Startup Innovation Credit Act of 2014

Summary: Startup Innovation Credit Act of 2014 - Amends the Internal Revenue Code to allow a qualified small business to elect to use a portion of its tax credit for increasing research expenditures as an offset against its payroll tax liability under the Federal Insurance Contributions Act (FICA).  Defines "qualified small business" as a corporation, a partnership, or a person other than a tax-exempt organization that had gross receipts of less than $5 million for the taxable year  and that did not have gross receipts for any period preceding the five-taxable-year period ending with such taxable year.  Limits: (1) the number of years a taxpayer may elect to offset payroll taxes under this Act to five, and (2) the annual amount of such offset to $250,000.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Startup Innovation Credit Act of 
2014''.

SEC. 2. TREATMENT OF RESEARCH CREDIT FOR CERTAIN STARTUP COMPANIES.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(i) Treatment of Credit for Qualified Small Businesses.--
            ``(1) In general.--At the election of a qualified small 
        business for any taxable year, section 3111(f) shall apply to 
        the payroll tax credit portion of the credit otherwise 
        determined under subsection (a) for the taxable year and such 
        portion shall not be treated (other than for purposes of 
        section 280C) as a credit determined under subsection (a).
            ``(2) Payroll tax credit portion.--For purposes of this 
        subsection, the payroll tax credit portion of the credit 
        determined under subsection (a) with respect to any qualified 
        small business for any taxable year is the least of--
                    ``(A) the amount specified in the election made 
                under this subsection,
                    ``(B) the credit determined under subsection (a) 
                for the taxable year (determined before the application 
                of this subsection), or
                    ``(C) in the case of a qualified small business 
                other than a partnership or S corporation, the amount 
                of the business credit carryforward under section 39 
                carried from the taxable year (determined before the 
                application of this subsection to the taxable year).
            ``(3) Qualified small business.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified small 
                business' means, with respect to any taxable year--
                            ``(i) a corporation or partnership, if--
                                    ``(I) the gross receipts (as 
                                determined under the rules of section 
                                448(c)(3), without regard to 
                                subparagraph (A) thereof) of such 
                                entity for the taxable year is less 
                                than $5,000,000, and
                                    ``(II) such entity did not have 
                                gross receipts (as so determined) for 
                                any taxable year preceding the 5-
                                taxable-year period ending with such 
                                taxable year, and
                            ``(ii) any person (other than a corporation 
                        or partnership) who meets the requirements of 
                        subclauses (I) and (II) of clause (i), 
                        determined--
                                    ``(I) by substituting `person' for 
                                `entity' each place it appears, and
                                    ``(II) by only taking into account 
                                the aggregate gross receipts received 
                                by such person in carrying on all 
                                trades or businesses of such person.
                    ``(B) Limitation.--Such term shall not include an 
                organization which is exempt from taxation under 
                section 501.
            ``(4) Election.--
                    ``(A) In general.--Any election under this 
                subsection for any taxable year--
                            ``(i) shall specify the amount of the 
                        credit to which such election applies,
                            ``(ii) shall be made on or before the due 
                        date (including extensions) of--
                                    ``(I) in the case of a qualified 
                                small business which is a partnership, 
                                the return required to be filed under 
                                section 6031,
                                    ``(II) in the case of a qualified 
                                small business which is an S 
                                corporation, the return required to be 
                                filed under section 6037, and
                                    ``(III) in the case of any other 
                                qualified small business, the return of 
                                tax for the taxable year, and
                            ``(iii) may be revoked only with the 
                        consent of the Secretary.
                    ``(B) Limitations.--
                            ``(i) Amount.--The amount specified in any 
                        election made under this subsection shall not 
                        exceed $250,000.
                            ``(ii) Number of taxable years.--A person 
                        may not make an election under this subsection 
                        if such person (or any other person treated as 
                        a single taxpayer with such person under 
                        paragraph (5)(A)) has made an election under 
                        this subsection for 5 or more preceding taxable 
                        years.
                    ``(C) Special rule for partnerships and s 
                corporations.--In the case of a qualified small 
                business which is a partnership or S corporation, the 
                election made under this subsection shall be made at 
                the entity level.
            ``(5) Aggregation rules.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), all persons or entities treated as a 
                single taxpayer under subsection (f)(1) shall be 
                treated as a single taxpayer for purposes of this 
                subsection.
                    ``(B) Special rules.--For purposes of this 
                subsection and section 3111(f)--
                            ``(i) each of the persons treated as a 
                        single taxpayer under subparagraph (A) may 
                        separately make the election under paragraph 
                        (1) for any taxable year, and
                            ``(ii) the $250,000 amount under paragraph 
                        (4)(B)(i) shall be allocated among all persons 
                        treated as a single taxpayer under subparagraph 
                        (A) in the same manner as under subparagraph 
                        (A)(ii) or (B)(ii) of subsection (f)(1), 
                        whichever is applicable.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection, including--
                    ``(A) regulations to prevent the avoidance of the 
                purposes of the limitations and aggregation rules under 
                this subsection through the use of successor companies 
                or other means,
                    ``(B) regulations to minimize compliance and 
                recordkeeping burdens under this subsection, and
                    ``(C) regulations for recapturing the benefit of 
                credits determined under section 3111(f) in cases where 
                there is a subsequent adjustment to the payroll tax 
                credit portion of the credit determined under 
                subsection (a), including requiring amended income tax 
                returns in the cases where there is such an 
                adjustment.''.
    (b) Credit Allowed Against FICA Taxes.--Section 3111 of such Code 
is amended by adding at the end the following new subsection:
    ``(f) Credit for Research Expenditures of Qualified Small 
Businesses.--
            ``(1) In general.--In the case of a taxpayer who has made 
        an election under section 41(i) for a taxable year, there shall 
        be allowed as a credit against the tax imposed by subsection 
        (a) for the first calendar quarter which begins after the date 
        on which the taxpayer files the return specified in section 
        41(i)(4)(A)(ii) an amount equal to the payroll tax credit 
        portion determined under section 41(i)(2).
            ``(2) Limitation.--The credit allowed by paragraph (1) 
        shall not exceed the tax imposed by subsection (a) for any 
        calendar quarter on the wages paid with respect to the 
        employment of all individuals in the employ of the employer.
            ``(3) Carryover of unused credit.--If the amount of the 
        credit under paragraph (1) exceeds the limitation of paragraph 
        (2) for any calendar quarter, such excess shall be carried to 
        the succeeding calendar quarter and allowed as a credit under 
        paragraph (1) for such quarter.
            ``(4) Deduction allowed for credited amounts.--The credit 
        allowed under paragraph (1) shall not be taken into account for 
        purposes of determining the amount of any deduction allowed 
        under chapter 1 for taxes imposed under subsection (a).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to credits determined for taxable years beginning after December 
31, 2013.