[House Report 112-447]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-447
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PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 9) TO AMEND THE
INTERNAL REVENUE CODE OF 1986 TO PROVIDE A DEDUCTION FOR
DOMESTIC BUSINESS INCOME OF QUALIFIED SMALL BUSINESSES
_______
April 17, 2012.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Sessions, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 620]
The Committee on Rules, having had under consideration
House Resolution 620, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for consideration of H.R. 9, the
Small Business Tax Cut Act, under a structured rule. The
resolution provides one hour of debate equally divided and
controlled by the chair and ranking minority member of the
Committee on Ways and Means. The resolution waives all points
of order against consideration of the bill. The resolution
provides that the amendment in the nature of a substitute
recommended by the Committee on Ways and Means now printed in
the bill shall be considered as adopted. The bill, as amended,
shall be considered as read. The resolution waives all points
of order against provisions in the bill, as amended. The
resolution makes in order the amendment in the nature of a
substitute printed in this report, if offered by Representative
Levin of Michigan or his designee, which shall be considered as
read, shall be debatable for 20 minutes equally divided and
controlled by the proponent and an opponent, and shall not be
subject to amendment. The resolution waives all points of order
against the amendment printed in this report. Finally, the
resolution provides one motion to recommit with or without
instructions.
EXPLANATION OF WAIVERS
Although the resolution waives all points of order against
consideration of the bill, the Committee is not aware of any
points of order. The waiver is prophylactic in nature.
Although the resolution waives all points of order against
provisions in the bill, as amended, the Committee is not aware
of any points of order. The waiver is prophylactic in nature.
Although the resolution waives all points of order against
the amendment printed in this report, the Committee is not
aware of any points of order. The waiver is prophylactic in
nature.
COMMITTEE VOTES
The results of each record vote on an amendment or motion
to report, together with the names of those voting for and
against, are printed below:
Rules Committee record vote No. 210
Motion by Mr. McGovern to make in order and provide the
appropriate waivers for amendment #1, offered by Rep. McDermott
(WA), which would extend for one year 100 percent expensing for
capital expenditures, and offset the cost by repealing the
section 199 manufacturing deduction for major integrated oil
companies. Defeated: 3-6.
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Majority Members Vote Minority Members Vote
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Ms. Foxx........................................ Nay Mr. McGovern...................... Yea
Mr. Woodall..................................... Nay Mr. Hastings of Florida........... Yea
Mr. Nugent...................................... Nay Mr. Polis......................... Yea
Mr. Scott of South Carolina..................... Nay
Mr. Webster..................................... Nay
Mr. Dreier, Chairman............................ Nay
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SUMMARY OF THE AMENDMENT MADE IN ORDER
Levin, Sander (MI): Would replace the deduction in the
underlying bill with a deduction for small businesses for the
amounts they spend on capital investments in 2012. (20 minutes)
TEXT OF AMENDMENT MADE IN ORDER
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Tax Cut Act''.
SEC. 2. DEDUCTION FOR DOMESTIC BUSINESS INCOME OF QUALIFIED SMALL
BUSINESSES.
(a) In General.--Part VI of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 200. DOMESTIC BUSINESS INCOME OF QUALIFIED SMALL BUSINESSES.
``(a) Allowance of Deduction.--In the case of a qualified
small business, there shall be allowed as a deduction an amount
equal to 20 percent of the lesser of--
``(1) the qualified domestic business income of the
taxpayer for the taxable year, or
``(2) taxable income (determined without regard to
this section) for the taxable year.
``(b) Deduction Limited Based on Wages Paid.--
``(1) In general.--The amount of the deduction
allowable under subsection (a) for any taxable year
shall not exceed 50 percent of the greater of--
``(A) the W-2 wages of the taxpayer paid to
non-owners, or
``(B) the sum of--
``(i) the W-2 wages of the taxpayer
paid to individuals who are non-owner
family members of direct owners, plus
``(ii) any W-2 wages of the taxpayer
paid to 10-percent-or-less direct
owners.
``(2) Definitions related to ownership.--For purposes
of this section--
``(A) Non-owner.--The term `non-owner' means,
with respect to any qualified small business,
any person who does not own (and is not
considered as owning within the meaning of
subsection (c) or (e)(3) of section 267, as the
case may be) any stock of such business (or, if
such business is other than a corporation, any
capital or profits interest of such business).
``(B) Non-owner family members.--An
individual is a non-owner family member of a
direct owner if--
``(i) such individual is family
(within the meaning of section
267(c)(4)) of a direct owner, and
``(ii) such individual would be a
non-owner if subsections (c) and (e)(3)
of section 267 were applied without
regard to section 267(c)(2).
``(C) Direct owner.--The term `direct owner'
means, with respect to any qualified small
business, any person who owns (or is considered
as owning under the applicable non-family
attribution rules) any stock of such business
(or, if such business is other than a
corporation, any capital or profits interest of
such business).
``(D) 10-percent-or-less direct owners.--The
term `10-percent-or-less direct owner' means,
with respect to any qualified small business,
any direct owner of such business who owns (or
is considered as owning under the applicable
non-family attribution rules)--
``(i) in the case of a qualified
small business which is a corporation,
not more than 10 percent of the
outstanding stock of the corporation or
stock possessing more than 10 percent
of the total combined voting power of
all stock of the corporation, or
``(ii) in the case of a qualified
small business which is not a
corporation, not more than 10 percent
of the capital or profits interest of
such business.
``(E) Applicable non-family attribution
rules.--The term `applicable non-family
attribution rules' means the attribution rules
of subsection (c) or (e)(3) of section 267, as
the case may be, but in each case applied
without regard to section 267(c)(2).
``(3) W-2 wages.--For purposes of this section--
``(A) In general.--The term `W-2 wages'
means, with respect to any person for any
taxable year of such person, the sum of the
amounts described in paragraphs (3) and (8) of
section 6051(a) paid by such person with
respect to employment of employees by such
person during the calendar year ending during
such taxable year.
``(B) Limitation to wages attributable to
qualified domestic business income.--Such term
shall not include any amount which is not
properly allocable to domestic business gross
receipts for purposes of subsection (d)(1).
``(C) Other requirements.--Except in the case
of amounts treated as W-2 wages under paragraph
(4)--
``(i) such term shall not include any
amount which is not allowed as a
deduction under section 162 for the
taxable year, and
``(ii) such term shall not include
any amount which is not properly
included in a return filed with the
Social Security Administration on or
before the 60th day after the due date
(including extensions) for such return.
``(4) Certain partnership distributions treated as w-
2 wages.--
``(A) In general.--In the case of a qualified
small business which is a partnership and
elects the application of this paragraph for
the taxable year--
``(i) the qualified domestic business
taxable income of such partnership for
such taxable year (determined after the
application of clause (ii)) which is
allocable under rules similar to the
rules of section 199(d)(1)(A)(ii) to
each qualified service-providing
partner shall be treated for purposes
of this section as W-2 wages paid
during such taxable year to such
partner as an employee, and
``(ii) the domestic business gross
receipts of such partnership for such
taxable year shall be reduced by the
amount so treated.
``(B) Qualified service-providing partner.--
For purposes of this paragraph, the term
`qualified service-providing partner' means,
with respect to any qualified domestic business
taxable income, any partner who is a 10-
percent-or-less direct owner and who materially
participates in the trade or business to which
such income relates.
``(5) Acquisitions and dispositions.--The Secretary
shall provide for the application of this subsection in
cases where the taxpayer acquires, or disposes of, the
major portion of a trade or business or the major
portion of a separate unit of a trade or business
during the taxable year.
``(c) Limitation Based on Investment in Qualified Property.--
``(1) In general.--The amount of the deduction
allowable under subsection (a) for any taxable year
shall not exceed the allowance which would be
determined under section 168(k)(1)(A) with respect to
the taxpayer for the taxable year if such section were
applied--
``(A) by substituting `100 percent' for `50
percent', and
``(B) without regard to paragraph (2).
``(2) Adjustment of basis.--No deduction shall be
allowed to the taxpayer under subsection (a) for any
taxable year unless the adjusted basis of property
taken into account under paragraph (1) is reduced by
the amount of the deduction allowed under subsection
(a) before computing the amount otherwise allowable as
a depreciation deduction under this chapter (including
any allowance otherwise determined under section
168(k)) for such taxable year and any subsequent
taxable year.
``(d) Qualified Domestic Business Income.--For purposes of
this section--
``(1) In general.--The term `qualified domestic
business income' for any taxable year means an amount
equal to the excess (if any) of--
``(A) the taxpayer's domestic business gross
receipts for such taxable year, over
``(B) the sum of--
``(i) the cost of goods sold that are
allocable to such receipts, and
``(ii) other expenses, losses, or
deductions (other than the deduction
allowed under this section), which are
properly allocable to such receipts.
``(2) Domestic business gross receipts.--
``(A) In general.--The term `domestic
business gross receipts' means the gross
receipts of the taxpayer which are effectively
connected with the conduct of a trade or
business within the United States within the
meaning of section 864(c) but determined--
``(i) without regard to paragraphs
(3), (4), and (5) thereof, and
``(ii) by substituting `qualified
small business (within the meaning of
section 200)' for `nonresident alien
individual or a foreign corporation'
each place it appears therein.
``(B) Exceptions.--For purposes of paragraph
(1), domestic business gross receipts shall not
include any of the following:
``(i) Gross receipts derived from the
sale or exchange of--
``(I) a capital asset, or
``(II) property used in the
trade or business (as defined
in section 1231(b)).
``(ii) Royalties, rents, dividends,
interest, or annuities.
``(iii) Any amount which constitutes
wages (as defined in section 3401).
``(3) Application of certain rules.--Rules similar to
the rules of paragraphs (2) and (3) of section 199(c)
shall apply for purposes of this section (applied with
respect to qualified domestic business income in lieu
of qualified production activities income and with
respect to domestic business gross receipts in lieu of
domestic production gross receipts).
``(e) Qualified Small Business.--For purposes of this
section--
``(1) In general.--The term `qualified small
business' means any employer engaged in a trade or
business if such employer had fewer than 500 full-time
equivalent employees for either calendar year 2010 or
2011.
``(2) Full-time equivalent employees.--The term
`full-time equivalent employees' has the meaning given
such term by subsection (d)(2) of section 45R applied--
``(A) without regard to subsection (d)(5) of
such section,
``(B) with regard to subsection (e)(1) of
such section, and
``(C) by substituting `calendar year' for
`taxable year' each place it appears therein.
``(3) Employers not in existence prior to 2012.--In
the case of an employer which was not in existence on
January 1, 2012, the determination under paragraph (1)
shall be made with respect to calendar year 2012.
``(4) Application to calendar years in which employer
in existence for portion of calendar year.--In the case
of any calendar year during which the employer comes
into existence, the number of full-time equivalent
employees determined under paragraph (2) with respect
to such calendar year shall be increased by multiplying
the number so determined (without regard to this
paragraph) by the quotient obtained by dividing--
``(A) the number of days in such calendar
year, by
``(B) the number of days during such calendar
year which such employer is in existence.
``(5) Special rules.--
``(A) Aggregation rule.--For purposes of
paragraph (1), any person treated as a single
employer under subsection (a) or (b) of section
52 (applied without regard to section 1563(b))
or subsection (m) or (o) of section 414 shall
be treated as a single employer for purposes of
this subsection.
``(B) Predecessors.--Any reference in this
subsection to an employer shall include a
reference to any predecessor of such employer.
``(f) Special Rules.--
``(1) Elective application of deduction.--Except as
otherwise provided by the Secretary, the taxpayer may
elect not to take any item of income into account as
domestic business gross receipts for purposes of this
section.
``(2) Coordination with section 199.--If a deduction
is allowed under this section with respect to any
taxpayer for any taxable year--
``(A) any gross receipts of the taxpayer
which are taken into account under this section
for such taxable year shall not be taken into
account under section 199 for such taxable
year, and
``(B) the W-2 wages of the taxpayer which are
taken into account under this section shall not
be taken into account under section 199 for
such taxable year.
``(3) Application of certain rules.--Rules similar to
the rules of paragraphs (1), (2), (3), (4), (6), and
(7) of section 199(d) shall apply for purposes of this
section (applied with respect to qualified domestic
business income in lieu of qualified production
activities income).
``(g) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations which prevent a taxpayer which
reorganizes from being treated as a qualified small business if
such taxpayer would not have been treated as a qualified small
business prior to such reorganization.
``(h) Application.--Subsection (a) shall apply only with
respect to the first taxable year of the taxpayer beginning
after December 31, 2011.''.
(b) Conforming Amendments.--
(1) Section 56(d)(1)(A) of such Code is amended by
striking ``deduction under section 199'' both places it
appears and inserting ``deductions under sections 199
and 200''.
(2) Section 56(g)(4)(C) of such Code is amended by
adding at the end the following new clause:
``(vii) Deduction for domestic
business income of qualified small
businesses.--Clause (i) shall not apply
to any amount allowable as a deduction
under section 200.''.
(3) The following provisions of such Code are each
amended by inserting ``200,'' after ``199,''.
(A) Section 86(b)(2)(A).
(B) Section 135(c)(4)(A).
(C) Section 137(b)(3)(A).
(D) Section 219(g)(3)(A)(ii).
(E) Section 221(b)(2)(C)(i).
(F) Section 222(b)(2)(C)(i).
(G) Section 246(b)(1).
(H) Section 469(i)(3)(F)(iii).
(4) Section 163(j)(6)(A)(i) of such Code is amended
by striking ``and'' at the end of subclause (III) and
by inserting after subclause (IV) the following new
subclause:
``(V) any deduction allowable
under section 200, and''.
(5) Section 170(b)(2)(C) of such Code is amended by
striking ``and'' at the end of clause (iv), by striking
the period at the end of clause (v) and inserting ``,
and'', and by inserting after clause (v) the following
new clause:
``(vi) section 200.''.
(6) Section 172(d) of such Code is amended by adding
at the end the following new paragraph:
``(8) Domestic business income of qualified small
businesses.--The deduction under section 200 shall not
be allowed.''.
(7) Section 613(a) of such Code is amended by
striking ``deduction under section 199'' and inserting
``deductions under sections 199 and 200''.
(8) Section 613A(d)(1) of such Code is amended by
redesignating subparagraphs (C), (D), and (E) as
subparagraphs (D), (E), and (F), respectively, and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) any deduction allowable under section
200,''.
(9) Section 1402(a) of such Code is amended by
striking ``and'' at the end of paragraph (16), by
redesignating paragraph (17) as paragraph (18), and by
inserting after paragraph (16) the following new
paragraph:
``(17) the deduction provided by section 200 shall
not be allowed; and''.
(c) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 of such Code is amended by adding at
the end the following new item:
``Sec. 200. Domestic business income of qualified small businesses.''.