Definition: In this task, you are given text for US Congressional and California state bills, your task is to generate a summary for this bill.
Input: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Entrepreneurial Equity Capital
Formation Act''.

TITLE I--TAX-FREE CONVERSIONS OF SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANIES INTO PASS-THRU ENTITIES

SEC. 101. MODIFICATIONS TO PROVISIONS RELATING TO REGULATED INVESTMENT
COMPANIES.

(a) In General.--Section 851 of the Internal Revenue Code of 1986
(relating to definition of regulated investment company) is amended by
adding at the end the following new subsection:
''(i) Special Rules for Specialized Small Business Investment
Companies.--
''(1) In general.--For purposes of determining whether a
specialized small business investment company is a regulated
investment company for purposes of this subchapter--
''(A) income derived in connection with activities
as a specialized small business investment company
(including compensation for services rendered in
connection with investments made as part of such
activities) shall be treated as qualifying income under
subsection (b)(2),
''(B) subsection (b)(3) shall not apply, and
''(C) the requirements of subsection (b)(4) shall
be treated as met if, at the close of each quarter of
the taxable year, at least 50 percent of the value of
its total assets is represented by--
''(i) assets described in subsection
(b)(4)(A)(i), and
''(ii) other investments permitted under
the Small Business Investment Act of 1958.
''(2) Waiver of distribution requirement; certain earnings
and profits disregarded.--In the case of a specialized small
business investment company--
''(A) section 852(a)(1) and section 4982(a) shall
not apply, and
''(B) earning and profits accumulated while the
company is a specialized small business investment
company shall be disregarded for purposes of section
852(a)(2).
''(3) Specialized small business investment company.--For
purposes of this subsection, the term 'specialized small
business investment company' means any corporation which--
''(A) as of September 30, 1996, held a license to
operate under section 301(d) of the Small Business
Investment Act of 1958, or
''(B) holds a license from the Small Business
Administration, issued after such date, to operate as a
specialized small business investment company.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 1996.

SEC. 102. TAX-FREE REORGANIZATION OF SPECIALIZED SMALL BUSINESS
INVESTMENT COMPANY AS A PARTNERSHIP.

(a) In General.--If, during the 180-day period beginning on the
date of the enactment of this Act, a corporation which is a specialized
small business investment company transfers substantially all of its
assets to a partnership (including its license to operate as a
specialized small business investment company) solely in exchange for
partnership interests in such partnership, no gain or loss shall be
recognized to the corporation on such a transfer if--
(1) immediately after such exchange, such corporation holds
partnership interests in such partnership having a value equal
to at least 80 percent of the total value of all partnership
interests in such partnership, and
(2) before the close of such period, such corporation
transfers all partnership interests held by the corporation in
such partnership, and all remaining assets of the corporation,
to its shareholders in the complete liquidation of such
corporation.
If, prior to the date of enactment of this Act or at any time before
the close of the 120-day period beginning on such date, a corporation
files an application with the Small Business Administration for
approval of a transfer described in the preceding sentence, the 180-day
period referred to in the preceding sentence shall not expire before
the date which is 180 days after the date such Administration grants
preliminary approval of such transfer.
(b) Nonrecognition of Gain or Loss to Corporation on Distribution
of Partnership Interests.--In the case of any distribution of a
partnership interest acquired by the liquidating corporation in an
exchange to which subsection (a) applies--
(1) no gain or loss shall be recognized to the liquidating
corporation by reason of such distribution, and
(2) such distribution shall not be treated as a sale or
exchange for purposes of section 708(b)(1)(B) of the Internal
Revenue Code of 1986.
(c) Gain Recognized by Shareholders on Receipt of Property Other
Than Partnership Interests.--
(1) In general.--No gain or loss shall be recognized to a
shareholder of a corporation on the transfer of such
shareholder's stock in such corporation to such corporation
solely in exchange for a partnership interest in the
partnership referred to in subsection (a)(1).
(2) Receipt of property.--If paragraph (1) would apply to
an exchange but for the fact that there is received, in
addition to the partnership interests permitted to be received
under paragraph (1), other property or money, then--
(A) gain (if any) to such recipient shall be
recognized, but not in excess of--
(i) the amount of money received, plus
(ii) the fair market value of such other
property received, and
(B) no loss to such recipient shall be recognized.
(d) Basis.--The basis of property received in any exchange to which
this section applies shall be determined in accordance with rules
similar to the rules of section 358 of the Internal Revenue Code of
1986.
(e) Imposition of Tax in Certain Cases.--If, at any time during the
3-year period beginning on the date of the transfer referred to in
subsection (a) to a partnership, such partnership ceases its investment
activities or ceases to have at least 75 percent of the value of its
assets (at cost) represented by investments permitted for specialized
small business investment companies under the Small Business Investment
Act of 1958, there is hereby imposed a tax on the income of such
partnership equal to the aggregate amount of tax which would have been
imposed under chapter 1 of the Internal Revenue Code of 1986 but for
subsections (a) and (b). Any tax imposed by this subsection shall be
treated for purposes of such Code as a tax imposed by chapter 1.
(f) Specialized Small Business Investment Company.--For purposes of
this section, the term ''specialized small business investment
company'' has the meaning given such term by section 1202(k) of the
Internal Revenue Code of 1986 (as added by this Act).

TITLE II--ADDITIONAL INCENTIVES RELATED TO INVESTING IN SPECIALIZED
SMALL BUSINESS INVESTMENT COMPANIES

SEC. 201. EXPANSION OF NONRECOGNITION TREATMENT FOR SECURITIES GAIN
ROLLED OVER INTO SPECIALIZED SMALL BUSINESS INVESTMENT
COMPANIES.

(a) Extension of Rollover Period.--Paragraph (1) of section 1044(a)
of the Internal Revenue Code of 1986 (relating to nonrecognition of
gain) is amended by striking ''60-day period'' and inserting ''180-day
period''.
(b) Increase of Maximum Exclusion.--
(1) In general.--Paragraphs (1) and (2) of section 1044(b)
of such Code (relating to limitations) are amended to read as
follows:
''(1) Limitation on individuals.--In the case of an
individual, the amount of gain which may be excluded under
subsection (a) for any taxable year shall not exceed--
''(A) $750,000, reduced by
''(B) the amount of gain excluded under subsection
(a) for all preceding taxable years.
''(2) Limitation on C corporations.--In the case of a C
corporation, the amount of gain which may be excluded under
subsection (a) for any taxable year shall not exceed--
''(A) $2,000,000, reduced by
''(B) the amount of gain excluded under subsection
(a) for all preceding taxable years.''
(2) Conforming amendment.--Subparagraph (A) of section
1044(b)(3) of such Code (relating to special rules for married
individuals) is amended to read as follows:
''(A) Separate returns.--In the case of a separate
return by a married individual, paragraph (1) shall be
applied by substituting '$375,000' for '$750,000'.''
(c) Extension to Preferred Stock.--Paragraph (1) of section 1044(a)
of such Code is amended by striking ''common''.
(d) Definition of Specialized Small Business Investment Company.--
Paragraph (3) of section 1044(c) of such Code (relating to definitions
and special rules) is amended to read as follows:
''(3) Specialized small business investment company.--The
term 'specialized small business investment company' means any
partnership or corporation which--
''(A) as of September 30, 1996, is licensed by the
Small Business Administration under section 301(d) of
the Small Business Investment Act of 1958, or
''(B) holds a license from the Small Business
Administration, issued after such date, to operate as a
specialized small business investment company.''
(e) Effective Date.--The amendments made by this section shall
apply to sales occurring after the date of the enactment of this Act.

SEC. 202. MODIFICATIONS TO EXCLUSION FOR GAIN FROM QUALIFIED SMALL
BUSINESS STOCK.

(a) In General.--Section 1202 of the Internal Revenue Code of 1986
(relating to 50-percent exclusion for gain from certain small business
stock) is amended by redesignating subsection (k) as subsection (l) and
by inserting after subsection (j) the following new subsection:
''(k) Special Rules for Specialized Small Business Investment
Companies.--
''(1) Increase in exclusion; corporate investors
eligible.--In the case of--
''(A) the sale or exchange of stock in a
specialized small business investment company, and
''(B) any amount treated under subsection (g) or
paragraph (2) of this subsection as gain described in
subsection (a) by reason of the holding, sale, or
exchange of an interest in a specialized small business
investment company,
subsection (a) shall be applied by substituting '60 percent'
for '50 percent' and, in the case of interests acquired after
the date of the enactment of this subsection, without being
limited to taxpayers other than corporations.
''(2) Exclusion allowable for certain gain on sale or
exchange of interests in certain specialized small business
investment companies.--
''(A) In general.--If any interest in a specialized
small business investment company which is a pass-thru
entity (as defined in subsection (g)(4)) is sold or
exchanged, gain on such sale or exchange shall be
treated as gain described in subsection (a) to the
extent attributable to unrealized small business stock
gain.
''(B) Unrealized small business stock gain.--For
purposes of subparagraph (A), the term 'unrealized
small business stock gain' means the amount which would
be eligible gain if the qualified small business stock
held by such company had been sold at the time of the
sale of the interest referred to in subparagraph (A).
''(C) Certain rules to apply.--Rules similar to the
rules of paragraphs (2)(B) and (3) of subsection (g)
shall apply for purposes of this subsection.
''(3) Application of active business requirement to stock
held by specialized small business investment companies.--For
purposes of determining whether stock held by a specialized
small business investment company is qualified small business
stock, subsection (e) shall be applied by treating as a
qualified trade or business any trade or business in which such
company is permitted to invest under the Small Business
Investment Act of 1958.
''(4) Specialized small business investment company.--For
purposes of this subsection, the term 'specialized small
business investment company' means any partnership or
corporation which--
''(A) as of September 30, 1996, is licensed by the
Small Business Administration under section 301(d) of
the Small Business Investment Act of 1958, or
''(B) holds a license from the Small Business
Administration, issued after such date, to operate as a
specialized small business investment company.''
(b) Definition of Specialized Small Business Investment Company for
Purposes of Waiver of Active Business Requirement.--Subparagraph (B) of
section 1202(c)(2) of such Code is amended to read as follows:
''(B) Special rule for specialized small business
investment companies.--Notwithstanding any provision of
subsection (e), a corporation shall be treated as
meeting the active business requirements of such
subsection for any period during which such corporation
qualifies as a specialized small business investment
company (as defined in subsection (k)(4)).''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1996.
Output:
TABLE OF CONTENTS:
Title I: Tax-Free Conversions of Specialized Small Business
Investment Companies Into Pass-Thru Entities
Title II: Additional Incentives Related to Investing in
Specialized Small Business Investment Companies
Entrepreneurial Equity Capital Formation Act -
Title I: Tax-Free Conversions of Specialized Small Business Investment Companies Into Pass-Thru Entities
- Amends the Internal Revenue Code to set forth special rules for determining whether a specialized small business investment company is a regulated investment company, to define such a company, to waive the distribution requirement for such a company, and to disregard certain earnings and profits of such a company.
Permits the tax-free reorganization of a specialized small investment company as a partnership if the reorganization is carried out within a specified time period following enactment and other specified conditions are met.
Title II: Additional Incentives Related to Investing in Specialized Small Business Investment Companies
- Sets forth additional tax incentives for investing in specialized small business investment companies.