Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success (PROGRESS) Act

I 117TH CONGRESS 1ST SESSION H. R. 2680 To amend the Internal Revenue Code of 1986 to provide a tax credit for investors in start-up businesses, to provide a credit for wages paid by start-up businesses to their first employees, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 20, 2021 Ms. CHU 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 provide a tax credit for investors in start-up businesses, to pro- vide a credit for wages paid by start-up businesses to their first employees, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Providing Real Oppor- 4 tunities for Growth to Rising Entrepreneurs for Sustained 5 Success (PROGRESS) Act’’. 6 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 2680 IH SEC. 2. SMALL BUSINESS INVESTOR TAX CREDIT. 1 (a) IN GENERAL.—Subpart D of part IV of sub- 2 chapter A of chapter 1 of the Internal Revenue Code of 3 1986 is amended by adding at the end the following new 4 section: 5 ‘‘SEC. 45U. SMALL BUSINESS INVESTOR TAX CREDIT. 6 ‘‘(a) GENERAL RULE.—For purposes of section 38, 7 the small business investor credit determined under this 8 section for any taxable year is an amount equal to the 9 sum of the credit amounts determined for the taxable year 10 for all qualified investments of the taxpayer. 11 ‘‘(b) CREDIT AMOUNT.—For purposes of this sec- 12 tion— 13 ‘‘(1) IN GENERAL.—The term ‘credit amount’ 14 means, with respect to any qualified investment in a 15 qualifying business entity, the lesser of— 16 ‘‘(A) 10 percent of the amount of the 17 qualified investment determined under sub- 18 section (c)(3) for the taxable year, or 19 ‘‘(B) an amount equal to— 20 ‘‘(i) 50 percent of such qualified in- 21 vestment, reduced (but not below zero) by 22 ‘‘(ii) the amount of the credit deter- 23 mined under this section with respect to 24 such qualified investment of the taxpayer 25 for all preceding taxable years. 26 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 2680 IH ‘‘(2) OVERALL DOLLAR LIMITATION.— 1 ‘‘(A) IN GENERAL.—The credit amount de- 2 termined under paragraph (1) with respect to 3 any qualified investment of a taxpayer in a 4 qualifying business entity for any taxable year 5 shall not exceed the lesser of— 6 ‘‘(i) $10,000 (as increased for the tax- 7 able year by the cost-of-living adjustment 8 under subsection (e)(2)), or 9 ‘‘(ii) an amount equal to— 10 ‘‘(I) an amount equal to 5 times 11 the amount under clause (i) for the 12 taxable year, reduced (but not below 13 zero) by 14 ‘‘(II) the amount of the credit 15 determined under this section with re- 16 spect to such qualified investment of 17 the taxpayer for all preceding taxable 18 years. 19 ‘‘(B) NO CREDIT AMOUNT BY REASON OF 20 COST-OF-LIVING ADJUSTMENT AFTER OVERALL 21 LIMIT FIRST REACHED.—No credit amount 22 shall be determined under this section with re- 23 spect to any qualified investment of a taxpayer 24 in a qualifying business entity for any taxable 25 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 2680 IH year after the first taxable year for which the 1 amount determined under subclause (II) of sub- 2 paragraph (A)(ii) equals or exceeds the amount 3 determined under subclause (I) of such sub- 4 paragraph. 5 ‘‘(3) REDUCTION IN CREDIT AMOUNT WHERE 6 LOAN RATE EXCEEDS PRIME RATE.— 7 ‘‘(A) IN GENERAL.—If— 8 ‘‘(i) the rate of interest (expressed as 9 an annual percentage rate) on a qualified 10 investment which is a qualifying loan, ex- 11 ceeds 12 ‘‘(ii) the bank prime rate as of the 13 first day of the month in which the loan is 14 entered into (or such other time as the 15 Secretary may specify), 16 then each of the amounts determined under 17 subparagraphs (A) and (B)(i) of paragraph (1) 18 shall be reduced (but not below zero) by the 19 amount which bears the same ratio to such 20 amount as the number of full percentage points 21 by which such rate of interest exceeds such 22 bank prime rate bears to 25. 23 ‘‘(B) SPECIAL RULES WHERE QUALIFYING 24 LOANS TREATED AS PART OF SINGLE INVEST- 25 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 2680 IH MENT.—If 1 or more qualifying loans to which 1 subparagraph (A) applies are treated as part of 2 a single qualified investment under subsection 3 (c)(1), then, for purposes of this subsection— 4 ‘‘(i) the credit amount under para- 5 graph (1) for such single qualified invest- 6 ment shall be the sum of such credit 7 amounts computed separately for each 8 such qualifying loan and such credit 9 amount computed for all other qualified in- 10 vestments treated as part of such single 11 qualified investment, and 12 ‘‘(ii) the limitation under paragraph 13 (2) shall be applied to such sum. 14 ‘‘(C) RULES RELATING TO INTEREST 15 RATES.— 16 ‘‘(i) ANNUAL PERCENTAGE RATE.— 17 The Secretary shall prescribe guidance or 18 regulations for the calculation of the an- 19 nual percentage rate of interest on a loan 20 for purposes of subparagraph (A)(i), in- 21 cluding rules which provide for— 22 ‘‘(I) the calculation of the annual 23 percentage rate in cases where there 24 is a variable rate of interest, 25 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 2680 IH ‘‘(II) the recalculation of the an- 1 nual percentage rate where the terms 2 of the loan are modified after the loan 3 is entered into, and 4 ‘‘(III) the proper taking into ac- 5 count of lump sum payments, orienta- 6 tion and application fees, closing fees, 7 invoice discounting fees and any other 8 loan fees. 9 ‘‘(ii) BANK PRIME RATE.—For pur- 10 poses of subparagraph (A)(ii), the term 11 ‘bank prime rate’ means the average pre- 12 dominant prime rate quoted by commercial 13 banks to large businesses, as determined 14 by the Board of Governors of the Federal 15 Reserve System. 16 ‘‘(4) SPECIAL RULES FOR PASS-THRU ENTI- 17 TIES.—For purposes of this subsection, if a qualified 18 investment in a qualifying business entity is made by 19 a partnership, trust, S corporation, or other pass- 20 thru entity, the limitations under this subsection 21 shall apply at the entity level. 22 ‘‘(c) QUALIFIED INVESTMENT.—For purposes of this 23 section— 24 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 2680 IH ‘‘(1) IN GENERAL.—The term ‘qualified invest- 1 ment’ means, with respect to any qualifying business 2 entity, either of the following of the taxpayer: 3 ‘‘(A) The direct or indirect acquisition of 4 stock, or a capital interest, in the entity at its 5 original issue solely in exchange for cash. 6 ‘‘(B) A qualifying loan made to the entity. 7 If a taxpayer has or had more than 1 qualified in- 8 vestment in any qualifying business entity for the 9 taxable year or any prior taxable year, all such in- 10 vestments shall be treated as a single qualified in- 11 vestment for purposes of applying this section. 12 ‘‘(2) EXCEPTION FOR INVESTMENTS MADE BY 13 QUALIFIED ACTIVE INVESTORS AND RELATED PER- 14 SONS.—Such term shall not include any acquisition 15 or loan made by a taxpayer who, immediately before 16 the acquisition or loan, is a qualified active investor 17 in the qualifying business entity or is related to any 18 qualified active investor. 19 ‘‘(3) AMOUNT OF QUALIFIED INVESTMENT.— 20 The amount of a taxpayer’s qualified investment 21 with respect to any qualifying business entity for 22 any taxable year shall be the monthly average for 23 months ending within the taxable year of— 24 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 2680 IH ‘‘(A) the taxpayer’s aggregate unadjusted 1 bases in all stock or interests described in para- 2 graph (1)(A) as of the close of each such 3 month, and 4 ‘‘(B) the aggregate outstanding principal 5 amount of all qualified loans described in para- 6 graph (1)(B) as of the close of each such 7 month. 8 ‘‘(4) SPECIAL RULES FOR TRANSFERS OF 9 QUALIFYING LOANS.— 10 ‘‘(A) IN GENERAL.—If a taxpayer sells, ex- 11 changes, or otherwise transfers all or any por- 12 tion of a qualifying loan which is a qualified in- 13 vestment in a qualifying business entity, such 14 investment shall be treated as a qualified in- 15 vestment in the hands of the transferee (and 16 not of the transferor) for periods after the 17 transfer. This paragraph shall also apply to any 18 subsequent transfer of such interest. 19 ‘‘(B) COORDINATION OF LIMITS.—In ap- 20 plying subsection (b) to any qualifying loan 21 treated as a qualified investment of a transferee 22 under this paragraph— 23 ‘‘(i) all credits determined under this 24 section for any periods before the transfer 25 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 2680 IH with respect to the qualified investment of 1 any prior holder of such investment shall 2 be taken into account under paragraphs 3 (1)(B)(ii) and (2)(A)(ii)(II) of such sub- 4 section in the same manner as if such 5 credits were determined for the transferee 6 for prior taxable years, and 7 ‘‘(ii) if only a portion of the qualified 8 investment was transferred, the amount 9 taken into account under such paragraphs 10 by reason of clause (i) shall be ratably re- 11 duced to reflect only the portion so trans- 12 ferred. 13 ‘‘(d) QUALIFYING BUSINESS ENTITY.—For purposes 14 of this section— 15 ‘‘(1) DEFINITION.— 16 ‘‘(A) IN GENERAL.—The term ‘qualifying 17 business entity’ means, with respect to any 18 qualified investment, any entity which is en- 19 gaged in 1 or more trades or businesses and 20 with respect to which— 21 ‘‘(i) the qualified active investor own- 22 ership requirements of paragraph (2) are 23 met immediately before and after the 24 qualified investment, 25 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 2680 IH ‘‘(ii) the wage requirements of para- 1 graph (3) are met, and 2 ‘‘(iii) the certification requirements of 3 paragraph (4) are met. 4 ‘‘(B) ENTITIES UNDER COMMON CON- 5 TROL.—For purposes of this section, all quali- 6 fying business entities treated as a single em- 7 ployer under subsection (a) or (b) of section 52 8 or subsection (m) or (o) of section 414 shall be 9 treated as a single qualifying business entity. 10 ‘‘(2) QUALIFIED ACTIVE INVESTOR OWNERSHIP 11 REQUIREMENTS.—The requirements of this para- 12 graph are met with respect to any entity if qualified 13 active investors own directly or indirectly— 14 ‘‘(A) in the case of a corporation, more 15 than 50 percent (by vote and value) of the 16 stock in the corporation, and 17 ‘‘(B) in the case of any other entity, more 18 than 50 percent of the capital or profits inter- 19 ests in the entity. 20 ‘‘(3) WAGE REQUIREMENTS.— 21 ‘‘(A) IN GENERAL.—The requirements of 22 this paragraph are met with respect to any enti- 23 ty if the entity, during the taxable year of the 24 VerDate Sep 11 2014 05:13 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 2680 IH entity preceding the taxable year in which the 1 qualified investment is made— 2 ‘‘(i) employed at least 1 full-time em- 3 ployee, or employees constituting a full- 4 time equivalent employee, in 1 or more 5 trades or businesses of the entity, and 6 ‘‘(ii) paid W–2 wages to such em- 7 ployee or employees with respect to such 8 employment. 9 ‘‘(B) CERTAIN WAGES NOT TAKEN INTO 10 ACCOUNT.—W–2 wages shall not be taken into 11 account under subparagraph (A) if paid by an 12 entity to an employee, and such employee shall 13 not be taken into account under subparagraph 14 (A)(i), during any period the employee is— 15 ‘‘(i) a qualified active investor, or 16 ‘‘(ii) an employee other than a quali- 17 fied active investor who is a 5-percent 18 owner (as defined in section 19 416(i)(1)(B)(i)) of the entity. 20 ‘‘(C) W–2 WAGES.—The term ‘W–2 wages’ 21 means, with respect to any entity, the amounts 22 described in paragraphs (3) and (8) of section 23 6051(a) paid by the entity with respect to em- 24 ployment of employees by the entity. 25 VerDate Sep 11 2014 01:17 Jun 26, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 2680 IH ‘‘(D) FULL-TIME EMPLOYEES AND 1 EQUIVALENTS.—For purposes of this para- 2 graph— 3 ‘‘(i) the term ‘full-time employee’ has 4 the meaning given to such term by section 5 4980H(c)(4), and 6 ‘‘(ii) the determination of the number 7 of employees constituting a full-time equiv- 8 alent shall be made in the same manner as 9 under section 4980H(c)(2)(E). 10 ‘‘(4) CERTIFICATION REQUIREMENTS.— 11 ‘‘(A) IN GENERAL.—The requirements of 12 this paragraph are met with respect to any enti- 13 ty if the entity certifies, in such form and man- 14 ner and at such time as the Secretary may pre- 15 scribe, that, at the time of the qualified invest- 16 ment, the entity— 17 ‘‘(i) is engaged in 1 or more trades or 18 businesses, and 19 ‘‘(ii) meets the requirements of para- 20 graphs (2) and (3) to be treated as a 21 qualifying business entity. 22 ‘‘(B) CERTIFICATION PROVIDED TO INVES- 23 TORS AND SECRETARY.—An entity shall— 24 VerDate Sep 11 2014 01:17 Jun 26, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H2680.IH H2680 kjohnson on DSK79L0C42PROD with BILLS 13 •HR 2680 IH ‘‘(i) provide the certification under 1 subparagraph (A) to the person making 2 the qualified investment at the time such 3 investment is made, and 4 ‘‘(ii) include such certification, and 5 the names, addresses, and taxpayer identi- 6 fication numbers of the entity’s qualified 7 active investors and the persons making 8 the qualified investment, with its return of 9 tax for the taxable year which includes the 10 date of the qualified investment. 11 ‘‘(C) CERTIFICATION INCLUDED WITH RE- 12 TURN CLAI [Text truncated for display. Full text available on Congress.gov.]