Incentivizing Small Business Retirement Savings Act

To amend the Internal Revenue Code of 1986 to enhance the credit for small employer pension plan startup costs. 1. Short title This Act may be cited as the Incentivizing Small Business Retirement Savings Act 2. Credits for employer contributions by certain eligible employers (a) In general Section 45E (f) Additional credit for employer contributions by certain eligible employers (1) In general In the case of an eligible employer, the credit allowed for the taxable year under subsection (a) (determined without regard to this subsection, and after the application of subsection (b)) shall be increased by an amount equal to the applicable percentage of employer contributions (other than any elective deferrals (as defined in section 402(g)(3))) made by the employer to an eligible employer plan (other than a defined benefit plan (as defined in section 414(j))) for the taxable year. (2) Limitations (A) Dollar limitation The amount determined under paragraph (1) (before the application of subparagraph (B)) with respect to any employee of the employer shall not exceed $1,000. (B) Credit phase-out With respect to any taxable year, the $1,000 amount under subparagraph (A) shall be reduced by 2 percent for each employee by which the number of employees of the employer for the preceding taxable year exceeds 50. (C) Only non-highly compensated employees taken into account For purposes of paragraph (1), only contributions with respect to employees who are not highly compensated employee (as defined in section 414(q)) shall be taken into account. (3) Applicable percentage For purposes of this subsection, the applicable percentage is— (A) for the first credit year with respect to the employer for purposes of subsection (b) and the taxable year immediately following such first credit year, 100 percent, (B) for the 2nd taxable year following such first credit year, 75 percent, (C) for the 3rd taxable year following such first credit year, 50 percent, (D) for the 4th taxable year following such first credit year, 25 percent, and (E) zero percent thereafter. . (b) Disallowance of deduction Section 45E(e)(2) (2) Disallowance of deduction No deduction shall be allowed— (A) for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to so much of the portion of the credit determined under subsection (a) as is properly allocable to such costs, or (B) for that portion of the employer contributions made by the employer for the taxable year which is equal to so much of the credit increase determined under subsection (f) as is properly allocable to such contributions. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: Incentivizing Small Business Retirement Savings Act This bill allows eligible small employers an additional pension plan startup cost tax credit for a specified percentage of their contributions to an pension plan established for the benefit of their non-highly compensated employees. The amount of such credit may not exceed $1,000 per employee and is subject to a phaseout if the employer has more than 50 employees.