I 
109TH CONGRESS 
2D SESSION 
H. R. 5198 
To amend the Internal Revenue Code of 1986 to allow a credit against 
income tax for qualified equity investments in certain small businesses. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 26, 2006 
Mr. MANZULLO (for himself and Mr. POMEROY) 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 a 
credit against income tax for qualified equity investments 
in certain small businesses. 
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 ‘‘Access to Capital for 
Entrepreneurs Act of 2006’’. 
SEC. 2. EQUITY INVESTMENT IN SMALL BUSINESS TAX 
CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
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its) is amended by adding at the end the following new 
section: 
‘‘SEC. 45N. EQUITY INVESTMENT IN SMALL BUSINESS TAX 
CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of a qualified investor, the equity investment 
in small business tax credit determined under this section 
for the taxable year is an amount equal to 25 percent of 
the amount of each qualified equity investment made by 
the qualified investor during the taxable year. 
‘‘(b) CREDIT AMOUNT.—For purposes of determining 
the small business tax credit under subsection (a)— 
‘‘(1) LIMITATION PER QUALIFIED INVESTOR.— 
The amount of qualified equity investments made by 
the qualified investor during the taxable year shall 
not exceed $500,000. 
‘‘(2) LIMITATION PER QUALIFIED SMALL BUSI-
NESS.—The amount of qualified equity investments 
made by the qualified investor in a qualified small 
business during the taxable year shall not exceed 
$250,000. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED INVESTOR.—The term ‘quali-
fied investor’ means— 
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‘‘(A) an individual who qualifies as an ac-
credited investor under rules and regulations 
prescribed by the Commissioner of the Securi-
ties and Exchange Commission, or 
‘‘(B) a partnership with respect to which 
all of the partners are individuals who qualify 
as accredited investors under rules and regula-
tions prescribed by the Commissioner of the Se-
curities and Exchange Commission. 
‘‘(2) QUALIFIED
EQUITY
INVESTMENT.—The 
term ‘qualified equity investment’ means the trans-
fer of cash or cash equivalents in exchange for stock 
or capital interest in a qualified small business. 
‘‘(3) QUALIFIED SMALL BUSINESS.—The term 
‘qualified small business’ means a private small busi-
ness concern (within the meaning of section 3 of the 
Small Business Act)— 
‘‘(A) that meets the applicable size stand-
ard (as in effect on January 1, 2005) estab-
lished by the Administrator of the Small Busi-
ness Administration pursuant to subsection 
(a)(2) of such section, and 
‘‘(B) has its principal place of business in 
the United States. 
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For purposes of this section, all members of the 
same controlled group of corporations (within the 
meaning of section 267(f)) and all persons under 
common control (within the meaning of section 
52(b)) shall be treated as 1 qualified small business. 
‘‘(d) ACTIVE BUSINESS REQUIREMENT.— 
‘‘(1) IN GENERAL.—Holding stock in a quali-
fied small business shall not be treated as a qualified 
equity investment unless, during substantially all of 
the qualified investor’s holding period for such stock, 
such qualified small business meets the active busi-
ness requirements of paragraph (2). 
‘‘(2) REQUIREMENTS.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the requirements of this paragraph 
are met by a qualified small business for any 
period if during such period at least 80 percent 
(by value) of the assets of such qualified small 
business are used by such qualified small busi-
ness in the active conduct of 1 or more quali-
fied trades or businesses. 
‘‘(B) SPECIAL RULE FOR CERTAIN ACTIVI-
TIES.—For purposes of subparagraph (A), if, in 
connection with any future qualified trade or 
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