II
109th CONGRESS
1st Session
S. 2111
IN THE SENATE OF THE UNITED STATES
December 15, 2005
Mr. Bayh introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to provide a credit for small business employee training expenses, to increase the exclusion of capital gains from small business stocks, to extend expensing for small businesses, and for other purposes.
Short title
This Act may be cited as the
Small Business Growth Initiative Act
of 2005
.
Credit for employee training expenses of small businesses
In General
Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by adding at the end the following new section:
Small business employee training expenses
In General
Allowance of credit
For purposes of section 38, in the case of an eligible small business employer, the small business employee training credit determined under this section for the taxable year is an amount equal to so much of the qualified training expenses paid or incurred by the eligible small business employer with respect to qualified employees as exceeds the base amount.
Base amount
For purposes of paragraph (1)—
In general
The base amount is an amount equal to the average amount of qualified training expenses paid or incurred by the eligible small business employer with respect to all qualified employees for the 3 preceding taxable years.
Special rule for new businesses
Businesses with at least 1 taxable year
In the case of an eligible small business employer which has at least 1 full preceding taxable year but fewer than 3 preceding taxable years, the base amount shall be the amount of qualified training expenses paid or incurred by such employer with respect to all qualified employees during the preceding taxable year.
Start-up year
In the case of an eligible small business employer which does not have any full preceding taxable years, the base amount shall be zero.
Limitations
Per employee limitation
The amount of the credit allowed under subsection (a) for any taxable year with respect to any qualified employee shall not exceed $1,000 ($500 in the case of an eligible small business to which subsection (a)(2)(B)(ii) applies).
Number of employees
Not more than 5 qualified employees may be taken into account under subsection (a) for any taxable year.
Eligible Small Business Employer
In general
The term eligible small business employer means, with respect to any calendar year, an employer who employed an average of at least 2 but not more than 100 employees on business days during the preceding taxable year.
Exception
Such term shall not include any employer who is a physician or whose principal business is providing legal, accounting, engineering, architectural, or similar services.
Qualified Training Expenses
For purposes of this section, the term qualified training expenses means expenses paid or incurred for the training of a qualified employee to a person who is an eligible provider of training services within the meaning of section 122 of the Workforce Investment Act of 1998.
Qualified Employee
For purposes of this section, the term qualified employee means an individual who has been employed by the eligible small business employer on a full-time basis for at least 6 months and who is not any of the following:
A highly compensated employee (within the meaning of section 414(q)).
A physician or a veterinarian.
An individual participating in an apprenticeship or a specialty trade skills development program associated with a specialty trade contractor as specified in subsection 238 of the North American Industry Classification System (as in effect on the date of the enactment of this section).
.
Credit Made Part of General Business Credit
Section 38(b) of the Internal
Revenue Code of 1986 is amended by striking and
at the end of
paragraph (25), by striking the period at the end of paragraph (26) and
inserting , plus
, and by adding at the end the following new
paragraph:
the small business employee training credit determined under section 45N(a).
.
Clerical Amendment
The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:
Sec. 45N. Small business employee training credit.
.
Effective Date
The amendments made by this section shall apply to expenditures incurred after December 31, 2005.
Increased exclusion and other modifications applicable to qualified small business stock
Increased exclusion
In general
Subsection (a) of section 1202 of the Internal Revenue Code of 1986 (relating to 50-percent exclusion for gain from certain small business stock) is amended to read as follows:
Exclusion
Gross income shall not include any gain from the sale or exchange of qualified small business stock held for more than 3 years.
.
Conforming amendments
Subparagraph (A) of section 1(h)(4) of such Code is amended to read as follows:
collectibles gain, over
.
Section 1(h) of such Code is amended by striking paragraph (7).
Section 1(h) of such Code is amended by redesignating paragraphs (8), (9), (10), (11), (12), and (13) as paragraphs (7), (8), (9), (10), (11), and (12), respectively.
Sections 163(d)(4)(B), 854(b)(5),
857(c)(2)(D) of such Code are each amended by striking section
1(h)(11)(B)
and inserting section 1(h)(10)(B)
.
The following sections in
301(f)(4) of such Code are each amended by striking section
1(h)(11)
and inserting section 1(h)(10)
:
Section 301(f)(4).
Section 306(a)(1)(D).
Section 584(c).
Section702(a)(5).
Section 854(a).
Section 854(b)(2).
The heading of section 857(c)(2)
is amended by striking 1(h)(11)
and inserting
1(h)(10)
.
Subsection (c) of section 1202 of such Code is amended by adding at the end the following new paragraph:
Stock held among members of controlled group not eligible
Stock of a member of a parent-subsidiary controlled group (as defined in subsection (d)(3)) shall not be treated as qualified small business stock while held by another member of such group.
.
Subsections
(g)(2)(A) and (j)(1)(A) of section 1202 of such Code are each amended by
striking 5 years
and inserting 3 years
.
The heading for
section 1202 of such Code is amended by striking
partial
.
The table of
sections for part I of subchapter P of chapter 1 of such Code is amended by
striking Partial exclusion
in the item relating to section 1202
and inserting Exclusion
.
Repeal of minimum tax preference
In general
Subsection (a) of section 57 of the Internal Revenue Code of 1986 (relating to items of tax preference) is amended by striking paragraph (7).
Technical amendment
Subclause (II) of section 53(d)(1)(B)(ii) of such Code
is amended by striking , (5), and (7)
and inserting and
(5)
.
Repeal of Per-Issuer limitation
Section 1202(b) of the Internal Revenue Code of 1986 (relating to per-issuer limitations on taxpayer’s eligible gain) is repealed.
Other modifications
Repeal of working capital limitation
Section 1202(e)(6) of the Internal Revenue Code of 1986 (relating to working capital) is amended—
in subparagraph
(B), by striking 2 years
and inserting 5 years
;
and
by striking the last sentence.
Exception from redemption rules where business purpose
Section 1202(c)(3) of such Code (relating to certain purchases by corporation of its own stock) is amended by adding at the end the following new subparagraph:
Waiver where business purpose
A purchase of stock by the issuing corporation shall be disregarded for purposes of subparagraph (B) if the issuing corporation establishes that there was a business purpose for such purchase and one of the principal purposes of the purchase was not to avoid the limitations of this section.
.
Qualified trade or business
Section 1202(e)(3) of the Internal Revenue Code of
1986 (defining qualified trade or business) is amended by inserting
and
at the end of subparagraph (C), by striking ,
and
at the end of subparagraph (D) and inserting a period, and by
striking subparagraph (E).
Effective dates
The amendments made by this section apply to stock issued after December 31, 2005.
Extension of increased expensing for small business
Subsections (b), (c), and (d) of section 179
are each amended by striking 2008
each place it appears and
inserting 2011
.
SBIR and STTR program expenditures
SBIR program expenditures
Section 9(f)(1) of the Small Business Act (15 U.S.C. 638(f)(1)) is amended by striking subparagraphs (A) through (C) and inserting the following:
not less than 2.5 percent of such budget in fiscal year 2006;
not less than 3.0 percent of such budget in fiscal year 2007;
not less than 3.5 percent of such budget in fiscal year 2008;
not less than 4.0 percent of such budget in fiscal year 2009;
not less than 4.5 percent of such budget in fiscal year 2010; and
not less than 5.0 percent of such budget in fiscal year 2011 and each fiscal year thereafter,
.
STTR program expenditures
Section 9(n)(1)(B) of the Small Business Act (15 U.S.C. 638(n)(1)(B)) is amended by striking clauses (i) and (ii) and inserting the following:
not less than 0.3 percent in fiscal year 2006;
not less than 0.36 percent in fiscal year 2007;
not less than 0.42 percent in fiscal year 2008;
not less than 0.48 percent in fiscal year 2009;
not less than 0.54 percent in fiscal year 2010;
not less than 0.6 percent in fiscal year 2011 and each fiscal year thereafter.
.
Expansion of credit for small employer pension plan startup costs
In general
Paragraph (1) of section 45E(b) of the Internal Revenue
Code of 1986 is amended by striking $500
and inserting
$1,000
.
Effective date
The amendment made by this section shall apply to taxable years beginning after December 31, 2005.