE.—

7 (A) IN GENERAL.—Section 1202(a)(1) (re8 lating to exclusion for gain from certain small 

9 business stock) is amended by striking ‘‘50 per10 cent’’ and inserting ‘‘75 percent’’. 

11 (B) 100-PERCENT EXCLUSION FOR CRIT12 ICAL TECHNOLOGY, SMALL MANUFACTURING, 

13 AND SPECIALIZED SMALL BUSINESS INVEST14 MENT BUSINESSES.—Section 1202(a) is amend15 ed by adding at the end the following new para16 graph: 

17 ‘‘(3) CRITICAL TECHNOLOGY, SMALL MANUFAC18 TURING, AND SPECIALIZED SMALL BUSINESS IN19 VESTMENT BUSINESSES.—

20 ‘‘(A) IN GENERAL.—In the case of quali21 fied small business stock acquired after the date 

22 of the enactment of this paragraph which is 

23 stock in—

24 ‘‘(i) a critical technology corporation, 

25 ‘‘(ii) a manufacturing corporation, or
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1 ‘‘(iii) a corporation which is a special2 ized small business investment company 

3 (as defined in subsection (c)(2)(B)(ii)), 

4 paragraph (1) shall be applied by substituting 

5 ‘100 percent’ for ‘75 percent’. 

6 ‘‘(B) CRITICAL TECHNOLOGY CORPORA7 TION.—The term ‘critical technology corpora8 tion’ means a corporation substantially all of 

9 the active business activities of which during 

10 substantially all of a taxpayer’s holding period 

11 of stock in the corporation are in connection 

12 with—

13 ‘‘(i) transportation or homeland secu14 rity technologies, 

15 ‘‘(ii) antiterrorism technologies, 

16 ‘‘(iii) technologies enhancing security 

17 by improving methods of personal identi18 fication (including biometrics), 

19 ‘‘(iv) environmental technologies for 

20 pollution minimization, remediation, or 

21 waste management, 

22 ‘‘(v) national defense technologies, or 

23 ‘‘(vi) energy efficiency or the develop24 ment of non-fossil based fuel source tech25 nologies. 
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1 ‘‘(C) MANUFACTURING CORPORATION.—

2 The term ‘manufacturing corporation’ means a 

3 corporation substantially all of the active busi4 ness activities of which during substantially all 

5 of a taxpayer’s holding period of stock in the 

6 corporation are in connection with manufac7 turing (as determined under the North Amer8 ican Industrial Classification System).’’. 

9 (C) EMPOWERMENT ZONE CONFORMING

10 AMENDMENT.—Section 1202(a)(2)(A) is 

11 amended—

12 (i) by striking ‘‘60 percent’’ and in13 serting ‘‘100 percent’’, and 

14 (ii) by striking ‘‘50 percent’’ and in15 serting ‘‘75 percent’’. 

16 (2) DECREASE IN HOLDING PERIOD.—

17 (A) IN GENERAL.—Section 1202(a)(1) is 

18 amended by striking ‘‘5 years’’ and inserting ‘‘4 

19 years’’. 

20 (B) CONFORMING AMENDMENT.—Section 

21 1202(j)(1)(A) is amended by striking ‘‘5 years’’ 

22 and inserting ‘‘4 years’’. 

23 (3) EXCLUSION AVAILABLE TO CORPORA24 TIONS.—
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1 (A) IN GENERAL.—Subsection (a) of sec2 tion 1202 (relating to partial exclusion for 

3 gains from certain small business stock) is 

4 amended by striking ‘‘other than a corpora5 tion’’. 

6 (B) TECHNICAL AMENDMENT.—Subsection 

7 (c) of section 1202 is amended by adding at the 

8 end the following new paragraph: 

9 ‘‘(4) STOCK HELD AMONG MEMBERS OF CON10 TROLLED GROUP NOT ELIGIBLE.—Stock of a mem11 ber of a parent-subsidiary controlled group (as de12 fined in subsection (d)(3)) shall not be treated as 

13 qualified small business stock while held by another 

14 member of such group.’’. 

15 (4) STOCK OF LARGER BUSINESSES ELIGIBLE

16 FOR EXCLUSION.—

17 (A) IN GENERAL.—Paragraph (1) of sec18 tion 1202(d) (defining qualified small business) 

19 is amended by striking ‘‘$50,000,000’’ each 

20 place it appears and inserting ‘‘$100,000,000’’. 

21 (B) INFLATION ADJUSTMENT.—Section 

22 1202(d) (defining qualified small business) is 

23 amended by adding at the end the following:

24 ‘‘(5) INFLATION ADJUSTMENT OF ASSET LIMI25 TATION.—In the case of stock issued in any calendar 
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1 year after 2004, the $100,000,000 amount con2 tained in paragraph (1) shall be increased by an 

3 amount equal to—

4 ‘‘(A) such dollar amount, multiplied by 

5 ‘‘(B) the cost-of-living adjustment deter6 mined under section 1(f)(3) for the calendar 

7 year, determined by substituting ‘calendar year 

8 2003’ for ‘calendar year 1992’ in subparagraph 

9 (B) thereof. 

10 If any amount as adjusted under the preceding sen11 tence is not a multiple of $10,000, such amount 

12 shall be rounded to the nearest multiple of 

13 $10,000.’’. 

14 (b) INCREASE IN PERIOD TO PURCHASE REPLACE15 MENT STOCK AND QUALIFY FOR ROLLOVER.—

16 (1) IN GENERAL.—Section 1045(a)(2) (relating 

17 to nonrecognition of gain) is amended by striking 

18 ‘‘60-day’’ and inserting ‘‘180-day’’. 

19 (2) CONFORMING AMENDMENT.—Section 

20 1045(b)(2) is amended by striking ‘‘60-day’’ and in21 serting ‘‘180-day’’. 

22 (c) EFFECTIVE DATES.—

23 (1) EXCLUSION.—The amendments made by 

24 subsection (a) shall apply to stock issued after the 

25 date of the enactment of this Act. 
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1 (2) ROLLOVER.—The amendment made by sub2 section (b) shall apply to sales after the date of the 

3 enactment of this Act. 

4 SEC. 4. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL 

5 BUSINESSES. 

6 (a) IN GENERAL.—Subchapter B of chapter 62 of the 

7 Internal Revenue Code of 1986 (relating to extensions of 

8 time for payment of tax) is amended by adding at the end 

9 the following new section: 

10 ‘‘SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR 

11 CERTAIN SMALL BUSINESSES. 

12 ‘‘(a) IN GENERAL.—An eligible small business may 

13 elect to pay the tax imposed by chapter 1 in 4 equal in14 stallments (6 equal installments in the case of a qualified 

15 manufacturer). 

16 ‘‘(b) LIMITATION.—The maximum amount of tax 

17 which may be paid in installments under this section for 

18 any taxable year shall not exceed whichever of the fol19 lowing is the least: 

20 ‘‘(1) The tax imposed by chapter 1 for the tax21 able year. 

22 ‘‘(2) The amount contributed by the taxpayer 

23 into a BRIDGE Account during such year. 

24 ‘‘(3) The excess of—
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1 ‘‘(A) $250,000 ($400,000 in the case of a 

2 qualified manufacturer), over 

3 ‘‘(B) the aggregate amount of tax for 

4 which an election under this section was made 

5 by the taxpayer (or any predecessor) for all 

6 prior taxable years. 

7 ‘‘(c) DEFINITIONS.—For purposes of this section—

8 ‘‘(1) ELIGIBLE SMALL BUSINESS.—

9 ‘‘(A) IN GENERAL.—The term ‘eligible 

10 small business’ means, with respect to any tax11 able year, any person if—

12 ‘‘(i) such person meets the active busi13 ness requirements of section 1202(e) 

14 throughout such taxable year, 

15 ‘‘(ii) the taxpayer has gross receipts 

16 of $10,000,000 or less for the taxable year, 

17 ‘‘(iii) the gross receipts of the tax18 payer for such taxable year are at least 10 

19 percent greater than the average annual 

20 gross receipts of the taxpayer (or any pred21 ecessor) for the 2 prior taxable years, and 

22 ‘‘(iv) the taxpayer uses an accrual 

23 method of accounting. 

24 ‘‘(B) CERTAIN RULES TO APPLY.—Rules 

25 similar to the rules of paragraphs (2) and (3) 
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1 of section 448(c) shall apply for purposes of 

2 this subsection. 

3 ‘‘(2) QUALIFIED MANUFACTURER.—The term 

4 ‘qualified manufacturer’ means an eligible small 

5 business substantially all of the business activities of 

6 which are in connection with manufacturing (as de7 termined under the North American Industrial Clas8 sification System). 

9 ‘‘(d) DATE FOR PAYMENT OF INSTALLMENTS; TIME

10 FOR PAYMENT OF INTEREST.—

11 ‘‘(1) DATE FOR PAYMENT OF INSTALLMENTS.—

12 ‘‘(A) IN GENERAL.—If an election is made 

13 under this section for any taxable year, the first 

14 installment shall be paid on or before the due 

15 date for such installment and each succeeding 

16 installment shall be paid on or before the date 

17 which is 1 year after the date prescribed by this 

18 paragraph for payment of the preceding install19 ment. 

20 ‘‘(B) DUE DATE FOR FIRST INSTALL21 MENT.—The due date for the first installment 

22 for a taxable year shall be whichever of the fol23 lowing is the earliest: 

24 ‘‘(i) The date selected by the tax25 payer. 
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1 ‘‘(ii) The date which is 2 years after 

2 the date prescribed by section 6151(a) for 

3 payment of the tax for such taxable year. 

4 ‘‘(2) TIME FOR PAYMENT OF INTEREST.—If the 

5 time for payment of any amount of tax has been ex6 tended under this section—

7 ‘‘(A) INTEREST FOR PERIOD BEFORE DUE

8 DATE OF FIRST INSTALLMENT.—Interest pay9 able under section 6601 on any unpaid portion 

10 of such amount attributable to the period before 

11 the due date for the first installment shall be 

12 paid annually. 

13 ‘‘(B) INTEREST DURING INSTALLMENT PE14 RIOD.—Interest payable under section 6601 on 

15 any unpaid portion of such amount attributable 

16 to any period after such period shall be paid at 

17 the same time as, and as a part of, each install18 ment payment of the tax. 

19 ‘‘(C) INTEREST IN THE CASE OF CERTAIN

20 DEFICIENCIES.—In the case of a deficiency to 

21 which subsection (e)(3) applies for a taxable 

22 year which is assessed after the due date for 

23 the first installment for such year, interest at24 tributable to the period before such due date, 

25 and interest assigned under subparagraph (B) 
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1 to any installment the date for payment of 

2 which has arrived on or before the date of the 

3 assessment of the deficiency, shall be paid upon 

4 notice and demand from the Secretary. 

5 ‘‘(e) SPECIAL RULES.—

6 ‘‘(1) APPLICATION OF LIMITATION TO PART7 NERS AND S CORPORATION SHAREHOLDERS.—

8 ‘‘(A) IN GENERAL.—In applying this sec9 tion to a partnership which is an eligible small 

10 business—

11 ‘‘(i) the election under subsection (a) 

12 shall be made by the partnership, 

13 ‘‘(ii) the amount referred to in sub14 section (b)(1) shall be the sum of each 

15 partner’s tax which is attributable to items 

16 of the partnership and assuming the high17 est marginal rate under section 1, and 

18 ‘‘(iii) the partnership shall be treated 

19 as the taxpayer referred to in paragraphs 

20 (2) and (3) of subsection (b). 

21 ‘‘(B) OVERALL LIMITATION ALSO APPLIED

22 AT PARTNER LEVEL.—In the case of a partner 

23 in a partnership, the limitation under sub24 section (b)(3) shall be applied at the partner25 ship and partner levels. 
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1 ‘‘(C) SIMILAR RULES FOR S CORPORA2 TIONS.—Rules similar to the rules of subpara3 graphs (A) and (B) shall apply to shareholders 

4 in an S corporation. 

5 ‘‘(2) ACCELERATION OF PAYMENT IN CERTAIN

6 CASES.—

7 ‘‘(A) IN GENERAL.—If—

8 ‘‘(i) the taxpayer ceases to meet the 

9 requirement of subsection (c)(1)(A)(i), or 

10 ‘‘(ii) there is an ownership change 

11 with respect to the taxpayer, 

12 then the extension of time for payment of tax 

13 provided in subsection (a) shall cease to apply, 

14 and the unpaid portion of the tax payable in in15 stallments shall be paid on or before the due 

16 date for filing the return of tax imposed by 

17 chapter 1 for the first taxable year following 

18 such cessation. 

19 ‘‘(B) OWNERSHIP CHANGE.—For purposes 

20 of subparagraph (A), in the case of a corpora21 tion, the term ‘ownership change’ has the 

22 meaning given to such term by section 382. 

23 Rules similar to the rules applicable under the 

24 preceding sentence shall apply to a partnership.
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1 ‘‘(3) PRORATION OF DEFICIENCY TO INSTALL2 MENTS.—Rules similar to the rules of section 

3 6166(e) shall apply for purposes of this section. 

4 ‘‘(f) BRIDGE ACCOUNT.—For purposes of this sec5 tion—

6 ‘‘(1) IN GENERAL.—The term ‘BRIDGE Ac7 count’ means a trust created or organized in the 

8 United States for the exclusive benefit of an eligible 

9 small business, but only if the written governing in10 strument creating the trust meets the following re11 quirements: 

12 ‘‘(A) No contribution will be accepted for 

13 any taxable year in excess of the amount al14 lowed as a deferral under subsection (b) for 

15 such year.

16 ‘‘(B) The trustee is a bank (as defined in 

17 section 408(n)) or another person who dem18 onstrates to the satisfaction of the Secretary 

19 that the manner in which such person will ad20 minister the trust will be consistent with the re21 quirements of this section. 

22 ‘‘(C) The assets of the trust consist en23 tirely of cash or of obligations which have ade24 quate stated interest (as defined in section 
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1 1274(c)(2)) and which pay such interest not 

2 less often than annually. 

3 ‘‘(D) The assets of the trust will not be 

4 commingled with other property except in a 

5 common trust fund or common investment 

6 fund. 

7 ‘‘(E) Amounts in the trust may be used 

8 only—

9 ‘‘(i) as security for a loan to the busi10 ness or for repayment of such loan, or 

11 ‘‘(ii) to pay the installments under 

12 this section. 

13 ‘‘(2) ACCOUNT TAXED AS GRANTOR TRUST.—

14 The grantor of a BRIDGE Account shall be treated 

15 for purposes of this title as the owner of such Ac16 count and shall be subject to tax thereon in accord17 ance with subpart E of part I of subchapter J of 

18 this chapter (relating to grantors and others treated 

19 as substantial owners). 

20 ‘‘(3) TIME WHEN PAYMENTS DEEMED MADE.—

21 For purposes of this section, a taxpayer shall be 

22 deemed to have made a payment to a BRIDGE Ac23 count on the last day of a taxable year if such pay24 ment is made on account of such taxable year and 
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is made within 31 1 ⁄2 months after the close of such 

2 taxable year. 

3 ‘‘(g) REPORTS.—The Secretary may require such re4 porting as the Secretary determines to be appropriate to 

5 carry out this section. 

6 ‘‘(h) APPLICATION OF SECTION.—This section shall 

7 apply to taxes imposed for taxable years beginning after 

8 December 31, 2003, and before January 1, 2008.’’. 

9 (b) PRIORITY OF LENDER.—Subsection (b) of section 

10 6323 of the Internal Revenue Code of 1986 (relating to 

11 protection for certain interests even though notice filed) 

12 is amended by adding at the end the following new para13 graph: 

14 ‘‘(11) LOANS SECURED BY BRIDGE AC15 COUNTS.—With respect to a BRIDGE account (as 

16 defined in section 6168(f)) with any bank (as de17 fined in section 408(n)), to the extent of any loan 

18 made by such bank without actual notice or knowl19 edge of the existence of such lien, as against such 

20 bank, if such loan is secured by such account.’’. 

21 (c) CLERICAL AMENDMENT.—The table of sections 

22 for subchapter B of chapter 62 of the Internal Revenue 

23 Code of 1986 is amended by adding at the end the fol24 lowing new item:

‘‘Sec. 6168. Extension of time for payment of tax for certain 

small businesses.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2003. 

4 (e) STUDY BY GENERAL ACCOUNTING OFFICE.—

5 (1) STUDY.—In consultation with the Secretary 

6 of the Treasury, the Comptroller General of the 

7 United States shall undertake a study to evaluate 

8 the applicability (including administrative aspects) 

9 and impact of the amendments made by section 4 of 

10 the Manufacturing Job Production Act of 2003, in11 cluding how it affects the capital funding needs of 

12 businesses under the Act and number of businesses 

13 benefiting. 

14 (2) REPORT.—Not later than March 31, 2007, 

15 the Comptroller General shall transmit to the Com16 mittee on Ways and Means of the House of Rep17 resentatives and the Committee on Finance of the 

18 Senate a written report presenting the results of the 

19 study conducted pursuant to this subsection, to20 gether with such recommendations for legislative or 

21 administrative changes as the Comptroller General 

22 determines are appropriate. 
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1 SEC. 5. PERMANENT EXTENSION OF INCREASED EXPENS2 ING FOR SMALL BUSINESSES. 

3 (a) IN GENERAL.—Paragraph (1) of section 179(b) 

4 of the Internal Revenue Code of 1986 (relating to dollar 

5 limitation) is amended by striking ‘‘$25,000 ($100,000 in 

6 the case of taxable years beginning after 2002 and before 

7 2006)’’ and inserting ‘‘$100,000’’. 

8 (b) INCREASE IN QUALIFYING INVESTMENT AT

9 WHICH PHASEOUT BEGINS.—Paragraph (2) of section 

10 179(b) of the Internal Revenue Code of 1986 (relating to 

11 reduction in limitation) is amended by striking ‘‘$200,000 

12 ($400,000 in the case of taxable years beginning after 

13 2002 and before 2006)’’ and inserting ‘‘$400,000’’. 

14 (c) OFF-THE-SHELF COMPUTER SOFTWARE.—Para15 graph (1) of section 179(d) of the Internal Revenue Code 

16 of 1986 (defining section 179 property) is amended by 

17 striking ‘‘, and which is placed in service in a taxable year 

18 beginning after 2002 and before 2006’’. 

19 (d) INFLATION ADJUSTMENT.—Subparagraph (A) of 

20 section 179(b)(5) of the Internal Revenue Code of 1986 

21 (relating to inflation adjustments) is amended by striking 

22 ‘‘and before 2006’’. 

23 (e) REVOCATION OF ELECTION.—Paragraph (2) of 

24 section 179(c) of the Internal Revenue Code of 1986 is 

25 amended by striking the last sentence. 
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1 (f) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2003.

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