I
103D CONGRESS
1ST SESSION
H. R. 104
To amend the Internal Revenue Code of 1986 to promote investment in
small businesses by providing Federal tax relief and simplification for
such businesses and their investors.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 5, 1993
Mr. MICHEL (for himself, Mr. ARCHER, and Mrs. MEYERS of Kansas) intro-
duced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to promote
investment in small businesses by providing Federal tax
relief and simplification for such businesses and their
investors.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Business Investment Act of 1993’’.
(b) AMENDMENTS OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
SEC. 2. PURPOSE.
It is the purpose of this Act to simplify Federal tax
laws applicable to small businesses. The resulting decrease
in operating costs and increase in economic return will
stimulate small business investment and create new jobs.
SEC. 3. EFFECTIVE DATE.
Except as otherwise provided, the amendments made
by this Act shall apply to taxable years beginning after
December 31, 1992.
TITLE I—INVESTMENT
INCENTIVES
SEC. 101. INCREASE IN SMALL BUSINESS EXPENSING AL-
LOWANCE.
Section 179(b)(1) (relating to dollar limitation) is
amended by striking ‘‘$10,000’’ and inserting ‘‘$25,000’’.
SEC. 102. ELECTION TO EXPENSE SMALL BUSINESS START-
UP EXPENDITURES.
(a) GENERAL RULE.—Section 195 (relating to treat-
ment of start-up expenditures) is amended by redesignat-
ing subsections (c) and (d) as subsections (d) and (e), re-
spectively, and by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c) ELECTION TO EXPENSE.—
‘‘(1) GENERAL
RULE.—Notwithstanding sub-
section (a), start-up expenditures may, at the elec-
tion of a qualified taxpayer, be allowed as a deduc-
tion for the taxable year in which the active trade
or business begins. The amount of start-up expendi-
tures allowed as a deduction under the preceding
sentence to any taxpayer shall not exceed $2,500.
‘‘(2) QUALIFIED TAXPAYER.—A taxpayer is a
qualified taxpayer if the taxpayer reasonably expects
or knows (as of the due date, determined with re-
gard to extensions, for filing its return for the tax-
able year in which the active trade or business be-
gins) that the taxpayer’s gross receipts for the 12-
month period beginning with the month in which the
active trade or business begins will not exceed (or
has not exceeded) $500,000.
‘‘(3) IN
ADDITION
TO
ELECTION
TO
AMOR-
TIZE.—If the taxpayer makes an election under
paragraph (1), start-up expenses that exceed $2,500
may, at the election of the taxpayer, be treated as
deferred expenses as provided in subsection (b).
‘‘(4) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52 shall be treated as one person for pur-
poses of this subsection.’’.
(b) CONFORMING AMENDMENT.—Paragraph (1) of
section 195(e) (as redesignated by subsection (a)) is
amended by striking ‘‘subsection (b)’’ and inserting ‘‘sub-
section (b) or (c)’’.
SEC. 103. SMALL BUSINESS AMT EXCEPTIONS.
(a) GENERAL RULE.—Part VI of subchapter A of
chapter 1 is amended by inserting after section 58 the fol-
lowing new section:
‘‘SEC. 58A. SPECIAL EXCEPTIONS FOR SMALL BUSINESSES.
‘‘(a) GENERAL RULE.—For purposes of this part—
‘‘(1) the adjustments listed in subsection (b),
and
‘‘(2) the preferences listed in subsection (c),
shall not be taken into account for any purpose in comput-
ing alternative minimum taxable income from any quali-
fied small business activity of the taxpayer.
‘‘(b) ADJUSTMENTS NOT TAKEN INTO ACCOUNT BY
QUALIFIED SMALL BUSINESS TAXPAYERS.—The adjust-
ments listed in this subsection are the adjustments pro-
vided by the following provisions:
‘‘(1) Section 56(a)(1) (relating to depreciation).
‘‘(2) Section 56(a)(2) (relating to mining explo-
ration and development costs).
‘‘(3) Section 56(a)(3) (relating to long-term
contracts).
‘‘(4) Section 56(a)(5) (relating to pollution con-
trol facilities).
‘‘(5) Section 56(a)(6) (relating to installment
sales).
‘‘(6) Section 56(b)(2) (relating to circulation
and research expenditures).
‘‘(7) Section 56(c) (relating to special adjust-
ments for corporations).
‘‘(c) PREFERENCES NOT TAKEN INTO ACCOUNT BY
QUALIFIED SMALL BUSINESSES.—The preferences listed
in this subsection are the preferences provided by the fol-
lowing provisions:
‘‘(1) Section 57(a)(1) (relating to depletion).
‘‘(2) Section 57(a)(2) (relating to intangible
drilling costs).
‘‘(3) Section 57(a)(4) (relating to bad debts re-
serve).
‘‘(4) Section 57(a)(7) (relating to accelerated
depreciation or amortization).
‘‘(d) DEFINITIONS.—
‘‘(1) QUALIFIED SMALL BUSINESS ACTIVITY.—
For purposes of this section, the term ‘qualified
small business activity’ means any trade or business
activity conducted by an individual or by a corpora-
tion or partnership if such individual or entity (as
the case may be) meets the $1,000,000 gross re-
ceipts test of paragraph (3) for all prior taxable
years beginning after December 31, 1991.
‘‘(2) $1,000,000 GROSS RECEIPTS TEST.—For
purposes of paragraph (1)—
‘‘(A) IN GENERAL.—An individual or en-
tity meets the $1,000,000 gross receipts test of
this subsection for any prior taxable year if the
average annual gross receipts of such person or
entity for the 3-taxable year period ending with
such prior taxable year does not exceed
$1,000,000.
‘‘(B) 
AGGREGATION
AND
SPECIAL
RULES.—For purposes of subparagraph (A),
aggregation and special rules similar to the
rules of paragraphs (2) and (3) of section
448(c) shall apply in determining whether an
individual or entity satisfies the $1,000,000
gross receipts test.
‘‘(e) FRESH START TRANSITIONAL RULES FOR AN
ACTIVITY THAT CEASES TO BE A QUALIFIED SMALL
BUSINESS ACTIVITY.—
‘‘(1) IN GENERAL.—If an activity ceases to be
a qualified small business activity, the adjustments
and preferences with respect to the activity listed in
subsections (b) and (c) shall be applied in computing
alternative minimum taxable income for the taxable
year of the cessation and subsequent taxable years
by substituting the last day of the last taxable year
in which the activity was as a qualified small busi-
ness activity for December 31, 1986, and December
31, 1989. Any references to January 1, 1987, or
January 1, 1990, in sections 56 and 57 shall be
treated as if such references were to the first day of
the taxable year in which the activity ceased to be
a qualified small business activity.
‘‘(2) EFFECT OF ADJUSTMENTS PRIOR TO THE
ENACTMENT OF THIS SECTION.—
‘‘(A) IN
GENERAL.—In determining the
amount of any adjustments or preferences with
respect to an activity in a taxable year in which
(or after) the activity ceases to be a qualified
small business activity, any of the adjustments
listed in subsection (b) and previously taken
into account with respect to the activity in a
taxable year beginning on or before December
31, 1992, shall be disregarded.