Generating Reinvestment Opportunities with America's Small Businesses Act of 2006 or the GROW America's Small Businesses Act of 2006 - Amends the Internal Revenue Code to: (1) allow certain small businesses (generally, businesses with $12 million or less in gross receipts for a taxable year) to defer payment of income tax by making four equal installments over a specified two-year period; (2) extend such deferral period to three years for small businesses that increase employment and maintain salary levels of employees called to duty as members of the Ready Reserve/National Guard; and (3) establish tax-exempt GROW Accounts to provide financing and tax relief for such small businesses.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6004 Introduced in House (IH)]
109th CONGRESS
2d Session
H. R. 6004
To amend the Internal Revenue Code of 1986 to allow certain small
businesses to defer payment of tax.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 28, 2006
Mr. Kennedy of Rhode Island 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 allow certain small
businesses to defer payment of tax.
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 ``Generating Reinvestment
Opportunities with America's Small Businesses Act of 2006'' or the
``GROW America's Small Businesses Act of 2006''.
SEC. 2. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL BUSINESSES.
(a) In General.--Subchapter B of chapter 62 of the Internal Revenue
Code of 1986 (relating to extensions of time for payment of tax) is
amended by adding at the end the following new section:
``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR CERTAIN SMALL
BUSINESSES.
``(a) In General.--An eligible small business may elect to pay the
tax imposed by chapter 1 in 4 equal installments.
``(b) Limitation.--The maximum amount of tax which may be paid in
installments under this section for any taxable year shall not exceed
whichever of the following is the least:
``(1) The tax imposed by chapter 1 for the taxable year.
``(2) The amount contributed by the taxpayer into a GROW
Account during such year.
``(3) The excess of $275,000 over the aggregate amount of
tax for which an election under this section was made by the
taxpayer (or any predecessor) for all prior taxable years.
``(c) Eligible Small Business.--For purposes of this section--
``(1) In general.--The term `eligible small business'
means, with respect to any taxable year, any person if--
``(A) such person meets the active business
requirements of section 1202(e) throughout such taxable
year,
``(B) the taxpayer has gross receipts of
$12,000,000 or less for the taxable year,
``(C) the gross receipts of the taxpayer for such
taxable year are at least 10 percent greater than the
average annual gross receipts of the taxpayer (or any
predecessor) for the 2 prior taxable years, and
``(D) the taxpayer uses an accrual method of
accounting.
``(2) Certain rules to apply.--Rules similar to the rules
of paragraphs (2) and (3) of section 448(c) shall apply for
purposes of this subsection.
``(d) Date for Payment of Installments; Time for Payment of
Interest.--
``(1) Date for payment of installments.--
``(A) In general.--If an election is made under
this section for any taxable year, the first
installment shall be paid on or before the due date for
such installment and each succeeding installment shall
be paid on or before the date which is 1 year after the
date prescribed by this paragraph for payment of the
preceding installment.
``(B) Due date for first installment.--The due date
for the first installment for a taxable year shall be
whichever of the following is the earliest:
``(i) The date selected by the taxpayer.
``(ii) The date which is 2 years after the
date prescribed by section 6151(a) for payment
of the tax for such taxable year.
``(C) Additional deferral where employment
increases.--
``(i) In general.--Subparagraph (B)(ii)
shall be applied by substituting `3 years' for
`2 years' in the case of an eligible small
business which meets the employment increase
requirement of clause (ii) for the second
taxable year following the taxable year for
which the election is made.
``(ii) Employment increase requirement.--
The employment increase requirement of this
clause is met for such second taxable year if
the average daily number of full-time employees
of such business for the last calendar quarter
ending in such taxable year is at least 10
percent greater than such average number for
the last calendar quarter ending before the
date that the GROW Account of such business is
established. For purposes of this clause, an
employee shall be considered full-time if such
employee is employed at least 35 hours per week
``(iii) Salary maintenance of called-up
reservist treated as employment increase.--For
purposes of clause (ii), an eligible small
business shall be treated as having an
additional full-time employee for any period
for each employee who is a Ready Reserve/
National Guard employee of such business
serving on qualified active duty for such
period if the compensation paid or incurred by
such business to such employee for such period
is not less than the active duty wage
differential of such employee for such period.
For the definition of terms used in this
clause, see subsection (g).
``(2) Time for payment of interest.--If the time for
payment of any amount of tax has been extended under this
section--
``(A) Interest for period before due date of first
installment.--Interest payable under section 6601 on
any unpaid portion of such amount attributable to the
period before the due date for the first installment
shall be paid annually.
``(B) Interest during installment period.--Interest
payable under section 6601 on any unpaid portion of
such amount attributable to any period after such
period shall be paid at the same time as, and as a part
of, each installment payment of the tax.
``(C) Interest in the case of certain
deficiencies.--In the case of a deficiency to which
subsection (e)(3) applies for a taxable year which is
assessed after the due date for the first installment
for such year, interest attributable to the period
before such due date, and interest assigned under
subparagraph (B) to any installment the date for
payment of which has arrived on or before the date of
the assessment of the deficiency, shall be paid upon
notice and demand from the Secretary.
``(e) Special Rules.--
``(1) Application of limitation to partners and s
corporation shareholders.--
``(A) In general.--In applying this section to a
partnership which is an eligible small business--
``(i) the election under subsection (a)
shall be made by the partnership,
``(ii) the amount referred to in subsection
(b)(1) shall be the sum of each partner's tax
which is attributable to items of the
partnership and assuming the highest marginal
rate under section 1, and
``(iii) the partnership shall be treated as
the taxpayer referred to in paragraphs (2) and
(3) of subsection (b).
``(B) Overall limitation also applied at partner
level.--In the case of a partner in a partnership, the
limitation under subsection (b)(3) shall be applied at
the partnership and partner levels.
``(C) Similar rules for s corporations.--Rules
similar to the rules of subparagraphs (A) and (B) shall
apply to shareholders in an S corporation.
``(2) Acceleration of payment in certain cases.--
``(A) In general.--If--
``(i) the taxpayer ceases to meet the
requirement of subsection (c)(1)(A), or
``(ii) there is an ownership change with
respect to the taxpayer,
then the extension of time for payment of tax provided
in subsection (a) shall cease to apply, and the unpaid
portion of the tax payable in installments shall be
paid on or before the due date for filing the return of
tax imposed by chapter 1 for the first taxable year
following such cessation.
``(B) Ownership change.--For purposes of
subparagraph, in the case of a corporation, the term
`ownership change' has the meaning given to such term
by section 382. Rules similar to the rules applicable
under the preceding sentence shall apply to a
partnership.
``(3) Proration of deficiency to installments.--Rules
similar to the rules of section 6166(e) shall apply for
purposes of this section.
``(f) GROW Account.--For purposes of this section--
``(1) In general.--The term `GROW Account' means a trust
created or organized in the United States for the exclusive
benefit of an eligible small business, but only if the written
governing instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted for any
taxable year in excess of the amount allowed as a
deferral under subsection (b) for such year.
``(B) The trustee is a bank (as defined in section
408(n)) or another person who demonstrates to the
satisfaction of the Secretary that the manner in which
such person will administer the trust will be
consistent with the requirements of this section.
``(C) The assets of the trust consist entirely of
cash or of obligations which have adequate stated
interest (as defined in section 1274(c)(2)) and which
pay such interest not less often than annually.
``(D) The assets of the trust will not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) Amounts in the trust may be used only--
``(i) as security for a loan to the
business or for repayment of such loan, or
``(ii) to pay the installments under this
section.
``(2) Account taxed as grantor trust.--The grantor of a
GROW Account shall be treated for purposes of this title as the
owner of such Account and shall be subject to tax thereon in
accordance with subpart E of part I of subchapter J of this
chapter (relating to grantors and others treated as substantial
owners).
``(3) Time when payments deemed made.--For purposes of this
section, a taxpayer shall be deemed to have made a payment to a
GROW Account on the last day of a taxable year if such payment
is made on account of such taxable year and is made within 3\1/
2\ months after the close of such taxable year.
``(g) Definitions Relating to Salary Maintenance of Called-Up
Reservists.--For purposes of subsection (d)(1)(C)(iii)--
``(1) Ready reserve/national guard employee.--
``(A) In general.--The term `Ready Reserve/National
Guard employee' means any employee--
``(i) who is a member of the Ready Reserve
or of the National Guard, and
``(ii) who was an employee of the taxpayer
during the 1-year period ending on the day
before the date that the employee begins
qualified active duty.
``(B) National guard.--The term `National Guard'
has the meaning given such term by section 101(c)(1) of
title 10, United States Code.
``(C) Ready reserve.--The term `Ready Reserve' has
the meaning given such term by section 10142 of title
10, United States Code.
``(2) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty under an order or call for a
period in excess of 90 days or for an indefinite
period, other than the training duty specified in--
``(i) section 10147 of title 10, United
States Code (relating to training requirements
for the Ready Reserve), or
``(ii) section 502(a) of title 32, United
States Code (relating to required drills and
field exercises for the National Guard),
in connection with which an employee is entitled to
reemployment rights and other benefits or to a leave of
absence from employment under chapter 43 of title 38,
United States Code, and
``(B) hospitalization incident to such active duty.
``(3) Active duty wage differential.--
``(A) In general.--The active duty wage
differential of a Ready Reserve/National Guard employee
for any period of qualified active duty is the amount
equal to the product of--
``(i) the daily wage differential of such
employee for such period, multiplied by
``(ii) the number of days that such
employee is on qualified active duty during
such period.
``(B) Daily wage differential.--For purposes of
subparagraph (A), the daily wage differential of a
Ready Reserve/National Guard employee for any period is
an amount equal to the excess of--
``(i) such employee's average daily
employer-provided compensation for such period,
over
``(ii) such employee's average daily
military pay for such period.
``(C) Average daily employer-provided
compensation.--
``(i) In general.--For purposes of
subparagraph (B), an employee's average daily
employer-provided compensation for any period
is the average daily compensation paid by the
employer to the employee for the 1-year period
ending on the day before the date that the
employee begins qualified active duty, adjusted
for cost-of-living and other increases
generally applicable to employees of the
employer for such period.
``(ii) Employer-provided compensation.--The
term `compensation' means any remuneration for
employment, whether in cash or in kind, which
is allowable as a deduction under section
162(a)(1).
``(D) Average daily military pay.--
``(i) In general.--For purposes of
subparagraph (B), a Ready Reserve/National
Guard employee's average daily military pay is
the average daily military pay and allowances
received by the employee on account of the
employee's performance of qualified active duty
during the period.
``(ii) Military pay and allowances.--For
purposes of clause (i)--
``(I) Military pay.--The term
`military pay' means pay (as defined in
section 101(21) of title 37, United
States Code).
``(II) Allowances.--The term
`allowances' means the allowances
payable to a member of the Armed Forces
of the United States under chapter 7 of
such title.
``(h) Reports.--The Secretary may require such reporting as the
Secretary determines to be appropriate to carry out this section.
``(i) Application of Section.--This section shall apply to taxes
imposed for taxable years beginning after the date of the enactment of
this section and before January 1, 2011.''
(b) Priority of Lender.--Subsection (b) of section 6323 of such
Code is amended by adding at the end the following new paragraph:
``(11) Loans secured by grow accounts.--With respect to a
GROW account (as defined in section 6168(f)) with any bank (as
defined in section 408(n)), to the extent of any loan made by
such bank without actual notice or knowledge of the existence
of such lien, as against such bank, if such loan is secured by
such account.''
(c) Clerical Amendment.--The table of sections for subchapter B of
chapter 62 of such Code is amended by adding at the end the following
new item:
``Sec. 6168. Extension of time for payment of tax for certain small
businesses.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
(e) Study by General Accounting Office.--
(1) Study.--In consultation with the Secretary of the
Treasury, the Comptroller General of the United States shall
undertake a study to evaluate the applicability (including
administrative aspects) and impact of the GROW America's Small
Business Act of 2006, including how it affects the capital
funding needs of businesses under the Act and number of
businesses benefitting.
(2) Report.--Not later than March 31, 2011, the Comptroller
General shall transmit to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of
the Senate a written report presenting the results of the study
conducted pursuant to this subsection, together with such
recommendations for legislative or administrative changes as
the Comptroller General determines are appropriate.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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