H.R. 3761 (103rd): Small Business Empowerment Act

103rd Congress, 1993–1994. Text as of Feb 02, 1994 (Introduced).

Status & Summary | PDF | Source: GPO

HR 3761 IH

103d CONGRESS

2d Session

H. R. 3761

To amend the Internal Revenue Code of 1986 to permit individual retirement accounts to be used as security for certain business loans.

IN THE HOUSE OF REPRESENTATIVES

February 2, 1994

Ms. BYRNE 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 permit individual retirement accounts to be used as security for certain business loans.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Small Business Empowerment Act’.

SEC. 2. USE OF INDIVIDUAL RETIREMENT ACCOUNTS AS SECURITY FOR CERTAIN BUSINESS LOANS.

    (a) GENERAL RULE- Paragraph (4) of section 408(e) of the Internal Revenue Code of 1986 (relating to effect of pledging account as security) is amended to read as follows:

      ‘(4) EFFECT OF PLEDGING ACCOUNT AS SECURITY-

        ‘(A) IN GENERAL- If, during any taxable year of the individual for whose benefit an individual retirement account is established, that individual uses the account or any portion thereof as security for a loan, the portion so used is treated as distributed to that individual.

        ‘(B) EXCEPTION FOR CERTAIN BUSINESS LOANS-

          ‘(i) IN GENERAL- Subparagraph (A) shall not apply to the use of an individual retirement account (or any portion thereof) as security for a qualified business loan and nothing in subsection (a)(4) shall be construed to prohibit such use.

          ‘(ii) QUALIFIED BUSINESS LOAN- For purposes of clause (i), the term ‘qualified business loan’ means any indebtedness incurred by the individual in connection with--

            ‘(I) the commencement of a new trade or business by the individual or the expansion of an existing trade or business, or

            ‘(II) the acquisition of property to be used in the conduct of a trade or business by the individual.

          ‘(iii) WAIVER OF PENALTY IN CASE OF DEFAULT- If--

            ‘(I) an individual retirement account (or portion thereof) was used as security for a qualified business loan, and

            ‘(II) as a result of a default on such loan there is a distribution from such account required under the security interest,

          no additional tax shall be imposed under section 72(t) on such distribution.’

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on the date of the enactment of this Act.