Small Business Tax Compliance Relief Act of 2015

To amend the Internal Revenue Code of 1986 to improve the tax treatment of small businesses. 1. Short title, etc (a) Short title This Act may be cited as the Small Business Tax Compliance Relief Act of 2015 (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title, etc. TITLE I—Small business tax reform Sec. 101. Expansion of cash accounting threshold. Sec. 102. Modification of Safe Harbor for Expensing of Acquisition or Production Costs of Tangible Property. Sec. 103. Removal of computer equipment from listed property. Sec. 104. Deduction for health insurance costs in computing self-employment taxes. Sec. 105. Flexible retirement account for small businesses. Sec. 106. Repeal of simple plans and simple IRAs. Sec. 107. Modification of rules relating to the termination of partnerships and S corporations. Sec. 108. Repeal of special rules for top-heavy plans. TITLE II—Provisions related to the Internal Revenue Service Sec. 201. Requirement to convene small business review panels. Sec. 202. Penalty waivers in cases of good faith efforts. Sec. 203. Inflation adjustments for certain provisions. Sec. 204. Report on uniform definitions. Sec. 205. Report on improvements to customer service. Sec. 206. Reasonable cause exception for failure to report certain transactions. Sec. 207. Reasonable cause exception. Sec. 208. Return due date modifications. TITLE III—Provisions related to start-up businesses Sec. 301. Modification of application of rules for nonqualified deferred compensation plans. Sec. 302. Reduction in holding period for qualified small business stock. Sec. 303. Extension of rollover period for qualified small business stock. I Small business tax reform 101. Expansion of cash accounting threshold (a) In general (1) In general Paragraph (3) of section 448(b) $5,000,000 $10,000,000 (2) Conforming amendments Section 448(c) of such Code is amended— (A) by striking $5,000,000 $10,000,000 (B) by adding at the end the following new paragraph: (4) Inflation adjustment In the case of any taxable year beginning in a calendar year after 2015, the dollar amount contained in subsection (b)(3) and paragraph (1) of this subsection shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 2014 calendar year 1992 If any amount as adjusted under this subparagraph is not a multiple of $100,000, such amount shall be rounded to the nearest multiple of $100,000. . (b) Exemption from inventory requirement Section 471 (c) Section Not To Apply to Certain Cash Method Taxpayers If a taxpayer— (1) would otherwise be required to use inventories under this section for any taxable year, but (2) the taxpayer meets the gross receipts test of section 448(b) for the taxable year and is eligible and elects to use the cash receipts and disbursements method of accounting for the taxable year, then the requirement to use inventories shall not apply to the taxpayer for the taxable year. . (c) Effective date and special rule (1) In general The amendments made by this section shall apply to taxable years beginning after December 31, 2014. (2) Change in method of accounting In the case of any taxpayer changing the taxpayer’s method of accounting for any taxable year under the amendments made by this section— (A) such change shall be treated as initiated by the taxpayer; and (B) such change shall be treated as made with the consent of the Secretary of the Treasury. 102. Modification of Safe Harbor for Expensing of Acquisition or Production Costs of Tangible Property (a) Requirement To Modify Safe Harbor The Secretary of the Treasury or his delegate shall, within 180 days after the date of enactment of this Act, modify Treasury Regulations section 1.263(a)–1(f) by— (1) increasing the amount of the de minimis safe harbor for taxpayers without applicable financial statements from $500 to $2,500, (2) requiring adequate records showing the dollar amount being expensed in lieu of accounting procedures in place at the beginning of the taxable year, and (3) modifying the definition of applicable financial statement to include reviewed financial statements. (b) Effective date The modifications required by subsection (a) shall apply to taxable years beginning after December 31, 2014. 103. Removal of computer equipment from listed property (a) In general Section 280F(d)(4)(A) and (b) Conforming amendment Section 280F(d)(4) (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 104. Deduction for health insurance costs in computing self-employment taxes (a) In general Paragraph (4) of section 162(l) for taxable years beginning before January 1, 2010, or after December 31, 2010 for taxable years beginning before January 1, 2015. (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2014. 105. Flexible retirement account for small businesses (a) In general Section 408 (r) Flexible retirement account defined (1) In general For purposes of this title, the term flexible retirement account (2) Maintained by small business (A) In general This paragraph is satisfied for a year with respect to a flexible retirement account that is part of a plan of an employer if the employer has not more than 100 full-time employees on the last day of the previous year. (B) Aggregation rules For purposes of subparagraph (A), all employees of any trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer. (3) Participation requirements This paragraph is satisfied with respect to a flexible retirement account for a year only if for such year the employer maintains a flexible retirement account on behalf of each employee who— (A) has attained age 21, and (B) received not less than $3,300 in compensation (within the meaning of section 415(c)(3)) from the employer in any calendar quarter during the previous year. (4) Automatic enrollment; employee may elect not to participate This paragraph is satisfied with respect to a flexible retirement account that is part of a plan of an employer if under the terms of the plan— (A) each employee described in paragraph (3) (without regard to paragraph (5))— (i) may elect— (I) to have the employer make contributions on behalf of the employee to a flexible retirement account, or (II) to have such payments paid to the employee directly in cash, and (ii) is deemed to have made the election under clause (i)(I), effective as of the first day of the first calendar quarter beginning after the employee becomes an employee described in paragraph (3), in an amount equal to 3 percent of the employee's compensation, until the employee specifically elects not to have such contributions made or to have contributions made in a different amount, and (B) amounts contributed pursuant clause (i) or (ii) of subparagraph (A) are invested in a diversified common stock fund chosen by the financial institution holding the flexible retirement account until the employee specifically elects to direct such contributions to a different investment option. (5) Inclusion of self-employed individuals For purposes of this subsection, the term employee compensation (6) Employer contributions The employer maintaining a flexible retirement account may make qualified nonelective contributions (as defined in section 401(m)(4)(C)) to the flexible retirement accounts of employees described in paragraph (3), but only if such contributions made with respect to all such employees bear a uniform relationship to the compensation of the employees. (7) Financial institutions This paragraph is satisfied with respect to a flexible retirement account if— (A) such account is maintained at a financial institution, including a bank, credit union, insurance company, broker or dealer registered with the Securities and Exchange Commission, and such other entities as the Secretary may by regulation designate, (B) such financial institution— (i) provides for not less than 3 investment options among which the employee may choose to direct the contributions to and balances held in the employee's flexible retirement account, each of which is diversified and has materially different risk and return characteristics, and (ii) provides a quarterly report to each employee with respect to whom it holds a flexible retirement account describing the contributions to the account, withdrawals from the account, and investment performance of the account, and (C) the contributions to and balances held in the flexible retirement account of an employee may not be invested in securities of the employer maintaining such account. . (b) Limitation on deductions by employer Subsection (h) of section 404 (1) by striking pensions pensions and flexible retirement accounts (2) by striking a simplified employee pension a simplified employee pension or a flexible retirement account (3) by striking For purposes of subsection (a)(7), a simplified employee pension shall be treated as if it were In the case of a simplified employee pension or a flexible retirement account, section (a)(7) shall be applied by treating such pension or account as if it were (c) Taxability of beneficiary Subsection (h) of section 402 (1) by striking pensions pensions and flexible retirement accounts (2) by striking 408(k)) 408(k)) or a flexible retirement account (as defined in section 408(r)) (3) by striking section 408(k)(6) subsection (k)(6) or (r)(4) of section 408 (4) by striking the simplified employee pension the simplified employee pension or flexible retirement account (5) by striking a simplified employee pension a simplified employee pension or flexible retirement account (6) by striking reduced in the case reduced, with respect to a simplified employee pension, in the case (d) Conforming amendments (1) Subparagraph (A) of section 219(g)(5) or (vii) a flexible retirement account (within the meaning of section 408(r)), or . (2) Paragraph (6) of section 280G(b) of such Code is amended by striking or , or (E) a flexible retirement account (as defined in section 408(r)). . (3) Subsection (j) of section 408 of such Code is amended— (A) by striking pensions pensions and flexible retirement accounts (B) by striking pension, pension or flexible retirement account, (4) Subsections (b), (c), (m)(4)(B), (n)(3)(B), and (u)(1)(C) of section 414 of such Code are each amended by inserting , 408(r) 408(p) (5) Paragraph (6) of section 414(u) of such Code is amended by inserting , any flexible retirement account under section 408(r) 408(p) (6) Subparagraph (B) of section 414(v)(3) of such Code is amended by inserting , 408(r) 408(k) (7) Clause (iv) of section 414(v)(6)(A) of such Code is amended by striking (k) or (p) (k), (p), or (r) (8) Paragraph (5) of section 414(w) of such Code is amended by striking and , and (F) a flexible retirement account (as defined in section 408(r)). . (9) Paragraph (2) of section 415(a) of such Code is amended— (A) by striking or (B) by striking the comma at the end of subparagraph (C) and inserting , or (C) by inserting after subparagraph (C) the following new subparagraph: (D) a flexible retirement account described in section 408(r), , (D) by striking or pension pension, or account (E) by striking or 408(k) 408(k), or 408(r) (10) Subparagraph (C) of section 3121(a)(5) of such Code is amended by inserting , or a flexible retirement account (as defined in section 408(r) 408(k)(6) (11) Subparagraph (C) of section 3306(a)(5) of such Code is amended by inserting , or a flexible retirement account (as defined in section 408(r) 408(k)(6) (12) Subparagraph (A) of section 4972(d)(1) of such Code is amended by striking and , and (v) any flexible retirement account (within the meaning of section 408(r)). . (e) Effective date The amendments made by this section shall apply to contributions made after December 31, 2015. 106. Repeal of simple plans and simple IRAs (a) Simple 401(k) Paragraph (11) of section 401(k) (E) Termination This paragraph shall not apply to any cash or deferred arrangement adopted after December 31, 2016. . (b) Simple IRAs Subsection (p) of section 408 (11) Termination This subsection shall not apply to any plan established after December 31, 2016. . 107. Modification of rules relating to the termination of partnerships and S corporations (a) No termination of partnership on sale or exchange of assets (1) In general Section 708(b)(1) only if only if no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership. (2) Conforming amendments (A) Section 168(i)(7)(B) of such Code is amended by striking the last sentence. (B) Section 743(e) of such Code is amended by striking paragraph (4). (C) Section 774 of such Code is amended by striking subsection (c). (b) No termination of S corporation status due to excessive passive investment income Paragraph (3) of section 1362(d) (D) Termination This paragraph shall not apply to taxable years ending after the date of the enactment of the Small Business Tax Compliance Relief Act of 2015 . 108. Repeal of special rules for top-heavy plans Section 416 (j) Termination This section shall not apply to plan years beginning after the date of the enactment of the Small Business Tax Compliance Relief Act of 2015 . II Provisions related to the Internal Revenue Service 201. Requirement to convene small business review panels Section 609(d) of title 5, United States Code, is amended— (1) in paragraph (2), by striking and (2) in paragraph (3), by striking the period and inserting ; and (3) by adding at the end the following: (4) the Internal Revenue Service. . 202. Penalty waivers in cases of good faith efforts The Commissioner of Internal Revenue may waive the application of any provision of the Internal Revenue Code of 1986 (other than a criminal penalty) if it is shown that the taxpayer acted in good faith or failure to comply with the provision was due to reasonable cause. 203. Inflation adjustments for certain provisions (a) In general Chapter 77 7529. Inflation adjustments (a) In general In the case of any taxable year beginning in a calendar year after 2015, each of the specified dollar amounts shall be increased by an amount equal to— (1) such dollar amount, multiplied by (2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2014 calendar year 1992 (b) Specified dollar amounts For purposes of subsection (a), the specified dollar amounts are— (1) the $50,000 amount in section 79(a)(1), (2) each of the $5,250 amounts in section 127(a)(2), (3) each of the $500 amounts in paragraphs (11)(A), (11)(B), and (12) of section 170(f), (4) the $5,000 amount in section 170(f)(11)(C), (5) the $10,000,000 amount in section 263A(b)(2), (6) each of the dollar amounts in section 274(b)(1), (7) each of the $400 amounts in section 274(j), (8) the $1,600 amount in section 274(j)(2)(B), (9) the $10,000,000 amount in section 1202(b)(1), (10) each of the $50,000,000 amounts in section 1202(d)(1), (11) the $50,000 amount in section 1244(b)(1), and (12) the $1,000,000 in section 1244(c)(3)(A). (c) Rounding (1) Any increase determined under paragraph (5), (9), or (10) of subsection (b) shall be rounded to the nearest multiple of $100,000. (2) Any increase determined under paragraph (1), (4), (11), or (12) of subsection (b) shall be rounded to the nearest multiple of $1,000. (3) Any increase determined under paragraph (2) of subsection (b) shall be rounded to the nearest multiple of $500. (4) Any increase determined under paragraph (3), (7), or (8) of subsection (b) shall be rounded to the nearest multiple of $100. (5) Any increase determined under paragraph (6) of subsection (b) shall be rounded to the nearest multiple of $5. . (b) Conforming amendments (1) Section 1202(b)(3) of such Code is amended by striking paragraph (1)(A) shall be applied by substituting $5,000,000 $10,000,000 the amount under paragraph (1)(A) shall be 50 percent of such dollar amount (determined without regard to this paragraph) (2) Section 1244(b)(2) of such Code is amended by striking $100,000 200 percent of the amount under paragraph (1) (c) Clerical amendment The table of sections for chapter 77 of such Code is amended by adding at the end the following new item: Sec. 7529. Inflation adjustments. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 204. Report on uniform definitions Not later than June 30, 2016, the Commissioner of Internal Revenue shall submit to the Committee on Small Business and Entrepreneurship of the Senate, the Committee on Finance of the Senate, and the Committee on Ways and Means of the House of Representatives a report detailing changes in law to make statutory definitions in the Internal Revenue Code of 1986 relating to small businesses consistent across different provisions of such Code. Such report shall include recommendations on wording such definitions in a manner that is easy to understand for a layman not familiar with the Internal Revenue Code of 1986. 205. Report on improvements to customer service Not later than June 30, 2016, the Commissioner of Internal Revenue shall submit to the Committee on Small Business and Entrepreneurship of the Senate, the Committee on Finance of the Senate, and the Committee on Ways and Means of the House of Representatives a report detailing specific ways to improve customer service to small businesses, including objectively measurable goals for how to reduce response times. 206. Reasonable cause exception for failure to report certain transactions (a) In general Subsection (d) of section 6707A (d) Reasonable cause waiver No penalty shall be imposed under this section with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect. . (b) Conforming amendments (1) Section 6664(d)(3) if the penalty for such failure was rescinded under section 6707A(d) if it is shown that such failure is due to reasonable cause and not to willful neglect (2) Section 6707(c) of such Code is amended to read as follows: (c) Reasonable cause waiver No penalty shall be imposed under this section with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect. . (c) Effective date The amendments made by this section shall take effect on the date of the enactment of this Act. 207. Reasonable cause exception (a) In general No assessable penalty or addition to tax shall be imposed under the Internal Revenue Code of 1986 if it is shown that an action, or failure to act, by the taxpayer with regard to any material element was due to reasonable cause and the taxpayer acted in good faith. (b) Coordination Subsection (a) shall not apply to any assessable penalty or addition to tax for which there is a provision of the Internal Revenue Code which provides for the nonapplication of such penalty or addition if the taxpayer's action (or failure to act) was due to reasonable cause. 208. Return due date modifications (a) New due date for partnership form 1065, S corporation form 1120S, and C corporation form 1120 (1) Partnerships (A) In general Section 6072 (f) Returns of partnerships Returns of partnerships under section 6031 made on the basis of the calendar year shall be filed on or before the 15th day of March following the close of the calendar year, and such returns made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year. . (B) Conforming amendment Section 6072(a) of such Code is amended by striking 6017, or 6031 or 6017 (2) S corporations (A) In general So much of subsection (b) of 6072 of such Code as precedes the second sentence thereof is amended to read as follows: (b) Returns of certain corporations Returns of S corporations under sections 6012 and 6037 made on the basis of the calendar year shall be filed on or before the 31st day of March following the close of the calendar year, and such returns made on the basis of a fiscal year shall be filed on or before the last day of the third month following the close of the fiscal year. . (B) Conforming amendments (i) Section 1362(b) of such Code is amended— (I) by striking 15th last (II) by striking 2 1/2 3 (III) by striking 2 months and 15 days 3 months (ii) Section 1362(d)(1)(C)(i) of such Code is amended by striking 15th last (iii) Section 1362(d)(1)(C)(ii) of such Code is amended by striking such 15th day the last day of the 3d month thereof (3) Conforming amendments relating to C corporations (A) Section 170(a)(2)(B) of such Code is amended by striking third month 4th month (B) Section 563 of such Code is amended by striking third month 4th month (C) Section 1354(d)(1)(B)(i) of such Code is amended by striking 3d month 4th month (D) Subsections (a) and (c) of section 6167 of such Code are each amended by striking third month 4th month (E) Section 6425(a)(1) of such Code is amended by striking third month 4th month (F) Subsections (b)(2)(A), (g)(3), and (h)(1) of section 6655 of such Code are each amended by striking 3rd month 4th month (4) Effective date The amendments made by this subsection shall apply to returns for taxable years beginning after December 31, 2015. (b) Modification of due dates by regulation In the case of returns for taxable years beginning after December 31, 2013, the Secretary of the Treasury or the Secretary's delegate shall modify appropriate regulations to provide as follows: (1) The maximum extension for the returns of partnerships filing Form 1065 shall be a 6-month period beginning on the due date for filing the return (without regard to any extensions). (2) The maximum extension for the returns of trusts and estates filing Form 1041 shall be a 5½-month period beginning on the due date for filing the return (without regard to any extensions). (3) The maximum extension for the returns of employee benefit plans filing Form 5500 shall be an automatic 3½-month period beginning on the due date for filing the return (without regard to any extensions). (4) The maximum extension for the Forms 990 (series) returns of organizations exempt from income tax shall be an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (5) The maximum extension for the returns of organizations exempt from income tax that are required to file Form 4720 returns of excise taxes shall be an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (6) The maximum extension for the returns of trusts required to file Form 5227 shall be an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (7) The maximum extension for the returns of Black Lung Benefit Trusts required to file Form 6069 returns of excise taxes shall be an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (8) The maximum extension for a taxpayer required to file Form 8870 shall be an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (9) The due date of Form 3520–A, Annual Information Return of a Foreign Trust with a United States Owner, shall be the 15th day of the 4th month after the close of the trust's taxable year, and the maximum extension shall be a 6-month period beginning on such day. (10) The due date of FinCEN Form 114 (relating to Report of Foreign Bank and Financial Accounts) shall be April 15 with a maximum extension for a 6-month period ending on October 15, and with provision for an extension under rules similar to the rules of 26 C.F.R. 1.6081–5. For any taxpayer required to file such form for the first time, the Secretary of the Treasury may waive any penalty for failure to timely request or file an extension. (11) Taxpayers filing Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, shall be allowed to extend the time for filing such form separately from the income tax return of the taxpayer, for an automatic 6-month period beginning on the due date for filing the return (without regard to any extensions). (c) Corporations Permitted Statutory Automatic 6-Month Extension of Income Tax Returns (1) In general Section 6081(b) 3 months 6 months (2) Effective date The amendment made by this section shall apply to returns for taxable years beginning after December 31, 2015. III Provisions related to start-up businesses 301. Modification of application of rules for nonqualified deferred compensation plans (a) Rules only apply to plans of publicly traded companies (1) In general Section 409A nonqualified deferred compensation plan specified nonqualified deferred compensation plan (2) Specified nonqualified deferred compensation plan Section 409A(d)(1) of such Code is amended to read as follows: (1) Specified nonqualified deferred compensation plan (A) In general The term specified nonqualified deferred compensation plan (i) a qualified employer plan, and (ii) any bona fide vacation leave, sick leave, compensatory time, disability pay, or death benefit plan. (B) Specified employer For purposes of subparagraph (A), the term specified employer (i) the stock of which is publicly traded on an established securities market or otherwise, or (ii) which is a member of a controlled group of corporations (within the meaning of section 1563(a), determined without regard to section 1563(a)(4)) one of which is publicly traded on an established securities market. . (b) Conforming amendments (1) The last sentence of section 409A(a)(2)(B)(i) For purposes of the preceding sentence, a specified employee is a key employee (as defined in section 416(i) without regard to paragraph (5) thereof) of the employer. (2) The heading of section 409A of such Code is amended by inserting specified nonqualified (3) The item relating to section 409A in the table of sections for subpart A of part I of subchapter D of chapter 1 of such Code is by inserting specified nonqualified (c) Effective date The amendments made by this section shall apply to amounts deferred after the date of the enactment of this Act. 302. Reduction in holding period for qualified small business stock (a) In general Paragraph (1) of section 1202(a) 5 years 3 years (b) Conforming amendments (1) Paragraph (2) of section 1202(b) of such Code is amended by striking 5 years 3 years (2) Subparagraph (A) of section 1202(g)(2) of such Code is amended by striking 5 years 3 years (3) Subparagraph (C) of section 1202(h)(2) of such Code is amended by striking 5-year 3-year (4) Subparagraph (A) of section 1202(j)(1) of such Code is amended by striking 5 years 3 years (c) Effective date The amendments made by this section shall apply to stock issued after the date of the enactment of this Act. 303. Extension of rollover period for qualified small business stock (a) In general Paragraph (1) of section 1045(a) 60-day period 1-year period (b) Conforming amendment Paragraph (3) of section 1045(b) of such Code is amended by striking 60-day period 1-year period (c) Effective date The amendment made by this section shall apply to sales after the date of the enactment of this Act.

Summary: Small Business Tax Compliance Relief Act of 2015 This bill amends provisions of the the Internal Revenue Code relating to the taxation of small businesses to: allow small business entities with gross receipts not exceeding $10 million (currently, $5 million) to use the cash method of accounting and an exemption from the requirement to use inventories; eliminate restrictions on the depreciation of computers or peripheral equipment; extend the tax deduction for the health insurance costs of self-employed individuals; allow small business entities to maintain pension plans designated as flexible retirement accounts; repeal provisions for simple pension plans and simple individual retirement accounts and special rules for top-heavy pension plans; require inflation adjustments after 2015 to the dollar amounts of specified tax exclusions and deductions; allow a reasonable cause exception to noncompliance penalties; modify return due dates for partnerships, C corporations, S corporations, and other entities; modifiy the application of tax rules for nonqualified deferred compensation plans; and reduce from 5 years to 3 years the required holding period for qualified small business stock and extend the rollover period for such stock. The bill directs: (1) the Department of the Treasury to modify Treasury regulations for the expensing of tangible property to increase from $500 to $2,500 the de minimis safe harbor amount for taxpayers without applicable financial statements; and (2) the Internal Revenue Service to implement procedures for the review of regulations affecting small business and report on uniform statutory definitions relating to small business and on improvements in customer service to small business.