HR4548-119

What This Bill Does

The Small Nonprofit Retirement Security Act makes existing retirement-plan tax credits usable by small tax-exempt employers. It amends Internal Revenue Code sections 45E and 45T so that, for a tax-exempt eligible employer described in section 501(c) and exempt under section 501(a), the credit is treated as a credit allowed under section 3111(g) rather than as a regular income-tax credit. The payroll-tax credit amount is the lesser of the otherwise determined section 45E or 45T credit and the employer's payroll tax paid during the calendar year in which the taxable year begins. Payroll tax means the employer portion of Social Security tax under section 3111(a), and a rule similar to the child tax credit payroll-tax rule applies to determine payroll tax paid. Section 3111 is amended to allow the credit against payroll tax for eligible tax-exempt employers.

Who Benefits and How

Small 501(c) nonprofits benefit because retirement-plan startup credits can offset payroll tax rather than unusable income tax. Tax-exempt employers adding automatic enrollment benefit from section 45T payroll-credit treatment. Nonprofit employees benefit if easier credit use encourages small employers to offer retirement plans. Retirement service providers benefit if more small nonprofits can afford plan startup and automatic-enrollment costs.

Who Bears the Burden and How

The Internal Revenue Service must administer payroll-tax credit treatment for sections 45E and 45T. Tax-exempt eligible employers must calculate the lesser of the credit amount and payroll tax paid. Payroll providers must apply the section 3111(g) credit mechanics for eligible nonprofits. Federal taxpayers bear the revenue effect of refundable-like payroll credit use by tax-exempt employers.

Key Provisions

• Provides section 45E retirement-plan startup credit treatment as a payroll-tax credit for tax-exempt eligible employers.
• Provides section 45T automatic-enrollment credit treatment as a payroll-tax credit for tax-exempt eligible employers.
• Limits each credit to the lesser of the otherwise determined credit or payroll tax paid during the relevant calendar year.
• Defines tax-exempt eligible employer by reference to section 501(c) and section 501(a).
• Modifies section 3111 to allow the credit against employer Social Security payroll tax.