I 
110TH CONGRESS 
1ST SESSION 
H. R. 126 
To amend the Internal Revenue Code of 1986 to allow loans from individual 
retirement plans for qualified small business capital assets. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 4, 2007 
Mr. FORTENBERRY 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 loans 
from individual retirement plans for qualified small busi-
ness capital assets. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. LOANS FROM INDIVIDUAL RETIREMENT PLANS 
FOR QUALIFIED SMALL BUSINESS CAPITAL 
ASSETS. 
(a) EXEMPTION FROM PROHIBITED TRANSACTION 
RULES.—Section 4975 of the Internal Revenue Code of 
1986 (relating to tax on prohibited transactions) is 
amended by redesignating subsections (h) and (i) as sub-
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sections (i) and (j), respectively, and by inserting after 
subsection (g) the following new subsection: 
‘‘(h) SPECIAL RULE FOR LOANS FOR QUALIFIED 
SMALL BUSINESS CAPITAL ASSETS.— 
‘‘(1) IN GENERAL.—The prohibitions provided 
in subsection (c) shall not apply to any qualified 
small business loan from an individual retirement 
plan to the individual for whose benefit the plan is 
maintained to the extent that such loan (when added 
to the outstanding balance of all other such loans) 
does exceed the lesser of— 
‘‘(A) $50,000, reduced by the excess (if 
any) of— 
‘‘(i) the highest outstanding balance 
of such loans during the 1-year period end-
ing on the day before the date on which 
such loan was made, over 
‘‘(ii) the outstanding balance of such 
loans on the date on which such loan was 
made, or 
‘‘(B) the greater of— 
‘‘(i) one-half of the amount available 
for distribution under the plan, or 
‘‘(ii) $10,000. 
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‘‘(2) QUALIFIED SMALL BUSINESS LOAN.—For 
purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
small business loan’ means a loan the proceeds 
of which are used by the individual for whose 
benefit the individual retirement plan is estab-
lished to acquire qualified small business capital 
assets. 
‘‘(B) QUALIFIED
SMALL
BUSINESS
CAP-
ITAL ASSETS.—The term ‘qualified small busi-
ness capital assets’ means— 
‘‘(i) stock in a domestic corporation 
acquired by the taxpayer at its original 
issue, 
‘‘(ii) any capital or profits interest in 
a domestic partnership acquired by the 
taxpayer from the partnership, and 
‘‘(iii) tangible property acquired by 
the taxpayer substantially all of the use of 
which is in a trade or business of the tax-
payer, 
but only if the taxpayer is an active participant 
in such trade or business or, in the case of in-
terests in a corporation or partnership de-
scribed in clauses (i) and (ii), only if the tax-
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payer is an active participant in a trade or busi-
ness of such corporation or partnership. 
‘‘(3) REQUIREMENT THAT LOAN BE REPAYABLE 
WITHIN 5 YEARS.—Paragraph (1) shall not apply to 
any loan unless such loan, by its terms, is required 
to be repaid within 5 years. 
‘‘(4) REQUIREMENT
OF
LEVEL
AMORTIZA-
TION.—Rules similar to the rules of section 
72(p)(2)(C) shall apply for purposes of this sub-
section.’’. 
(b) CONFORMING AMENDMENT.—Subsection (e) of 
section 408 of such Code (relating to tax treatment of ac-
counts and annuities) is amended by adding at the end 
the following new paragraph: 
‘‘(7) EXCEPTION FOR LOANS FROM INDIVIDUAL 
RETIREMENT PLANS FOR QUALIFIED SMALL BUSI-
NESS CAPITAL EXPENDITURES.—In the case of a 
qualified small business loan (as defined in section 
4975(h)(2)) from an individual retirement plan— 
‘‘(A) such plan shall not fail to be treated 
as an individual retirement plan under para-
graph (2) or (3) solely because of such loan, 
and 
‘‘(B) such loan shall not be treated as a 
distribution from such plan.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to loans made after the date of 
the enactment of this Act. 
Æ 
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