Small Business Jobs Act

IB Union Calendar No. 100 118TH CONGRESS 1ST SESSION H. R. 3937 [Report No. 118–128] To amend the Internal Revenue Code of 1986 to promote the establishment and growth of small businesses. IN THE HOUSE OF REPRESENTATIVES JUNE 9, 2023 Mr. SMITH of Missouri introduced the following bill; which was referred to the Committee on Ways and Means JUNE 30, 2023 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed [Strike out all after the enacting clause and insert the part printed in italic] [For text of introduced bill, see copy of bill as introduced on June 9, 2023] VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3937 RH A BILL To amend the Internal Revenue Code of 1986 to promote the establishment and growth of small businesses. VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6652 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3937 RH 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; TABLE OF CONTENTS, ETC. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Small Business Jobs Act’’. 5 (b) AMENDMENT OF 1986 CODE.—Except as otherwise 6 expressly provided, whenever in this Act an amendment or 7 repeal is expressed in terms of an amendment to, or repeal 8 of, a section or other provision, the reference shall be consid- 9 ered to be made to a section or other provision of the Inter- 10 nal Revenue Code of 1986. 11 (c) TABLE OF CONTENTS.—The table of contents for 12 this Act is as follows: 13 Sec. 1. Short title; table of contents, etc. Sec. 2. Increase in threshold for requiring information reporting with respect to certain payees. Sec. 3. Restoration of reporting rule for third party network transactions. Sec. 4. Modifications to exclusion for gain from qualified small business stock. Sec. 5. Increase in limitations on expensing of depreciable business assets. Sec. 6. Establishment of special rules for capital gains invested in rural oppor- tunity zones. Sec. 7. Reporting on qualified opportunity funds and qualified rural opportunity funds. SEC. 2. INCREASE IN THRESHOLD FOR REQUIRING INFOR- 14 MATION REPORTING WITH RESPECT TO CER- 15 TAIN PAYEES. 16 (a) IN GENERAL.—Sections 6041(a) is amended by 17 striking ‘‘$600’’ and inserting ‘‘$5,000’’. 18 (b) INFLATION ADJUSTMENT.—Section 6041 is amend- 19 ed by adding at the end the following new subsection: 20 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3937 RH ‘‘(h) INFLATION ADJUSTMENT.—In the case of any cal- 1 endar year after 2024, the dollar amount in subsection (a) 2 shall be increased by an amount equal to— 3 ‘‘(1) such dollar amount, multiplied by 4 ‘‘(2) the cost-of-living adjustment determined 5 under section 1(f)(3) for such calendar year, deter- 6 mined by substituting ‘calendar year 2023’ for ‘cal- 7 endar year 2016’ in subparagraph (A)(ii) thereof. 8 If any increase under the preceding sentence is not a mul- 9 tiple of $100, such increase shall be rounded to the nearest 10 multiple of $100.’’. 11 (c) APPLICATION TO REPORTING ON REMUNERATION 12 FOR SERVICES AND DIRECT SALES.—Section 6041A is 13 amended— 14 (1) in subsection (a)(2), by striking ‘‘is $600 or 15 more’’ and inserting ‘‘equals or exceeds the dollar 16 amount in effect for such calendar year under section 17 6041(a)’’, and 18 (2) in subsection (b)(1)(B), by striking ‘‘is 19 $5,000 or more’’ and inserting ‘‘equals or exceeds the 20 dollar amount in effect for such calendar year under 21 section 6041(a)’’. 22 (d) APPLICATION TO BACKUP WITHHOLDING.—Sec- 23 tion 3406(b)(6) is amended— 24 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3937 RH (1) by striking ‘‘$600’’ in subparagraph (A) and 1 inserting ‘‘the dollar amount in effect for such cal- 2 endar year under section 6041(a)’’, and 3 (2) by striking ‘‘ONLY WHERE AGGREGATE FOR 4 CALENDAR YEAR IS $600 OR MORE’’ in the heading 5 and inserting ‘‘ONLY IF IN EXCESS OF THRESHOLD’’. 6 (e) CONFORMING AMENDMENTS.— 7 (1) The heading of section 6041(a) is amended 8 by striking ‘‘OF $600 OR MORE’’ and inserting ‘‘EX- 9 CEEDING THRESHOLD’’. 10 (2) Section 6041(a) is amended by striking ‘‘tax- 11 able year’’ and inserting ‘‘calendar year’’. 12 (f) EFFECTIVE DATE.—The amendments made by this 13 section shall apply with respect to payments made after De- 14 cember 31, 2023. 15 SEC. 3. RESTORATION OF REPORTING RULE FOR THIRD 16 PARTY NETWORK TRANSACTIONS. 17 (a) DE MINIMIS EXCEPTION FOR THIRD PARTY SET- 18 TLEMENT ORGANIZATIONS.—Section 6050W(e) is amended 19 to read as follows: 20 ‘‘(e) EXCEPTION FOR DE MINIMIS PAYMENTS BY 21 THIRD PARTY SETTLEMENT ORGANIZATIONS.—A third 22 party settlement organization shall be required to report 23 any information under subsection (a) with respect to third 24 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3937 RH party network transactions of any participating payee only 1 if— 2 ‘‘(1) the amount which would otherwise be re- 3 ported under subsection (a)(2) with respect to such 4 transactions exceeds $20,000, and 5 ‘‘(2) the aggregate number of such transactions 6 exceeds 200.’’. 7 (b) EFFECTIVE DATE.—The amendment made by this 8 section shall apply to returns for calendar years beginning 9 after December 31, 2021. 10 SEC. 4. MODIFICATIONS TO EXCLUSION FOR GAIN FROM 11 QUALIFIED SMALL BUSINESS STOCK. 12 (a) PHASED INCREASE IN EXCLUSION FOR GAIN FROM 13 QUALIFIED SMALL BUSINESS STOCK.— 14 (1) IN GENERAL.—Section 1202(a)(1) is amend- 15 ed— 16 (A) by striking ‘‘50 percent’’ and inserting 17 ‘‘the applicable percentage’’, and 18 (B) by striking ‘‘held for more than 5 19 years’’ and inserting ‘‘held for at least 3 years’’. 20 (2) APPLICABLE PERCENTAGE.—Section 1202(a) 21 is amended by adding at the end the following new 22 paragraph: 23 ‘‘(5) APPLICABLE PERCENTAGE.—Except as pro- 24 vided in paragraphs (3) and (4), the applicable per- 25 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3937 RH centage under paragraph (1) shall be determined 1 under the following table: 2 ‘‘Years stock held: Applicable percentage: 3 years ............................................................................................... 50% 4 years ............................................................................................... 75% 5 years or more ................................................................................. 100%’’. (3) CONTINUED TREATMENT AS NOT ITEM OF 3 TAX PREFERENCE.— 4 (A) IN GENERAL.—Section 57(a)(7) is 5 amended by striking ‘‘An amount’’ and inserting 6 ‘‘In the case of stock acquired on or before the 7 date of the enactment of the Creating Small 8 Business Jobs Act of 2010, an amount’’. 9 (B) CONFORMING AMENDMENT.—Section 10 1202(a)(4) is amended— 11 (i) by striking ‘‘, and’’ at the end of 12 subparagraph (B) and inserting a period, 13 and 14 (ii) by striking subparagraph (C). 15 (4) OTHER CONFORMING AMENDMENTS.— 16 (A) Section 1202(a)(4) is amended by in- 17 serting ‘‘and before the date of the enactment of 18 the Small Business Jobs Act’’ after ‘‘Act of 19 2010’’. 20 (B) Paragraphs (3) and (4) of section 21 1202(a) are each amended by inserting ‘‘held for 22 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3937 RH more than 5 years and’’ after ‘‘In the case of 1 qualified small business stock’’. 2 (C) Section 1202(a)(3)(A) of such Code is 3 amended to read as follows: 4 ‘‘(A) the applicable percentage under para- 5 graph (1) shall be 75 percent, and’’, 6 (D) Section 1202(a)(4)(A) is amended to 7 read as follows: 8 ‘‘(A) the applicable percentage under para- 9 graph (1) shall be 100 percent, and’’. 10 (E) Section 1202(b)(2) is amended by strik- 11 ing ‘‘more than 5 years’’ and inserting ‘‘at least 12 3 years’’. 13 (F) Section 1202(g)(2)(A) is amended by 14 striking ‘‘more than 5 years’’ and inserting ‘‘at 15 least 3 years’’. 16 (G) Section 1202(j)(1)(A) is amended by 17 striking ‘‘more than 5 years’’ and inserting ‘‘at 18 least 3 years’’. 19 (b) TACKING HOLDING PERIOD OF CONVERTIBLE 20 DEBT INSTRUMENTS.— 21 (1) IN GENERAL.—Section 1202(f) is amended— 22 (A) by redesignating paragraphs (1) and 23 (2) as subparagraphs (A) and (B) and moving 24 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3937 RH such subparagraphs (as so redesignated) 2 ems to 1 the right, 2 (B) by striking ‘‘CONVERSION OF OTHER 3 STOCK.—If any stock’’ and inserting the fol- 4 lowing: ‘‘CONVERSION.— 5 ‘‘(1) OTHER STOCK.—If any stock’’, and 6 (C) by adding at the end the following new 7 paragraph: 8 ‘‘(2) CONVERTIBLE DEBT INSTRUMENTS.— 9 ‘‘(A) IN GENERAL.—If any stock in a cor- 10 poration is acquired by the taxpayer, without 11 recognition of gain, solely through the conversion 12 of a qualified convertible debt instrument— 13 ‘‘(i) the stock so acquired shall be treat- 14 ed as qualified small business stock in the 15 hands of the taxpayer, and 16 ‘‘(ii) the stock so acquired shall be 17 treated as having been held during the pe- 18 riod during which the qualified convertible 19 debt instrument was held. 20 ‘‘(B) QUALIFIED CONVERTIBLE DEBT IN- 21 STRUMENT.—For purposes of this paragraph, the 22 term ‘qualified convertible debt instrument’ 23 means any bond or other evidence of indebted- 24 ness— 25 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 3937 RH ‘‘(i) which is originally issued by the 1 corporation to the taxpayer, 2 ‘‘(ii) the issuer of which— 3 ‘‘(I) from issuance until conver- 4 sion, is a qualified small business, and 5 ‘‘(II) during substantially all of 6 the taxpayer’s holding period of such 7 bond or evidence of indebtedness, the 8 corporation meets the active business 9 requirements of subsection (e), and 10 ‘‘(iii) which is convertible into stock in 11 the corporation.’’. 12 (c) GAIN EXCLUSION ALLOWED WITH RESPECT TO 13 QUALIFIED SMALL BUSINESS STOCK IN CORPORATION.— 14 (1) IN GENERAL.—Section 1202(c) is amended— 15 (A) by striking ‘‘C corporation’’ in para- 16 graph (1) and inserting ‘‘corporation’’, and 17 (B) by striking ‘‘and such corporation is a 18 C corporation’’ in paragraph (2)(A). 19 (2) QUALIFIED SMALL BUSINESS DEFINITION.— 20 Section 1202(d)(1) is amended by striking ‘‘which is 21 a C corporation’’. 22 (3) CLARIFICATION OF AGGREGATION RULES AP- 23 PLICABLE TO S CORPORATIONS.—Section 1202(d)(3) 24 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 3937 RH is amended by adding at the end the following new 1 subparagraph: 2 ‘‘(C) CLARIFICATION WITH RESPECT TO S 3 CORPORATIONS.—Any determination of the mem- 4 bers of a controlled group of corporations under 5 this paragraph shall include taking into account 6 any stock ownership in an S corporation.’’. 7 (4) TREATMENT OF PASSIVE LOSSES.—Section 8 469(g)(1) is amended by adding at the end the fol- 9 lowing new subparagraph: 10 ‘‘(D) CERTAIN DISPOSITIONS OF SMALL 11 BUSINESS STOCK.—In the case a disposition any 12 gain from which is excluded from gross income 13 under section 1202, subparagraph (A) shall not 14 apply.’’. 15 (5) SPECIAL RULES RELATING TO S CORPORA- 16 TIONS.—Section 1202(e) is amended by adding at the 17 end the following new paragraph: 18 ‘‘(9) APPLIED AT S CORPORATION LEVEL.—In 19 the case of an S corporation, the requirements of this 20 subsection shall be applied at the corporate level.’’. 21 (d) EFFECTIVE DATES.— 22 (1) IN GENERAL.—Except as otherwise provided 23 in this subsection, the amendments made by this sec- 24 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 3937 RH tion shall apply to stock acquired after the date of the 1 enactment of this Act. 2 (2) CONTINUED TREATMENT AS NOT ITEM OF 3 TAX PREFERENCE.—The amendments made by sub- 4 section (a)(3) shall take effect as if included in the en- 5 actment of section 2011 the Creating Small Business 6 Jobs Act of 2010. 7 (3) TACKING HOLDING PERIOD OF CONVERTIBLE 8 DEBT INSTRUMENTS.—The amendments made by sub- 9 section (b) shall apply to debt instruments originally 10 issued after the date of the enactment of this Act. 11 SEC. 5. INCREASE IN LIMITATIONS ON EXPENSING OF DE- 12 PRECIABLE BUSINESS ASSETS. 13 (a) IN GENERAL.—Section 179(b) is amended— 14 (1) by striking ‘‘$1,000,000’’ in paragraph (1) 15 and inserting ‘‘$2,500,000’’, and 16 (2) by striking ‘‘$2,500,000’’ in paragraph (2) 17 and inserting ‘‘$4,000,000’’. 18 (b) INFLATION ADJUSTMENT.—Section 179(b)(6) is 19 amended— 20 (1) by striking ‘‘2018’’ and inserting ‘‘2024 21 (2018 in the case of the dollar amount in paragraph 22 (5)(A))’’, and 23 (2) by striking ‘‘ ‘calendar year 2017’’ and in- 24 serting ‘‘ ‘calendar year 2024’ (‘calendar year 2017’ 25 VerDate Sep 11 2014 23:46 Jun 30, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6203 E:\BILLS\H3937.RH H3937 kjohnson on DSK79L0C42PROD with BILLS 13 •HR 3937 RH in the case of the dollar amount in paragraph 1 (5)(A))’’. 2 (c) EFFECTIVE DATE.—The amendments made by this 3 section shall apply to property placed in service in taxable 4 years beginning after December 31, 2023. 5 SEC. 6. ESTABLISHMENT OF SPECIAL RULES FOR CAPITAL 6 GAINS INVESTED IN RURAL OPPORTUNITY 7 ZONES. 8 (a) IN GENERAL.—Subchapter Z of chapter 1 is 9 amended by adding at the end the following new section: 10 ‘‘SEC. 1400Z–3. SPECIAL RULES FOR CAPITAL GAINS IN- 11 VESTED IN RURAL OPPORTUNITY ZONES. 12 ‘‘(a) IN GENERAL.— 13 ‘‘(1) TREATMENT OF GAINS.—In the case of cap- 14 ital gain from the sale to, or exchange with, an unre- 15 lated person of any property held by the taxpayer, at 16 the election of the taxpayer— 17 ‘‘(A) gross income for the taxable year shall 18 not include so much of such gain as does not ex- 19 ceed the aggregate amount invested by the tax- 20 payer in a qualified ru [Text truncated for display. Full text available on Congress.gov.]