I 

116TH CONGRESS 

2D SESSION H. R. 7505 

To amend the Internal Revenue Code of 1986 to promote new business 

innovation, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 9, 2020 

Mr. BUCHANAN introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on the 

Budget, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Internal Revenue Code of 1986 to promote 

new business innovation, and for other purposes. 

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 Act of 2020’’. 


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1 SEC. 2. SIMPLIFICATION AND EXPANSION OF DEDUCTION 

2 FOR START-UP AND ORGANIZATIONAL EX3 PENDITURES. 

4 (a) IN GENERAL.—Section 195 of the Internal Rev5 enue Code of 1986 is amended by redesignating sub6 sections (c) and (d) as subsections (d) and (e), respec7 tively, and by striking all that precedes subsection (d) (as 

8 so redesignated) and inserting the following: 

9 ‘‘SEC. 195. START-UP AND ORGANIZATIONAL EXPENDI10 TURES. 

11 ‘‘(a) CAPITALIZATION OF EXPENDITURES.—Except 

12 as otherwise provided in this section, no deduction shall 

13 be allowed for start-up or organizational expenditures. 

14 ‘‘(b) ELECTION TO DEDUCT.— 

15 ‘‘(1) IN GENERAL.—If a taxpayer elects the ap16 plication of this subsection with respect to any active 

17 trade or business— 

18 ‘‘(A) the taxpayer shall be allowed a deduc19 tion for the taxable year in which such active 

20 trade or business begins in an amount equal to 

21 the lesser of— 

22 ‘‘(i) the aggregate amount of start-up 

23 and organizational expenditures paid or in24 curred in connection with such active trade 

25 or business, or 


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1 ‘‘(ii) $20,000, reduced (but not below 

2 zero) by the amount by which such aggre3 gate amount exceeds $120,000, and 

4 ‘‘(B) the remainder of such start-up and 

5 organizational expenditures shall be charged to 

6 capital account and allowed as an amortization 

7 deduction determined by amortizing such ex8 penditures ratably over the 180-month period 

9 beginning with the month in which the active 

10 trade or business begins. 

11 ‘‘(2) APPLICATION TO ORGANIZATIONAL EX12 PENDITURES.—In the case of organizational expend13 itures with respect to any corporation or partner14 ship, the active trade or business referred to in para15 graph (1) means the first active trade or business 

16 carried on by such corporation or partnership. 

17 ‘‘(3) INFLATION ADJUSTMENT.—In the case of 

18 any taxable year beginning after December 31, 

19 2020, the $20,000 and $120,000 amounts in para20 graph (1)(A)(ii) shall each be increased by an 

21 amount equal to— 

22 ‘‘(A) such dollar amount, multiplied by 

23 ‘‘(B) the cost-of-living adjustment deter24 mined under section 1(f)(3) for the calendar 

25 year in which the taxable year begins, deterVerDate Sep 11 2014 18:59 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7505.IH H7505

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1 mined by substituting ‘calendar year 2019’ for 

2 ‘calendar year 2016’ in subparagraph (A)(ii) 

3 thereof. 

4 If any amount as increased under the preceding sen5 tence is not a multiple of $1,000, such amount shall 

6 be rounded to the nearest multiple of $1,000. 

7 ‘‘(c) ALLOWANCE OF DEDUCTION UPON LIQUIDA8 TION OR DISPOSITION.— 

9 ‘‘(1) LIQUIDATION OF PARTNERSHIP OR COR10 PORATION.—If any partnership or corporation is 

11 completely liquidated by the taxpayer, any start-up 

12 or organizational expenditures paid or incurred in 

13 connection with such partnership or corporation 

14 which were not allowed as a deduction by reason of 

15 this section may be deducted to the extent allowable 

16 under section 165. 

17 ‘‘(2) DISPOSITION OF TRADE OR BUSINESS.—If 

18 any trade or business is completely disposed of or 

19 discontinued by the taxpayer, any start-up expendi20 tures paid or incurred in connection with such trade 

21 or business which were not allowed as a deduction 

22 by reason of this section (and not taken into account 

23 in connection with a liquidation to which paragraph 

24 (1) applies) may be deducted to the extent allowable 

25 under section 165. For purposes of this paragraph, 


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1 in the case of any deduction allowed under sub2 section (b)(1) with respect to both start-up and or3 ganizational expenditures, the amount treated as so 

4 allowed with respect to start-up expenditures shall 

5 bear the same ratio to such deduction as the start6 up expenditures taken into account in determining 

7 such deduction bears to the aggregate of the start8 up and organizational expenditures so taken into ac9 count.’’. 

10 (b) ORGANIZATIONAL EXPENDITURES.—Section 

11 195(d) of such Code, as redesignated by subsection (a), 

12 is amended by adding at the end the following new para13 graphs: 

14 ‘‘(3) ORGANIZATIONAL EXPENDITURES.—The 

15 term ‘organizational expenditures’ means any ex16 penditure which— 

17 ‘‘(A) is incident to the creation of a cor18 poration or a partnership, 

19 ‘‘(B) is chargeable to capital account, and 

20 ‘‘(C) is of a character which, if expended 

21 incident to the creation of a corporation or a 

22 partnership having an ascertainable life, would 

23 be amortizable over such life. 

24 ‘‘(4) APPLICATION TO CERTAIN DISREGARDED

25 ENTITIES.—In the case of any entity with a single 


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1 owner that is disregarded as an entity separate from 

2 its owner, this section shall be applied in the same 

3 manner as if such entity were a corporation.’’. 

4 (c) ELECTION.—Section 195(e)(2) of such Code, as 

5 redesignated by subsection (a), is amended to read as fol6 lows: 

7 ‘‘(2) PARTNERSHIPS AND S CORPORATIONS.—In 

8 the case of any partnership or S corporation, the 

9 election under subsection (b) shall be made (and this 

10 section shall be applied) at the entity level.’’. 

11 (d) CONFORMING AMENDMENTS.— 

12 (1)(A) Part VIII of subchapter B of chapter 1 

13 is amended by striking section 248 of such Code 

14 (and by striking the item relating to such section in 

15 the table of sections of such part). 

16 (B) Section 170(b)(2)(D)(ii) of such Code is 

17 amended by striking ‘‘(except section 248)’’. 

18 (C) Section 312(n)(3) of such Code is amended 

19 by striking ‘‘Sections 173 and 248’’ and inserting 

20 ‘‘Sections 173 and 195’’. 

21 (D) Section 535(b)(3) of such Code is amended 

22 by striking ‘‘(except section 248)’’. 

23 (E) Section 545(b)(3) of such Code is amended 

24 by striking ‘‘(except section 248)’’. 


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1 (F) Section 545(b)(4) of such Code is amended 

2 by striking ‘‘(except section 248)’’. 

3 (G) Section 834(c)(7) of such Code is amended 

4 by striking ‘‘(except section 248)’’. 

5 (H) Section 852(b)(2)(C) of such Code is 

6 amended by striking ‘‘(except section 248)’’. 

7 (I) Section 857(b)(2)(A) of such Code is 

8 amended by striking ‘‘(except section 248)’’. 

9 (J) Section 1363(b) of such Code is amended 

10 by adding ‘‘and’’ at the end of paragraph (2), by 

11 striking paragraph (3), and by redesignating para12 graph (4) as paragraph (3). 

13 (K) Section 1375(b)(1)(B)(i) of such Code is 

14 amended by striking ‘‘(other than the deduction al15 lowed by section 248, relating to organization ex16 penditures)’’. 

17 (2)(A) Section 709 of such Code is amended to 

18 read as follows: 

19 ‘‘SEC. 709. TREATMENT OF SYNDICATION FEES. 

20 ‘‘No deduction shall be allowed under this chapter to 

21 a partnership or to any partner of the partnership for any 

22 amounts paid or incurred to promote the sale of (or to 

23 sell) an interest in the partnership.’’. 


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1 (B) The item relating to section 709 in the 

2 table of sections for part I of subchapter K of chap3 ter 1 of such Code is amended to read as follows: 

‘‘Sec. 709. Treatment of syndication fees.’’. 

4 (3) Section 1202(e)(2)(A) of such Code is 

5 amended by striking ‘‘section 195(c)(1)(A)’’ and in6 serting ‘‘section 195(d)(1)(A)’’. 

7 (4) The item relating to section 195 in the table 

8 of contents of part VI of subchapter B of chapter 1 

9 of such Code is amended to read as follows: 

‘‘Sec. 195. Start-up and organizational expenditures.’’. 

10 (e) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to expenditures paid or incurred 

12 in connection with active trades or businesses which begin 

13 in taxable years beginning after December 31, 2019. 

14 SEC. 3. PRESERVATION OF START-UP NET OPERATING 

15 LOSSES AND TAX CREDITS AFTER OWNER16 SHIP CHANGE. 

17 (a) APPLICATION TO NET OPERATING LOSSES.— 

18 Section 382(d) of the Internal Revenue Code of 1986 is 

19 amended by adding at the end the following new para20 graph: 

21 ‘‘(4) EXCEPTION FOR START-UP LOSSES.— 

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

23 operating loss carryforward described in para24 graph (1)(A) which arose in a start-up period 


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1 taxable year, the amount of such net operating 

2 loss carryforward otherwise taken into account 

3 under such paragraph shall be reduced by the 

4 net start-up loss determined with respect to the 

5 trade or business referred to in subparagraph 

6 (B)(i) for such start-up period taxable year. 

7 ‘‘(B) START-UP PERIOD TAXABLE YEAR.— 

8 The term ‘start-up period taxable year’ means 

9 any taxable year of the old loss corporation 

10 which— 

11 ‘‘(i) begins before the close of the 3- 

12 year period beginning on the date on which 

13 any trade or business of such corporation 

14 begins as an active trade or business (as 

15 determined under section 195(d)(2) with16 out regard to subparagraph (B) thereof), 

17 and 

18 ‘‘(ii) ends after May 31, 2020. 

19 ‘‘(C) NET START-UP LOSS.— 

20 ‘‘(i) IN GENERAL.—The term ‘net 

21 start-up loss’ means, with respect to any 

22 trade or business referred to in subpara23 graph (B)(i) for any start-up period tax24 able year, the amount which bears the 

25 same ratio (but not greater than 1) to the 


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1 net operating loss carryforward which 

2 arose in such start-up period taxable year 

3 as— 

4 ‘‘(I) the net operating loss (if 

5 any) which would have been deter6 mined for such start-up period taxable 

7 year if only items of income, gain, de8 duction, and loss properly allocable to 

9 such trade or business were taken into 

10 account, bears to 

11 ‘‘(II) the amount of the net oper12 ating loss determined for such start13 up period taxable year. 

14 ‘‘(ii) SPECIAL RULE FOR LAST TAX15 ABLE YEAR IN START-UP PERIOD.—In the 

16 case of any start-up period taxable year 

17 which ends after the close of the 3-year pe18 riod described in subparagraph (B)(i) with 

19 respect to any trade or business, the net 

20 start-up loss with respect to such trade or 

21 business for such start-up period taxable 

22 year shall be the same proportion of such 

23 loss (determined without regard to this 

24 clause) as the proportion of such start-up 


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1 period taxable year which is on or before 

2 the last day of such period. 

3 ‘‘(D) APPLICATION TO NET OPERATING

4 LOSS ARISING IN YEAR OF OWNERSHIP

5 CHANGE.—Subparagraph (A) shall apply to any 

6 net operating loss described in paragraph 

7 (1)(B) in the same manner as such subpara8 graph applies to net operating loss 

9 carryforwards described in paragraph (1)(A), 

10 but by only taking into account the amount of 

11 such net operating loss (and the amount of the 

12 net start-up loss) which is allocable under para13 graph (1)(B) to the period described in such 

14 paragraph. Proper adjustment in the allocation 

15 of the net start-up loss under the preceding 

16 sentence shall be made in the case of a taxable 

17 year to which subparagraph (C)(ii) applies. 

18 ‘‘(E) APPLICATION TO TAXABLE YEARS

19 WHICH ARE START-UP PERIOD TAXABLE YEARS

20 WITH RESPECT TO MORE THAN 1 TRADE OR

21 BUSINESS.—In the case of any net operating 

22 loss carryforward which arose in a taxable year 

23 which is a start-up period taxable year with re24 spect to more than 1 trade or business— 


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1 ‘‘(i) this paragraph shall be applied 

2 separately with respect to each such trade 

3 or business, and 

4 ‘‘(ii) the aggregate reductions under 

5 subparagraph (A) shall not exceed such net 

6 operating loss carryforward. 

7 ‘‘(F) CONTINUITY OF BUSINESS REQUIRE8 MENT.—If the new loss corporation does not 

9 continue the trade or business referred to in 

10 subparagraph (B)(i) at all times during the 2- 

11 year period beginning on the change date, this 

12 paragraph shall not apply with respect to such 

13 trade or business. 

14 ‘‘(G) CERTAIN TITLE 11 OR SIMILAR

15 CASES.— 

16 ‘‘(i) MULTIPLE OWNERSHIP

17 CHANGES.—In the case of a 2nd ownership 

18 change to which subsection (l)(5)(D) ap19 plies, this paragraph shall not apply for 

20 purposes of determining the pre-change 

21 loss with respect to such 2nd ownership 

22 change. 

23 ‘‘(ii) CERTAIN INSOLVENCY TRANS24 ACTIONS.—If subsection (l)(6) applies for 

25 purposes of determining the value of the 


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1 old loss corporation under subsection (e), 

2 this paragraph shall not apply. 

3 ‘‘(H) NOT APPLICABLE TO DISALLOWED

4 INTEREST.—This paragraph shall not apply for 

5 purposes of applying the rules of paragraph (1) 

6 to the carryover of disallowed interest under 

7 paragraph (3). 

8 ‘‘(I) TRANSITION RULE.—This paragraph 

9 shall not apply with respect to any trade or 

10 business if the date on which such trade or 

11 business begins as an active trade or business 

12 (as determined under section 195(d)(2) without 

13 regard to subparagraph (B) thereof) is on or 

14 before May 31, 2020.’’. 

15 (b) APPLICATION TO EXCESS CREDITS.—Section 383 

16 of such Code is amended by redesignating subsection (e) 

17 as subsection (f) and by inserting after subsection (d) the 

18 following new subsection: 

19 ‘‘(e) EXCEPTION FOR START-UP EXCESS CREDITS.— 

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

21 general business credit of the corporation under sec22 tion 39 which arose in a start-up period taxable 

23 year, the amount of such unused general business 

24 credit otherwise taken into account under subsection 

25 (a)(2)(A) shall be reduced by the start-up excess 


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1 credit determined with respect to any trade or busi2 ness referred to in section 382(d)(4)(B)(i) for such 

3 start-up period taxable year. 

4 ‘‘(2) START-UP PERIOD TAXABLE YEAR.—For 

5 purposes of this subsection, the term ‘start-up pe6 riod taxable year’ has the meaning given such term 

7 in section 382(d)(4)(B). 

8 ‘‘(3) START-UP EXCESS CREDIT.—For purposes 

9 of this subsection, the term ‘start-up excess credit’ 

10 means, with respect to any trade or business re11 ferred to in section 382(d)(4)(B)(i) for any start-up 

12 period taxable year, the amount which bears the 

13 same ratio to the unused general business credit 

14 which arose in such start-up period taxable year 

15 as— 

16 ‘‘(A) the amount of the general business 

17 credit which would have been determined for 

18 such start-up period taxable year if only credits 

19 properly allocable to such trade or business 

20 were taken into account, bears to 

21 ‘‘(B) the amount of the general business 

22 credit determined for such start-up period tax23 able year. 

24 ‘‘(4) APPLICATION OF CERTAIN RULES.—Rules 

25 similar to the rules of subparagraphs (C)(ii), (D), 


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1 (E), and (F) of section 382(d)(4) shall apply for 

2 purposes of this subsection. 

3 ‘‘(5) TRANSITION RULE.—This subsection shall 

4 not apply with respect to any trade or business if 

5 the date on which such trade or business begins as 

6 an active trade or business (as determined under 

7 section 195(d)(2) without regard to subparagraph 

8 (B) thereof) is on or before May 31, 2020.’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to taxable years ending after May 

11 31, 2020. 

12 SEC. 4. BUDGETARY EFFECTS. 

13 (a) STATUTORY PAYGO SCORECARDS.—The budg14 etary effects of this Act shall not be entered on either 

15 PAYGO scorecard maintained pursuant to section 4(d) of 

16 the Statutory Pay-As-You-Go Act of 2010. 

17 (b) SENATE PAYGO SCORECARDS.—The budgetary 

18 effects of this Act shall not be entered on any PAYGO 

19 scorecard maintained for purposes of section 4106 of H. 

20 Con. Res. 71 (115th Congress). 

Æ 


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