II 

113TH CONGRESS 

1ST SESSION S. 1658 

To amend the Internal Revenue Code of 1986 to make permanent certain 

small business tax provisions, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 6, 2013 

Mr. TOOMEY (for himself and Mr. MENENDEZ) 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 make 

permanent certain small business tax provisions, 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 ‘‘Start-up Jobs and In5 novation Act’’. 

6 SEC. 2. PERMANENT EXTENSION OF INCREASED EXPENS7 ING LIMITATION. 

8 (a) DOLLAR LIMITATION.—Section 179(b)(1) of the 

9 Internal Revenue Code of 1986 is amended by striking 


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1 ‘‘shall not exceed’’ and all that follows and inserting ‘‘shall 

2 not exceed $500,000.’’. 

3 (b) REDUCTION IN LIMITATION.—Section 179(b)(2) 

4 of the Internal Revenue Code of 1986 is amended— 

5 (1) by striking subparagraph (C), 

6 (2) by striking ‘‘, and’’ at the end of subpara7 graph (B) and inserting a period, 

8 (3) by striking the comma at the end of sub9 paragraph (A) and inserting ‘‘, and’’, and 

10 (4) by inserting ‘‘beginning before 2014’’ after 

11 ‘‘The limitation under paragraph (1) for any taxable 

12 year’’. 

13 (c) ADJUSTMENT FOR INFLATION.—Subsection (b) 

14 of section 179 of the Internal Revenue Code of 1986 is 

15 amended by adding at the end the following new para16 graph: 

17 ‘‘(6) ADJUSTMENT FOR INFLATION.—In the 

18 case of any taxable year beginning after December 

19 31, 2014, the $500,000 amount in paragraph (1) 

20 shall be increased by an amount equal to— 

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

22 ‘‘(B) the cost-of-living adjustment deter23 mined under section 1(f)(3) for the calendar 

24 year in which the taxable year begins, by subVerDate Mar 15 2010 23:40 Nov 07, 2013 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1658.IS S1658

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1 stituting ‘calendar year 2013’ for ‘calendar year 

2 1992’ in subparagraph (B) thereof. 

3 If any amount as increased under the preceding sen4 tence is not a multiple of $1,000, such amount shall 

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

6 (d) COMPUTER SOFTWARE.—Section 

7 179(d)(1)(A)(ii) of the Internal Revenue Code of 1986 is 

8 amended by striking ‘‘and before 2014’’. 

9 (e) ELECTION.—Section 179(c)(2) of the Internal 

10 Revenue Code of 1986 is amended by striking ‘‘and before 

11 2014’’. 

12 (f) SPECIAL RULES FOR TREATMENT OF QUALIFIED

13 REAL PROPERTY.— 

14 (1) IN GENERAL.—Section 179(f)(1) of the In15 ternal Revenue Code of 1986 is amended by striking 

16 ‘‘beginning in 2010, 2011, 2012, or 2013’’ and in17 serting ‘‘beginning after 2009’’. 

18 (2) REPEAL OF LIMITATION.—Section 179(f) of 

19 such Code is amended by striking paragraph (3). 

20 (3) CONFORMING AMENDMENT.—Section 179(f) 

21 of such Code is amended by striking paragraph (4). 

22 (g) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to property placed in service in 

24 taxable years beginning after December 31, 2013. 


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1 SEC. 3. PERMANENT FULL EXCLUSION APPLICABLE TO 

2 QUALIFIED SMALL BUSINESS STOCK. 

3 (a) IN GENERAL.—Paragraph (4) of section 1202(a) 

4 of the Internal Revenue Code of 1986 is amended— 

5 (1) by striking ‘‘and before January 1, 2014’’, 

6 and 

7 (2) by striking ‘‘CERTAIN PERIODS IN 2010, 

8 2011, 2012, AND 2013’’ in the heading and inserting 

9 ‘‘CERTAIN PERIODS AFTER 2009’’. 

10 (b) CONFORMING AMENDMENTS.— 

11 (1) The heading for section 1202 of the Inter12 nal Revenue Code of 1986 is amended by striking 

13 ‘‘PARTIAL’’. 

14 (2) The item relating to section 1202 in the 

15 table of sections for part I of subchapter P of chap16 ter 1 of such Code is amended by striking ‘‘Partial 

17 exclusion’’ and inserting ‘‘Exclusion’’. 

18 (3) Section 1223(13) of such Code is amended 

19 by striking ‘‘1202(a)(2),’’. 

20 (c) INCREASE IN GROSS ASSET THRESHOLD.— 

21 (1) IN GENERAL.—Paragraph (1) of section 

22 1202(d) of the Internal Revenue Code of 1986 is 

23 amended by striking ‘‘$50,000,000’’ each place it 

24 appears and inserting ‘‘$150,000,000’’. 


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1 (2) ADJUSTMENT FOR INFLATION.—Subsection 

2 (d) of section 1202 of such Code is amended by add3 ing at the end the following new paragraph: 

4 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 

5 case of any taxable year beginning after December 

6 31, 2014, the $150,000,000 amount in subpara7 graphs (A) and (B) of paragraph (1) shall be in8 creased by an amount equal to— 

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

10 ‘‘(B) the cost-of-living adjustment deter11 mined under section 1(f)(3) for the calendar 

12 year in which the taxable year begins, by sub13 stituting ‘calendar year 2013’ for ‘calendar year 

14 1992’ in subparagraph (B) thereof. 

15 If any amount as increased under the preceding sen16 tence is not a multiple of $1,000, such amount shall 

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

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

19 this section shall apply to stock acquired after December 

20 31, 2013. 

21 SEC. 4. UNIFICATION OF DEDUCTION FOR START-UP AND 

22 ORGANIZATIONAL EXPENDITURES. 

23 (a) IN GENERAL.—Subsection (a) of section 195 of 

24 the Internal Revenue Code of 1986 is amended by insert25 ing ‘‘and organizational’’ after ‘‘start-up’’. 


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1 (b) ORGANIZATIONAL EXPENDITURES.—Subsection 

2 (c) of section 195 of the Internal Revenue Code of 1986 

3 is amended by adding at the end the following new para4 graph: 

5 ‘‘(3) ORGANIZATIONAL EXPENDITURES.—The 

6 term ‘organizational expenditures’ means any ex7 penditure which— 

8 ‘‘(A) is incident to the creation of a cor9 poration or a partnership, 

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

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

12 incident to the creation of a corporation or a 

13 partnership having a limited life, would be am14 ortizable over such life.’’. 

15 (c) DOLLAR AMOUNTS.—Clause (ii) of section 

16 195(b)(1)(A) of the Internal Revenue Code of 1986 is 

17 amended— 

18 (1) by striking ‘‘$5,000’’ and inserting 

19 ‘‘$10,000’’, and 

20 (2) by striking ‘‘$50,000’’ and inserting 

21 ‘‘$60,000’’. 

22 (d) ADJUSTMENT FOR INFLATION.—Paragraph (3) 

23 of section 195(b) is amended to read as follows: 

24 ‘‘(3) ADJUSTMENT FOR INFLATION.—In the 

25 case of any taxable year beginning after December 


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1 31, 2014, the $10,000 and $60,000 amounts in 

2 paragraph (1)(A)(ii) shall each be increased by an 

3 amount equal to— 

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

5 ‘‘(B) the cost-of-living adjustment deter6 mined under section 1(f)(3) for the calendar 

7 year in which the taxable year begins, by sub8 stituting ‘calendar year 2013’ for ‘calendar year 

9 1992’ in subparagraph (B) thereof. 

10 If any amount as increased under the preceding sen11 tence is not a multiple of $1,000, such amount shall 

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

13 (e) CONFORMING AMENDMENTS.— 

14 (1) Section 195(b)(1) of the Internal Revenue 

15 Code of 1986 is amended— 

16 (A) by inserting ‘‘(or, in the case of a part17 nership, the partnership elects)’’ after ‘‘If a tax18 payer elects’’, 

19 (B) by inserting ‘‘(or the partnership, as 

20 the case may be)’’ after ‘‘the taxpayer’’ in sub21 paragraph (A), and 

22 (C) by inserting ‘‘or organizational’’ after 

23 ‘‘start-up’’ each place it appears. 

24 (2) Section 195(b)(2) of such Code is amend25 ed— 


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1 (A) by striking ‘‘AMORTIZATION PERIOD.— 

2 In any case’’ and inserting ‘‘AMORTIZATION PE3 RIOD.— 

4 ‘‘(A) IN GENERAL.—In any case’’, and 

5 (B) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(B) SPECIAL PARTNERSHIP RULE.—In 

8 the case of a partnership, subparagraph (A) 

9 shall be applied at the partnership level.’’. 

10 (3)(A) Part VIII of subchapter B of chapter 1 

11 of such Code is amended by striking section 248. 

12 (B) Section 170(b)(2)(C)(ii) of such Code is 

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

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

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

16 ‘‘Section 173’’. 

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

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

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

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

21 (F) Section 834(c)(7) of such Code is amended 

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

23 (G) Section 852(b)(2)(C) of such Code is 

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


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1 (H) Section 857(b)(2)(A) of such Code is 

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

3 (I) Section 1363(b) of such Code is amended by 

4 inserting ‘‘and’’ at the end of paragraph (2), by 

5 striking paragraph (3), and by redesignating para6 graph (4) as paragraph (3). 

7 (J) Section 1375(b)(1)(B)(i) of such Code is 

8 amended by striking ‘‘(other than the deduction al9 lowed by section 248, relating to organization ex10 penditures)’’. 

11 (K) The table of sections for part VIII of sub12 chapter B of chapter 1 of such Code is amended by 

13 striking the item relating to section 248. 

14 (4) Part I of subchapter K of chapter 1 of such 

15 Code is amended by striking section 709. 

16 (5) The table of sections for part I of sub17 chapter K of chapter 1 of such Code is amended by 

18 striking the item relating to section 709. 

19 (f) CLERICAL AMENDMENTS.— 

20 (1) The heading of section 195 of the Internal 

21 Revenue Code of 1986 is amended by striking ‘‘EX22 PENDITURES’’ and inserting ‘‘AND ORGANIZA23 TIONAL EXPENDITURES’’. 


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1 (2) The item relating to section 195 in the table 

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

3 of such Code is amended to read as follows: 

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

4 (g) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to expenses paid or incurred after 

6 December 31, 2013. 

7 SEC. 5. EXPANSION OF GROSS RECEIPTS TEST. 

8 (a) IN GENERAL.—Paragraph (1) of section 448(c) 

9 of the Internal Revenue Code of 1986 is amended— 

10 (1) by striking ‘‘the $5,000,000 gross receipts 

11 test’’ and inserting ‘‘the gross receipts test’’, and 

12 (2) by striking ‘‘does not exceed $5,000,000’’ 

13 and inserting ‘‘does not exceed $10,000,000’’. 

14 (b) ADJUSTMENT FOR INFLATION.—Subsection (c) 

15 of section 448 of the Internal Revenue Code of 1986 is 

16 amended by adding at the end the following new para17 graph: 

18 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 

19 case of any taxable year beginning after December 

20 31, 2014, the $10,000,000 amount in paragraph (1) 

21 shall be increased by an 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, by subVerDate Mar 15 2010 23:40 Nov 07, 2013 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1658.IS S1658

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1 stituting ‘calendar year 2013’ for ‘calendar year 

2 1992’ in subparagraph (B) thereof. 

3 If any amount as increased under the preceding sen4 tence is not a multiple of $1,000, such amount shall 

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

6 (c) CONFORMING AMENDMENTS.— 

7 (1) Paragraph (3) of section 448(b) of the In8 ternal Revenue Code of 1986 is amended by striking 

9 ‘‘the $5,000,000 gross receipts test’’ and inserting 

10 ‘‘the gross receipts test’’. 

11 (2) The heading for paragraph (3) of section 

12 448(b) of such Code is amended by striking ‘‘WITH

13 GROSS RECEIPTS OF NOT MORE THAN $5,000,000’’ 

14 and inserting ‘‘THAT PASS GROSS RECEIPTS TEST’’. 

15 (3) The heading for subsection (c) of section 

16 448 of such Code is amended by striking 

17 ‘‘$5,000,000 GROSS’’ and inserting ‘‘GROSS’’. 

18 (4) Clause (iii) of section 172(b)(1)(F) of such 

19 Code is amended by inserting ‘‘, applied by sub20 stituting ‘$5,000,000’ for ‘$10,000,000’ each place 

21 it appears,’’ after ‘‘section 448(c)’’. 

22 (5) Subclause (II) of section 172(b)(1)(H)(v) of 

23 such Code is amended by striking ‘‘$5,000,000’’ and 

24 inserting ‘‘$10,000,000’’. 

25 (d) EFFECTIVE DATE AND SPECIAL RULES.— 


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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxable years beginning 

3 after December 31, 2013. 

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

5 the case of any taxpayer changing the taxpayer’s 

6 method of accounting for any taxable year under the 

7 amendments made by this section— 

8 (A) such change shall be treated as initi9 ated by the taxpayer; and 

10 (B) such change shall be treated as made 

11 with the consent of the Secretary of the Treas12 ury. 

13 SEC. 6. CLARIFICATION OF INVENTORY AND ACCOUNTING 

14 RULES FOR SMALL BUSINESS. 

15 (a) CASH ACCOUNTING PERMITTED.—Section 446 of 

16 the Internal Revenue Code of 1986 is amended by adding 

17 at the end the following new subsection: 

18 ‘‘(g) CERTAIN SMALL BUSINESS TAXPAYERS PER19 MITTED TO USE CASH ACCOUNTING METHOD WITHOUT

20 LIMITATION.— 

21 ‘‘(1) IN GENERAL.—With respect to an eligible 

22 taxpayer who uses the cash receipts and disburse23 ments method for any taxable year, such method 

24 shall be deemed to clearly reflect income and the 


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1 taxpayer shall not be required to use an accrual 

2 method. 

3 ‘‘(2) ELIGIBLE TAXPAYER.—For purposes of 

4 this subsection, a taxpayer is an eligible taxpayer 

5 with respect to any taxable year if— 

6 ‘‘(A) for all prior taxable years beginning 

7 after December 31, 2013, the taxpayer (or any 

8 predecessor) met the gross receipts test of sec9 tion 448(c), and 

10 ‘‘(B) the taxpayer is not subject to section 

11 447 or 448.’’. 

12 (b) INVENTORY RULES.— 

13 (1) IN GENERAL.—Section 471 of the Internal 

14 Revenue Code of 1986 is amended by redesignating 

15 subsection (c) as subsection (d) and by inserting 

16 after subsection (b) the following new subsection: 

17 ‘‘(c) SMALL BUSINESS TAXPAYERS NOT REQUIRED

18 TO USE INVENTORIES.— 

19 ‘‘(1) IN GENERAL.—A qualified taxpayer shall 

20 not be required to use inventories under this section 

21 for a taxable year. 

22 ‘‘(2) TREATMENT OF TAXPAYERS NOT USING

23 INVENTORIES.—If a qualified taxpayer does not use 

24 inventories with respect to any property for any tax25 able year beginning after December 31, 2013, such 


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1 property shall be treated as a material or supply 

2 which is not incidental. 

3 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

4 this subsection, the term ‘qualified taxpayer’ 

5 means— 

6 ‘‘(A) any eligible taxpayer (as defined in 

7 section 446(g)(2)), and 

8 ‘‘(B) any taxpayer described in section 

9 448(b)(3).’’. 

10 (2) INCREASED ELIGIBILITY FOR SIMPLIFIED

11 DOLLAR-VALUE LIFO METHOD.—Section 474(c) of 

12 such Code is amended by striking ‘‘$5,000,000’’ and 

13 inserting ‘‘$10,000,000’’. 

14 (3) CONFORMING AMENDMENT.—Subsection (c) 

15 of section 263A of such Code is amended by adding 

16 at the end the following new paragraph: 

17 ‘‘(7) EXCLUSION FROM INVENTORY RULES.— 

18 Nothing in this section shall require the use of in19 ventories for any taxable year by a qualified tax20 payer (within the meaning of section 471(c)) who is 

21 not required to use inventories under section 471 for 

22 such taxable year.’’. 

23 (c) EFFECTIVE DATE AND SPECIAL RULES.— 


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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to taxable years beginning 

3 after December 31, 2013. 

4 (2) CHANGE IN METHOD OF ACCOUNTING.—In 

5 the case of any taxpayer changing the taxpayer’s 

6 method of accounting for any taxable year under the 

7 amendments made by this section— 

8 (A) such change shall be treated as initi9 ated by the taxpayer; and 

10 (B) such change shall be treated as made 

11 with the consent of the Secretary of the Treas12 ury. 

13 SEC. 7. EXCEPTION FROM PASSIVE LOSS RULES FOR IN14 VESTMENTS IN HIGH TECHNOLOGY RE15 SEARCH SMALL BUSINESS PASS-THRU ENTI16 TIES. 

17 (a) IN GENERAL.—Subsection (c) of section 469 is 

18 amended by redesignating paragraphs (4) through (7) as 

19 paragraphs (5) through (8), respectively, and by inserting 

20 after paragraph (3) the following new paragraph: 

21 ‘‘(4) HIGH TECHNOLOGY RESEARCH ACTIVI22 TIES.— 

23 ‘‘(A) IN GENERAL.—The term ‘passive ac24 tivity’ shall not include any qualified research 

25 activity of the taxpayer carried on by a high 


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1 technology research small business pass-thru 

2 entity. 

3 ‘‘(B) TREATMENT OF LOSSES AND DEDUC4 TIONS.— 

5 ‘‘(i) IN GENERAL.—Losses or deduc6 tions of a taxpayer relating to qualified re7 search activities carried on by a high tech8 nology research small business pass-thru 

9 entity shall not be treated as losses or de10 ductions, respectively, from a passive activ11 ity except as provided in clause (ii) and 

12 subparagraph (C). 

13 ‘‘(ii) LIMITATION.—Clause (i) shall 

14 apply to losses and deductions of a tax15 payer relating to a high technology small 

16 business pass-thru entity for a taxable year 

17 only to the extent that the aggregate losses 

18 and deductions of the taxpayer relating to 

19 qualified research activities of such entity 

20 for such taxable year do not exceed the 

21 portion of the taxpayer’s adjusted basis in 

22 the taxpayer’s ownership interest in such 

23 entity that is attributable to money or 

24 other property contributed— 


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1 ‘‘(I) in exchange for such owner2 ship interest, and 

3 ‘‘(II) specifically for use in con4 nection with qualified research activi5 ties. 

6 For purposes of the preceding sentence, 

7 the taxpayer’s basis shall not include any 

8 portion of such basis which is attributable 

9 to an increase in a partner’s share of the 

10 liabilities of a partnership that is consid11 ered under section 752(a) as a contribution 

12 of money. 

13 ‘‘(C) TREATMENT OF CARRYOVERS.—Sub14 paragraph (B)(i) shall not apply to the portion 

15 of any loss or deduction that is carried over 

16 under subsection (b) into a taxable year other 

17 than the taxable year in which such loss or de18 duction arose. 

19 ‘‘(D) QUALIFIED RESEARCH ACTIVITY.— 

20 For purposes of this paragraph, the term 

21 ‘qualified research activity’ means any activity 

22 constituting qualified research (within the 

23 meaning of section 41(d)(1)(B) and taking into 

24 account paragraphs (3) and (4) of section 


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1 41(d)) which involves a process of experimen2 tation. 

3 ‘‘(E) HIGH TECHNOLOGY RESEARCH

4 SMALL BUSINESS PASS-THRU ENTITY.—For 

5 purposes of this paragraph, the term ‘high tech6 nology research small business pass-thru entity’ 

7 means any domestic pass-thru entity for any 

8 taxable year if— 

9 ‘‘(i) either— 

10 ‘‘(I) more than 75 percent of the 

11 entity’s expenditures (including sala12 ries, rent and overhead) for such tax13 able year are paid or incurred in con14 nection with qualified research (within 

15 the meaning of section 41(d)(1)(B), 

16 taking into account paragraphs (3) 

17 and (4) of section 41(d)) that involves 

18 a process of experimentation con19 ducted by the entity, or 

20 ‘‘(II) more than 50 percent of 

21 the entity’s expenditures for such tax22 able year constitute qualified research 

23 expenses (as defined in section 41(b), 

24 but determined without regard to the 


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1 phrase ‘65 percent of’ in paragraph 

2 (3)(A) thereof), 

3 ‘‘(ii) such entity is a small business 

4 (within the meaning of section 

5 41(b)(3)(D)(iii), applied by substituting 

6 ‘250’ for ‘500’ in subclause (I) thereof), 

7 and 

8 ‘‘(iii) at no time during the taxable 

9 year does the entity have aggregate gross 

10 assets in excess of $150,000,000. 

11 ‘‘(F) PROVISIONS RELATED TO AGGRE12 GATE GROSS ASSETS LIMITATION.—For pur13 poses of this paragraph— 

14 ‘‘(i) IN GENERAL.—Except as other15 wise provided in this subparagraph, the 

16 term ‘aggregate gross assets’ has the 

17 meaning given such term in section 

18 1202(d)(2). 

19 ‘‘(ii) EXCEPTION FOR CERTAIN IN20 TANGIBLES.—Any section 197 intangible 

21 (as defined in section 197(d) and deter22 mined without regard to section 197(e)) 

23 which is used directly in connection with 

24 the research referred to in subparagraph 


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1 (E)(i) shall not be taken into account in 

2 determining aggregate gross assets. 

3 ‘‘(iii) EXCEPTION FOR CERTAIN FOL4 LOW-ON INVESTMENTS.—Cash from a sale 

5 of equity interests shall not be taken into 

6 account in determining aggregate gross as7 sets if— 

8 ‘‘(I) the aggregate gross assets of 

9 such entity (determined immediately 

10 after such sale and without regard to 

11 this clause) do not exceed the sum of 

12 $150,000,000, plus 25 percent of the 

13 aggregate gross assets of such entity 

14 (determined immediately before such 

15 sale and without regard to this 

16 clause), and 

17 ‘‘(II) the aggregate gross assets 

18 of such entity (determined imme19 diately before such sale and without 

20 regard to this clause) do not exceed 

21 $150,000,000. 

22 Sales of equity interests which are part of 

23 the same plan or arrangement, or which 

24 are carried out with the principal purpose 

25 of increasing the amount of cash to which 


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1 this clause applies (determined without re2 gard to this sentence), shall be treated as 

3 a single sale for purposes of this clause. 

4 ‘‘(iv) INFLATION ADJUSTMENT.—In 

5 the case of any taxable year beginning 

6 after 2014, the $150,000,000 amount in 

7 subparagraph (E)(iii) and subclauses (I) 

8 and (II) of clause (iii) shall each be in9 creased by an amount equal to— 

10 ‘‘(I) such dollar amount, multi11 plied by 

12 ‘‘(II) the cost-of-living adjust13 ment determined under section 1(f)(3) 

14 for the calendar year in which the tax15 able year begins determined by sub16 stituting ‘calendar year 2013’ for ‘cal17 endar year 1992’ in subparagraph (B) 

18 thereof. 

19 Any increase determined under the pre20 ceding sentence shall be rounded to the 

21 nearest $100,000. 

22 ‘‘(G) CAPITAL EXPENDITURES TAKEN INTO

23 ACCOUNT FOR EXPENDITURES TEST.—An ex24 penditure shall not fail to be taken into account 


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1 under subparagraph (E)(i) merely because such 

2 expenditure is chargeable to capital account. 

3 ‘‘(H) PASS-THRU ENTITY.—For purposes 

4 of this paragraph, the term ‘pass-thru entity’ 

5 means any partnership, S corporation, or other 

6 entity identified by the Secretary as a pass-thru 

7 entity for purposes of this paragraph. 

8 ‘‘(I) AGGREGATION RULES.— 

9 ‘‘(i) IN GENERAL.—All persons treat10 ed as a single employer under subsection 

11 (a) or (b) of section 52, or subsection (m) 

12 or (o) of section 414, shall be treated as a 

13 single entity for purposes of subparagraphs 

14 (E) and (F)(iii). 

15 ‘‘(ii) LIMITATION WHERE ENTITY

16 WOULD NOT QUALIFY.—No entity shall be 

17 treated as a high technology research small 

18 business pass-thru entity unless such enti19 ty qualifies as such both with and without 

20 the application of clause (i). 

21 ‘‘(J) ACTIVITIES NOT ENGAGED IN FOR

22 PROFIT AND ECONOMIC SUBSTANCE RULES.— 

23 Section 183 and the economic substance rules 

24 of section 7701(o) shall not apply to disallow 

25 the losses, deductions, and credits of a high 


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1 technology research small business pass-thru 

2 entity solely as a result of losses incurred by 

3 such entity.’’. 

4 (b) MATERIAL PARTICIPATION NOT REQUIRED.— 

5 Paragraph (5) of section 469(c) of such Code, as redesig6 nated by subsection (a), is amended by striking ‘‘and (3)’’ 

7 in the heading and text and inserting ‘‘, (3), and (4)’’. 

8 (c) CERTAIN RESEARCH-RELATED DEDUCTIONS AND

9 CREDITS OF HIGH TECHNOLOGY RESEARCH SMALL

10 BUSINESS PASS-THRU ENTITIES ALLOWED FOR PUR11 POSES OF DETERMINING ALTERNATIVE MINIMUM TAX.— 

12 (1) DEDUCTION FOR RESEARCH AND EXPERI13 MENTAL EXPENDITURES.—Paragraph (2) of section 

14 56(b) of such Code is amended by adding at the end 

15 the following new subparagraph: 

16 ‘‘(E) EXCEPTION FOR HIGH TECHNOLOGY

17 RESEARCH SMALL BUSINESS PASS-THRU ENTI18 TIES.—In the case of a high technology re19 search small business pass-thru entity (as de20 fined in section 469(c)(4)), this paragraph shall 

21 not apply to any amount allowable as a deduc22 tion under section 174(a).’’. 

23 (2) ALLOWANCE OF CERTAIN RESEARCH-RE24 LATED CREDITS.—Subparagraph (B) of section 

25 38(c)(4) of such Code is amended by redesignating 


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24 

•S 1658 IS

1 clauses (ii) through (ix) as clauses (iii) through (x), 

2 respectively, and by inserting after clause (i) the fol3 lowing new clause: 

4 ‘‘(ii) the credits of an individual tax5 payer determined under sections 41 and 

6 48D to the extent attributable to a high 

7 technology research small business pass8 thru entity (as defined in section 

9 469(c)(4)),’’. 

10 (d) EXCEPTION TO LIMITATION ON PASS-THRU OF

11 RESEARCH CREDIT.—Subsection (g) of section 41 of such 

12 Code is amended by adding at the end the following: 

13 ‘‘Paragraphs (2) and (4) shall not apply with respect to 

14 any high technology research small business pass-thru en15 tity (as defined in section 469(c)(4)).’’ 

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

17 this section shall apply to losses and credits arising in tax18 able years beginning on or after the date of the enactment 

19 of this Act. 

Æ 


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