Title: To defer the tax of certain sales of employer stock and reduce certain retirement-related excise taxes, and for other purposes.
Policy area: Taxation

Summary:
This bill extends to all domestic corporations (including S corporations) the deferral of tax on certain sales of employer stock to employee stock ownership plans (ESOPs) and reduces certain retirement-related excise taxes.
Specifically, the bill reduces excise tax rates of certain excess accumulations in tax-exempt retirement plans and on failures to take required minimum distributions from such plans. It also allows employers who establish a tax-exempt 403(b) pension plan to participate in a multiple employer plan.
The bill extends the tax credit for small employer pension plan startup costs to employers that join an existing plan.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8606 Introduced in House (IH)]

<DOC>






116th CONGRESS
  2d Session
                                H. R. 8606

To defer the tax of certain sales of employer stock and reduce certain 
        retirement-related excise taxes, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 16, 2020

  Mr. Kind (for himself, Mr. Kelly of Pennsylvania, and Mr. Smith of 
  Missouri) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and Labor, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
To defer the tax of certain sales of employer stock and reduce certain 
        retirement-related excise taxes, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. DEFERRAL OF TAX FOR CERTAIN SALES OF EMPLOYER STOCK TO 
              EMPLOYEE STOCK OWNERSHIP PLAN SPONSORED BY S CORPORATION.

    (a) In General.--Section 1042(c)(1)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``domestic C corporation'' and inserting 
``domestic corporation''.
    (b) Effective Date.--The amendment made by this section shall apply 
to sales after the date of the enactment of this Act.

SEC. 2. REDUCTION IN EXCISE TAX ON CERTAIN ACCUMULATIONS IN QUALIFIED 
              RETIREMENT PLANS.

    (a) In General.--Subsection (a) of section 4974 of the Internal 
Revenue Code of 1986 is amended by striking ``50 percent'' and 
inserting ``25 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2019.

SEC. 3. REDUCTION IN EXCISE TAX ON FAILURES TO TAKE REQUIRED MINIMUM 
              DISTRIBUTIONS.

    (a) In General.--Section 4974 of the Internal Revenue Code of 1986, 
as amended by section 2 of this Act, is further amended by adding at 
the end the following new subsection:
    ``(e) Reduction of Tax in Certain Cases.--
            ``(1) Reduction.--In the case of a taxpayer who--
                    ``(A) corrects, during the correction window, a 
                shortfall of distributions from an individual 
                retirement plan which resulted in imposition of a tax 
                under subsection (a), and
                    ``(B) submits a return, during the correction 
                window, reflecting such tax (as modified by this 
                subsection),
        the first sentence of subsection (a) shall be applied by 
        substituting `10 percent' for `25 percent'.
            ``(2) Correction window.--For purposes of this subsection, 
        the term `correction window' means the period of time beginning 
        on the date on which the tax under subsection (a) is imposed 
        with respect to a shortfall of distributions from an individual 
        retirement plan, and ending on the earlier of--
                    ``(A) the date on which the Secretary initiates an 
                audit, or otherwise demands payment, with respect to 
                the shortfall of distributions, or
                    ``(B) the last day of the second taxable year that 
                begins after the end of the taxable year in which the 
                tax under subsection (a) is imposed.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SECTION 4. MULTIPLE EMPLOYER 403(B) PLANS.

    (a) In General.--Section 403(b) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(15) Multiple employer plans.--
                    ``(A) In general.--Except in the case of a church 
                plan, this subsection shall not be treated as failing 
                to apply to an annuity contract solely by reason of 
                such contract being purchased under a plan maintained 
                by more than 1 employer.
                    ``(B) Treatment of employers failing to meet 
                requirements of plan.--
                            ``(i) In general.--In the case of a plan 
                        maintained by more than 1 employer, this 
                        subsection shall not be treated as failing to 
                        apply to an annuity contract held under such 
                        plan merely because of one or more employers 
                        failing to meet the requirements of this 
                        subsection if such plan satisfies rules similar 
                        to the rules of section 413(e)(2) with respect 
                        to any such employer failure.
                            ``(ii) Additional requirements in case of 
                        non-governmental plans.--A plan shall not be 
                        treated as meeting the requirements of this 
                        subparagraph unless the plan meets the 
                        requirements of subparagraph (A) or (B) of 
                        section 413(e)(1), except in the case of a 
                        multiple employer plan maintained solely by any 
                        of the following: A State, a political 
                        subdivision of a State, or an agency or 
                        instrumentality of any one or more of the 
                        foregoing.''.
    (b) Annual Registration for 403(b) Multiple Employer Plan.--Section 
6057 of such Code is amended by redesignating subsection (g) as 
subsection (h) and by inserting after subsection (f) the following new 
subsection:
    ``(g) 403(b) Multiple Employer Plans Treated as One Plan.--In the 
case of annuity contracts to which this section applies and to which 
section 403(b) applies by reason of the plan under which such contracts 
are purchased meeting the requirements of paragraph (15) thereof, such 
plan shall be treated as a single plan for purposes of this section.''.
    (c) Annual Information Returns for 403(b) Multiple Employer Plan.--
Section 6058 of the Internal Revenue Code of 1986 is amended by 
redesignating subsection (f) as subsection (g) and by inserting after 
subsection (e) the following new subsection:
    ``(f) 403(b) Multiple Employer Plans Treated as One Plan.--In the 
case of annuity contracts to which this section applies and to which 
section 403(b) applies by reason of the plan under which such contracts 
are purchased meeting the requirements of paragraph (15) thereof, such 
plan shall be treated as a single plan for purposes of this section.''.
    (d) Amendments to Employee Retirement and Income Security Act of 
1974.--
            (1) Treated as pooled employer plan.--
                    (A) In general.--Section 3(43)(A) of the Employee 
                Retirement and Income Security Act of 1974 is amended--
                            (i) in clause (ii), by striking ``section 
                        501(a) of such Code or'' and inserting ``501(a) 
                        of such Code, a plan that consists of contracts 
                        described in section 403(b) of such Code, or''; 
                        and
                            (ii) in the flush text at the end, by 
                        striking ``the plan.'' and inserting ``the 
                        plan, but such term shall include any program 
                        (other than a governmental plan) maintained for 
                        the benefit of the employees of more than 1 
                        employer that consists of contracts described 
                        in section 403(b) of such Code and that meets 
                        the requirements of subparagraph (A) or (B) of 
                        section 413(e)(1) of such Code.''.
                    (B) Conforming amendments.--Sections 
                3(43)(B)(v)(II) and 3(44)(A)(i)(I) of such Act are each 
                amended by striking ``section 401(a) of such Code or'' 
                and inserting ``401(a) of such Code, a plan that 
                consists of contracts described in section 403(b) of 
                such Code, or''.
            (2) Fiduciaries.--Section 3(43)(B)(ii) of such Act is 
        amended--
                    (A) by striking ``trustees meeting the requirements 
                of section 408(a)(2) of the Internal Revenue Code of 
                1986'' and inserting ``trustees (or other fiduciaries 
                in the case of a plan that consists of contracts 
                described in section 403(b) of the Internal Revenue 
                Code of 1986) meeting the requirements of section 
                408(a)(2) of such Code'', and
                    (B) by striking ``holding'' and inserting ``holding 
                (or causing to be held under the terms of a plan 
                consisting of such contracts)''.
    (e) Regulations Relating to Plan Termination.--The Secretary of the 
Treasury (or the Secretary's designee) shall prescribe such regulations 
as may be necessary to clarify the treatment of a plan termination by 
an employer in the case of plans to which section 403(b)(15) of such 
Code applies.
    (f) Modification of Model Plan Language.--
            (1) Plan notifications.--The Secretary of the Treasury (or 
        the Secretary's designee) shall modify the model plan language 
        published under section 413(e)(5) of the Internal Revenue Code 
        of 1986 to include language which notifies participating 
        employers which are exempt from tax under section 501(a) of 
        such Code that the plan is subject to the Employee Retirement 
        and Income Security Act of 1974 and that such employer is a 
        plan sponsor with respect to its employees participating in the 
        multiple employer plan and, as such, has certain fiduciary 
        duties with respect to the plan and to its employees.
            (2) Model plans for multiple employer 403(b) non-
        governmental plans.--For plans to which section 403(b)(15)(A) 
        of the Internal Revenue Code of 1986 applies (other than a plan 
        maintained for its employees by a State, a political 
        subdivision of a State, or an agency or instrumentality of any 
        one or more of the foregoing) the Secretary shall publish model 
        plan language similar to model plan language published under 
        section 413(e)(5) of such Code.
    (g) No Inference With Respect to Church Plans.--Regarding any 
application of section 403(b) of the Internal Revenue Code of 1986 to 
an annuity contract purchased under a church plan (as defined in 
section 414(e) of such Code) maintained by more than 1 employer, or to 
any application of rules similar to section 413(e) of such Code to such 
a plan, no inference shall be made from section 403(b)(15)(A) of such 
Code (as added by this Act) not applying to such plans.
    (h) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2020.
            (2) Rule of construction.--Nothing in the amendments made 
        by subsection (a) shall be construed as limiting the authority 
        of the Secretary of the Treasury or the Secretary's delegate 
        (determined without regard to such amendment) to provide for 
        the proper treatment of a failure to meet any requirement 
        applicable under such Code with respect to one employer (and 
        its employees) in the case of a plan to which section 
        403(b)(15) applies.

SEC. 5. APPLICATION OF CREDIT FOR SMALL EMPLOYER PENSION PLAN STARTUP 
              COSTS TO EMPLOYERS WHICH JOIN AN EXISTING PLAN.

    (a) In General.--Section 45E(d)(3)(A) of the Internal Revenue Code 
of 1986 is amended by striking ``effective'' and inserting ``effective 
with respect to the eligible employer''.
    (b) Effective Date.--The amendment made by this section shall apply 
to eligible employer plans which become effective with respect to the 
eligible employer after the date of the enactment of this Act.

SEC. 6. HARMONIZATION OF TREATMENT OF IRAS WITH EMPLOYER PLANS.

    (a) Statute of Limitations.--Section 6501(l) of the Internal 
Revenue Code of 1986 is amended--
            (1) in paragraph (1), by inserting ``(other than with 
        respect to an individual retirement plan)'' after ``section 
        4975'', and
            (2) by adding at the end the following new paragraph:
            ``(4) Individual retirement plans.--For purposes of any tax 
        imposed by section 4973, 4974, or 4975 in connection with an 
        individual retirement plan, the return referred to in this 
        section shall be the income tax return filed by the person on 
        whom the tax under such section is imposed for the year in 
        which the act (or failure to act) giving rise to the liability 
        for such tax occurred. In the case of a person who is not 
        required to file an income tax return for such year--
                    ``(A) the return referred to in this section shall 
                be the income tax return that such person would have 
                been required to file but for the fact that such person 
                was not required to file such return, and
                    ``(B) the 3-year period referred to in subsection 
                (a) with respect to the return shall be deemed to begin 
                on the date by which the return would have been 
                required to be filed (excluding any extension 
                thereof).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2020.
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