Text: H.R.9 — 112th Congress (2011-2012)All Information (Except Text)

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Referred in Senate (04/23/2012)

 
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9 Referred in Senate (RFS)]

112th CONGRESS
  2d Session
                                 H. R. 9


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 23, 2012

     Received; read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 AN ACT


 
 To amend the Internal Revenue Code of 1986 to provide a deduction for 
        domestic business income of qualified small businesses.

    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 ``Small Business Tax Cut Act''.

SEC. 2. DEDUCTION FOR DOMESTIC BUSINESS INCOME OF QUALIFIED SMALL 
              BUSINESSES.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 200. DOMESTIC BUSINESS INCOME OF QUALIFIED SMALL BUSINESSES.

    ``(a) Allowance of Deduction.--In the case of a qualified small 
business, there shall be allowed as a deduction an amount equal to 20 
percent of the lesser of--
            ``(1) the qualified domestic business income of the 
        taxpayer for the taxable year, or
            ``(2) taxable income (determined without regard to this 
        section) for the taxable year.
    ``(b) Deduction Limited Based on Wages Paid.--
            ``(1) In general.--The amount of the deduction allowable 
        under subsection (a) for any taxable year shall not exceed 50 
        percent of the greater of--
                    ``(A) the W-2 wages of the taxpayer paid to non-
                owners, or
                    ``(B) the sum of--
                            ``(i) the W-2 wages of the taxpayer paid to 
                        individuals who are non-owner family members of 
                        direct owners, plus
                            ``(ii) any W-2 wages of the taxpayer paid 
                        to 10-percent-or-less direct owners.
            ``(2) Definitions related to ownership.--For purposes of 
        this section--
                    ``(A) Non-owner.--The term `non-owner' means, with 
                respect to any qualified small business, any person who 
                does not own (and is not considered as owning within 
                the meaning of subsection (c) or (e)(3) of section 267, 
                as the case may be) any stock of such business (or, if 
                such business is other than a corporation, any capital 
                or profits interest of such business).
                    ``(B) Non-owner family members.--An individual is a 
                non-owner family member of a direct owner if--
                            ``(i) such individual is family (within the 
                        meaning of section 267(c)(4)) of a direct 
                        owner, and
                            ``(ii) such individual would be a non-owner 
                        if subsections (c) and (e)(3) of section 267 
                        were applied without regard to section 
                        267(c)(2).
                    ``(C) Direct owner.--The term `direct owner' means, 
                with respect to any qualified small business, any 
                person who owns (or is considered as owning under the 
                applicable non-family attribution rules) any stock of 
                such business (or, if such business is other than a 
                corporation, any capital or profits interest of such 
                business).
                    ``(D) 10-percent-or-less direct owners.--The term 
                `10-percent-or-less direct owner' means, with respect 
                to any qualified small business, any direct owner of 
                such business who owns (or is considered as owning 
                under the applicable non-family attribution rules)--
                            ``(i) in the case of a qualified small 
                        business which is a corporation, not more than 
                        10 percent of the outstanding stock of the 
                        corporation or stock possessing more than 10 
                        percent of the total combined voting power of 
                        all stock of the corporation, or
                            ``(ii) in the case of a qualified small 
                        business which is not a corporation, not more 
                        than 10 percent of the capital or profits 
                        interest of such business.
                    ``(E) Applicable non-family attribution rules.--The 
                term `applicable non-family attribution rules' means 
                the attribution rules of subsection (c) or (e)(3) of 
                section 267, as the case may be, but in each case 
                applied without regard to section 267(c)(2).
            ``(3) W-2 wages.--For purposes of this section--
                    ``(A) In general.--The term `W-2 wages' means, with 
                respect to any person for any taxable year of such 
                person, the sum of the amounts described in paragraphs 
                (3) and (8) of section 6051(a) paid by such person with 
                respect to employment of employees by such person 
                during the calendar year ending during such taxable 
                year.
                    ``(B) Limitation to wages attributable to qualified 
                domestic business income.--Such term shall not include 
                any amount which is not properly allocable to domestic 
                business gross receipts for purposes of subsection 
                (c)(1).
                    ``(C) Other requirements.--Except in the case of 
                amounts treated as W-2 wages under paragraph (4)--
                            ``(i) such term shall not include any 
                        amount which is not allowed as a deduction 
                        under section 162 for the taxable year, and
                            ``(ii) such term shall not include any 
                        amount which is not properly included in a 
                        return filed with the Social Security 
                        Administration on or before the 60th day after 
                        the due date (including extensions) for such 
                        return.
            ``(4) Certain partnership distributions treated as w-2 
        wages.--
                    ``(A) In general.--In the case of a qualified small 
                business which is a partnership and elects the 
                application of this paragraph for the taxable year--
                            ``(i) the qualified domestic business 
                        taxable income of such partnership for such 
                        taxable year (determined after the application 
                        of clause (ii)) which is allocable under rules 
                        similar to the rules of section 
                        199(d)(1)(A)(ii) to each qualified service-
                        providing partner shall be treated for purposes 
                        of this section as W-2 wages paid during such 
                        taxable year to such partner as an employee, 
                        and
                            ``(ii) the domestic business gross receipts 
                        of such partnership for such taxable year shall 
                        be reduced by the amount so treated.
                    ``(B) Qualified service-providing partner.--For 
                purposes of this paragraph, the term `qualified 
                service-providing partner' means, with respect to any 
                qualified domestic business taxable income, any partner 
                who is a 10-percent-or-less direct owner and who 
                materially participates in the trade or business to 
                which such income relates.
            ``(5) Acquisitions and dispositions.--The Secretary shall 
        provide for the application of this subsection in cases where 
        the taxpayer acquires, or disposes of, the major portion of a 
        trade or business or the major portion of a separate unit of a 
        trade or business during the taxable year.
    ``(c) Qualified Domestic Business Income.--For purposes of this 
section--
            ``(1) In general.--The term `qualified domestic business 
        income' for any taxable year means an amount equal to the 
        excess (if any) of--
                    ``(A) the taxpayer's domestic business gross 
                receipts for such taxable year, over
                    ``(B) the sum of--
                            ``(i) the cost of goods sold that are 
                        allocable to such receipts, and
                            ``(ii) other expenses, losses, or 
                        deductions (other than the deduction allowed 
                        under this section), which are properly 
                        allocable to such receipts.
            ``(2) Domestic business gross receipts.--
                    ``(A) In general.--The term `domestic business 
                gross receipts' means the gross receipts of the 
                taxpayer which are effectively connected with the 
                conduct of a trade or business within the United States 
                within the meaning of section 864(c) but determined--
                            ``(i) without regard to paragraphs (3), 
                        (4), and (5) thereof, and
                            ``(ii) by substituting `qualified small 
                        business (within the meaning of section 200)' 
                        for `nonresident alien individual or a foreign 
                        corporation' each place it appears therein.
                    ``(B) Exceptions.--For purposes of paragraph (1), 
                domestic business gross receipts shall not include any 
                of the following:
                            ``(i) Gross receipts derived from the sale 
                        or exchange of--
                                    ``(I) a capital asset, or
                                    ``(II) property used in the trade 
                                or business (as defined in section 
                                1231(b)).
                            ``(ii) Royalties, rents, dividends, 
                        interest, or annuities.
                            ``(iii) Any amount which constitutes wages 
                        (as defined in section 3401).
            ``(3) Application of certain rules.--Rules similar to the 
        rules of paragraphs (2) and (3) of section 199(c) shall apply 
        for purposes of this section (applied with respect to qualified 
        domestic business income in lieu of qualified production 
        activities income and with respect to domestic business gross 
        receipts in lieu of domestic production gross receipts).
    ``(d) Qualified Small Business.--For purposes of this section--
            ``(1) In general.--The term `qualified small business' 
        means any employer engaged in a trade or business if such 
        employer had fewer than 500 full-time equivalent employees for 
        either calendar year 2010 or 2011.
            ``(2) Full-time equivalent employees.--The term `full-time 
        equivalent employees' has the meaning given such term by 
        subsection (d)(2) of section 45R applied--
                    ``(A) without regard to subsection (d)(5) of such 
                section,
                    ``(B) with regard to subsection (e)(1) of such 
                section, and
                    ``(C) by substituting `calendar year' for `taxable 
                year' each place it appears therein.
            ``(3) Employers not in existence prior to 2012.--In the 
        case of an employer which was not in existence on January 1, 
        2012, the determination under paragraph (1) shall be made with 
        respect to calendar year 2012.
            ``(4) Application to calendar years in which employer in 
        existence for portion of calendar year.--In the case of any 
        calendar year during which the employer comes into existence, 
        the number of full-time equivalent employees determined under 
        paragraph (2) with respect to such calendar year shall be 
        increased by multiplying the number so determined (without 
        regard to this paragraph) by the quotient obtained by 
        dividing--
                    ``(A) the number of days in such calendar year, by
                    ``(B) the number of days during such calendar year 
                which such employer is in existence.
            ``(5) Special rules.--
                    ``(A) Aggregation rule.--For purposes of paragraph 
                (1), any person treated as a single employer under 
                subsection (a) or (b) of section 52 (applied without 
                regard to section 1563(b)) or subsection (m) or (o) of 
                section 414 shall be treated as a single employer for 
                purposes of this subsection.
                    ``(B) Predecessors.--Any reference in this 
                subsection to an employer shall include a reference to 
                any predecessor of such employer.
    ``(e) Special Rules.--
            ``(1) Elective application of deduction.--Except as 
        otherwise provided by the Secretary, the taxpayer may elect not 
        to take any item of income into account as domestic business 
        gross receipts for purposes of this section.
            ``(2) Coordination with section 199.--If a deduction is 
        allowed under this section with respect to any taxpayer for any 
        taxable year--
                    ``(A) any gross receipts of the taxpayer which are 
                taken into account under this section for such taxable 
                year shall not be taken into account under section 199 
                for such taxable year, and
                    ``(B) the W-2 wages of the taxpayer which are taken 
                into account under this section shall not be taken into 
                account under section 199 for such taxable year.
            ``(3) Application of certain rules.--Rules similar to the 
        rules of paragraphs (1), (2), (3), (4), (6), and (7) of section 
        199(d) shall apply for purposes of this section (applied with 
        respect to qualified domestic business income in lieu of 
        qualified production activities income).
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as are necessary to carry out the purposes of this section, including 
regulations which prevent a taxpayer which reorganizes from being 
treated as a qualified small business if such taxpayer would not have 
been treated as a qualified small business prior to such 
reorganization.
    ``(g) Application.--Subsection (a) shall apply only with respect to 
the first taxable year of the taxpayer beginning after December 31, 
2011.''.
    (b) Conforming Amendments.--
            (1) Section 56(d)(1)(A) of such Code is amended by striking 
        ``deduction under section 199'' both places it appears and 
        inserting ``deductions under sections 199 and 200''.
            (2) Section 56(g)(4)(C) of such Code is amended by adding 
        at the end the following new clause:
                            ``(vii) Deduction for domestic business 
                        income of qualified small businesses.--Clause 
                        (i) shall not apply to any amount allowable as 
                        a deduction under section 200.''.
            (3) The following provisions of such Code are each amended 
        by inserting ``200,'' after ``199,''.
                    (A) Section 86(b)(2)(A).
                    (B) Section 135(c)(4)(A).
                    (C) Section 137(b)(3)(A).
                    (D) Section 219(g)(3)(A)(ii).
                    (E) Section 221(b)(2)(C)(i).
                    (F) Section 222(b)(2)(C)(i).
                    (G) Section 246(b)(1).
                    (H) Section 469(i)(3)(F)(iii).
            (4) Section 163(j)(6)(A)(i) of such Code is amended by 
        striking ``and'' at the end of subclause (III) and by inserting 
        after subclause (IV) the following new subclause:
                                    ``(V) any deduction allowable under 
                                section 200, and''.
            (5) Section 170(b)(2)(C) of such Code is amended by 
        striking ``and'' at the end of clause (iv), by striking the 
        period at the end of clause (v) and inserting ``, and'', and by 
        inserting after clause (v) the following new clause:
                            ``(vi) section 200.''.
            (6) Section 172(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) Domestic business income of qualified small 
        businesses.--The deduction under section 200 shall not be 
        allowed.''.
            (7) Section 613(a) of such Code is amended by striking 
        ``deduction under section 199'' and inserting ``deductions 
        under sections 199 and 200''.
            (8) Section 613A(d)(1) of such Code is amended by 
        redesignating subparagraphs (C), (D), and (E) as subparagraphs 
        (D), (E), and (F), respectively, and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) any deduction allowable under section 200,''.
            (9) Section 1402(a) of such Code is amended by striking 
        ``and'' at the end of paragraph (16), by redesignating 
        paragraph (17) as paragraph (18), and by inserting after 
        paragraph (16) the following new paragraph:
            ``(17) the deduction provided by section 200 shall not be 
        allowed; and''.
    (c) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 200. Domestic business income of qualified small businesses.''.

            Passed the House of Representatives April 19, 2012.

            Attest:

                                                 KAREN L. HAAS,

                                                                 Clerk.

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