‘‘(4) TREATMENT FOR FAILURE TO BE TREAT-
ED AS ELIGIBLE SMALL BUSINESS.—If for any tax-
able year a taxpayer which holds a small business 
start-up savings account as an eligible small busi-
ness ceases to be an eligible small business— 
‘‘(A) such account shall cease to be a small 
business start-up savings account, and 
‘‘(B) the balance of such account shall be 
treated as paid out for such taxable year in a 
distribution which is not a qualified distribu-
tion. 
‘‘(f) SPECIAL RULES.— 
‘‘(1) DENIAL OF DOUBLE BENEFIT.—Any de-
duction or credit otherwise allowed for the taxable 
year with respect to amounts described in subsection 
(e)(2)(A) shall be reduced by an amount equal to 
the qualified distributions attributable to such 
amounts. The adjusted basis of any property placed 
in service for the taxable year shall be reduced by 
the amount of any qualified distributions attrib-
utable to such property. For purposes of this para-
graph, qualified distributions shall first be treated as 
attributable to amounts described in subsection 
(e)(2)(A), then to property placed in service for the 
taxable year. 
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‘‘(2) AGGREGATION
RULE.—For purposes of 
this section, all persons treated as a single employer 
under subsection (a) or (b) of section 52, or sub-
section (m) or (o) of section 414, shall be treated as 
one person.’’. 
(b) EXCISE TAX ON EXCESS CONTRIBUTIONS AND 
NONQUALIFIED DISTRIBUTIONS.—Subtitle D of the Inter-
nal Revenue Code of 1986 is amended by adding at the 
end the following new chapter: 
‘‘CHAPTER 50A—SMALL BUSINESS START- 
UP SAVINGS ACCOUNTS 
‘‘Sec. 5000D. Tax on excess contributions to small business start-up savings 
accounts. 
‘‘Sec. 5000E. Tax on nonqualified distributions from small business start-up 
savings accounts. 
‘‘Sec. 5000F. Cross reference. 
‘‘SEC. 5000D. TAX ON EXCESS CONTRIBUTIONS TO SMALL 
BUSINESS START-UP SAVINGS ACCOUNTS. 
‘‘(a) IN GENERAL.—In the case of a small business 
start-up savings account (within the meaning of section 
7529) there is imposed for each taxable year a tax in an 
amount equal to 6 percent of the amount of the excess 
contributions to such taxpayer’s account (determined as 
of the close of the taxable year). 
‘‘(b) LIMITATION.—The amount of tax imposed by 
subsection (a) shall not exceed 6 percent of the value of 
the account (determined as of the close of the taxable 
year). 
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‘‘(c) EXCESS CONTRIBUTIONS.—For purposes of this 
section, in the case of contributions to all small business 
start-up savings accounts maintained for the benefit of a 
person, the term ‘excess contributions’ means the sum 
of— 
‘‘(1) the excess (if any) of— 
‘‘(A) the amount contributed to such ac-
counts for the taxable year, over 
‘‘(B) the amount allowable as a contribu-
tion under section 7529(d)(2)(A) for such tax-
able year, and 
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by 
the sum of— 
‘‘(A) the distributions out of the accounts 
for the taxable year, and 
‘‘(B) the excess (if any) of— 
‘‘(i) the maximum amount allowable 
as 
a 
contribution 
under 
section 
7529(d)(2)(A) for such taxable year, over 
‘‘(ii) the amount contributed to such 
accounts for such taxable year. 
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‘‘SEC. 5000E. TAX ON NONQUALIFIED DISTRIBUTIONS FROM 
SMALL BUSINESS START-UP SAVINGS AC-
COUNTS. 
‘‘(a) IN GENERAL.—If for any taxable year an 
amount is paid or distributed out of a taxpayer’s small 
business start-up savings account, there is imposed for 
such taxable year a tax in an amount equal to 10 percent 
of the portion of such amount which is includible in the 
gross income of the taxpayer. 
‘‘(b) EXCEPTION FOR DISABILITY OR DEATH.—Sub-
section (a) shall not apply if the payment or distribution 
is made after the account beneficiary becomes disabled 
within the meaning of section 72(m)(7) (but only if such 
beneficiary’s account was created before becoming so dis-
abled) or dies. 
‘‘SEC. 5000F. CROSS REFERENCE. 
‘‘For prohibited transactions, see section 4975.’’. 
(c) PROHIBITED TRANSACTIONS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
4975(e) of such Code is amended by striking ‘‘or’’ 
at the end of subparagraph (F), by striking the pe-
riod at the end of subparagraph and inserting ‘‘, 
or’’, and by adding at the end the following new sub-
paragraph: 
‘‘(H) a small business start-up savings ac-
count (within the meaning of section 7529).’’. 
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(2) SPECIAL
RULE
FOR
CEASING
TO
BE
A 
SMALL
BUSINESS
START-UP
SAVINGS
ACCOUNT.— 
Section 4975(c) of such Code (relating to tax on 
prohibited transactions) is amended by adding at the 
end the following new paragraph: 
‘‘(7) SPECIAL
RULE
FOR
SMALL
BUSINESS 
START-UP
SAVINGS
ACCOUNT.—An individual for 
whose benefit a small business start-up savings ac-
count (within the meaning of section 7529) is estab-
lished shall be exempt from the tax imposed by this 
section with respect to any transaction concerning 
such account (which would otherwise be taxable 
under this section) if, with respect to such trans-
action, the account ceases to be a small business 
start-up savings account by reason of the application 
of paragraph (3) or (4) of section 7529(e) to such 
account.’’. 
(d) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES.—Subsection (a) of section 62 of such 
Code is amended by inserting after paragraph (21) the 
following new paragraph: 
‘‘(22) CONTRIBUTIONS
TO
SMALL
BUSINESS 
START-UP SAVINGS ACCOUNTS.—The deduction al-
lowed by section 7529(d)(1)(A).’’. 
(e) CONFORMING AMENDMENTS.— 
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