I 
111TH CONGRESS 
2D SESSION 
H. R. 5978 
To amend the Internal Revenue Code of 1986 to allow loans from certain 
retirement plans for the payment of certain small business expenses. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 29, 2010 
Ms. TSONGAS (for herself, Ms. CLARKE, Ms. RICHARDSON, Mr. SIMPSON, Mr. 
KAGEN, Mr. CONNOLLY of Virginia, Mr. LANCE, Mr. COURTNEY, Mr. 
KILDEE, and Mr. COFFMAN of Colorado) 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 certain retirement plans for the payment of certain 
small business expenses. 
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 Tax 
Relief and Retirement Restoration Act of 2010’’. 
SEC. 2. FINDINGS. 
Congress finds the following: 
(1) Small businesses are critical to the eco-
nomic recovery of the United States. 
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(2) As a consequence of the recession that 
began in December 2007, even fundamentally 
healthy small businesses have been unable to access 
the credit they need. 
(3) Data released by the Federal Deposit Insur-
ance Corporation indicate that lending to small busi-
nesses fell in 2009 by ‘‘the largest percentage de-
cline since 1942’’. 
(4) Limited access to credit has forced many 
small business owners to use their personal assets, 
including retirement savings, to ensure that their en-
terprises survive. 
(5) Such actions have helped to mitigate fur-
ther job losses. 
(6) While it is appropriate for Congress to re-
sist calls to allow individual retirement account hold-
ers to withdraw loans during normal economic times, 
the current recession represents an extraordinary 
situation during which extraordinary measures must 
be taken. 
(7) A targeted and temporary suspension of 
penalties for loans made from retirement accounts 
will help small businesses recover and provide a di-
rect infusion of funds into the economy. 
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SEC. 3. LOANS FROM INDIVIDUAL RETIREMENT PLANS FOR 
CERTAIN SMALL BUSINESS EXPENSES. 
(a) IN GENERAL.—Subsection (e) of section 408 of 
the Internal Revenue Code of 1986 (relating to tax treat-
ment of accounts and annuities) is amended by adding at 
the end the following new paragraph: 
‘‘(7) TEMPORARY EXCEPTION FOR LOANS FROM 
INDIVIDUAL
RETIREMENT
PLANS
FOR
CERTAIN 
SMALL BUSINESS EXPENSES.— 
‘‘(A) IN GENERAL.—On election of the tax-
payer, paragraphs (2) and (3) of this subsection 
and section 4975 shall not apply with respect to 
any qualified small business loan from an indi-
vidual retirement plan to the individual for 
whose benefit the plan is maintained. 
‘‘(B) 
QUALIFIED
SMALL
BUSINESS 
LOAN.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘quali-
fied small business loan’ means, with re-
spect to any taxable year, a loan the prin-
cipal amount of which does not exceed the 
amounts paid or incurred by the taxpayer, 
with respect to a trade or business carried 
on by the taxpayer— 
‘‘(I) for the purchase of property 
which is placed in service during the 
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taxable year which is used in the 
trade or business of the taxpayer and 
which is subject to the allowance for 
depreciation provided in section 167 
or is real property used in such trade 
or business, or— 
‘‘(II) for salaries or wages (other 
than for bonuses) of unrelated em-
ployees in such trade or business for 
the taxable year. 
‘‘(ii) AGGREGATION
OF
LOANS.—All 
loans with respect to which the taxpayer 
elects the application of this paragraph for 
the taxable year shall be aggregated for 
purposes of determining whether a loan is 
a qualified small business loan under 
clause (i). 
‘‘(C) REQUIREMENTS RELATED TO LOAN 
REPAYMENTS.— 
‘‘(i) REQUIREMENT
THAT
LOAN
BE 
REPAID WITHIN 5 YEARS.—Paragraph (1) 
shall not apply to any loan unless such 
loan is required, by its terms, to be repaid 
within 5 years. 
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‘‘(ii) REQUIREMENT OF LEVEL AMOR-
TIZATION.—Rules similar to the rules of 
section 72(p)(2)(C) shall apply for pur-
poses of this subsection. 
‘‘(iii) FAILURE TO REPAY TREATED AS 
DISTRIBUTION.—A qualified small business 
loan shall not be treated as a distribution 
from the individual retirement plan except 
that any repayment of a qualified small 
business loan which is not made on the 
date that such payment is due shall be 
treated as a distribution from the indi-
vidual retirement plan on such date. 
‘‘(D) RELATED
PERSONS.—For purposes 
of this paragraph, a person shall be treated as 
related to another person if the relationship be-
tween such persons would result in the disallow-
ance of losses under section 267 or 707(b). 
‘‘(E) TERMINATION.—Subparagraph (A) 
shall not apply to any loan made after Decem-
ber 31, 2010.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to loans made after Decem-
ber 31, 2007. 
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(2) DISTRIBUTIONS PRIOR TO DATE OF ENACT-
MENT.—In the case of any distribution made after 
December 31, 2007, and before the date of the en-
actment of this Act, if the taxpayer so elects (at 
such time and in such form and manner as the Sec-
retary of the Treasury shall prescribe), such dis-
tribution shall be treated as a loan for purposes of 
section 408(e)(7) of the Internal Revenue Code of 
1986, but only to the extent such distribution does 
not exceed the amount described in subparagraph 
(B) thereof (in the taxable year of distribution), and 
only if beginning on a date not later than 1 year 
after the date of the enactment of this Act such dis-
tribution 
meets 
the 
requirements 
of 
section 
408(e)(7) of such Code. 
SEC. 4. QUALIFIED SMALL BUSINESS LOANS FROM QUALI-
FIED EMPLOYER PLAN. 
(a) IN GENERAL.—Subsection (p) of section 72 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new paragraph: 
‘‘(6) SPECIAL
RULE
FOR
QUALIFIED
SMALL 
BUSINESS LOANS.— 
‘‘(A) IN GENERAL.—On the election of the 
taxpayer, paragraph (1) shall not apply to any 
loan to the extent that such loan is a qualified 
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small business loan that meets the requirements 
of subparagraphs (B)(i) and (C) of paragraph 
(2). 
‘‘(B) APPLICATION
OF
LIMITATION
AND 
COORDINATION
WITH
PRE-EFFECTIVE
DATE 
LOANS.—Any qualified small business loan shall 
be taken into account under paragraph (2) only 
with respect to amounts received as a loan 
(other than qualified small business loans) after 
the date of the enactment of this paragraph. 
‘‘(C) 
QUALIFIED
SMALL
BUSINESS 
LOAN.—For purposes of this paragraph, the 
term ‘qualified small business loan’ shall have 
the meaning given such term in section 
408(e)(7)(B). 
‘‘(D) 
TERMINATION.—This 
paragraph 
shall not apply to any amount received as a 
loan after December 31, 2010.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to loans made after December 31, 
2007. 
(c) DISTRIBUTIONS PRIOR
TO DATE
OF ENACT-
MENT.—In the case of any distribution made after Decem-
ber 31, 2007, and before the date of the enactment of 
this Act, if the taxpayer so elects (at such time and in 
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such form and manner as the Secretary of the Treasury 
shall prescribe), such distribution shall be treated as a 
loan to which section 72(p)(1) of the Internal Revenue 
Code of 1986 does not apply, but only to the extent such 
distribution does not exceed the amount described in sec-
tion 408(e)(7)(B) of such Code (in the taxable year of dis-
tribution), and only if beginning on a date not later than 
1 year after the date of the enactment of this Act such 
distribution is structured as a loan which meets the re-
quirements of subparagraphs (B)(i) and (C) of section 
72(p)(2) of such Code. 
Æ 
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