To allow Connecticut to permit certain recipients of aid to families with dependent children a one-time election to purchase capital equipment for a small business, to prohibit depreciation of such equipment, and to require that repayments by such persons of the principal portion of small business loans be treated as business expenses for purposes of the program of aid to families with dependent children.

Amends part A (Aid to Families with Dependent Children) (AFDC) of title IV of the Social Security Act to authorize the State of Connecticut, in determining the earned income of families who are self-employment program participants for purposes of AFDC eligibility, to treat as offsetting receipts: (1) repayments of the principal portions of business loans; and (2) capital expenditures for businesses over an elected one-year period.

Amends the Internal Revenue Code to prohibit the depreciation of property to which such capital expenditures apply.