Text: H.R.3255 — 111th Congress (2009-2010)All Information (Except Text)

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Introduced in House (07/17/2009)


111th CONGRESS
1st Session
H. R. 3255


To amend the Internal Revenue Code of 1986 to clarify that qualified personal service corporations may continue to use the cash method of accounting, and for other purposes.


IN THE HOUSE OF REPRESENTATIVES

July 17, 2009

Ms. Schwartz (for herself and Mr. Sam Johnson of Texas) introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to clarify that qualified personal service corporations may continue to use the cash method of accounting, 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. Short title.

This Act may be cited as the “Qualified Personal Service Corporations Clarification Act of 2009”.

SEC. 2. Modifications to determination of whether corporation is a qualified personal service corporation.

(a) Stock held by certain former employees taken into account.—Subparagraph (B) of section 448(d)(2) of the Internal Revenue Code of 1986 (defining qualified personal service corporation) is amended by striking “or” at the end of clause (iii), by striking the period at the end of clause (iv) and inserting a comma, and by inserting after clause (iv) the following new clauses:

“(v) former employees of such corporation who performed the services referred to in subparagraph (A) and who are holding such stock by reason of their former employment with such corporation, or

“(vi) former employees of such corporation who performed the services referred to in subparagraph (A) and who are holding such stock by reason of their current or former employment with any controlled entity (as defined in paragraph (4)(B)).”.

(b) Other modifications.—Paragraph (4) of section 448(d) of such Code is amended to read as follows:

“(4) SPECIAL RULES FOR PARAGRAPH (2).—

“(A) IN GENERAL.—For purposes of paragraph (2)—

“(i) community property laws shall be disregarded,

“(ii) stock held by a plan described in section 401(a) which is exempt from tax under section 501(a) shall be treated as held by an employee described in paragraph (2)(B)(i), and

“(iii) at the election of the common parent of an affiliated group (within the meaning of section 1504(a)), all members of such group may be treated as 1 taxpayer for purposes of paragraph (2)(B) if 80 percent or more of the activities of such group involve the performance of services in the fields described in paragraph (2)(A).

“(B) CONTROLLED ENTITY.—For purposes of paragraph (2)(B)(vi), the term ‘controlled entity’ means, with respect to a corporation—

“(i) any corporation at least 50 percent (by value) of the outstanding stock of which is owned (directly or indirectly as determined under section 318) by such corporation, and

“(ii) any partnership at least 50 percent of the capital interest or profits interest in which is owned (directly or indirectly as determined under section 318) by such corporation.

“(C) NEW CORPORATIONS.—A corporation shall be treated as a qualified personal service corporation for each taxable year preceding the first taxable year for which the corporation has gross receipts if the corporation is a qualified personal service corporation for such first taxable year.

“(D) CERTAIN STOCK NOT TAKEN INTO ACCOUNT.—

“(i) IN GENERAL.—The determination of whether an employee-owned corporation is a qualified personal service corporation shall be made without regard to stock in such corporation which is held by employees of unaffiliated controlled entities. The preceding sentence shall not apply to employees described in clause (v) or (vi) of paragraph (2)(B).

“(ii) EMPLOYEE-OWNED CORPORATION.—For purposes of clause (i), the term ‘employee-owned corporation’ means any corporation at least 50 percent of the value of the outstanding stock of which is owned (directly or indirectly) by employees described in paragraph (2)(B) (without regard to this subparagraph) of such corporation.

“(iii) UNAFFILIATED CONTROLLED ENTITY.—For purposes of clause (i), the term ‘unaffiliated controlled entity’ means, with respect to an employee-owned corporation—

“(I) any corporation at least 50 percent (by value) of the outstanding stock of which is owned (directly or indirectly as determined under section 318) by members of an affiliated group (within the meaning of section 1504(a)) which includes such employee-owned corporation, and

“(II) any partnership at least 50 percent of the capital interest or profits interest in which is owned (directly or indirectly as determined under section 318) by members of such affiliated group.

Such term shall not include any corporation which is permitted to file a consolidated return with such affiliated group.

“(E) CERTAIN SERVICES DEFINED.—For purposes of paragraph (2), the terms ‘engineering’ and ‘architecture’ include—

“(i) the performance of professional services described in section 1102(2) of title 40, United States Code, and

“(ii) design-build and its various options, including financing, owning, and operation.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.