I
107TH CONGRESS
1ST SESSION
H. R. 3062
To amend the Internal Revenue Code of 1986 to allow certain small
businesses to defer payment of tax.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 9, 2001
Mr. DEMINT (for himself, Mr. BAIRD, Mr. CRANE, Mr. MATSUI, Mr. MAN-
ZULLO, Ms. VELA´ZQUEZ, Mr. TOOMEY, Mr. PASCRELL, Mr. LEWIS of
Kentucky, and Ms. HART) introduced the following bill; which was re-
ferred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow
certain small businesses to defer payment of tax.
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 ‘‘Business Retained In-
come During Growth and Expansion Act of 2001’’ or the
‘‘BRIDGE Act of 2001’’.
SEC. 2. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL
BUSINESSES.
(a) IN GENERAL.—Subchapter B of chapter 62 of the
Internal Revenue Code of 1986 (relating to extensions of
time for payment of tax) is amended by adding at the end
the following new section:
‘‘SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR
CERTAIN SMALL BUSINESSES.
‘‘(a) IN GENERAL.—An eligible small business may
elect to pay the tax imposed by chapter 1 in 4 equal in-
stallments.
‘‘(b) LIMITATION.—The maximum amount of tax
which may be paid in installments under this section for
any taxable year shall not exceed whichever of the fol-
lowing is the least:
‘‘(1) The tax imposed by chapter 1 for the tax-
able year.
‘‘(2) The amount contributed by the taxpayer
into a BRIDGE Account during such year.
‘‘(3) The excess of $250,000 over the aggregate
amount of tax for which an election under this sec-
tion was made by the taxpayer (or any predecessor)
for all prior taxable years.
‘‘(c) ELIGIBLE SMALL BUSINESS.—For purposes of
this section—
‘‘(1) IN
GENERAL.—The term ‘eligible small
business’ means, with respect to any taxable year,
any person if—
‘‘(A) such person meets the active business
requirements of section 1202(e) throughout
such taxable year,
‘‘(B) the taxpayer has gross receipts of
$10,000,000 or less for the taxable year,
‘‘(C) the gross receipts of the taxpayer for
such taxable year are at least 10 percent great-
er than the average annual gross receipts of the
taxpayer (or any predecessor) for the 2 prior
taxable years, and
‘‘(D) the taxpayer uses an accrual method
of accounting.
‘‘(2) CERTAIN RULES TO APPLY.—Rules similar
to the rules of paragraphs (2) and (3) of section
448(c) shall apply for purposes of this subsection.
‘‘(d) DATE FOR PAYMENT OF INSTALLMENTS; TIME
FOR PAYMENT OF INTEREST.—
‘‘(1) DATE FOR PAYMENT OF INSTALLMENTS.—
‘‘(A) IN GENERAL.—If an election is made
under this section for any taxable year, the first
installment shall be paid on or before the due
date for such installment and each succeeding
installment shall be paid on or before the date
which is 1 year after the date prescribed by this
paragraph for payment of the preceding install-
ment.
‘‘(B) DUE
DATE
FOR
FIRST
INSTALL-
MENT.—The due date for the first installment
for a taxable year shall be whichever of the fol-
lowing is the earliest:
‘‘(i) The date selected by the tax-
payer.
‘‘(ii) The date which is 2 years after
the date prescribed by section 6151(a) for
payment of the tax for such taxable year.
‘‘(2) TIME FOR PAYMENT OF INTEREST.—If the
time for payment of any amount of tax has been ex-
tended under this section—
‘‘(A) INTEREST FOR PERIOD BEFORE DUE
DATE OF FIRST INSTALLMENT.—Interest pay-
able under section 6601 on any unpaid portion
of such amount attributable to the period before
the due date for the first installment shall be
paid annually.
‘‘(B) INTEREST DURING INSTALLMENT PE-
RIOD.—Interest payable under section 6601 on
any unpaid portion of such amount attributable
to any period after such period shall be paid at
the same time as, and as a part of, each install-
ment payment of the tax.
‘‘(C) INTEREST IN THE CASE OF CERTAIN
DEFICIENCIES.—In the case of a deficiency to
which subsection (e)(3) applies for a taxable
year which is assessed after the due date for
the first installment for such year, interest at-
tributable to the period before such due date,
and interest assigned under subparagraph (B)
to any installment the date for payment of
which has arrived on or before the date of the
assessment of the deficiency, shall be paid upon
notice and demand from the Secretary.
‘‘(e) SPECIAL RULES.—
‘‘(1) APPLICATION
OF
LIMITATION
TO
PART-
NERS AND S CORPORATION SHAREHOLDERS.—
‘‘(A) IN GENERAL.—In applying this sec-
tion to a partnership which is an eligible small
business—
‘‘(i) the election under subsection (a)
shall be made by the partnership,
‘‘(ii) the amount referred to in sub-
section (b)(1) shall be the sum of each
partner’s tax which is attributable to items
of the partnership and assuming the high-
est marginal rate under section 1, and
‘‘(iii) the partnership shall be treated
as the taxpayer referred to in paragraphs
(2) and (3) of subsection (b).
‘‘(B) OVERALL LIMITATION ALSO APPLIED
AT PARTNER LEVEL.—In the case of a partner
in a partnership, the limitation under sub-
section (b)(3) shall be applied at the partner-
ship and partner levels.
‘‘(C) SIMILAR
RULES
FOR
S
CORPORA-
TIONS.—Rules similar to the rules of subpara-
graphs (A) and (B) shall apply to shareholders
in an S corporation.
‘‘(2) ACCELERATION OF PAYMENT IN CERTAIN
CASES.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the taxpayer ceases to meet the
requirement of subsection (c)(1)(A), or
‘‘(ii) there is an ownership change
with respect to the taxpayer,
then the extension of time for payment of tax
provided in subsection (a) shall cease to apply,
and the unpaid portion of the tax payable in in-
stallments shall be paid on or before the due
date for filing the return of tax imposed by
chapter 1 for the first taxable year following
such cessation.
‘‘(B) OWNERSHIP CHANGE.—For purposes
of subparagraph, in the case of a corporation,
the term ‘ownership change’ has the meaning
given to such term by section 382. Rules simi-
lar to the rules applicable under the preceding
sentence shall apply to a partnership.
‘‘(3) PRORATION OF DEFICIENCY TO INSTALL-
MENTS.—Rules similar to the rules of section
6166(e) shall apply for purposes of this section.
‘‘(f) BRIDGE ACCOUNT.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘BRIDGE Ac-
count’ means a trust created or organized in the
United States for the exclusive benefit of an eligible
small business, 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 deferral under subsection (b) 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) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(E) Amounts in the trust may be used
only—
‘‘(i) as security for a loan to the busi-
ness or for repayment of such loan, or
‘‘(ii) to pay the installments under
this section.
‘‘(2) ACCOUNT TAXED AS GRANTOR TRUST.—
The grantor of a BRIDGE Account shall be treated
for purposes of this title as the owner of such Ac-
count and shall be subject to tax thereon in accord-
ance with subpart E of part I of subchapter J of
this chapter (relating to grantors and others treated
as substantial owners).
‘‘(3) TIME WHEN PAYMENTS DEEMED MADE.—
For purposes of this section, a taxpayer shall be
deemed to have made a payment to a BRIDGE Ac-
count on the last day of a taxable year if such pay-
ment is made on account of such taxable year and
is made within 31⁄2 months after the close of such
taxable year.
‘‘(g) REPORTS.—The Secretary may require such re-
porting as the Secretary determines to be appropriate to
carry out this section.
‘‘(h) APPLICATION OF SECTION.—This section shall
apply to taxes imposed for taxable years beginning after
the date of the enactment of this section and before Janu-
ary 1, 2006.’’
(b) PRIORITY OF LENDER.—Subsection (b) of section
6323 of such Code is amended by adding at the end the
following new paragraph:
‘‘(11) 
LOANS
SECURED
BY
BRIDGE
AC-
COUNTS.—With respect to a BRIDGE account (as
defined in section 6168(f)) with any bank (as de-
fined in section 408(n)), to the extent of any loan
made by such bank without actual notice or knowl-
edge of the existence of such lien, as against such
bank, if such loan is secured by such account.’’
(c) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 62 of such Code is amended
by adding at the end the following new item:
‘‘Sec.
6168. Extension of time for payment of tax for certain
small businesses.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
(e) STUDY BY GENERAL ACCOUNTING OFFICE.—
(1) STUDY.—In consultation with the Secretary
of the Treasury, the Comptroller General of the
United States shall undertake a study to evaluate
the applicability (including administrative aspects)
and impact of the BRIDGE Act of 2001, including
how it affects the capital funding needs of busi-
nesses under the Act and number of businesses ben-
efiting.
(2) REPORT.—Not later than March 31, 2005,
the Comptroller General shall transmit to the Com-
mittee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the
Senate a written report presenting the results of the
study conducted pursuant to this subsection, to-
gether with such recommendations for legislative or
administrative changes as the Comptroller General
determines are appropriate.
Æ