To amend the Internal Revenue Code of 1986 to provide a payroll tax holiday for small businesses.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Payroll Tax Holiday Act of 2009''.

SEC. 2. PAYROLL TAX HOLIDAY FOR SMALL BUSINESSES.

    (a) In General.--Subchapter C of chapter 21 of the Internal Revenue 
Code of 1986 (relating to Federal Insurance Contributions Act) is 
amended by redesignating section 3128 as section 3129 and by inserting 
after section 3127 the following new section:

``SEC. 3128. PAYROLL TAX HOLIDAY FOR SMALL BUSINESSES DURING PORTION OF 
              2009.

    ``(a) Payroll Taxes.--In the case of an eligible small business, 
the rate of the taxes imposed by sections 3101(a) and 3111(a) shall be 
zero with respect to remuneration paid during the payroll tax holiday 
period, including for purposes of determining the rates of tax under 
sections 3201(a) and 3221(a) with respect to compensation paid during 
such period.
    ``(b) Self-Employment Taxes.--In the case of an eligible small 
business--
            ``(1) In general.--For purposes of the tax imposed by 
        section 1401(a), the self-employment income of the taxpayer for 
        the taxable year (determined without regard to this subsection) 
        shall be reduced by the payroll tax holiday period income for 
        such taxable year.
            ``(2) Tax on employee representatives under the railroad 
        retirement tax act.--For purposes of the tax imposed by section 
        3211(a), the compensation of the taxpayer subject to tax under 
        such section for the taxable year (determined without regard to 
        this subsection) shall be reduced by the payroll tax holiday 
        period income for such taxable year for purposes of applying so 
        much of the rate of such tax as is determined by reference to 
        the taxes imposed by sections 3101(a) and 3111(a).
            ``(3) Payroll tax holiday period income.--For purposes of 
        this subsection, the payroll tax holiday period income for any 
        taxable year is the amount equal to the applicable percentage 
        of--
                    ``(A) the self-employment income for such taxable 
                year in the case of the tax imposed by section 1401(a), 
                and
                    ``(B) the compensation subject to tax under section 
                3211(a) in the case of the tax impose by section 
                3211(a).
            ``(4) Applicable percentage.--For purposes of paragraph 
        (3), the applicable percentage is the percentage determined by 
        dividing--
                    ``(A) the number of days during the taxable year 
                which are within the payroll tax holiday period, by
                    ``(B) the number of days during the taxable year.
    ``(c) Eligible Small Business; Payroll Tax Holiday Period.--For 
purposes of this section--
            ``(1) Eligible small business.--
                    ``(A) In general.--The term `eligible small 
                business' means any person engaged in a trade or 
                business if such person employed no more than 50 
                employees on the first day of the payroll tax holiday 
                period.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) all persons treated as a single 
                        employer under subsection (b), (c), (m), or (o) 
                        of section 414 shall be treated as 1 taxpayer, 
                        and
                            ``(ii) temporary lay-offs shall be 
                        disregarded.
            ``(2) Payroll tax holiday period.--The term `payroll tax 
        holiday period' means the period--
                    ``(A) after the last day of the month which 
                includes the date of the enactment of this section, and
                    ``(B) before January 1, 2010.
    ``(d) Limitation on Reduction in Employer Taxes.--
            ``(1) In general.--If at the close of the payroll tax 
        holiday period--
                    ``(A) the aggregate reduction under this section in 
                the employer taxes, exceeds
                    ``(B) the aggregate increase in employee 
                compensation or capital expenditures during the payroll 
                tax holiday period as compared to the comparable period 
                ending on the day before the payroll tax holiday 
                period,
        then the applicable employer tax (determined without regard to 
        this subsection) for the first payroll period beginning after 
        the payroll tax holiday period shall be increased by such 
        excess.
            ``(2) Employer taxes.--For purposes of subparagraph (A), 
        the term `employer taxes' means--
                    ``(A) the taxes imposed by sections 3111(a) and 
                3221(a), and
                    ``(B) so much of the taxes imposed by sections 
                1401(a) and 3211(a) as does not exceed the tax 
                determined at the rate imposed by section 3111(a).
    ``(e) Trust Funds Held Harmless.--There are hereby appropriated 
(out of any money in the Treasury not otherwise appropriated) for each 
fiscal year to the trust funds under section 201 of the Social Security 
Act and the Social Security Equivalent Benefit Account under section 
15A of the Railroad Retirement Act of 1974 (45 U.S.C. 231n-1) an amount 
equal to the reduction in the transfers to such fund for such fiscal 
year by reason of this section.
    ``(f) Employer Notification.--The Secretary shall notify small 
business employers of the payroll tax holiday period in any manner the 
Secretary deems appropriate.''.
    (b) Conforming Amendment.--The table of sections for such 
subchapter C is amended by redesignating the item relating to section 
3128 as relating to section 3129 and by inserting after the item 
relating to section 3127 the following new item:

``Sec. 3128. Payroll tax holiday for small businesses during portion of 
                            2009.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to remuneration 
        paid after the last day of the month which includes the date of 
        the enactment of this Act.
            (2) Self-employment taxes.--So much of section 3128 of the 
        Internal Revenue Code of 1986 (as added by this section) as 
        relates to the taxes imposed by sections 1401(a) and 3211(a) 
        shall apply to taxable years ending after such last day.

Summary: Payroll Tax Holiday Act of 2009 - Amends the Internal Revenue Code to eliminate employment and self-employment taxes between the enactment of this Act and January 1, 2010, for small business owners who employ 50 or fewer employees.