		II
		Calendar No. 365
		112th CONGRESS
		2d Session
		S. 2343
		IN THE SENATE OF THE UNITED STATES

			April 24 (legislative
			 day, April 23), 2012
			Mr. Reid introduced the
			 following bill; which was read twice and ordered placed on the
			 calendar

		A BILL
		To amend the Higher Education Act of 1965 to extend the
		  reduced interest rate for Federal Direct Stafford Loans, and for other
		  purposes.

		1.Short titleThis Act may be cited as the
			 Stop the Student Loan Interest Rate
			 Hike Act of 2012.
		2.Interest rate
			 extensionSection 455(b)(7)(D)
			 of the Higher Education Act of 1965 (20 U.S.C. 1087e(b)(7)(D)) is
			 amended—
			(1)in the matter
			 preceding clause (i), by striking and before July 1, 2012, and
			 inserting and before July 1, 2013,; and
			(2)in clause (v), by
			 striking and before July 1, 2012, and inserting and
			 before July 1, 2013,.
			3.Employment tax
			 treatment of professional service businesses
			(a)In
			 generalSection 1402 of the
			 Internal Revenue Code of 1986 is amended by adding at the end the following new
			 subsection:

					(m)Special rules
				for professional service businesses
						(1)Shareholders
				providing services to specified S corporations
							(A)In
				generalIn the case of an applicable shareholder who provides
				substantial services with respect to a professional service business referred
				to in subparagraph (C) of a specified S corporation—
								(i)such shareholder
				shall be treated as engaged in the trade or business of such professional
				service business with respect to items of income or loss described in section
				1366 which are attributable to such business, and
								(ii)such
				shareholder's net earnings from self-employment shall include such
				shareholder’s pro rata share of such items of income or loss, except that in
				computing such pro rata share of such items the exceptions provided in
				subsection (a) shall apply.
								(B)Treatment of
				family membersExcept as
				otherwise provided by the Secretary, the applicable shareholder’s pro rata
				share of items referred to in subparagraph (A) shall be increased by the pro
				rata share of such items of each member of such applicable shareholder’s family
				(within the meaning of section 318(a)(1)) who does not provide substantial
				services with respect to such professional service business.
							(C)Specified S
				corporationFor purposes of this subsection, the term
				specified S corporation means—
								(i)any S corporation
				which is a partner in a partnership which is engaged in a professional service
				business if substantially all of the activities of such S corporation are
				performed in connection with such partnership, and
								(ii)any other S
				corporation which is engaged in a professional service business if 75 percent
				or more of the gross income of such business is attributable to service of 3 or
				fewer shareholders of such corporation.
								(D)Applicable
				shareholderFor purposes of this paragraph, the term
				applicable shareholder means any shareholder whose modified
				adjusted gross income for the taxable year exceeds—
								(i)in the case of a
				shareholder making a joint return under section 6013 or a surviving spouse (as
				defined in section 2(a)), $250,000,
								(ii)in the case of a
				married shareholder (as defined in section 7703) filing a separate return, half
				of the dollar amount determined under clause (i), and
								(iii)in any other
				case, $200,000.
								(2)Partners
							(A)In
				generalIn the case of any partnership which is engaged in a
				professional service business, subsection (a)(13) shall not apply to any
				applicable partner who provides substantial services with respect to such
				professional service business.
							(B)Applicable
				partnerFor purposes of this paragraph, the term applicable
				partner means any partner whose modified adjusted gross income for the
				taxable year exceeds—
								(i)in the case of a
				partner making a joint return under section 6013 or a surviving spouse (as
				defined in section 2(a)), $250,000,
								(ii)in the case of a
				married partner (as defined in section 7703) filing a separate return, half of
				the dollar amount determined under clause (i), and
								(iii)in any other
				case, $200,000.
								(3)Professional
				service businessFor purposes of this subsection, the term
				professional service business means any trade or business (or
				portion thereof) providing services in the fields of health, law, lobbying,
				engineering, architecture, accounting, actuarial science, performing arts,
				consulting, athletics, investment advice or management, or brokerage
				services.
						(4)Modified
				adjusted gross incomeFor purposes of this subsection, the term
				modified adjusted gross income means adjusted gross income—
							(A)determined
				without regard to any deduction allowed under section 164(f), and
							(B)increased by the
				amount excluded from gross income under section 911(a)(1).
							(5)RegulationsThe
				Secretary shall prescribe such regulations as may be necessary or appropriate
				to carry out the purposes of this subsection, including regulations which
				prevent the avoidance of the purposes of this subsection through tiered
				entities or otherwise.
						(6)Cross
				referenceFor employment tax
				treatment of wages paid to shareholders of S corporations, see subtitle
				C.
						.
			(b)Conforming
			 amendmentSection 211 of the
			 Social Security Act is amended by adding at the end the following new
			 subsection:

					(l)Special rules
				for professional service businesses
						(1)Shareholders
				providing services to specified S corporations
							(A)In
				generalIn the case of an applicable shareholder who provides
				substantial services with respect to a professional service business referred
				to in subparagraph (C) of a specified S corporation—
								(i)such shareholder
				shall be treated as engaged in the trade or business of such professional
				service business with respect to items of income or loss described in section
				1366 of the Internal Revenue Code of 1986 which are attributable to such
				business, and
								(ii)such
				shareholder's net earnings from self-employment shall include such
				shareholder’s pro rata share of such items of income or loss, except that in
				computing such pro rata share of such items the exceptions provided in
				subsection (a) shall apply.
								(B)Treatment of
				family membersExcept as
				otherwise provided by the Secretary of the Treasury, the applicable
				shareholder’s pro rata share of items referred to in subparagraph (A) shall be
				increased by the pro rata share of such items of each member of such applicable
				shareholder’s family (within the meaning of section 318(a)(1) of the Internal
				Revenue Code of 1986) who does not provide substantial services with respect to
				such professional service business.
							(C)Specified S
				corporationFor purposes of this subsection, the term
				specified S corporation means—
								(i)any S corporation
				(as defined in section 1361(a) of the Internal Revenue Code of 1986) which is a
				partner in a partnership which is engaged in a professional service business if
				substantially all of the activities of such S corporation are performed in
				connection with such partnership, and
								(ii)any other S
				corporation (as so defined) which is engaged in a professional service business
				if 75 percent or more of the gross income of such business is attributable to
				service of 3 or fewer shareholders of such corporation.
								(D)Applicable
				shareholderFor purposes of this paragraph, the term
				applicable shareholder means any shareholder whose modified
				adjusted gross income for the taxable year exceeds—
								(i)in the case of a
				shareholder making a joint return under section 6013 of the Internal Revenue
				Code of 1986 or a surviving spouse (as defined in section 2(a) of such Code),
				$250,000,
								(ii)in the case of a
				married shareholder (as defined in section 7703 of such Code) filing a separate
				return, half of the dollar amount determined under clause (i), and
								(iii)in any other
				case, $200,000.
								(2)Partners
							(A)In
				generalIn the case of any partnership which is engaged in a
				professional service business, subsection (a)(12) shall not apply to any
				applicable partner who provides substantial services with respect to such
				professional service business.
							(B)Applicable
				partnerFor purposes of this paragraph, the term applicable
				partner means any partner whose modified adjusted gross income for the
				taxable year exceeds—
								(i)in the case of a
				partner making a joint return under section 6013 of the Internal Revenue Code
				of 1986 or a surviving spouse (as defined in section 2(a) of such Code),
				$250,000,
								(ii)in the case of a
				married partner (as defined in section 7703 of such Code) filing a separate
				return, half of the dollar amount determined under clause (i), and
								(iii)in any other
				case, $200,000.
								(3)Professional
				service businessFor purposes of this subsection, the term
				professional service business means any trade or business (or
				portion thereof) providing services in the fields of health, law, lobbying,
				engineering, architecture, accounting, actuarial science, performing arts,
				consulting, athletics, investment advice or management, or brokerage
				services.
						(4)Modified
				adjusted gross incomeFor purposes of this subsection, the term
				modified adjusted gross income means adjusted gross income as
				determined under section 62 of the Internal Revenue Code of 1986—
							(A)determined
				without regard to any deduction allowed under section 164(f) of such Code,
				and
							(B)increased by the
				amount excluded from gross income under section 911(a)(1) of such
				Code.
							.
			(c)Effective
			 dateThe amendments made by this section shall apply to taxable
			 years beginning after December 31, 2012.
			4.Compliance
			 provisionThe budgetary
			 effects of this Act, for the purpose of complying with the Statutory
			 Pay-As-You-Go-Act of 2010, shall be determined by reference to the latest
			 statement titled Budgetary Effects of PAYGO Legislation for this
			 Act, submitted for printing in the Congressional Record by the Chairman of the
			 Senate Budget Committee, provided that such statement has been submitted prior
			 to the vote on passage.

		April 24, 2012
		Read twice and ordered placed on the calendar