I 
109TH CONGRESS 
1ST SESSION H. R. 3586 
To amend the Internal Revenue Code of 1986 to provide for Small Business 
Protection Accounts, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 28, 2005 
Mr. PORTER introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Small 
Business, for a period to be subsequently determined by the Speaker, in 
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
for Small Business Protection Accounts, and for other 
purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Small Business Protec-
tion Act of 2005’’. 
SEC. 2. FINDINGS. 
Congress hereby finds that—
(1) small businesses represent more than 99 
percent of all employers, 
(2) the majority of private sector employees 
work for small businesses, 
(3) more than half of all high-tech workers 
work for small businesses, 
(4) small businesses are responsible for the ma-
jority of net job creation in the United States, 
(5) more than 12 million small businesses are 
owned by women or minorities, 
(6) small businesses face unique challenges in 
accessing capital markets, 
(7) small businesses are exposed to more mar-
ket volatility than larger employers, 
(8) small businesses are hurt disproportionately 
by costs imposed by government regulations, and 
(9) small businesses are in need of reforms to 
the tax code that reflect these unique challenges. 
SEC. 3. PURPOSES. 
The purposes of this Act are— 
(1) to provide employees salaries and benefits, 
and to help ensure solvency of small businesses dur-
ing times of recession, 
(2) to encourage the formation, growth, and 
survival of small businesses,
(3) to encourage opportunities for charitable 
giving by small businesses, and 
(4) to enable small businesses to stimulate the 
national economy through increased employment and 
capital generation. 
SEC. 4. SMALL BUSINESS PROTECTION ACCOUNTS. 
(a) IN GENERAL.—Subpart C of part II of sub-
chapter E of chapter 1 of the Internal Revenue Code of 
1986 (relating to taxable year for which deductions taken) 
is amended by inserting after section 468B the following: 
‘‘SEC. 468C. SMALL BUSINESS PROTECTION ACCOUNTS. 
‘‘(a) DEDUCTION ALLOWED.—In the case of an indi-
vidual engaged in an eligible small business, there shall 
be allowed as a deduction for any taxable year the amount 
paid in cash by the taxpayer during the taxable year to 
a Small Business Protection Account. 
‘‘(b) LIMITATION.— 
‘‘(1) IN GENERAL.—The amount which a tax-
payer may pay into a Small Business Protection Ac-
count for any taxable year shall not exceed 50 per-
cent of so much of the net profit of the taxpayer 
(determined without regard to this section) which is 
attributable (determined in the manner applicable 
under section 1301) to any trade or business.
‘‘(2) CARRYOVER OF EXCESS LIMITATION.—If 
the limitation under paragraph (1) for any taxable 
year exceeds the amount paid by the taxpayer to the 
taxpayer’s Small Business Protection Account for 
such year, the limitation under paragraph (1) for 
the following taxable year (determined without re-
gard to this paragraph) shall be increased by such 
excess. 
‘‘(c) ELIGIBLE SMALL BUSINESS.—For purposes of 
this section, the term ‘eligible small business’ means any 
trade or business if— 
‘‘(1) such trade or business (or any predecessor 
thereof) meets the gross receipts test of section 
448(c) for all prior taxable years, 
‘‘(2) such trade or business is not a passive ac-
tivity (within the meaning of section 469(c)) of the 
taxpayer, 
‘‘(3) such trade or business is not a farming 
business (as defined in section 263A(e)(4)), and 
‘‘(4) such trade or business has never been de-
termined by the United States Equal Employment 
Opportunity Commission to have engaged in job dis-
crimination. 
‘‘(d) SMALL BUSINESS PROTECTION ACCOUNT.—For 
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘Small Business 
Protection Account’ means a trust created or orga-
nized in the United States for the exclusive benefit 
of the taxpayer, but only if the written governing in-
strument creating the trust meets the following re-
quirements: 
‘‘(A) No contribution will be accepted for 
any taxable year in excess of the amount al-
lowed as a deduction under subsection (a) for 
such year. 
‘‘(B) The trustee is a bank (as defined in 
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary 
that the manner in which such person will ad-
minister the trust will be consistent with the re-
quirements of this section. 
‘‘(C) The assets of the trust consist en-
tirely of cash or of obligations which have ade-
quate stated interest (as defined in section 
1274(c)(2)) and which pay such interest not 
less often than annually. 
‘‘(D) All income of the trust is distributed 
currently to the grantor. 
‘‘(E) The assets of the trust will not be 
commingled with other property except in a
common trust fund or common investment 
fund. 
‘‘(2) ACCOUNT TAXED AS GRANTOR TRUST.— 
The grantor of a Small Business Protection Account 
shall be treated for purposes of this title as the 
owner of such Account and shall be subject to tax 
thereon in accordance with subpart E of part I of 
subchapter J of this chapter (relating to grantors 
and others treated as substantial owners). 
‘‘(e) INCLUSION OF AMOUNTS DISTRIBUTED.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), there shall be includible in the gross in-
come of the taxpayer for any taxable year— 
‘‘(A) any amount distributed from a Small 
Business Protection Account of the taxpayer 
during such taxable year, and 
‘‘(B) any deemed distribution under— 
‘‘(i) subsection (f)(1) (relating to de-
posits not distributed within 5 years), 
‘‘(ii) subsection (f)(2) (relating to ces-
sation in eligible small business), and 
‘‘(iii) subparagraph (A) or (B) of sub-
section (f)(3) (relating to prohibited trans-
actions and pledging account as security).