I 

112TH CONGRESS 

1ST SESSION H. R. 2614 

To amend the Internal Revenue Code of 1986 to allow distributions from 

retirement accounts to start a business. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 21, 2011 

Mr. PAUL 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 allow 

distributions from retirement accounts to start a 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. SHORT TITLE. 

4 This Act may be cited as the ‘‘The Entrepreneurship 

5 Tax Cut Act of 2011’’. 


jbell on DSKDVH8Z91PROD with BILLS
2 

•HR 2614 IH

1 SEC. 2. EXCLUSION FROM GROSS INCOME OF QUALIFIED 

2 CAPITAL DISTRIBUTION FROM TAX-FAVORED 

3 ACCOUNTS. 

4 (a) IN GENERAL.—Part III of subchapter B of chap5 ter 1 of the Internal Revenue Code is amended by insert6 ing before section 140 the following new section: 

7 ‘‘SEC. 139F. QUALIFIED CAPITAL DISTRIBUTIONS. 

8 ‘‘(a) IN GENERAL.—Gross income shall not include 

9 any qualified capital distribution from a tax-favored ac10 count. 

11 ‘‘(b) DEFINITIONS.—For purposes of this section— 

12 ‘‘(1) QUALIFIED CAPITAL DISTRIBUTION.— 

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

14 capital distribution’ means any distribution to 

15 an individual from a tax-favored account of 

16 such individual to the extent such distribution 

17 is used to acquire an eligible interest in an enti18 ty in connection with beginning an active trade 

19 or business. 

20 ‘‘(B) ELIGIBLE INTEREST.—For purposes 

21 of this paragraph, the term ‘eligible interest’ 

22 means, with respect to any entity, an ownership 

23 interest in such entity of at least 40 percent of 

24 the total combined voting power of all classes of 

25 interests entitled to vote, or at least 40 percent 


jbell on DSKDVH8Z91PROD with BILLS
3 

•HR 2614 IH

1 of the total value of all ownership interests in 

2 the entity. 

3 ‘‘(C) SOLE PROPRIETORSHIPS.—Any cap4 ital contribution to a sole proprietorship shall 

5 be treated as meeting the requirements of sub6 paragraphs (A) and (B) if such requirements 

7 would be met if such proprietorship were a cor8 poration. 

9 ‘‘(D) BEGINNING OF TRADE OR BUSI10 NESS.—Rules similar to the rules of section 

11 195(c)(2) shall apply for purposes of this para12 graph. 

13 ‘‘(2) TAX-FAVORED ACCOUNT.—The term ‘tax14 favored account’ means any of the following: 

15 ‘‘(A) An eligible retirement plan (as de16 fined in section 402(c)(8)(B)). 

17 ‘‘(B) A health savings account described in 

18 section 223. 

19 ‘‘(C) A Roth IRA. 

20 ‘‘(D) A qualified tuition program described 

21 in section 529. 

22 ‘‘(c) AMOUNT DISTRIBUTED MUST BE REPAID.— 

23 ‘‘(1) IN GENERAL.—Any individual who receives 

24 a qualified capital distribution may make one or 

25 more contributions in an aggregate amount not to 


jbell on DSKDVH8Z91PROD with BILLS
4 

•HR 2614 IH

1 exceed the amount of such distribution to a tax-fa2 vored account of which such individual is a bene3 ficiary and to which a rollover contribution of such 

4 distribution could be made under section 402(c), 

5 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), 

6 223(f)(5),or 529(c)(3)(C), as the case may be. 

7 ‘‘(2) TREATMENT OF REPAYMENTS OF DIS8 TRIBUTIONS FROM ELIGIBLE RETIREMENT PLANS

9 OTHER THAN IRAS.—For purposes of this title, if a 

10 contribution is made pursuant to paragraph (1) with 

11 respect to a qualified capital distribution from an el12 igible retirement plan other than an individual re13 tirement plan, then the taxpayer shall, to the extent 

14 of the amount of the contribution, be treated as hav15 ing received the qualified capital distribution in an 

16 eligible rollover distribution (as defined in section 

17 402(c)(4)) and as having transferred the amount to 

18 the eligible retirement plan in a direct trustee to 

19 trustee transfer within 60 days of the distribution. 

20 ‘‘(3) TREATMENT OF REPAYMENTS FOR DIS21 TRIBUTIONS FROM IRAS.—For purposes of this title, 

22 if a contribution is made pursuant to paragraph (1) 

23 with respect to a qualified capital distribution from 

24 an individual retirement plan, then, to the extent of 

25 the amount of the contribution, the qualified capital 


jbell on DSKDVH8Z91PROD with BILLS
5 

•HR 2614 IH

1 distribution shall be treated as a distribution de2 scribed in section 408(d)(3) and as having been 

3 transferred to the eligible retirement plan in a direct 

4 trustee to trustee transfer within 60 days of the dis5 tribution. 

6 ‘‘(4) OTHER TAX-FAVORED ACCOUNTS.—For 

7 purposes of this title, if a contribution is made pur8 suant to paragraph (1) with respect to a qualified 

9 capital distribution— 

10 ‘‘(A) from a health savings account de11 scribed in section 223, or 

12 ‘‘(B) from a qualified tuition program de13 scribed in section 529, 

14 then, to the extent of the amount of the contribu15 tion, the qualified capital distribution shall be treat16 ed as a distribution described in section 

17 529(c)(3)(C) or 223(f)(5), as the case may be, and 

18 as having been transferred to such account or pro19 gram, as the case may be, within 60 days of the dis20 tribution. 

21 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—The basis in 

22 any ownership interest with respect to the acquisition of 

23 which an amount was excluded from gross income under 

24 subsection (a) shall be reduced by an amount equal to the 

25 amount so excluded. The Secretary may prescribe such 


jbell on DSKDVH8Z91PROD with BILLS
6 

•HR 2614 IH

1 regulations as may be necessary to carry out the purposes 

2 of this subsection in the case of capital contributions to 

3 sole proprietorships.’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Paragraph (2) of section 72(t) of such Code 

6 is amended by adding at the end the following new 

7 subparagraph: 

8 ‘‘(H) QUALIFIED CAPITAL DISTRIBU9 TIONS.—Any distribution excludable from gross 

10 income under section 139F (relating to quali11 fied capital distributions).’’. 

12 (2) Subsection (a) of section 1016 of such Code 

13 is amended by striking ‘‘and’’ at the end of para14 graph (35), by striking the period at the end of 

15 paragraph (36) and inserting ‘‘, and’’, and by add16 ing at the end the following new paragraph: 

17 ‘‘(37) to the extent provided in section 

18 139F(d).’’. 

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

20 for part III of subchapter B of chapter 1 of such Code 

21 is amended by inserting before the item relating to section 

22 140 the following new section: 

‘‘Sec. 139F. Qualified capital distributions.’’. 


jbell on DSKDVH8Z91PROD with BILLS
7 

•HR 2614 IH

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

2 this section shall apply to distributions made after the 

3 date of the enactment of this Act. 

Æ 


jbell on DSKDVH8Z91PROD with BILLS