Commitment to American Growth, Renewal, and Opportunities for Workers, Technology, and Health Act or the Commitment to American GROWTH Act
This bill provides tax incentives for economic growth, research and development, and small business start-ups.
Specifically, the bill
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 11 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 11
To amend the Internal Revenue Code of 1986 to encourage investment to
renew, restore, and rebuild the American economy for our workers,
families, and small businesses, maximize innovation through research
and development, and secure America's medical supplies.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 9, 2020
Mr. Brady 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 encourage investment to
renew, restore, and rebuild the American economy for our workers,
families, and small businesses, maximize innovation through research
and development, and secure America's medical supplies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Commitment to
American Growth, Renewal, and Opportunities for Workers, Technology,
and Health Act'' or as the ``Commitment to American GROWTH Act''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--GROWTH IN BUSINESS INVESTMENT TO BOOST AMERICAN WAGES AND JOBS
Sec. 101. Permanent full expensing for qualified property.
Sec. 102. Limitation on business interest permanently applied without
regard to deductions for depreciation,
amortization, and depletion.
TITLE II--GROWTH IN RESEARCH IN AMERICA
Sec. 201. Repeal amortization of research and experimental
expenditures.
Sec. 202. Doubling the research and experimental tax credit and better
access to credits for startups.
Sec. 203. Special rules for transfers of intangible property from
controlled foreign corporations to United
States shareholders.
TITLE III--GROWTH IN AMERICA'S MEDICAL INDEPENDENCE
Sec. 301. Domestic medical and drug manufacturing credit.
Sec. 302. Qualifying advanced medical manufacturing equipment credit.
Sec. 303. New medical research expenditure component of credit for
increasing research activities.
Sec. 304. Refundable portion of research credit for small businesses
engaging in specified medical research.
Sec. 305. Exception from passive loss rules for investments in
specified medical research small business
pass-thru entities.
TITLE IV--GROWTH IN INNOVATION AND TECHNOLOGY BREAKTHROUGHS
Sec. 401. Simplification and expansion of deduction for start-up and
organizational expenditures.
Sec. 402. Preservation of start-up net operating losses and tax credits
after ownership change.
TITLE I--GROWTH IN BUSINESS INVESTMENT TO BOOST AMERICAN WAGES AND JOBS
SEC. 101. PERMANENT FULL EXPENSING FOR QUALIFIED PROPERTY.
(a) In General.--Paragraph (6) of section 168(k) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(6) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means, in the case
of property placed in service (or, in the case of a specified
plant described in paragraph (5), a plant which is planted or
grafted) after September 27, 2017, 100 percent.''.
(b) Conforming Amendments.--
(1) Section 168(k) of the Internal Revenue Code of 1986 is
amended--
(A) in paragraph (2)--
(i) in subparagraph (A)--
(I) in clause (i)(V), by inserting
``and'' at the end;
(II) in clause (ii), by striking
``clause (ii) of subparagraph (E),
and'' and inserting ``clause (i) of
subparagraph (E).''; and
(III) by striking clause (iii);
(ii) in subparagraph (B)--
(I) in clause (i)--
(aa) by striking subclauses
(II) and (III); and
(bb) by redesignating
subclauses (IV) through (VI) as
subclauses (II) through (IV),
respectively;
(II) by striking clause (ii); and
(III) by redesignating clauses
(iii) and (iv) as clauses (ii) and
(iii), respectively;
(iii) in subparagraph (C)--
(I) in clause (i), by striking
``and subclauses (II) and (III) of
subparagraph (B)(i)''; and
(II) in clause (ii), by striking
``subparagraph (B)(iii)'' and inserting
``subparagraph (B)(ii)''; and
(iv) in subparagraph (E)--
(I) by striking clause (i); and
(II) by redesignating clauses (ii)
and (iii) as clauses (i) and (ii),
respectively; and
(B) in paragraph (5)(A), by striking ``planted
before January 1, 2027, or is grafted before such date
to a plant that has already been planted,'' and
inserting ``planted or grafted''.
(2) Section 460(c)(6)(B) of such Code is amended by
striking ``which'' and all that follows through the period and
inserting ``which has a recovery period of 7 years or less.''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in section 13201 of Public Law 115-97.
SEC. 102. LIMITATION ON BUSINESS INTEREST PERMANENTLY APPLIED WITHOUT
REGARD TO DEDUCTIONS FOR DEPRECIATION, AMORTIZATION, AND
DEPLETION.
(a) In General.--Section 163(j)(8)(A)(v) of the Internal Revenue
Code of 1986 is amended by striking ``in the case of taxable years
beginning before January 1, 2022''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2021.
TITLE II--GROWTH IN RESEARCH IN AMERICA
SEC. 201. REPEAL AMORTIZATION OF RESEARCH AND EXPERIMENTAL
EXPENDITURES.
(a) In General.--Section 174 is amended to read as follows:
``SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES.
``(a) Treatment as Expenses.--
``(1) In general.--A taxpayer may treat research or
experimental expenditures which are paid or incurred by him
during the taxable year in connection with his trade or
business as expenses which are not chargeable to capital
account. The expenditures so treated shall be allowed as a
deduction.
``(2) When method may be adopted.--
``(A) Without consent.--A taxpayer may, without the
consent of the Secretary, adopt the method provided in
this subsection for his first taxable year for which
expenditures described in paragraph (1) are paid or
incurred.
``(B) With consent.--A taxpayer may, with the
consent of the Secretary, adopt at any time the method
provided in this subsection.
``(3) Scope.--The method adopted under this subsection
shall apply to all expenditures described in paragraph (1). The
method adopted shall be adhered to in computing taxable income
for the taxable year and for all subsequent taxable years
unless, with the approval of the Secretary, a change to a
different method is authorized with respect to part or all of
such expenditures.
``(b) Amortization of Certain Research and Experimental
Expenditures.--
``(1) In general.--At the election of the taxpayer, made in
accordance with regulations prescribed by the Secretary,
research or experimental expenditures which are--
``(A) paid or incurred by the taxpayer in
connection with his trade or business,
``(B) not treated as expenses under subsection (a),
and
``(C) chargeable to capital account but not
chargeable to property of a character which is subject
to the allowance under section 167 (relating to
allowance for depreciation, etc.) or section 611
(relating to allowance for depletion),
may be treated as deferred expenses. In computing taxable
income, such deferred expenses shall be allowed as a deduction
ratably over such period of not less than 60 months as may be
selected by the taxpayer (beginning with the month in which the
taxpayer first realizes benefits from such expenditures). Such
deferred expenses are expenditures properly chargeable to
capital account for purposes of section 1016(a)(1) (relating to
adjustments to basis of property).
``(2) Time for and scope of election.--The election
provided by paragraph (1) may be made for any taxable year, but
only if made not later than the time prescribed by law for
filing the return for such taxable year (including extensions
thereof). The method so elected, and the period selected by the
taxpayer, shall be adhered to in computing taxable income for
the taxable year for which the election is made and for all
subsequent taxable years unless, with the approval of the
Secretary, a change to a different method (or to a different
period) is authorized with respect to part or all of such
expenditures. The election shall not apply to any expenditure
paid or incurred during any taxable year before the taxable
year for which the taxpayer makes the election.
``(c) Land and Other Property.--This section shall not apply to any
expenditure for the acquisition or improvement of land, or for the
acquisition or improvement of property to be used in connection with
the research or experimentation and of a character which is subject to
the allowance under section 167 (relating to allowance for
depreciation, etc.) or section 611 (relating to allowance for
depletion); but for purposes of this section allowances under section
167, and allowances under section 611, shall be considered as
expenditures.
``(d) Exploration Expenditures.--This section shall not apply to
any expenditure paid or incurred for the purpose of ascertaining the
existence, location, extent, or quality of any deposit of ore or other
mineral (including oil and gas).
``(e) Only Reasonable Research Expenditures Eligible.--This section
shall apply to a research or experimental expenditure only to the
extent that the amount thereof is reasonable under the
circumstances.''.
(b) Clerical Amendment.--The table of sections for part VI of
subchapter B of chapter 1 is amended by striking the item relating to
section 174 and inserting the following new item:
``Sec. 174. Research and experimental expenditures''.
(c) Conforming Amendments.--
(1) Section 41(d)(1)(A) is amended by striking ``specified
research or experimental expenditures under section 174'' and
inserting ``expenses under section 174''.
(2) Section 280C(c) is amended to read as follows:
``(c) Credit for Increasing Research Activities.--
``(1) In general.--No deduction shall be allowed for that
portion of the qualified research expenses (as defined in
section 41(b)) or basic research expenses (as defined in
section 41(e)(2)) otherwise allowable as a deduction for the
taxable year which is equal to the amount of the credit
determined for such taxable year under section 41(a).
``(2) Similar rule where taxpayer capitalizes rather than
deducts expenses.--If--
``(A) the amount of the credit determined for the
taxable year under section 41(a)(1), exceeds
``(B) the amount allowable as a deduction for such
taxable year for qualified research expenses or basic
research expenses (determined without regard to
paragraph (1)),
the amount chargeable to capital account for the taxable year
for such expenses shall be reduced by the amount of such
excess.
``(3) Election of reduced credit.--
``(A) In general.--In the case of any taxable year
for which an election is made under this paragraph--
``(i) paragraphs (1) and (2) shall not
apply, and
``(ii) the amount of the credit under
section 41(a) shall be the amount determined
under subparagraph (B).
``(B) Amount of reduced credit.--The amount of
credit determined under this subparagraph for any
taxable year shall be the amount equal to the excess
of--
``(i) the amount of credit determined under
section 41(a) without regard to this paragraph,
over
``(ii) the product of--
``(I) the amount described in
clause (i), and
``(II) the rate of tax under
section 11(b).
``(C) Election.--An election under this paragraph
for any taxable year shall be made not later than the
time for filing the return of tax for such year
(including extensions), shall be made on such return,
and shall be made in such manner as the Secretary may
prescribe. Such an election, once made, shall be
irrevocable.
``(4) Controlled groups.--Paragraph (3) of subsection (b)
shall apply for purposes of this subsection.''.
(d) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2021.
SEC. 202. DOUBLING THE RESEARCH AND EXPERIMENTAL TAX CREDIT AND BETTER
ACCESS TO CREDITS FOR STARTUPS.
(a) Credit Rate Increase.--
(1) In general.--Section 41(a) of the Internal Revenue Code
of 1986 is amended by striking ``20 percent'' and inserting
``40 percent''.
(2) Alternative simplified credit.--Section 41(c)(4)(A) of
such Code is amended by striking ``14 percent'' and inserting
``28 percent''.
(3) Credit rate in case of no research expenses in 3
preceding years.--Section 41(c)(4)(B)(ii) of such Code is
amended by striking ``6 percent'' and inserting ``\1/2\ the
credit percentage in effect under subparagraph (A)''.
(b) Modification of Small Business Portion Allowed Against Payroll
Tax.--
(1) Increase in limitation.--Paragraphs (4)(B)(i) and
(5)(B)(ii) of section 41(h) of such Code are each amended by
striking ``$250,000'' and inserting ``$500,000''.
(2) Qualified small business gross receipts threshold.--
Section 41(h)(3)(A)(i)(I) of such Code is amended by striking
``$5,000,000'' and inserting ``the dollar amount in effect for
the taxable year under section 448(c)(1)''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to taxable years beginning after December 31, 2020.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to taxable years beginning after December 31, 2019.
SEC. 203. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE PROPERTY FROM
CONTROLLED FOREIGN CORPORATIONS TO UNITED STATES
SHAREHOLDERS.
(a) In General.--Subpart F of part III of subchapter N of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO UNITED STATES
SHAREHOLDERS.
``(a) In General.--If a controlled foreign corporation holds
intangible property on the date of the enactment of this section and
thereafter distributes such property to a domestic corporation which is
a United States shareholder with respect to such controlled foreign
corporation--
``(1) for purposes of part I of subchapter C and any other
provision of this title specified by the Secretary, the fair
market value of such property on the date of such distribution
shall be treated as not exceeding the adjusted basis of such
property immediately before such distribution, and
``(2) if any portion of such distribution is not a
dividend--
``(A) no gain shall be recognized by such United
States shareholder with respect to such distribution,
and
``(B) the adjusted basis of such property in the
hands of such United States shareholder immediately
after such distribution shall be the adjusted basis of
such property in the hands of such controlled foreign
corporation immediately before such distribution
reduced by the amount (if any) of gain not recognized
by reason of subparagraph (A) (determined after the
application of paragraph (1)).
``(b) Intangible Property.--For purposes of this section, the term
`intangible property' means any--
``(1) patent, copyright, license, invention, formula,
process, design, pattern, know-how, or format,
``(2) method, program, system, procedure, campaign, survey,
study, forecast, estimate, or technical data,
``(3) computer software (as defined in section
197(e)(3)(B)), or
``(4) any similar item, which has substantial value
independent of the services of any individual.''.
(b) Conforming Amendments.--
(1) Section 197(f)(2)(B)(i) of such Code is amended by
inserting ``966(a),'' after ``731,''.
(2) The table of sections for subpart F of part III of
subchapter N of chapter 1 of such Code is amended by adding at
the end the following new item:
``Sec. 966. Transfers of intangible property to United States
shareholders.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions made in taxable years of foreign corporations
beginning after December 31, 2020, and to taxable years of United
States shareholders in which or with which such taxable years of
foreign corporations end.
TITLE III--GROWTH IN AMERICA'S MEDICAL INDEPENDENCE
SEC. 301. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 45U. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.
``(a) In General.--For purposes of section 38, the domestic medical
and drug manufacturing credit determined under this section for any
taxable year is an amount equal to 10.5 percent of the lesser of--
``(1) the qualified medical and drug manufacturing income
of the taxpayer for the taxable year, or
``(2) taxable income of the taxpayer for the taxable year.
``(b) Credit Limited to Wages Paid.--
``(1) In general.--The amount of the credit allowable under
subsection (a) for any taxable year shall not exceed 50 percent
of the W-2 wages of the taxpayer for the taxable year.
``(2) W-2 wages.--For purposes of this section--
``(A) In general.--The term `W-2 wages' means, with
respect to any person for any taxable year of such
person, the sum of the amounts described in paragraphs
(3) and (8) of section 6051(a) paid by such person with
respect to employment of employees by such person
during the calendar year ending during such taxable
year.
``(B) Limitation to wages attributable to domestic
production.--Such term shall not include any amount
which is not properly allocable to domestic medical and
drug manufacturing gross receipts for purposes of
subsection (c)(1).
``(C) Return requirement.--Such term shall not
include any amount which is not properly included in a
return filed with the Social Security Administration on
or before the 60th day after the due date (including
extensions) for such return.
``(3) Acquisitions, dispositions, and short taxable
years.--The Secretary shall provide for the application of this
subsection in cases of a short taxable year or where the
taxpayer acquires, or disposes of, the major portion of a trade
or business or the major portion of a separate unit of a trade
or business during the taxable year.
``(c) Qualified Medical and Drug Manufacturing Income.--For
purposes of this section--
``(1) In general.--The term `qualified medical and drug
manufacturing income' for any taxable year means an amount
equal to the excess (if any) of--
``(A) the taxpayer's domestic medical and drug
manufacturing gross receipts for the taxable year, over
``(B) the sum of--
``(i) the cost of goods sold that are
allocable to such receipts, and
``(ii) other expenses, losses, or
deductions which are properly allocable to such
receipts.
``(2) Allocation method.--The Secretary shall prescribe
rules for the proper allocation of items described in paragraph
(1)(B) for purposes of determining qualified medical and drug
manufacturing income. Such rules shall provide for the proper
allocation of items whether or not such items are directly
allocable to domestic medical and drug manufacturing gross
receipts.
``(3) Special rules for determining costs.--
``(A) In general.--For purposes of determining
costs under clause (i) of paragraph (1)(B), any item or
service brought into the United States shall be treated
as acquired by purchase, and its cost shall be treated
as not less than its value immediately after it entered
the United States.
``(B) Exports for further manufacture.--In the case
of any property described in subparagraph (A) that had
been exported by the taxpayer for further manufacture,
the increase in cost or adjusted basis under
subparagraph (A) shall not exceed the difference
between the value of the property when exported and the
value of the property when brought back into the United
States after the further manufacture.
``(4) Domestic medical and drug manufacturing gross
receipts.--
``(A) In general.--The term `domestic medical and
drug manufacturing gross receipts' means the gross
receipts of the taxpayer which are derived from any
sale, exchange, or other disposition of--
``(i) any active pharmaceutical ingredient,
or
``(ii) any qualified countermeasure,
which was manufactured or produced by the taxpayer in
whole or in significant part within the United States.
``(B) Active pharmaceutical ingredient.--The term
`active pharmaceutical ingredient' means any substance
or mixture of substances intended to be used in the
manufacture of a drug product and (when so used)
becomes an active ingredient in the drug product.
``(C) Qualified countermeasure.--The term
`qualified countermeasure' has the meaning given such
term in section 319F-1(a)(2) of the Public Health
Service Act (42 U.S.C. 247d-6a(a)(2)).''
``(D) Partnerships owned by expanded affiliated
groups.--For purposes of this paragraph, if all of the
interests in the capital and profits of a partnership
are owned by members of a single expanded affiliated
group at all times during the taxable year of such
partnership, the partnership and all members of such
group shall be treated as a single taxpayer during such
period.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Application of section to pass-thru entities.--
``(A) Partnerships and s corporations.--In the case
of a partnership or S corporation--
``(i) this section shall be applied at the
partner or shareholder level,
``(ii) each partner or shareholder shall
take into account such person's allocable share
of each item described in subparagraph (A) or
(B) of subsection (c)(1) (determined without
regard to whether the items described in such
subparagraph (A) exceed the items described in
such subparagraph (B)), and
``(iii) each partner or shareholder shall
be treated for purposes of subsection (b) as
having W-2 wages for the taxable year in an
amount equal to such person's allocable share
of the W-2 wages of the partnership or S
corporation for the taxable year (as determined
under regulations prescribed by the Secretary).
``(B) Trusts and estates.--In the case of a trust
or estate--
``(i) the items referred to in subparagraph
(A)(ii) (as determined therein) and the W-2
wages of the trust or estate for the taxable
year, shall be apportioned between the
beneficiaries and the fiduciary (and among the
beneficiaries) under regulations prescribed by
the Secretary, and
``(ii) for purposes of paragraph (2),
adjusted gross income of the trust or estate
shall be determined as provided in section
67(e) with the adjustments described in such
paragraph.
``(C) Regulations.--The Secretary may prescribe
rules requiring or restricting the allocation of items
and wages under this paragraph and may prescribe such
reporting requirements as the Secretary determines
appropriate.
``(2) Application to individuals.--In the case of an
individual, subsection (a)(2) shall be applied by substituting
`adjusted gross income' for `taxable income'. For purposes of
the preceding sentence, adjusted gross income shall be
determined after application of sections 86, 135, 137, 219,
221, 222, and 469.
``(3) Special rule for affiliated groups.--
``(A) In general.--All members of an expanded
affiliated group shall be treated as a single
corporation for purposes of this section.
``(B) Expanded affiliated group.--For purposes of
this section, the term `expanded affiliated group'
means an affiliated group as defined in section
1504(a), determined--
``(i) by substituting `more than 50
percent' for `at least 80 percent' each place
it appears, and
``(ii) without regard to paragraphs (2) and
(4) of section 1504(b).
``(C) Allocation of credit.--Except as provided in
regulations, the credit under subsection (a) shall be
allocated among the members of the expanded affiliated
group in proportion to each member's respective amount
(if any) of qualified medical and drug manufacturing
income.
``(4) Trade or business requirement.--This section shall be
applied by only taking into account items which are
attributable to the actual conduct of a trade or business.
``(5) Coordination with minimum tax.--For purposes of
determining alternative minimum taxable income under section
55, qualified medical and drug manufacturing income shall be
determined without regard to any adjustments under sections 56
through 59.
``(6) Unrelated business taxable income.--For purposes of
determining the tax imposed by section 511, subsection
(a)(1)(B) shall be applied by substituting `unrelated business
taxable income' for `taxable income'.
``(7) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations which prevent more than 1
taxpayer from being allowed a credit under this section with
respect to any activity described in subsection (c)(4)(A).''.
(b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of
such Code is amended by striking ``plus'' at the end of subclause (I),
by redesignating subclause (II) as subclause (III), and by inserting
after subclause (I) the following new subclause:
``(II) the credit allowed under
section 38 for the taxable year which
is properly allocable to the domestic
medical and drug manufacturing credit
determined under section 45U(a),
plus''.
(c) Part of General Business Credit.--Section 38(b) of such Code is
amended by striking ``plus'' at the end of paragraph (32), by striking
the period at the end of paragraph (33) and inserting ``, plus'', and
by adding at the end the following new paragraph:
``(34) the domestic medical and drug manufacturing credit
determined under section 45U(a).''.
(d) Credit Allowed Against Alternative Minimum Tax.--Section
38(c)(4)(B) of such Code is amended by redesignating clauses (x)
through (xii) as clauses (xi) through (xiii), respectively, and by
inserting after clause (ix) the following new clause:
``(x) the credit determined under section
45U,''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45U. Domestic medical and drug manufacturing credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 302. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 48D. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
advanced medical manufacturing equipment credit determined under this
section for any taxable year is the applicable percentage of the basis
of any qualifying advanced medical manufacturing equipment placed in
service during such taxable year.
``(b) Applicable Percentage.--For purposes of subsection (a), the
applicable percentage is--
``(1) 30 percent in the case of equipment which is placed
in service before January 1, 2028,
``(2) 20 percent in the case of equipment which is placed
in service during calendar year 2028,
``(3) 10 percent in the case of equipment which is placed
in service during calendar year 2029, and
``(4) 0 percent in the case of equipment which is placed in
service after December 31, 2029.
``(c) Qualifying Advanced Medical Manufacturing Equipment.--For
purposes of this section, the term `qualifying advanced medical
manufacturing equipment' means property of a character subject to the
allowance for depreciation--
``(1) which is machinery or equipment that is designed and
used to manufacture a--
``(A) drug (as such term is defined in section
201(g)(1) of the Federal Food, Drug, and Cosmetic Act),
``(B) device (as such term is defined in section
201(h) of such Act), or
``(C) biological product (as such term is defined
in section 351(i) of the Public Health Service Act),
``(2) which has been identified by the Secretary (after
consultation with the Secretary of Health and Human Services)
as machinery or equipment that--
``(A) incorporates novel technology or uses an
established technique or technology in a new or
innovative way, or
``(B) that can improve medical product quality,
address shortages of medicines, and speed time-to-
market,
``(3) which is placed in service in the United States by
the taxpayer, and
``(4) with respect to which depreciation is allowable.
``(d) Certain Qualified Progress Expenditures Rules Made
Applicable.--Rules similar to the rules of subsections (c)(4) and (d)
of section 46 (as in effect on the day before the enactment of the
Revenue Reconciliation Act of 1990) shall apply for purposes of this
section.
``(e) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary to carry out the purposes of this
section, including regulations which prevent abuse or fraud.''.
(b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of
such Code, as amended by section 7 of this Act, is further amended by
striking ``plus'' at the end of subclause (II), by redesignating
subclause (III) as subclause (IV), and by inserting after subclause
(II) the following new subclause:
``(III) the credit allowed under
section 46 for the taxable year which
is properly allocable to the qualifying
advanced medical manufacturing
equipment credit determined under
section 48D(a), plus''.
(c) Part of Investment Credit.--Section 46 of such Code is amended
by striking ``and'' at the end of paragraph (5), by striking the period
at the end of paragraph (6) and inserting ``, and'', and by adding at
the end the following new paragraph:
``(7) the qualifying advanced medical manufacturing
equipment credit.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 48D. Qualifying advanced medical manufacturing equipment
credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this section under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the date of the enactment fo the Revenue
Reconciliation Act of 1990).
SEC. 303. NEW MEDICAL RESEARCH EXPENDITURE COMPONENT OF CREDIT FOR
INCREASING RESEARCH ACTIVITIES.
(a) In General.--Section 41(a) of the Internal Revenue Code of 1986
is amended by striking ``and'' at the end of paragraph (2), by striking
the period at the end of paragraph (3) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(4) 14 percent of specified medical research
expenditures.''.
(b) Specified Medical Research Expenditures.--Section 41(f) of such
Code is amended by adding at the end the following new paragraph:
``(7) Specified medical research expenditures.--
``(A) In general.--The term `specified medical
research expenditures' means amounts paid or incurred
for qualified research with respect to any qualified
countermeasure.
``(B) Qualified countermeasure.--The term
`qualified countermeasure' has the meaning given to
such term in section 319F-1(a)(2) of the Public Health
Service Act (42 U.S.C. 247d-6a(a)(2)).''.
(c) Denial of Double Benefit.--
(1) Taxable years beginning before january 1, 2021.--In the
case of specified medical research expenditures (as defined in
section 41(f)(7) of such Code (as added by this section)) paid
or incurred in taxable years beginning before January 1, 2021--
(A) such expenditures shall be treated in the same
manner as qualified research expenses and basic
research expenses under section 280C(c)(1) of such Code
(as in effect on the day before the enactment of the
Tax Cuts and Jobs Act), and
(B) the amount determined under section
280C(c)(2)(A) (as in effect on such day) for the
taxable year shall be increased by the amount of credit
determined for the taxable year under section 41(a)(4)
(as added by this section).
(2) Taxable years beginning after december 31, 2020.--
Section 280C(c)(1) of such Code is amended by striking
``section 41(a)(1)'' and inserting ``paragraphs (1) and (4) of
section 41(a)''.
(d) Conforming Amendment.--Section 41(f)(1) of such Code is amended
by striking ``and amounts paid or incurred to energy research
consortiums'' each place it appears and inserting ``, amounts paid or
incurred to energy research consortiums, and specified medical research
expenditures''.
(e) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after the date of the enactment of
this Act, in taxable years ending after such date.
SEC. 304. REFUNDABLE PORTION OF RESEARCH CREDIT FOR SMALL BUSINESSES
ENGAGING IN SPECIFIED MEDICAL RESEARCH.
(a) In General.--Section 41 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subsection:
``(i) Refundable Portion for Small Businesses Engaging in Specified
Medical Research.--
``(1) In general.--At the election of a medical research
small business, the portion of the credit determined under this
section for the taxable year which is properly allocable to
specified medical research shall be treated (other than for
purposes of section 280C) as a credit allowed under subpart C
(and not this subpart).
``(2) Medical research small business.--For purposes of
this subsection, the term `medical research small business'
means any domestic C corporation--
``(A) which conducts any specified medical research
during the taxable year, and
``(B) the gross receipts of which (determined under
the rules of subsection (c)) for the taxable year do
not exceed $1,000,000.
``(3) Specified medical research.--For purposes of this
subsection, the term `specified medical research' means any
qualified research with respect to qualified countermeasures
(as defined in section 319F-1(a)(2) of the Public Health
Service Act (42 U.S.C. 247d-6a(a)(2))).
``(4) Election.--Any election under this subsection for any
taxable year--
``(A) shall specify the amount of the credit to
which such election applies,
``(B) shall be made on or before the due date
(including extensions) of the return of tax for the
taxable year,
``(C) may not be made for any taxable year with
respect to any portion of the credit determined under
this section with respect to which an election is made
under subsection (h), and
``(D) may be revoked only with the consent of the
Secretary.
``(5) Regulations.--The Secretary shall prescribe such
regulations for purposes of this subsection as may be necessary
or appropriate for determining proper allocation to specified
medical research of the portion of any credit allowed to a
taxpayer for a taxable year under this section.''.
(b) Conforming Amendment.--Section 1324(b) of title 31, United
States Code, is amended by inserting ``41(i),'' after ``6428,''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 305. EXCEPTION FROM PASSIVE LOSS RULES FOR INVESTMENTS IN
SPECIFIED MEDICAL RESEARCH SMALL BUSINESS PASS-THRU
ENTITIES.
(a) In General.--Subsection (c) of section 469 of the Internal
Revenue Code of 1986 is amended by redesignating paragraphs (4) through
(7) as paragraphs (5) through (8), respectively, and by inserting after
paragraph (3) the following new paragraph:
``(4) Specified medical research activities.--
``(A) In general.--The term `passive activity'
shall not include any qualified medical research
activity of the taxpayer carried on by a specified
medical research small business pass-thru entity.
``(B) Treatment of losses and deductions.--
``(i) In general.--Losses or deductions of
a taxpayer in connection with qualified medical
research activities carried on by a specified
medical research small business pass-thru
entity shall not be treated as losses or
deductions, respectively, from a passive
activity except as provided in clause (ii) and
subparagraph (C).
``(ii) Limitation.--Clause (i) shall apply
to losses and deductions of a taxpayer in
connection with a specified medical small
business pass-thru entity for a taxable year
only to the extent that the aggregate losses
and deductions of the taxpayer in connection
with qualified medical research activities of
such entity for such taxable year do not exceed
the portion of the taxpayer's adjusted basis in
the taxpayer's ownership interest in such
entity that is attributable to money or other
property contributed--
``(I) in exchange for such
ownership interest, and
``(II) specifically for use in
connection with qualified medical
research activities.
For purposes of the preceding sentence, the
taxpayer's basis shall not include any portion
of such basis which is attributable to an
increase in a partner's share of the
liabilities of a partnership that is considered
under section 752(a) as a contribution of
money.
``(C) Treatment of carryovers.--Subparagraph (B)(i)
shall not apply to the portion of any loss or deduction
that is carried over under subsection (b) into a
taxable year other than the taxable year in which such
loss or deduction arose.
``(D) Qualified medical research activity.--For
purposes of this paragraph, the term `qualified medical
research activity' means any qualified research (within
the meaning of section 41(d)) with respect to qualified
countermeasures (as defined in section 319F-1(a)(2) of
the Public Health Service Act (42 U.S.C. 247d-
6a(a)(2))).
``(E) Specified medical research small business
pass-thru entity.--For purposes of this paragraph, the
term `specified medical research small business pass-
thru entity' means any domestic pass-thru entity for
any taxable year if--
``(i) more than 80 percent of such entity's
expenditures on qualified research for such
taxable year are paid or incurred in connection
with qualified medical research activities, and
``(ii) the gross receipts (as determined
under the rules of section 41(h)(3)) of such
entity for the taxable year (and each preceding
taxable year) is less than $1,000,000.
``(F) Capital expenditures taken into account for
expenditures test.--An expenditure shall not fail to be
taken into account under subparagraph (E)(i) merely
because such expenditure is chargeable to capital
account.
``(G) Pass-thru entity.--For purposes of this
paragraph, the term `pass-thru entity' means any
partnership, S corporation, or other entity identified
by the Secretary as a pass-thru entity for purposes of
this paragraph.
``(H) Aggregation rules.--
``(i) In general.--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 entity for
purposes of subparagraphs (E) and (F)(iii).
``(ii) Limitation where entity would not
qualify.--No entity shall be treated as a
specified medical research small business pass-
thru entity unless such entity qualifies as
such both with and without the application of
clause (i).''.
(b) Material Participation Not Required.--Paragraph (5) of section
469(c) of the Internal Revenue Code of 1986, as redesignated by
subsection (a), is amended by striking ``and (3)'' in the heading and
text and inserting ``, (3), and (4)''.
(c) Certain Research-Related Deductions and Credits of Specified
Medical Research Small Business Pass-Thru Entities Allowed for Purposes
of Determining Alternative Minimum Tax.--
(1) Deduction for research and experimental expenditures.--
Paragraph (2) of section 56(b) of the Internal Revenue Code of
1986 is amended by adding at the end the following new
subparagraph:
``(E) Exception for specified medical research
small business pass-thru entities.--In the case of a
specified medical research small business pass-thru
entity (as defined in section 469(c)(4)), this
paragraph shall not apply to any amount allowable as a
deduction under section 174(a).''.
(2) Allowance of certain research-related credits.--
Subparagraph (B) of section 38(c)(4) of such Code is amended by
redesignating clauses (ii) through (ix) as clauses (iii)
through (x), respectively, and by inserting after clause (i)
the following new clause:
``(ii) the credit of an individual taxpayer
determined under section 41 to the extent
attributable to a specified medical research
small business pass-thru entity (as defined in
section 469(c)(4)),''.
(d) Exception to Limitation on Pass-Thru of Research Credit.--
Subsection (g) of section 41 of such Code is amended by adding at the
end the following: ``Paragraphs (2) and (4) shall not apply with
respect to any specified medical research small business pass-thru
entity (as defined in section 469(c)(4)).''.
(e) Effective Date.--The amendments made by this section shall
apply to losses and credits arising in taxable years beginning after
December 31, 2020.
TITLE IV--GROWTH IN INNOVATION AND TECHNOLOGY BREAKTHROUGHS
SEC. 401. SIMPLIFICATION AND EXPANSION OF DEDUCTION FOR START-UP AND
ORGANIZATIONAL EXPENDITURES.
(a) In General.--Section 195 of the Internal Revenue Code of 1986
is amended by redesignating subsections (c) and (d) as subsections (d)
and (e), respectively, and by striking all that precedes subsection (d)
(as so redesignated) and inserting the following:
``SEC. 195. START-UP AND ORGANIZATIONAL EXPENDITURES.
``(a) Capitalization of Expenditures.--Except as otherwise provided
in this section, no deduction shall be allowed for start-up or
organizational expenditures.
``(b) Election To Deduct.--
``(1) In general.--If a taxpayer elects the application of
this subsection with respect to any active trade or business--
``(A) the taxpayer shall be allowed a deduction for
the taxable year in which such active trade or business
begins in an amount equal to the lesser of--
``(i) the aggregate amount of start-up and
organizational expenditures paid or incurred in
connection with such active trade or business,
or
``(ii) $20,000, reduced (but not below
zero) by the amount by which such aggregate
amount exceeds $120,000, and
``(B) the remainder of such start-up and
organizational expenditures shall be charged to capital
account and allowed as an amortization deduction
determined by amortizing such expenditures ratably over
the 180-month period beginning with the month in which
the active trade or business begins.
``(2) Application to organizational expenditures.--In the
case of organizational expenditures with respect to any
corporation or partnership, the active trade or business
referred to in paragraph (1) means the first active trade or
business carried on by such corporation or partnership.
``(3) Inflation adjustment.--In the case of any taxable
year beginning after December 31, 2020, the $20,000 and
$120,000 amounts in paragraph (1)(A)(ii) shall each be
increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) 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 2019' for `calendar year 2016' in
subparagraph (A)(ii) thereof.
If any amount as increased under the preceding sentence is not
a multiple of $1,000, such amount shall be rounded to the
nearest multiple of $1,000.
``(c) Allowance of Deduction Upon Liquidation or Disposition.--
``(1) Liquidation of partnership or corporation.--If any
partnership or corporation is completely liquidated by the
taxpayer, any start-up or organizational expenditures paid or
incurred in connection with such partnership or corporation
which were not allowed as a deduction by reason of this section
may be deducted to the extent allowable under section 165.
``(2) Disposition of trade or business.--If any trade or
business is completely disposed of or discontinued by the
taxpayer, any start-up expenditures paid or incurred in
connection with such trade or business which were not allowed
as a deduction by reason of this section (and not taken into
account in connection with a liquidation to which paragraph (1)
applies) may be deducted to the extent allowable under section
165. For purposes of this paragraph, in the case of any
deduction allowed under subsection (b)(1) with respect to both
start-up and organizational expenditures, the amount treated as
so allowed with respect to start-up expenditures shall bear the
same ratio to such deduction as the start-up expenditures taken
into account in determining such deduction bears to the
aggregate of the start-up and organizational expenditures so
taken into account.''.
(b) Organizational Expenditures.--Section 195(d) of such Code, as
redesignated by subsection (a), is amended by adding at the end the
following new paragraphs:
``(3) Organizational expenditures.--The term
`organizational expenditures' means any expenditure which--
``(A) is incident to the creation of a corporation
or a partnership,
``(B) is chargeable to capital account, and
``(C) is of a character which, if expended incident
to the creation of a corporation or a partnership
having an ascertainable life, would be amortizable over
such life.
``(4) Application to certain disregarded entities.--In the
case of any entity with a single owner that is disregarded as
an entity separate from its owner, this section shall be
applied in the same manner as if such entity were a
corporation.''.
(c) Election.--Section 195(e)(2) of such Code, as redesignated by
subsection (a), is amended to read as follows:
``(2) Partnerships and s corporations.--In the case of any
partnership or S corporation, the election under subsection (b)
shall be made (and this section shall be applied) at the entity
level.''.
(d) Conforming Amendments.--
(1)(A) Part VIII of subchapter B of chapter 1 is amended by
striking section 248 of such Code (and by striking the item
relating to such section in the table of sections of such
part).
(B) Section 170(b)(2)(D)(ii) of such Code is amended by
striking ``(except section 248)''.
(C) Section 312(n)(3) of such Code is amended by striking
``Sections 173 and 248'' and inserting ``Sections 173 and
195''.
(D) Section 535(b)(3) of such Code is amended by striking
``(except section 248)''.
(E) Section 545(b)(3) of such Code is amended by striking
``(except section 248)''.
(F) Section 545(b)(4) of such Code is amended by striking
``(except section 248)''.
(G) Section 834(c)(7) of such Code is amended by striking
``(except section 248)''.
(H) Section 852(b)(2)(C) of such Code is amended by
striking ``(except section 248)''.
(I) Section 857(b)(2)(A) of such Code is amended by
striking ``(except section 248)''.
(J) Section 1363(b) of such Code is amended by adding
``and'' at the end of paragraph (2), by striking paragraph (3),
and by redesignating paragraph (4) as paragraph (3).
(K) Section 1375(b)(1)(B)(i) of such Code is amended by
striking ``(other than the deduction allowed by section 248,
relating to organization expenditures)''.
(2)(A) Section 709 of such Code is amended to read as
follows:
``SEC. 709. TREATMENT OF SYNDICATION FEES.
``No deduction shall be allowed under this chapter to a partnership
or to any partner of the partnership for any amounts paid or incurred
to promote the sale of (or to sell) an interest in the partnership.''.
(B) The item relating to section 709 in the table of
sections for part I of subchapter K of chapter 1 of such Code
is amended to read as follows:
``Sec. 709. Treatment of syndication fees.''.
(3) Section 1202(e)(2)(A) of such Code is amended by
striking ``section 195(c)(1)(A)'' and inserting ``section
195(d)(1)(A)''.
(4) The item relating to section 195 in the table of
contents of part VI of subchapter B of chapter 1 of such Code
is amended to read as follows:
``Sec. 195. Start-up and organizational expenditures.''.
(e) Effective Date.--The amendments made by this section shall
apply to expenditures paid or incurred in connection with active trades
or businesses which begin in taxable years beginning after December 31,
2019.
SEC. 402. PRESERVATION OF START-UP NET OPERATING LOSSES AND TAX CREDITS
AFTER OWNERSHIP CHANGE.
(a) Application to Net Operating Losses.--Section 382(d) of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(4) Exception for start-up losses.--
``(A) In general.--In the case of any net operating
loss carryforward described in paragraph (1)(A) which
arose in a start-up period taxable year, the amount of
such net operating loss carryforward otherwise taken
into account under such paragraph shall be reduced by
the net start-up loss determined with respect to the
trade or business referred to in subparagraph (B)(i)
for such start-up period taxable year.
``(B) Start-up period taxable year.--The term
`start-up period taxable year' means any taxable year
of the old loss corporation which--
``(i) begins before the close of the 3-year
period beginning on the date on which any trade
or business of such corporation begins as an
active trade or business (as determined under
section 195(d)(2) without regard to
subparagraph (B) thereof), and
``(ii) ends after May 31, 2020.
``(C) Net start-up loss.--
``(i) In general.--The term `net start-up
loss' means, with respect to any trade or
business referred to in subparagraph (B)(i) for
any start-up period taxable year, the amount
which bears the same ratio (but not greater
than 1) to the net operating loss carryforward
which arose in such start-up period taxable
year as--
``(I) the net operating loss (if
any) which would have been determined
for such start-up period taxable year
if only items of income, gain,
deduction, and loss properly allocable
to such trade or business were taken
into account, bears to
``(II) the amount of the net
operating loss determined for such
start-up period taxable year.
``(ii) Special rule for last taxable year
in start-up period.--In the case of any start-
up period taxable year which ends after the
close of the 3-year period described in
subparagraph (B)(i) with respect to any trade
or business, the net start-up loss with respect
to such trade or business for such start-up
period taxable year shall be the same
proportion of such loss (determined without
regard to this clause) as the proportion of
such start-up period taxable year which is on
or before the last day of such period.
``(D) Application to net operating loss arising in
year of ownership change.--Subparagraph (A) shall apply
to any net operating loss described in paragraph (1)(B)
in the same manner as such subparagraph applies to net
operating loss carryforwards described in paragraph
(1)(A), but by only taking into account the amount of
such net operating loss (and the amount of the net
start-up loss) which is allocable under paragraph
(1)(B) to the period described in such paragraph.
Proper adjustment in the allocation of the net start-up
loss under the preceding sentence shall be made in the
case of a taxable year to which subparagraph (C)(ii)
applies.
``(E) Application to taxable years which are start-
up period taxable years with respect to more than 1
trade or business.--In the case of any net operating
loss carryforward which arose in a taxable year which
is a start-up period taxable year with respect to more
than 1 trade or business--
``(i) this paragraph shall be applied
separately with respect to each such trade or
business, and
``(ii) the aggregate reductions under
subparagraph (A) shall not exceed such net
operating loss carryforward.
``(F) Continuity of business requirement.--If the
new loss corporation does not continue the trade or
business referred to in subparagraph (B)(i) at all
times during the 2-year period beginning on the change
date, this paragraph shall not apply with respect to
such trade or business.
``(G) Certain title 11 or similar cases.--
``(i) Multiple ownership changes.--In the
case of a 2nd ownership change to which
subsection (l)(5)(D) applies, this paragraph
shall not apply for purposes of determining the
pre-change loss with respect to such 2nd
ownership change.
``(ii) Certain insolvency transactions.--If
subsection (l)(6) applies for purposes of
determining the value of the old loss
corporation under subsection (e), this
paragraph shall not apply.
``(H) Not applicable to disallowed interest.--This
paragraph shall not apply for purposes of applying the
rules of paragraph (1) to the carryover of disallowed
interest under paragraph (3).
``(I) Transition rule.--This paragraph shall not
apply with respect to any trade or business if the date
on which such trade or business begins as an active
trade or business (as determined under section
195(d)(2) without regard to subparagraph (B) thereof)
is on or before May 31, 2020.''.
(b) Application to Excess Credits.--Section 383 of such Code is
amended by redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new subsection:
``(e) Exception for Start-Up Excess Credits.--
``(1) In general.--In the case of any unused general
business credit of the corporation under section 39 which arose
in a start-up period taxable year, the amount of such unused
general business credit otherwise taken into account under
subsection (a)(2)(A) shall be reduced by the start-up excess
credit determined with respect to any trade or business
referred to in section 382(d)(4)(B)(i) for such start-up period
taxable year.
``(2) Start-up period taxable year.--For purposes of this
subsection, the term `start-up period taxable year' has the
meaning given such term in section 382(d)(4)(B).
``(3) Start-up excess credit.--For purposes of this
subsection, the term `start-up excess credit' means, with
respect to any trade or business referred to in section
382(d)(4)(B)(i) for any start-up period taxable year, the
amount which bears the same ratio to the unused general
business credit which arose in such start-up period taxable
year as--
``(A) the amount of the general business credit
which would have been determined for such start-up
period taxable year if only credits properly allocable
to such trade or business were taken into account,
bears to
``(B) the amount of the general business credit
determined for such start-up period taxable year.
``(4) Application of certain rules.--Rules similar to the
rules of subparagraphs (C)(ii), (D), (E), and (F) of section
382(d)(4) shall apply for purposes of this subsection.
``(5) Transition rule.--This subsection shall not apply
with respect to any trade or business if the date on which such
trade or business begins as an active trade or business (as
determined under section 195(d)(2) without regard to
subparagraph (B) thereof) is on or before May 31, 2020.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years ending after May 31, 2020.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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