H. R. 2608
IN THE HOUSE OF REPRESENTATIVES
June 2, 2015
Ms. DeLauro (for herself, Mr. Cole, Mr. Welch, Ms. Duckworth, Ms. Lee, Mr. Lipinski, Mr. Ryan of Ohio, Ms. Esty, and Ms. Kuster) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to allow manufacturing businesses to establish tax-free manufacturing reinvestment accounts to assist them in providing for new equipment and facilities and workforce training.
This Act may be cited as the
Manufacturing Reinvestment Account Act of 2015.
Manufacturing reinvestment accounts
Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 199 the following new section:
Manufacturing reinvestment accounts
In the case of a taxpayer engaged in a manufacturing business, there shall be allowed as a deduction for the taxable year the amount paid in cash by the taxpayer during the taxable year to a manufacturing reinvestment account (hereinafter referred to as an MRA) for the taxpayer’s benefit.
The amount which a taxpayer may pay into an MRA for the taxable year shall not exceed the lesser of—
the domestic manufacturing gross receipts of the taxpayer for the taxable year, or
For purposes of this subsection, all persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single manufacturer.
Inclusion of foreign corporations
For purposes of subparagraph (A), in applying subsections (a) and (b) of section 52 to this section, section 1563 shall be applied without regard to subsection (b)(2)(C) thereof.
For purposes of this section, the term MRA means a trust created or organized in the United States for the exclusive benefit of the taxpayer, but only if the written governing instrument creating the trust meets the following requirements:
No contribution will be accepted for any taxable year unless it is in cash.
Contributions will not be accepted for any taxable year in excess of the amount allowed as a deduction under subsection (a) for such year.
The trustee is an eligible institution.
No part of the trust assets will be invested in life insurance contracts.
No part of the trust assets will be invested in any collectible (as defined in section 408(m)).
The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.
Tax treatment of accounts
An MRA is exempt from taxation under this subtitle unless the account has ceased to be an MRA. Notwithstanding the preceding sentence, an MRA is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).
Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to MRAs, and any amount treated as distributed under such rules shall be treated as not used to pay qualified reinvestment expenses.
Treatment of distributions
Except as provided in paragraphs (3) and (4), there shall be includible in the gross income of the taxpayer for any taxable year—
any amount distributed from an MRA of the taxpayer during such taxable year, and
any deemed distribution under—
subsection (g)(1) (relating to deposits not distributed within 7 years),
subsection (g)(2) (relating to cessation in manufacturing business), and
subparagraph (A) or (B) of subsection (g)(3) (relating to prohibited transactions and pledging account as security).
The tax imposed by this chapter on the taxpayer for any taxable year in which there is a distribution from an MRA shall be increased by 10 percent of the amount of such distribution which is includible in gross income.
Subparagraph (A) shall not apply to distributions during the taxable year to the extent necessary, under regulations prescribed by the Secretary, to avoid bankruptcy.
Reduced inclusion for amounts reinvested
Only 43 percent of the aggregate amount distributed from an MRA during the taxable year shall be includible in income under paragraph (1)(A) to the extent that such aggregate amount does not exceed the aggregate amount of qualified reinvestment expenses paid or incurred by the taxpayer during such year.
Distribution of excess contributions
Paragraph (1) shall not apply to the distribution of any contribution paid during a taxable year to an MRA to the extent that such contribution exceeds the limitation applicable under subsection (b) if requirements similar to the requirements of section 408(d)(4) are met.
For purposes of this section—
The term manufacturing business means any trade or business having domestic manufacturing gross receipts.
Domestic manufacturing gross receipts
The term domestic manufacturing gross receipts means gross receipts of the taxpayer which are derived from any lease, rental, license, sale, exchange, or other disposition of tangible personal property which was manufactured by the taxpayer in whole or in significant part within the United States. Rules similar to the rules of section 199 shall apply in determining the gross receipts of the taxpayer for purposes of the preceding sentence.
Qualified reinvestment expenses
The term qualified reinvestment expenses means—
expenses for property to be used by the taxpayer in a manufacturing business, and
expenses for job training and workforce development for employees of the taxpayer.
The term eligible institution means—
any insured depository institution, which—
is not controlled by a bank holding company or savings and loan holding company that is also an eligible institution,
has total assets of equal to or less than $25,000,000,000, as reported in the call report as of the end of the fourth quarter of calendar year 2014, and
is not directly or indirectly controlled by any company or other entity that has total consolidated assets of more than $25,000,000,000, as so reported;
any bank holding company which has total consolidated assets of equal to or less than $25,000,000,000;
any savings and loan holding company which has total consolidated assets of equal to or less than $25,000,000,000;
any community development financial institution loan fund which has total assets of equal to or less than $25,000,000,000; and
any small business lending company that has total assets of equal to or less than $25,000,000,000.
Insured depository institution
The term insured depository institution has the meaning given such term under section 3(c)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)(2)).
Bank holding company
The term bank holding company has the meaning given such term under section 2(a)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(2)(a)(1)).
The term call report means—
reports of Condition and Income submitted to the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation;
the Office of Thrift Supervision Thrift Financial Report;
any report that is designated by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision, as applicable, as a successor to any report referred to in clause (i) or (ii);
standard reports of Condition and Income submitted by Community Development Financial Institution loan funds to the Community Development Financial Institutions Fund; and
with respect to an eligible institution for which no report exists that is described under clause (i), (ii), or (iii), such other report or set of information as the Secretary, in consultation with the Administrator of the Small Business Administration, may prescribe.
Tax on deposits in account which are not distributed within 7 years
If, at the close of any taxable year, there is a nonqualified balance in any MRA—
there shall be deemed distributed from the MRA during such taxable year an amount equal to such balance, and
the taxpayer's tax imposed by this chapter for such taxable year shall be increased by 10 percent of such deemed distribution.
For purposes of subparagraph (A), the term nonqualified balance means any balance in the MRA on the last day of the taxable year which is attributable to amounts deposited in such account before the 6th preceding taxable year.
For purposes of this paragraph, distributions from an MRA shall be treated as made from deposits (and income thereon) in the order in which such deposits were made, beginning with the earliest deposits.
Cessation of manufacturing business
If the taxpayer ceases to be engaged in a manufacturing business, there shall be deemed distributed from the MRA of the taxpayer at the close of the first taxable year beginning after such cessation an amount equal to the balance in the MRA (if any) at such close.
Certain rules to apply
Rules similar to the following rules shall apply for purposes of this section:
Section 408(e)(2) (relating to loss of exemption of account where taxpayer engages in prohibited transaction).
Section 408(e)(4) (relating to effect of pledging account as security).
Section 408(h) (relating to custodial accounts).
Time when payments deemed made
For purposes of this section, a taxpayer shall be deemed to have made a payment to an MRA on the last day of a taxable year if such payment is made on account of such taxable year and is made on or before the due date (without regard to extensions) for filing the return of tax for such taxable year.
Deduction not allowed for self-employment tax
The deduction allowable by reason of subsection (a) shall not be taken into account in determining an individual's net earnings from self-employment (within the meaning of section 1402(a)) for purposes of chapter 2.
The trustee of an MRA shall make such reports regarding such account to the Secretary and to the person for whose benefit the account is maintained with respect to contributions, distributions, and such other matters as the Secretary may require under regulations. The reports required by this subsection shall be filed at such time and in such manner and furnished to such persons at such time and in such manner as may be required by such regulations.
No deduction shall be allowed under this section for any taxable year beginning more than 10 years after the date of the enactment of this section.
Tax on excess contributions
Subsection (a) of section 4973 of such Code (relating to tax on excess contributions to certain tax-favored accounts and annuities) is amended by striking
or at the end of paragraph (5), by adding
or at the end of paragraph (6), and by inserting after paragraph (6) the following new paragraph:
an MRA (within the meaning of section 199A(c)),
Excess contribution defined
Section 4973 of such Code is amended by adding at the end the following new subsection:
Excess contributions to MRAs
For purposes of this section, in the case of MRAs (within the meaning of section 199A(c)), the term excess contributions means the amount by which the amount contributed for the taxable year to the MRAs of the taxpayer exceeds the amount which may be contributed to such MRAs under section 199A(b) for such taxable year. For purposes of this subsection, any contribution which is distributed out of an MRA in a distribution to which section 199A(e)(3) applies shall be treated as an amount not contributed.
Tax on prohibited transactions
Paragraph (1) of section 4975(e) of such Code is amended by striking
or at the end of subparagraph (F), by redesignating subparagraph (G) as subparagraph (H), and by inserting after subparagraph (F) the following:
an MRA described in section 199A(c), or
Subsection (c) of section 4975 of such Code (relating to tax on prohibited transactions) is amended by adding at the end the following:
Special rule for manufacturing reinvestment accounts
A person for whose benefit an MRA (within the meaning of section 199A(c)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be an MRA by reason of the application of section 199A(g)(3)(A) to such account.
Failure To provide reports on MRAs
Paragraph (2) of section 6693(a) of such Code (relating to failure to provide reports on certain tax-favored accounts or annuities) is amended by redesignating subparagraphs (A) through (F) as subparagraphs (B) through (G), respectively, and by inserting before subparagraph (B), as so redesignated, the following new subparagraph:
section 199A(h) (relating to manufacturing reinvestment accounts),
The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 199 the following new item:
Sec. 199A. Manufacturing reinvestment accounts..
The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.