Small Business Emergency Savings Accounts Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 8656 To amend the Internal Revenue Code of 1986 to provide emergency savings accounts for small businesses. IN THE HOUSE OF REPRESENTATIVES OCTOBER 23, 2020 Mr. CLOUD (for himself, Mr. WEBER of Texas, Mr. GOHMERT, and Mr. KING of Iowa) introduced the following bill; which was referred to the Com- mittee 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 2020’’. 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 8656 IH 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 8656 IH ‘‘(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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 8656 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 8656 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 8656 IH ‘‘(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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 8656 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 8656 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 8656 IH ‘‘(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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 8656 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 2020, 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 8656 IH mined by substituting ‘calendar year 2019’ 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 VerDate Sep 11 2014 18:41 Nov 06, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H8656.IH H8656 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 8656 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 [Text truncated for display. 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