II 

111TH CONGRESS 

2D SESSION S. 2985 

To amend the Internal Revenue Code of 1986 to establish a new Small 

Business Startup Savings Account. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 4, 2010 

Mr. PRYOR 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 establish 

a new Small Business Startup Savings Account. 

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

3 SECTION 1. ESTABLISHMENT OF SMALL BUSINESS START4 UP SAVINGS ACCOUNTS. 

5 (a) IN GENERAL.—Subpart A of part I of subchapter 

6 D of chapter 1 of the Internal Revenue Code of 1986 is 

7 amended by inserting after section 408A the following new 

8 section: 


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1 ‘‘SEC. 408B. SMALL BUSINESS STARTUP SAVINGS AC2 COUNTS. 

3 ‘‘(a) GENERAL RULE.—Except as provided in this 

4 section, a Small Business Startup Savings Account shall 

5 be treated for purposes of this title in the same manner 

6 as an individual retirement plan. 

7 ‘‘(b) SMALL BUSINESS STARTUP SAVINGS AC8 COUNT.—For purposes of this title, the term ‘Small Busi9 ness Startup Savings Account’ means a tax preferred sav10 ings plan which is designated at the time of establishment 

11 of the plan as a Small Business Startup Savings Account. 

12 Such designation shall be made in such manner as the 

13 Secretary may prescribe. 

14 ‘‘(c) TREATMENT OF CONTRIBUTIONS.— 

15 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction 

16 shall be allowed under section 219 for a contribution 

17 to a Small Business Startup Savings Account. 

18 ‘‘(2) CONTRIBUTION LIMIT.— 

19 ‘‘(A) IN GENERAL.—The aggregate 

20 amount of contributions for any taxable year to 

21 all Small Business Startup Savings Accounts 

22 maintained for the benefit of an individual shall 

23 not exceed $10,000. 

24 ‘‘(B) AGGREGATE LIMITATION.—The ag25 gregate of the amounts which may be taken 

26 into account under subparagraph (A) for all 


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1 taxable years with respect to all Small Business 

2 Startup Savings Accounts maintained for the 

3 benefit of an individual shall not exceed 

4 $150,000. 

5 ‘‘(C) COST OF LIVING ADJUSTMENT.—The 

6 Secretary shall adjust annually the $10,000 

7 amount in subparagraph (A) for increases in 

8 the cost-of-living at the same time and in the 

9 same manner as adjustments under section 

10 415(d); except that the base period shall be the 

11 calendar quarter beginning July 1, 2010, and 

12 any increase which is not a multiple of $500 

13 shall be rounded to the next lowest multiple of 

14 $500. 

15 ‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE

701 16 ⁄2.—Contributions to a Small Business Startup 

17 Savings Account may be made even after the indi18 vidual for whom the account is maintained has attained age 701 19 ⁄2. 

20 ‘‘(4) ROLLOVERS FROM RETIREMENT PLANS

21 NOT ALLOWED.—A taxpayer shall not be allowed to 

22 make a qualified rollover contribution to a Small 

23 Business Startup Savings Account from any quali24 fied retirement plan (as defined in section 4974(c)). 


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1 ‘‘(d) DISTRIBUTION RULES.—For purposes of this 

2 title— 

3 ‘‘(1) GENERAL RULES.— 

4 ‘‘(A) LIMITATIONS ON DISTRIBUTIONS.— 

5 All qualified distributions from a Small Busi6 ness Startup Savings Account— 

7 ‘‘(i) shall be limited to a single busi8 ness, and 

9 ‘‘(ii) must be disbursed not later than 

10 the last day of the 5th taxable year begin11 ning after the initial disbursement. 

12 ‘‘(B) EXCLUSIONS FROM GROSS INCOME.— 

13 Any qualified distribution from a Small Busi14 ness Startup Savings Account shall not be in15 cludible in gross income. 

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

17 of this subsection, the term ‘qualified distribution’ 

18 means any payment or distribution made for oper19 ating capital, the purchase of equipment or facilities, 

20 marketing, training, incorporation, and accounting 

21 fees. 

22 ‘‘(3) NONQUALIFIED DISTRIBUTIONS.— 

23 ‘‘(A) IN GENERAL.—In applying section 72 

24 to any distribution from a Small Business 

25 Startup Savings Account which is not a qualiVerDate Nov 24 2008 03:42 Feb 05, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2985.IS S2985

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1 fied distribution, such distribution shall be 

2 treated as made from contributions to the 

3 Small Business Startup Savings Account to the 

4 extent that such distribution, when added to all 

5 previous distributions from the Small Business 

6 Startup Savings Account, does not exceed the 

7 aggregate amount of contributions to the Small 

8 Business Startup Savings Account. 

9 ‘‘(B) TREATMENT OF AMOUNTS REMAIN10 ING IN ACCOUNT.—Any remaining amount in a 

11 Small Business Startup Savings Account fol12 lowing the date described in paragraph 

13 (1)(A)(ii) shall be treated as distributed during 

14 the taxable year following such date and such 

15 distribution shall not be treated as a qualified 

16 distribution. 

17 ‘‘(4) ROLLOVERS TO A ROTH IRA.—Subject to 

18 the application of the treatment of contributions in 

19 section 408A(c), distributions from a Small Business 

20 Startup Savings Account may be rolled over into a 

21 Roth IRA.’’. 

22 (b) EXCESS CONTRIBUTIONS.—Section 4973 of the 

23 Internal Revenue Code of 1986 is amended by adding at 

24 the end the following new subsection: 


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1 ‘‘(h) EXCESS CONTRIBUTIONS TO SMALL BUSINESS

2 STARTUP SAVINGS ACCOUNTS.—For purposes of this sec3 tion, in the case of contributions to all Small Business 

4 Startup Savings Accounts (within the meaning of section 

5 408B(b)) maintained for the benefit of an individual, the 

6 term ‘excess contributions’ means the sum of— 

7 ‘‘(1) the excess (if any) of— 

8 ‘‘(A) the amount contributed to such ac9 counts for the taxable year, over 

10 ‘‘(B) the amount allowable as a contribu11 tion under section 408B(c)(2) for such taxable 

12 year, and 

13 ‘‘(2) the amount determined under this sub14 section for the preceding taxable year, reduced by 

15 the sum of— 

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

17 for the taxable year, and 

18 ‘‘(B) the excess (if any) of— 

19 ‘‘(i) the maximum amount allowable 

20 as a contribution under section 408B(c)(2) 

21 for such taxable year, over 

22 ‘‘(ii) the amount contributed to such 

23 accounts for such taxable year.’’. 

24 (c) CONFORMING AMENDMENT.—The table of sec25 tions for subpart A of part I of subchapter D of chapter 


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1 1 of the Internal Revenue Code of 1986 is amended by 

2 inserting after the item relating to section 408A the fol3 lowing new item: 

‘‘Sec. 408B. Small Business Startup Savings Accounts.’’. 

4 (d) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 December 31, 2009. 

Æ 


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