Incentivizing Small Business Retirement Savings Act

“(f) Additional credit for employer contributions by certain eligible employers

“(1) In general—In the case of an eligible employer, the credit allowed for the taxable year under subsection (a) (determined without regard to this subsection, and after the application of subsection (b)) shall be increased by an amount equal to the applicable percentage of employer contributions (other than any elective deferrals (as defined in section 402(g)(3))) made by the employer to an eligible employer plan (other than a defined benefit plan (as defined in section 414(j))) for the taxable year.

“(2) Limitations

“(A) Dollar limitation—The amount determined under paragraph (1) (before the application of subparagraph (B)) with respect to any employee of the employer shall not exceed $1,000.

“(B) Credit phase-out—With respect to any taxable year, the $1,000 amount under subparagraph (A) shall be reduced by 2 percent for each employee by which the number of employees of the employer for the preceding taxable year exceeds 50.

“(C) Only non-highly compensated employees taken into account—For purposes of paragraph (1), only contributions with respect to employees who are not highly compensated employee (as defined in section 414(q)) shall be taken into account.

“(3) Applicable percentage—For purposes of this subsection, the applicable percentage is—

“(A) for the first credit year with respect to the employer for purposes of subsection (b) and the taxable year immediately following such first credit year, 100 percent,

“(B) for the 2nd taxable year following such first credit year, 75 percent,

“(C) for the 3rd taxable year following such first credit year, 50 percent,

“(D) for the 4th taxable year following such first credit year, 25 percent, and

“(E) zero percent thereafter.”

“(2) Disallowance of deduction—No deduction shall be allowed—

“(A) for that portion of the qualified startup costs paid or incurred for the taxable year which is equal to so much of the portion of the credit determined under subsection (a) as is properly allocable to such costs, or

“(B) for that portion of the employer contributions made by the employer for the taxable year which is equal to so much of the credit increase determined under subsection (f) as is properly allocable to such contributions.”