I 
112TH CONGRESS 
1ST SESSION H. R. 2614 
To amend the Internal Revenue Code of 1986 to allow distributions from 
retirement accounts to start a business. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 21, 2011 
Mr. PAUL 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 
distributions from retirement accounts to start a business. 
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 ‘‘The Entrepreneurship 
Tax Cut Act of 2011’’. 
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SEC. 2. EXCLUSION FROM GROSS INCOME OF QUALIFIED 
CAPITAL DISTRIBUTION FROM TAX-FAVORED 
ACCOUNTS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code is amended by insert-
ing before section 140 the following new section: 
‘‘SEC. 139F. QUALIFIED CAPITAL DISTRIBUTIONS. 
‘‘(a) IN GENERAL.—Gross income shall not include 
any qualified capital distribution from a tax-favored ac-
count. 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED CAPITAL DISTRIBUTION.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
capital distribution’ means any distribution to 
an individual from a tax-favored account of 
such individual to the extent such distribution 
is used to acquire an eligible interest in an enti-
ty in connection with beginning an active trade 
or business. 
‘‘(B) ELIGIBLE INTEREST.—For purposes 
of this paragraph, the term ‘eligible interest’ 
means, with respect to any entity, an ownership 
interest in such entity of at least 40 percent of 
the total combined voting power of all classes of 
interests entitled to vote, or at least 40 percent 
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of the total value of all ownership interests in 
the entity. 
‘‘(C) SOLE PROPRIETORSHIPS.—Any cap-
ital contribution to a sole proprietorship shall 
be treated as meeting the requirements of sub-
paragraphs (A) and (B) if such requirements 
would be met if such proprietorship were a cor-
poration. 
‘‘(D) BEGINNING
OF
TRADE
OR
BUSI-
NESS.—Rules similar to the rules of section 
195(c)(2) shall apply for purposes of this para-
graph. 
‘‘(2) TAX-FAVORED ACCOUNT.—The term ‘tax- 
favored account’ means any of the following: 
‘‘(A) An eligible retirement plan (as de-
fined in section 402(c)(8)(B)). 
‘‘(B) A health savings account described in 
section 223. 
‘‘(C) A Roth IRA. 
‘‘(D) A qualified tuition program described 
in section 529. 
‘‘(c) AMOUNT DISTRIBUTED MUST BE REPAID.— 
‘‘(1) IN GENERAL.—Any individual who receives 
a qualified capital distribution may make one or 
more contributions in an aggregate amount not to 
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exceed the amount of such distribution to a tax-fa-
vored account of which such individual is a bene-
ficiary and to which a rollover contribution of such 
distribution could be made under section 402(c), 
403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), 
223(f)(5),or 529(c)(3)(C), as the case may be. 
‘‘(2) TREATMENT
OF
REPAYMENTS
OF
DIS-
TRIBUTIONS
FROM
ELIGIBLE
RETIREMENT
PLANS 
OTHER THAN IRAS.—For purposes of this title, if a 
contribution is made pursuant to paragraph (1) with 
respect to a qualified capital distribution from an el-
igible retirement plan other than an individual re-
tirement plan, then the taxpayer shall, to the extent 
of the amount of the contribution, be treated as hav-
ing received the qualified capital distribution in an 
eligible rollover distribution (as defined in section 
402(c)(4)) and as having transferred the amount to 
the eligible retirement plan in a direct trustee to 
trustee transfer within 60 days of the distribution. 
‘‘(3) TREATMENT
OF
REPAYMENTS
FOR
DIS-
TRIBUTIONS FROM IRAS.—For purposes of this title, 
if a contribution is made pursuant to paragraph (1) 
with respect to a qualified capital distribution from 
an individual retirement plan, then, to the extent of 
the amount of the contribution, the qualified capital 
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distribution shall be treated as a distribution de-
scribed in section 408(d)(3) and as having been 
transferred to the eligible retirement plan in a direct 
trustee to trustee transfer within 60 days of the dis-
tribution. 
‘‘(4) OTHER
TAX-FAVORED
ACCOUNTS.—For 
purposes of this title, if a contribution is made pur-
suant to paragraph (1) with respect to a qualified 
capital distribution— 
‘‘(A) from a health savings account de-
scribed in section 223, or 
‘‘(B) from a qualified tuition program de-
scribed in section 529, 
then, to the extent of the amount of the contribu-
tion, the qualified capital distribution shall be treat-
ed 
as 
a 
distribution 
described 
in 
section 
529(c)(3)(C) or 223(f)(5), as the case may be, and 
as having been transferred to such account or pro-
gram, as the case may be, within 60 days of the dis-
tribution. 
‘‘(d) DENIAL OF DOUBLE BENEFIT.—The basis in 
any ownership interest with respect to the acquisition of 
which an amount was excluded from gross income under 
subsection (a) shall be reduced by an amount equal to the 
amount so excluded. The Secretary may prescribe such 
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regulations as may be necessary to carry out the purposes 
of this subsection in the case of capital contributions to 
sole proprietorships.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 72(t) of such Code 
is amended by adding at the end the following new 
subparagraph: 
‘‘(H) 
QUALIFIED
CAPITAL
DISTRIBU-
TIONS.—Any distribution excludable from gross 
income under section 139F (relating to quali-
fied capital distributions).’’. 
(2) Subsection (a) of section 1016 of such Code 
is amended by striking ‘‘and’’ at the end of para-
graph (35), by striking the period at the end of 
paragraph (36) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph: 
‘‘(37) to the extent provided in section 
139F(d).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 of such Code 
is amended by inserting before the item relating to section 
140 the following new section: 
‘‘Sec. 139F. Qualified capital distributions.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made after the 
date of the enactment of this Act. 
Æ 
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