text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Small Business Start-up Savings 
  Accounts Act of 2011''.
  
  SEC. 2. ESTABLISHMENT OF SMALL BUSINESS START-UP SAVINGS ACCOUNTS.
  
      (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 is 
  amended by adding at the end the following new section:
  
  ``SEC. 7529. SMALL BUSINESS START-UP SAVINGS ACCOUNTS.
  
      ``(a) In General.--An individual or an eligible small business may 
  enter into an agreement with the Secretary to establish a small 
  business start-up savings account.
      ``(b) Small Business Start-Up Savings Account.--For purposes of 
  this section, the term `small business start-up savings account' means 
  a trust created or organized in the United States for the benefit of 
  the account beneficiary, but only if the written governing instrument 
  creating the trust meets the following requirements:
              ``(1) Except as provided in subsection (d)(3) in the case 
          of a rollover contribution, no contribution will be accepted 
          unless it is in cash, and contributions will not be accepted 
          for the taxable year on behalf of any account beneficiary in 
          excess of the amount in effect for such taxable year under 
          subsection (d)(2).
              ``(2) The trustee is a bank (as defined in section 408(n)) 
          or such other person who demonstrates to the satisfaction of 
          the Secretary that the manner in which such other person will 
          administer the trust will be consistent with the requirements 
          of this section.
              ``(3) No part of the trust funds will be invested in life 
          insurance contracts.
              ``(4) The interest of an individual in the balance of his 
          account is nonforfeitable.
              ``(5) The assets of the trust will not be commingled with 
          other property except in a common trust fund or common 
          investment fund.
      ``(c) Eligible Small Business.--For purposes of this section, the 
  term `eligible small business' means, with respect to any taxable year, 
  any person engaged in a trade or business if the average number of 
  employees employed by such person on business days during the taxable 
  year was 500 or fewer.
      ``(d) Treatment of Contributions.--
              ``(1) In general.--There shall be allowed as a deduction 
          for the taxable year an amount equal to so much of the account 
          beneficiary's contributions for the taxable year to all small 
          business start-up savings accounts maintained for the benefit 
          of such beneficiary as do not exceed the contribution 
          limitations in effect for the taxable year under paragraph (2).
              ``(2) Contribution limitation.--
                      ``(A) In general.--The amount allowable as a 
                  deduction under paragraph (1) with respect to all small 
                  business start-up savings accounts maintained for the 
                  benefit of any person shall not exceed the lesser of--
                              ``(i) $10,000, or
                              ``(ii) $150,000, reduced by the aggregate 
                          contributions by such person for all taxable 
                          years with respect to all small business start-
                          up savings accounts of the taxpayer.
                      ``(B) Cost of living adjustment.--
                              ``(i) In general.--In the case of a taxable 
                          year beginning after 2011, the $10,000 amount 
                          in subparagraph (A) shall be increased by an 
                          amount equal to--
                                      ``(I) such dollar amount, 
                                  multiplied by
                                      ``(II) the cost-of-living 
                                  adjustment determined under section 
                                  1(f)(3) for the calendar year in which 
                                  the taxable year begins, determined by 
                                  substituting `calendar year 2010' for 
                                  `calendar year 1992' in subparagraph 
                                  (B) thereof.
                              ``(ii) Rounding.--If any amount as adjusted 
                          under clause (i) is not a multiple of $500, 
                          such amount shall be rounded to the next lowest 
                          multiple of $500.
              ``(3) Rollovers from retirement plans not allowed.--Under 
          regulations prescribed by the Secretary, a person may make a 
          rollover contribution to a small business start-up savings 
          account only in the case of a rollover from another small 
          business start-up savings account.
              ``(4) Treated as deduction for individuals and 
          corporations.--For purposes of chapter 1, the deduction allowed 
          under paragraph (1) shall be treated as a deduction specified 
          in part VI of subchapter B of chapter 1 (relating to itemized 
          deductions for individuals and corporations).
      ``(e) Treatment of Distributions.--
              ``(1) Tax treatment.--
                      ``(A) Exclusion of qualified distributions.--Any 
                  qualified distribution from a small business start-up 
                  savings account shall not be includible in gross 
                  income.
                      ``(B) Inclusion of other distributions.--Any 
                  distribution from a small business start-up savings 
                  account which is not a qualified distribution shall be 
                  included in gross income.
              ``(2) Qualified distribution.--For purposes of this 
          subsection, the term `qualified distribution' means, with 
          respect to any taxable year, any payment or distribution from a 
          small business start-up savings account--
                      ``(A) to the extent the amount of such payment or 
                  distribution does not exceed the sum of--
                              ``(i) the aggregate amounts paid or 
                          incurred by the taxpayer for such taxable year 
                          with respect to the taxpayer's trade or 
                          business for the purchase of equipment or 
                          facilities, marketing, training, incorporation, 
                          and accounting fees, and
                              ``(ii) the aggregate capital contributions 
                          of the taxpayer with respect to an eligible 
                          small business for the taxable year (but only 
                          to the extent such amounts are used by such 
                          small business for purposes described in clause 
                          (i)), and
                      ``(B) which, in the case of a payment or 
                  distribution subsequent to the first payment or 
                  distribution from such account (or any predecessor to 
                  such account)--
                              ``(i) is made not later than the close of 
                          the 5th taxable year beginning after the date 
                          of such first payment or distribution, and
                              ``(ii) is made with respect to the same 
                          eligible small business with respect to which 
                          such first payment or distribution was made.
              ``(3) Treatment after death of account beneficiary.--
                      ``(A) In general.--If, by reason of the death of 
                  the account beneficiary, any person acquires the 
                  account beneficiary's interest in a small business 
                  start-up savings account--
                              ``(i) such account shall cease to be a 
                          small business start-up savings account as of 
                          the date of death, and
                              ``(ii) an amount equal to the fair market 
                          value of the assets in such account on such 
                          date shall be includible--
                                      ``(I) in the case of a person who 
                                  is not the estate of such beneficiary, 
                                  in such person's gross income for the 
                                  taxable year which includes such date, 
                                  or
                                      ``(II) in the case of a person who 
                                  is the estate of such beneficiary, in 
                                  such beneficiary's gross income for the 
                                  last taxable year of such beneficiary.
                      ``(B) Special rules.--
                              ``(i) Reduction of inclusion for predeath 
                          expenses.--The amount includible in gross 
                          income under subparagraph (A) shall be reduced 
                          by the amounts described in paragraph (2) which 
                          were incurred by the decedent before the date 
                          of the decedent's death and paid by such person 
                          within 1 year after such date.
                              ``(ii) Deduction for estate taxes.--An 
                          appropriate deduction shall be allowed under 
                          section 691(c) to any person (other than the 
                          decedent) with respect to amounts included in 
                          gross income under subparagraph (A)(ii)(I) by 
                          such person.
              ``(4) Treatment for failure to be treated as eligible small 
          business.--If for any taxable year a taxpayer which holds a 
          small business start-up savings account as an eligible small 
          business ceases to be an eligible small business--
                      ``(A) such account shall cease to be a small 
                  business start-up savings account, and
                      ``(B) the balance of such account shall be treated 
                  as paid out for such taxable year in a distribution 
                  which is not a qualified distribution.
      ``(f) Special Rules.--
              ``(1) Denial of double benefit.--Any deduction or credit 
          otherwise allowed for the taxable year with respect to amounts 
          described in subsection (e)(2)(A) shall be reduced by an amount 
          equal to the qualified distributions attributable to such 
          amounts. The adjusted basis of any property placed in service 
          for the taxable year shall be reduced by the amount of any 
          qualified distributions attributable to such property. For 
          purposes of this paragraph, qualified distributions shall first 
          be treated as attributable to amounts described in subsection 
          (e)(2)(A), then to property placed in service for the taxable 
          year.
              ``(2) Aggregation rule.--For purposes of this section, 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 one person.''.
      (b) Excise Tax on Excess Contributions and Nonqualified 
  Distributions.--Subtitle D of the Internal Revenue Code of 1986 is 
  amended by adding at the end the following new chapter:
  
           ``CHAPTER 50--SMALL BUSINESS START-UP SAVINGS ACCOUNTS
  
  ``Sec. 5000C. Tax on excess contributions to small business start-up 
                              savings accounts.
  ``Sec. 5000D. Tax on nonqualified distributions from small business 
                              start-up savings accounts.
  
  ``SEC. 5000C. TAX ON EXCESS CONTRIBUTIONS TO SMALL BUSINESS START-UP 
                SAVINGS ACCOUNTS.
  
      ``(a) In General.--In the case of a small business start-up savings 
  account (within the meaning of section 7529) there is imposed for each 
  taxable year a tax in an amount equal to 6 percent of the amount of the 
  excess contributions to such taxpayer's account (determined as of the 
  close of the taxable year).
      ``(b) Limitation.--The amount of tax imposed by subsection (a) 
  shall not exceed 6 percent of the value of the account (determined as 
  of the close of the taxable year).
      ``(c) Excess Contributions.--For purposes of this section, in the 
  case of contributions to all small business start-up savings accounts 
  maintained for the benefit of a person, the term `excess contributions' 
  means the sum of--
              ``(1) the excess (if any) of--
                      ``(A) the amount contributed to such accounts for 
                  the taxable year, over
                      ``(B) the amount allowable as a contribution under 
                  section 7529(d)(2)(A) for such taxable year, and
              ``(2) the amount determined under this subsection for the 
          preceding taxable year, reduced by the sum of--
                      ``(A) the distributions out of the accounts for the 
                  taxable year, and
                      ``(B) the excess (if any) of--
                              ``(i) the maximum amount allowable as a 
                          contribution under section 7529(d)(2)(A) for 
                          such taxable year, over
                              ``(ii) the amount contributed to such 
                          accounts for such taxable year.
  
  ``SEC. 5000D. TAX ON NONQUALIFIED DISTRIBUTIONS FROM SMALL BUSINESS 
                START-UP SAVINGS ACCOUNTS.
  
      ``(a) In General.--If for any taxable year an amount is paid or 
  distributed out of a taxpayer's small business start-up savings 
  account, there is imposed for such taxable year a tax in an amount 
  equal to 10 percent of the portion of such amount which is includible 
  in the gross income of the taxpayer.
      ``(b) Exception for Disability or Death.--Subsection (a) shall not 
  apply if the payment or distribution is made after the account 
  beneficiary becomes disabled within the meaning of section 72(m)(7) 
  (but only if such beneficiary's account was created before becoming so 
  disabled) or dies.
  
  ``SEC. 5000E. CROSS REFERENCE.
  
      ``For prohibited transactions, see section 4975.''.
      (c) Prohibited Transactions.--
              (1) In general.--Paragraph (1) of section 4975(e) of such 
          Code is amended by striking ``or'' at the end of subparagraph 
          (F), by striking the period at the end of subparagraph and 
          inserting ``, or'', and by adding at the end the following new 
          subparagraph:
                      ``(H) a small business start-up savings account 
                  (within the meaning of section 7529).''.
              (2) Special rule for ceasing to be a small business start-
          up savings account.--Section 4975(d) of such Code (relating to 
          tax on prohibited transactions) is amended by adding at the end 
          the following new paragraph:
              ``(7) Special rule for small business start-up savings 
          account.--An individual for whose benefit a small business 
          start-up savings account (within the meaning of section 7529) 
          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 a small 
          business start-up savings account by reason of the application 
          of paragraph (3) or (4) of section 7529(e) to such account.''.
      (d) Deduction Allowed Whether or Not Individual Itemizes.--
  Subsection (a) of section 62 of such Code is amended by adding at the 
  end the following new paragraph:
              ``(22) Contributions to small business start-up savings 
          accounts.--The deduction allowed by section 7529(d)(1)(A).''.
      (e) Conforming Amendments.--
              (1) The table of chapters for subtitle D such Code is 
          amended by adding at the end the following new item:
  
         ``Chapter 50. Small Business Start-Up Savings Accounts''.
  
              (2) The table of sections for chapter 77 of such Code is 
          amended by inserting after the item relating to section 7528 
          the following new item:
  
  ``Sec. 7529. Small Business Start-Up Savings Accounts.''.
      (f) Effective Date.--The amendments made by this section shall 
  apply to taxable years beginning after December 31, 2010.
target: Small Business Start-up Savings Accounts Act of 2011 - Amends the Internal Revenue Code to allow businesses with 500 or fewer employees to establish small business start-up savings accounts for the payment of certain business expenses, including the purchase of equipment or facilities, marketing, training, incorporation, and accounting fees. Requires all distributions from such accounts for payment of business expenses to be completed within five years after the first account distribution.
  
  Allows a tax deduction for contributions to a start-up savings account, limited to the lesser of: (1) $10,000, or (2) $150,000 reduced by the aggregate account contributions for all taxable years. Excludes distributions from such accounts from gross income for income tax purposes. Imposes an excise tax on excess contributions to and for nonqualified distributions from such accounts.
feat_title: To amend the Internal Revenue Code of 1986 to establish small business start-up savings accounts.