I 
113TH CONGRESS 
1ST SESSION 
H. R. 815 
To amend the Internal Revenue Code of 1986 to make certain dividends 
and distributions paid to individuals from certain small businesses exempt 
from tax to the extent of the increased wages of the small business. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 25, 2013 
Mr. OWENS 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 make 
certain dividends and distributions paid to individuals 
from certain small businesses exempt from tax to the 
extent of the increased wages of the small business. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EXEMPTION FOR CERTAIN DISTRIBUTIONS OF 
SMALL 
BUSINESSES 
TO 
EXTENT 
OF 
IN-
CREASED WAGES. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting before section 140 the following new section: 
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‘‘SEC. 139F. INCREASED-WAGE DISTRIBUTIONS OF SMALL 
BUSINESSES. 
‘‘(a) APPLICATION TO CORPORATIONS.— 
‘‘(1) IN GENERAL.—In the case of a distribu-
tion to an individual from a corporation which is a 
small business concern, gross income shall not in-
clude any increased-wage exempt-dividend. 
‘‘(2) INCREASED-WAGE
EXEMPT-DIVIDEND.— 
For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘increased- 
wage exempt-dividend’ means any dividend 
properly designated as an increased-wage ex-
empt-dividend under subparagraph (B). 
‘‘(B) DESIGNATION.—A corporation which 
is a small business concern may designate any 
dividend paid by such corporation as an in-
creased-wage exempt-dividend to the extent that 
the aggregate amount of the dividends so des-
ignated for any taxable year does not exceed the 
wage increase amount for such taxable year. 
‘‘(b) APPLICATION TO PARTNERSHIPS.— 
‘‘(1) IN GENERAL.—In the case of a distribu-
tion to an individual from a partnership which is a 
small business concern— 
‘‘(A) no gain shall be recognized on any in-
creased-wage partnership distribution, and 
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‘‘(B) in the case of an increased-wage part-
nership distribution with respect to which no 
gain is recognized under section 731(a)(2), no 
reduction shall be made to the adjusted basis to 
the partner of his interest in the partnership 
under section 733(1). 
‘‘(2) 
INCREASED-WAGE
PARTNERSHIP
DIS-
TRIBUTION.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘increased- 
wage partnership distribution’ means any cash 
distribution from the partnership to a partner 
which is properly designated as an increased- 
wage partnership distribution under subpara-
graph (B). 
‘‘(B) DESIGNATION.—A partnership which 
is a small business concern may designate any 
cash distribution as an increased-wage partner-
ship distribution to the extent that the aggre-
gate amount of the distributions so designated 
for any taxable year does not exceed the wage 
increase amount for such taxable year. 
‘‘(c) WAGE INCREASE AMOUNT.—For purposes of 
this section— 
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‘‘(1) IN GENERAL.—The term ‘wage increase 
amount’ means, with respect to any corporation or 
partnership for any taxable year, the sum of— 
‘‘(A) the excess (if any) of— 
‘‘(i) the aggregate qualified wages 
paid or incurred by the corporation or 
partnership for such taxable year, over 
‘‘(ii) the aggregate qualified wages 
paid or incurred by the corporation or 
partnership for the preceding taxable year, 
plus 
‘‘(B) any increased-wage exempt-dividends 
or increased-wage partnership distributions re-
ceived by such corporation or partnership dur-
ing such taxable year. 
‘‘(2) QUALIFIED WAGES.—The term ‘qualified 
wages’ has the meaning which would be given such 
term by section 3121(a) if paragraph (1) thereof 
were applied by treating the contribution and benefit 
base as being equal to $50,000. 
‘‘(3) AGGREGATION RULE.—All persons treated 
as a single employer under subsection (a) or (b) of 
section 52 shall be treated as one person for pur-
poses of this subsection. 
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‘‘(4) TREATMENT
OF
PREDECESSORS.—Any 
reference in this subsection to a corporation or part-
nership shall include a reference to any predecessor 
of such corporation or partnership. 
‘‘(d) SMALL BUSINESS CONCERN.—For purposes of 
this section, the term ‘small business concern’ has the 
meaning given such term by section 3 of the Small Busi-
ness Act.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1(h)(11)(B)(ii) of such Code is 
amended by striking ‘‘and’’ at the end of subclause 
(II), by striking the period at the end of subclause 
(III) and inserting ‘‘, and’’, and by adding at the 
end the following new subclause: 
‘‘(IV) any increased-wage ex-
empt-dividend (as defined in section 
139F).’’. 
(2) The table of sections for part III of sub-
chapter B of chapter 1 of such Code is amended by 
inserting before the item relating to section 140 the 
following new item: 
‘‘Sec. 139F. Increased-wage distributions.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
Æ 
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