II 

118TH CONGRESS 

1ST SESSION S. 866 

To amend the Internal Revenue Code of 1986 to enhance tax benefits for 

research activities. 

IN THE SENATE OF THE UNITED STATES 

MARCH 16, 2023 

Ms. HASSAN (for herself, Mr. YOUNG, Ms. CORTEZ MASTO, Mr. BARRASSO, 

Ms. SINEMA, Mr. TILLIS, Mrs. FEINSTEIN, Mr. DAINES, Mr. KELLY, Mr. 

HAGERTY, Mrs. MURRAY, Mr. MORAN, Mr. PETERS, and Mr. WICKER) 

introduced the following bill; which was read twice and referred to the 

Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to enhance 

tax benefits for research activities. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘American Innovation 

5 and Jobs Act’’. 

6 SEC. 2. RESTORING IMMEDIATE EXPENSING FOR RE7 SEARCH AND DEVELOPMENT INVESTMENTS. 

8 (a) IN GENERAL.—Section 174 of the Internal Rev9 enue Code of 1986 is amended to read as follows: 


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1 ‘‘SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES. 

2 ‘‘(a) TREATMENT AS EXPENSES.— 

3 ‘‘(1) IN GENERAL.—A taxpayer may treat re4 search or experimental expenditures which are paid 

5 or incurred by him during the taxable year in con6 nection with his trade or business as expenses which 

7 are not chargeable to capital account. The expendi8 tures so treated shall be allowed as a deduction. 

9 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 

10 ‘‘(A) WITHOUT CONSENT.—A taxpayer 

11 may, without the consent of the Secretary, 

12 adopt the method provided in this subsection 

13 for his first taxable year for which expenditures 

14 described in paragraph (1) are paid or incurred. 

15 ‘‘(B) WITH CONSENT.—A taxpayer may, 

16 with the consent of the Secretary, adopt at any 

17 time the method provided in this subsection. 

18 ‘‘(3) SCOPE.—The method adopted under this 

19 subsection shall apply to all expenditures described 

20 in paragraph (1). The method adopted shall be ad21 hered to in computing taxable income for the taxable 

22 year and for all subsequent taxable years unless, 

23 with the approval of the Secretary, a change to a 

24 different method is authorized with respect to part 

25 or all of such expenditures. 


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1 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND

2 EXPERIMENTAL EXPENDITURES.— 

3 ‘‘(1) IN GENERAL.—At the election of the tax4 payer, made in accordance with regulations pre5 scribed by the Secretary, research or experimental 

6 expenditures which are— 

7 ‘‘(A) paid or incurred by the taxpayer in 

8 connection with his trade or business, 

9 ‘‘(B) not treated as expenses under sub10 section (a), and 

11 ‘‘(C) chargeable to capital account but not 

12 chargeable to property of a character which is 

13 subject to the allowance under section 167 (re14 lating to allowance for depreciation, etc.) or sec15 tion 611 (relating to allowance for depletion), 

16 may be treated as deferred expenses. In computing 

17 taxable income, such deferred expenses shall be al18 lowed as a deduction ratably over such period of not 

19 less than 60 months as may be selected by the tax20 payer (beginning with the month in which the tax21 payer first realizes benefits from such expenditures). 

22 Such deferred expenses are expenditures properly 

23 chargeable to capital account for purposes of section 

24 1016(a)(1) (relating to adjustments to basis of prop25 erty). 


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1 ‘‘(2) TIME FOR AND SCOPE OF ELECTION.—The 

2 election provided by paragraph (1) may be made for 

3 any taxable year, but only if made not later than the 

4 time prescribed by law for filing the return for such 

5 taxable year (including extensions thereof). The 

6 method so elected, and the period selected by the 

7 taxpayer, shall be adhered to in computing taxable 

8 income for the taxable year for which the election is 

9 made and for all subsequent taxable years unless, 

10 with the approval of the Secretary, a change to a 

11 different method (or to a different period) is author12 ized with respect to part or all of such expenditures. 

13 The election shall not apply to any expenditure paid 

14 or incurred during any taxable year before the tax15 able year for which the taxpayer makes the election. 

16 ‘‘(c) LAND AND OTHER PROPERTY.—This section 

17 shall not apply to any expenditure for the acquisition or 

18 improvement of land, or for the acquisition or improve19 ment of property to be used in connection with the re20 search or experimentation and of a character which is sub21 ject to the allowance under section 167 (relating to allow22 ance for depreciation, etc.) or section 611 (relating to al23 lowance for depletion); but for purposes of this section al24 lowances under section 167, and allowances under section 

25 611, shall be considered as expenditures. 


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1 ‘‘(d) EXPLORATION EXPENDITURES.—This section 

2 shall not apply to any expenditure paid or incurred for 

3 the purpose of ascertaining the existence, location, extent, 

4 or quality of any deposit of ore or other mineral (including 

5 oil and gas). 

6 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES

7 ELIGIBLE.—This section shall apply to a research or ex8 perimental expenditure only to the extent that the amount 

9 thereof is reasonable under the circumstances. 

10 ‘‘(f) CROSS REFERENCES.— 

11 ‘‘(1) For adjustments to basis of property for 

12 amounts allowed as deductions as deferred expenses 

13 under subsection (b), see section 1016(a)(14). 

14 ‘‘(2) For election of 10-year amortization of ex15 penditures allowable as a deduction under subsection 

16 (a), see section 59(e).’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 for part VI of subchapter B of chapter 1 is amended by 

19 striking the item relating to section 174 and inserting the 

20 following new item: 

‘‘Sec. 174. Research and experimental expenditures’’. 

21 (c) CONFORMING AMENDMENTS.— 

22 (1) Section 41(d)(1)(A) is amended by striking 

23 ‘‘specified research or experimental expenditures 

24 under section 174’’ and inserting ‘‘expenses under 

25 section 174’’. 


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1 (2) Section 280C(c) is amended to read as fol2 lows: 

3 ‘‘(c) CREDIT FOR INCREASING RESEARCH ACTIVI4 TIES.— 

5 ‘‘(1) IN GENERAL.—No deduction shall be al6 lowed for that portion of the qualified research ex7 penses (as defined in section 41(b)) or basic re8 search expenses (as defined in section 41(e)(2)) oth9 erwise allowable as a deduction for the taxable year 

10 which is equal to the amount of the credit deter11 mined for such taxable year under section 41(a). 

12 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP13 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 

14 ‘‘(A) the amount of the credit determined 

15 for the taxable year under section 41(a)(1), ex16 ceeds 

17 ‘‘(B) the amount allowable as a deduction 

18 for such taxable year for qualified research ex19 penses or basic research expenses (determined 

20 without regard to paragraph (1)), 

21 the amount chargeable to capital account for the 

22 taxable year for such expenses shall be reduced by 

23 the amount of such excess. 

24 ‘‘(3) ELECTION OF REDUCED CREDIT.— 


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1 ‘‘(A) IN GENERAL.—In the case of any 

2 taxable year for which an election is made 

3 under this paragraph— 

4 ‘‘(i) paragraphs (1) and (2) shall not 

5 apply, and 

6 ‘‘(ii) the amount of the credit under 

7 section 41(a) shall be the amount deter8 mined under subparagraph (B). 

9 ‘‘(B) AMOUNT OF REDUCED CREDIT.—The 

10 amount of credit determined under this sub11 paragraph for any taxable year shall be the 

12 amount equal to the excess of— 

13 ‘‘(i) the amount of credit determined 

14 under section 41(a) without regard to this 

15 paragraph, over 

16 ‘‘(ii) the product of— 

17 ‘‘(I) the amount described in 

18 clause (i), and 

19 ‘‘(II) the rate of tax under sec20 tion 11(b). 

21 ‘‘(C) ELECTION.—An election under this 

22 paragraph for any taxable year shall be made 

23 not later than the time for filing the return of 

24 tax for such year (including extensions), shall 

25 be made on such return, and shall be made in 


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1 such manner as the Secretary may prescribe. 

2 Such an election, once made, shall be irrev3 ocable. 

4 ‘‘(4) CONTROLLED GROUPS.—Paragraph (3) of 

5 subsection (b) shall apply for purposes of this sub6 section.’’. 

7 (d) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to amounts paid or incurred in tax9 able years beginning after December 31, 2021. 

10 SEC. 3. EXPANDING REFUNDABLE RESEARCH CREDIT FOR 

11 NEW AND SMALL BUSINESSES. 

12 (a) INCREASING CAP ON REFUNDABLE CREDIT.— 

13 (1) IN GENERAL.—Subclause (I) of section 

14 41(h)(4)(B)(i) of the Internal Revenue Code of 1986 

15 is amended by striking ‘‘$250,000’’ and inserting 

16 ‘‘the applicable amount’’. 

17 (2) APPLICABLE AMOUNT.—Subclause (II) of 

18 section 41(h)(4)(B)(i) of such Code is amended to 

19 read as follows: 

20 ‘‘(II) APPLICABLE AMOUNT.— 

21 For purposes of subclause (I), the ap22 plicable amount is— 

23 ‘‘(aa) in the case of any tax24 able year beginning after DecemVerDate Sep 11 2014 07:20 Mar 28, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S866.IS S866

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1 ber 31, 2022, and before Janu2 ary 1, 2024, $500,000, 

3 ‘‘(bb) in the case of any tax4 able year beginning after Decem5 ber 31, 2023, and before Janu6 ary 1, 2025, $525,000, 

7 ‘‘(cc) in the case of any tax8 able year beginning after Decem9 ber 31, 2024, and before Janu10 ary 1, 2026, $550,000, 

11 ‘‘(dd) in the case of any tax12 able year beginning after Decem13 ber 31, 2025, and before Janu14 ary 1, 2027, $575,000, 

15 ‘‘(ee) in the case of any tax16 able year beginning after Decem17 ber 31, 2026, and before Janu18 ary 1, 2028, $600,000, 

19 ‘‘(ff) in the case of any tax20 able year beginning after Decem21 ber 31, 2027, and before Janu22 ary 1, 2029, $625,000, 

23 ‘‘(gg) in the case of any tax24 able year beginning after DecemVerDate Sep 11 2014 07:20 Mar 28, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S866.IS S866

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1 ber 31, 2028, and before Janu2 ary 1, 2030, $650,000, 

3 ‘‘(hh) in the case of any tax4 able year beginning after Decem5 ber 31, 2029, and before Janu6 ary 1, 2031, $675,000, 

7 ‘‘(ii) in the case of any tax8 able year beginning after Decem9 ber 31, 2030, and before Janu10 ary 1, 2032, $700,000, 

11 ‘‘(jj) in the case of any tax12 able year beginning after Decem13 ber 31, 2031, and before Janu14 ary 1, 2033, $725,000, and 

15 ‘‘(kk) in the case of any tax16 able year beginning after Decem17 ber 31, 2032, $750,000.’’. 

18 (3) CONFORMING AMENDMENTS.— 

19 (A) Clause (ii) of section 41(h)(5)(B) of 

20 such Code is amended by striking ‘‘each of the 

21 $250,000 amounts’’ and inserting ‘‘the applica22 ble amount’’. 

23 (B) Section 3111(f) of such Code is 

24 amended— 

25 (i) in paragraph (1)— 


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1 (I) by striking ‘‘(applied without 

2 regard to subclause (II) thereof), 

3 and’’ and inserting a period, 

4 (II) by striking subparagraph 

5 (B), and 

6 (III) by striking ‘‘for a taxable 

7 year’’ and all that follows through ‘‘al8 lowed as a credit’’ and inserting ‘‘for 

9 a taxable year, there shall be allowed 

10 as a credit’’, 

11 (ii) in paragraph (2)— 

12 (I) by striking ‘‘paragraph 

13 (1)(A)’’ and inserting ‘‘paragraph 

14 (1)’’, and 

15 (II) by striking ‘‘, and the credit 

16 allowed by paragraph (1)(B) shall not 

17 exceed the tax imposed by subsection 

18 (b) for any calendar quarter,’’, and 

19 (iii) in paragraph (4)— 

20 (I) by striking ‘‘credits’’ and in21 serting ‘‘credit’’, and 

22 (II) by striking ‘‘or (b)’’. 

23 (b) EXTENSION OF ELIGIBILITY AND APPLICABILITY

24 OF ELECTION.— 


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1 (1) STARTUP DATE.—Subclause (II) of section 

2 41(h)(3)(A)(i) of the Internal Revenue Code of 1986 

3 is amended by striking ‘‘5-taxable-year period’’ and 

4 inserting ‘‘8-taxable-year period’’. 

5 (2) EXTENSION OF LIMITATION ON ELEC6 TION.—Clause (ii) of section 41(h)(4)(B) of such 

7 Code is amended by striking ‘‘5 or more’’ and in8 serting ‘‘8 or more’’. 

9 (c) GROSS RECEIPTS TEST.—Clause (i) of section 

10 41(h)(3)(A) of the Internal Revenue Code of 1986 is 

11 amended— 

12 (1) by striking ‘‘$5,000,000’’ in subclause (I) 

13 and inserting ‘‘$15,000,000’’, and 

14 (2) by striking ‘‘gross receipts’’ in subclause 

15 (II) and inserting ‘‘gross receipts in excess of 

16 $25,000’’. 

17 (d) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to taxable years beginning after 

19 December 31, 2022. 

20 SEC. 4. INCREASING ACCESS TO THE RESEARCH CREDIT 

21 FOR STARTUPS. 

22 (a) IN GENERAL.—Paragraph (4) of section 41(c) of 

23 the Internal Revenue Code of 1986 is amended by adding 

24 at the end the following new subparagraph: 


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1 ‘‘(D) SPECIAL RULES FOR QUALIFIED

2 SMALL BUSINESSES.—In the case of a qualified 

3 small business (as defined in subsection 

4 (h)(3))— 

5 ‘‘(i) subparagraph (A) shall be applied 

6 by substituting ‘20 percent’ for ‘14 per7 cent’, and 

8 ‘‘(ii) if subparagraph (B) applies to 

9 such taxpayer, at the election of the tax10 payer— 

11 ‘‘(I) subparagraph (B)(ii) shall 

12 be applied by substituting ‘10 percent’ 

13 for ‘6 percent’, or 

14 ‘‘(II) in lieu of applying subpara15 graph (B), the average under sub16 paragraph (A) shall be determined by 

17 disregarding any taxable year in the 

18 3-year period described in such sub19 paragraph in which there were no 

20 qualified research expenses.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 

Æ 


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