What This Bill Does
This bill creates emergency savings accounts for small businesses. Small businesses can set aside money in these accounts without paying taxes on the funds. They can take tax deductions when they contribute money to these accounts.
Who It Affects
Small businesses with 500 or fewer full-time employees. Banks and insurance companies that manage these accounts. The Internal Revenue Service.
Key Provisions
• Small businesses can deduct contributions they make to emergency savings accounts, up to 25 percent of the wages they pay their employees, but the account balance cannot exceed 150 percent of those wages (Sec. 2(b)).
• Only four types of expenses qualify for tax-free withdrawals: disaster loss replacement expenses (losses of $3,000 or more from federally declared disasters), disaster recovery operation expenses, public health emergency expenses, and expenses incurred while official emergency declarations are in effect (Sec. 2(d)).
• Money withdrawn from these accounts for qualified disaster and public health emergency expenses is not counted as income and is not taxed (Sec. 2(f)(1)).
• Money withdrawn for any other reason is counted as income and taxed, plus an additional 20 percent tax penalty, unless the business owner becomes disabled or dies (Sec. 2(f)(4)).
• Accounts must be held in cash only and kept with a bank, insurance company, or approved trustee that meets Treasury Department standards (Sec. 2(d)).
What Changes
The Internal Revenue Code is changed to add a new tax deduction for small business emergency savings accounts. Businesses can now deposit money into qualified accounts and reduce their taxable income by the amount contributed, subject to the wage-based limits. Money in these accounts grows tax-free until it is withdrawn. Withdrawals used only for qualified emergency expenses are not taxed. Withdrawals for other purposes become taxable income with a 20 percent penalty.
Important Definitions
"Eligible business" means any business operating in the United States (except as an employee) with an average of 500 or fewer full-time employees during the tax year (Sec. 2(c)).
"Qualified disaster and public health emergency expenses" means disaster loss replacement expenses, disaster recovery operations expenses, and public health emergency expenses as defined in the bill (Sec. 2(d)(2)).
"Federally declared disaster" is defined by reference to existing tax law Section 165(i)(5) (Sec. 2(d)(6)).
"Public health emergency declaration" means any declaration of a public health emergency by the Secretary of Health and Human Services under Section 319 of the Public Health Service Act (Sec. 2(d)(7)).
"Account beneficiary" means the eligible business on whose behalf the account was established (Sec. 2(d)(8)).
Effective Date
The changes apply to tax years beginning after December 31, 2022 (Sec. 2(f)).
I
118TH CONGRESS
1ST SESSION
H. R. 313
To amend the Internal Revenue Code of 1986 to provide emergency savings
accounts for small businesses.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 12, 2023
Mr. CLOUD 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
emergency savings accounts for small businesses.
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 ‘‘Small Business Emer-
4
gency Savings Accounts Act of 2023’’.
5
SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO SMALL BUSI-
6
NESS EMERGENCY SAVINGS ACCOUNTS.
7
(a) IN GENERAL.—Part VI of subchapter B of chap-
8
ter 1 of the Internal Revenue Code of 1986 (relating to
9
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itemized deductions for individuals and corporations) is
1
amended by adding at the end the following new section:
2
‘‘SEC. 200. SMALL BUSINESS EMERGENCY SAVINGS AC-
3
COUNTS.
4
‘‘(a) DEDUCTION ALLOWED.—In the case of a eligi-
5
ble business, there shall be allowed as a deduction for the
6
taxable year an amount equal to the aggregate amount
7
paid during such taxable year by such business to a small
8
business emergency savings account of such business.
9
‘‘(b) LIMITATION.—The amount allowed as a deduc-
10
tion under subsection (a) to any business for any taxable
11
year shall not exceed the lesser of—
12
‘‘(1) 25 percent of the wages (as defined in sec-
13
tion 3121(a)) paid by the eligible business during
14
such taxable year, or
15
‘‘(2) the greater of—
16
‘‘(A) zero, or
17
‘‘(B) the maximum amount which when
18
added to the balance of such account (as deter-
19
mined at the end of such taxable year but with-
20
out regard to contributions made during such
21
taxable year) would not result in such balance
22
(as so determined) to exceed 150 percent of
23
wages (as defined in section 3121(a)) paid by
24
the eligible business during such taxable year.
25
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‘‘(c) ELIGIBLE BUSINESS.—For purposes of this sec-
1
tion, the term ‘eligible business’ means any person if—
2
‘‘(1) such person carries on any trade or busi-
3
ness in the United States (other than the trade or
4
business of being an employee), and
5
‘‘(2) the average number of full-time employees
6
(as determined for purposes of determining whether
7
an employer is an applicable large employer for pur-
8
poses of section 4980H(c)(2)) employed by such em-
9
ployer during the taxable year does not exceed 500.
10
‘‘(d) SMALL BUSINESS EMERGENCY SAVINGS AC-
11
COUNT.—For purposes of this section—
12
‘‘(1) IN GENERAL.—The term ‘small business
13
emergency savings account’ means a trust created or
14
organized in the United States as a small business
15
emergency savings account exclusively for the pur-
16
pose of paying the qualified disaster and public
17
health emergency expenses of the account bene-
18
ficiary, but only if the written governing instrument
19
creating the trust meets the following requirements:
20
‘‘(A) Except in the case of a rollover con-
21
tribution described in subsection (f)(5), no con-
22
tribution will be accepted unless it is in cash.
23
‘‘(B) The trustee is a bank (as defined in
24
section 408(n)), an insurance company (as de-
25
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•HR 313 IH
fined in section 816), or another person who
1
demonstrates to the satisfaction of the Sec-
2
retary that the manner in which such person
3
will administer the trust will be consistent with
4
the requirements of this section.
5
‘‘(C) No part of the trust assets will be in-
6
vested in life insurance contracts.
7
‘‘(D) The assets of the trust will not be
8
commingled with other property except in a
9
common trust fund or common investment
10
fund.
11
‘‘(E) The interest of account beneficiary in
12
the balance in the account is nonforfeitable.
13
‘‘(2)
QUALIFIED
DISASTER
AND
PUBLIC
14
HEALTH EMERGENCY EXPENSES.—The term ‘quali-
15
fied disaster and public health emergency expenses’
16
means—
17
‘‘(A) disaster loss replacement expenses,
18
‘‘(B) disaster recovery operations expenses,
19
and
20
‘‘(C) public health emergency expenses.
21
‘‘(3)
DISASTER
LOSS
REPLACEMENT
EX-
22
PENSES.—The term ‘disaster loss replacement ex-
23
penses’ means any expense paid or incurred in the
24
ordinary course of a trade or business of the eligible
25
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•HR 313 IH
business to replace or repair casualty losses totaling
1
$3,000 or more resulting from a federally declared
2
disaster.
3
‘‘(4) DISASTER
RECOVERY
OPERATIONS
EX-
4
PENSES.—The term ‘disaster recovery operations ex-
5
penses’ means the following amounts if paid or in-
6
curred in the ordinary course of a trade or business
7
of the eligible business while the declaration with re-
8
spect to a federally declared disaster is in effect:
9
‘‘(A) Wages (as defined in section 3121(a))
10
and taxes imposed under section 3111.
11
‘‘(B) Unemployment insurance contribu-
12
tions.
13
‘‘(C) Health care costs.
14
‘‘(D) Rent, lease, or mortgage costs, in-
15
cluding property taxes.
16
‘‘(E) Utilities.
17
‘‘(5)
PUBLIC
HEALTH
EMERGENCY
EX-
18
PENSES.—The term ‘public health emergency ex-
19
penses’ means amounts described in subparagraphs
20
(A) through (E) of paragraph (4) if paid or incurred
21
in the ordinary course of a trade or business of the
22
eligible business while a public health emergency
23
declaration is in effect.
24
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‘‘(6) FEDERALLY
DECLARED
DISASTER.—The
1
term ‘federally declared disaster’ has the meaning
2
given such term by section 165(i)(5).
3
‘‘(7) PUBLIC
HEALTH
EMERGENCY
DECLARA-
4
TION.—The term ‘public health emergency declara-
5
tion’ means any declaration of a public health emer-
6
gency by the Secretary of Health and Human Serv-
7
ices under section 319 of the Public Health Service
8
Act (42 U.S.C. 247d).
9
‘‘(8) ACCOUNT
BENEFICIARY.—The term ‘ac-
10
count beneficiary’ means the eligible business on
11
whose behalf the small business emergency savings
12
account was established.
13
‘‘(e) TREATMENT OF ACCOUNT.—
14
‘‘(1) IN
GENERAL.—A small business emer-
15
gency savings account is exempt from taxation under
16
this subtitle unless such account has ceased to be a
17
small business emergency savings account. Notwith-
18
standing the preceding sentence, any such account is
19
subject to the taxes imposed by section 511 (relating
20
to imposition of tax on unrelated business income of
21
charitable, etc. organizations).
22
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar
23
to the rules of paragraphs (2) and (4) of section
24
408(e) shall apply to small business emergency sav-
25
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•HR 313 IH
ings accounts, and any amount treated as distrib-
1
uted under such rules shall be treated as not used
2
to pay qualified disaster and public health emer-
3
gency expenses.
4
‘‘(f) TAX TREATMENT OF DISTRIBUTIONS.—
5
‘‘(1) AMOUNTS USED FOR QUALIFIED DISASTER
6
AND PUBLIC HEALTH EMERGENCY EXPENSES.—Any
7
amount paid or distributed out of a small business
8
emergency savings account which is used exclusively
9
to pay qualified disaster and public health emer-
10
gency expenses of any account beneficiary shall not
11
be includible in gross income.
12
‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR
13
QUALIFIED DISASTER AND PUBLIC HEALTH EMER-
14
GENCY EXPENSES.—Any amount paid or distributed
15
out of a small business emergency savings account
16
which is not used exclusively to pay the qualified dis-
17
aster and public health emergency expenses of the
18
account beneficiary shall be included in the gross in-
19
come of such beneficiary.
20
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
21
FORE DUE DATE OF RETURN.—
22
‘‘(A) IN
GENERAL.—If any excess con-
23
tribution is contributed for a taxable year to
24
any small business emergency savings account
25
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•HR 313 IH
of an eligible business, paragraph (2) shall not
1
apply to distributions from the small business
2
emergency savings accounts of such eligible
3
business (to the extent such distributions do not
4
exceed the aggregate excess contributions to all
5
such accounts of such eligible business for such
6
year) if—
7
‘‘(i) such distribution is received by
8
the eligible business on or before the last
9
day prescribed by law (including extensions
10
of time) for filing such eligible business’s
11
return for such taxable year, and
12
‘‘(ii) such distribution is accompanied
13
by the amount of net income attributable
14
to such excess contribution.
15
Any net income described in clause (ii) shall be
16
included in the gross income of the eligible busi-
17
ness for the taxable year in which it is received.
18
‘‘(B) EXCESS
CONTRIBUTION.—For pur-
19
poses of subparagraph (A), the term ‘excess
20
contribution’ means any contribution (other
21
than a rollover contribution described in para-
22
graph (5)) which is not deductible under this
23
section.
24
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‘‘(4) ADDITIONAL TAX ON DISTRIBUTIONS NOT
1
USED
FOR
QUALIFIED
DISASTER
AND
PUBLIC
2
HEALTH EMERGENCY EXPENSES.—
3
‘‘(A) IN GENERAL.—The tax imposed by
4
this chapter on the account beneficiary for any
5
taxable year in which there is a payment or dis-
6
tribution from a small business emergency sav-
7
ings account of such beneficiary which is includ-
8
ible in gross income under paragraph (2) shall
9
be increased by 20 percent of the amount which
10
is so includible.
11
‘‘(B) EXCEPTION
FOR
DISABILITY
OR
12
DEATH.—If the eligible business is an indi-
13
vidual, subparagraph (A) shall not apply if the
14
payment or distribution is made after the ac-
15
count beneficiary becomes disabled within the
16
meaning of section 72(m)(7) or dies.
17
‘‘(5) ROLLOVER CONTRIBUTION.—An amount is
18
described in this paragraph as a rollover contribu-
19
tion if it meets the requirements of subparagraphs
20
(A) and (B).
21
‘‘(A) IN
GENERAL.—Paragraph (2) shall
22
not apply to any amount paid or distributed
23
from a small business emergency savings ac-
24
count to the account beneficiary to the extent
25
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•HR 313 IH
the amount received is paid into a small busi-
1
ness emergency savings account for the benefit
2
of such beneficiary not later than the 60th day
3
after the day on which the beneficiary receives
4
the payment or distribution.
5
‘‘(B) LIMITATION.—This paragraph shall
6
not apply to any amount described in subpara-
7
graph (A) received by an eligible business from
8
a small business emergency savings account if,
9
at any time during the 1-year period ending on
10
the day of such receipt, such eligible business
11
received any other amount described in sub-
12
paragraph (A) from a small business emergency
13
savings account which was not includible in the
14
small business’s gross income because of the
15
application of this paragraph.
16
‘‘(g) COST-OF-LIVING ADJUSTMENT.—
17
‘‘(1) IN GENERAL.—In the case of any taxable
18
year beginning in a calendar year after 2023, the
19
$3,000 amount in subsection (d)(3) shall be in-
20
creased by an amount equal to—
21
‘‘(A) such dollar amount, multiplied by
22
‘‘(B) the cost-of-living adjustment deter-
23
mined under section 1(f)(3) for the calendar
24
year in which such taxable year begins deter-
25
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•HR 313 IH
mined by substituting ‘calendar year 2022’ for
1
‘calendar year 2016’ in subparagraph (A)(ii)
2
thereof.
3
‘‘(2) ROUNDING.—If any increase under para-
4
graph (1) is not a multiple of $50, such increase
5
shall be rounded to the nearest multiple of $50.
6
‘‘(h) SPECIAL RULES.—
7
‘‘(1) DENIAL
OF
DEDUCTION
TO
DEPEND-
8
ENTS.—No deduction shall be allowed under this
9
section to any individual with respect to whom a de-
10
duction under section 151 is allowable to another
11
taxpayer for a taxable year beginning in the cal-
12
endar year in which such individual’s taxable year
13
begins.
14
‘‘(2) TAXABLE YEAR MUST BE FULL TAXABLE
15
YEAR.—Except in the case of a taxable year closed
16
by reason of the death of an individual who is an eli-
17
gible business, no deduction shall be allowed under
18
this section in the case of a taxable year covering a
19
period of less than 12 months.
20
‘‘(3) CERTAIN RULES TO APPLY.—Rules similar
21
to the following rules shall apply for purposes of this
22
section:
23
‘‘(A) Section 219(d)(2) (relating to no de-
24
duction for rollovers).
25
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•HR 313 IH
‘‘(B) Section 219(f)(3) (relating to time
1
when contributions deemed made).
2
‘‘(C) Section 219(f)(5) (relating to em-
3
ployer payments).
4
‘‘(D) Section 408(g) (relating to commu-
5
nity property laws).
6
‘‘(E) Section 408(h) (relating to custodial
7
accounts).
8
‘‘(F) Section 223(f)(7) (relating to transfer
9
of account incident to divorce).
10
‘‘(G) Section 223(f)(8) (relating to treat-
11
ment after death of account beneficiary).
12
‘‘(4) DENIAL OF DOUBLE BENEFIT.—No deduc-
13
tion shall be allowed under this chapter for any
14
qualified disaster and public health emergency ex-
15
penses with respect to which any payment or dis-
16
tribution is excluded from gross income under sub-
17
section (f)(1).
18
‘‘(i) REPORTS.—The Secretary may require the trust-
19
ee of a small business emergency savings account to make
20
such reports regarding such account to the Secretary and
21
to the
[Text truncated for display. Full text available on Congress.gov.]