I 

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. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Commitment to American Growth, Renewal, and Oppor6 tunities for Workers, Technology, and Health Act’’ or as 

7 the ‘‘Commitment to American GROWTH Act’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents of 

2 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. 

3 TITLE I—GROWTH IN BUSINESS 

4 INVESTMENT TO BOOST 

5 AMERICAN WAGES AND JOBS 

6 SEC. 101. PERMANENT FULL EXPENSING FOR QUALIFIED 

7 PROPERTY. 

8 (a) IN GENERAL.—Paragraph (6) of section 168(k) 

9 of the Internal Revenue Code of 1986 is amended to read 

10 as follows: 


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1 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes 

2 of this subsection, the term ‘applicable percentage’ 

3 means, in the case of property placed in service (or, 

4 in the case of a specified plant described in para5 graph (5), a plant which is planted or grafted) after 

6 September 27, 2017, 100 percent.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 168(k) of the Internal Revenue 

9 Code of 1986 is amended— 

10 (A) in paragraph (2)— 

11 (i) in subparagraph (A)— 

12 (I) in clause (i)(V), by inserting 

13 ‘‘and’’ at the end; 

14 (II) in clause (ii), by striking 

15 ‘‘clause (ii) of subparagraph (E), 

16 and’’ and inserting ‘‘clause (i) of sub17 paragraph (E).’’; and 

18 (III) by striking clause (iii); 

19 (ii) in subparagraph (B)— 

20 (I) in clause (i)— 

21 (aa) by striking subclauses 

22 (II) and (III); and 

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1 clauses (II) through (IV), respec2 tively; 

3 (II) by striking clause (ii); and 

4 (III) by redesignating clauses 

5 (iii) and (iv) as clauses (ii) and (iii), 

6 respectively; 

7 (iii) in subparagraph (C)— 

8 (I) in clause (i), by striking ‘‘and 

9 subclauses (II) and (III) of subpara10 graph (B)(i)’’; and 

11 (II) in clause (ii), by striking 

12 ‘‘subparagraph (B)(iii)’’ and inserting 

13 ‘‘subparagraph (B)(ii)’’; and 

14 (iv) in subparagraph (E)— 

15 (I) by striking clause (i); and 

16 (II) by redesignating clauses (ii) 

17 and (iii) as clauses (i) and (ii), respec18 tively; and 

19 (B) in paragraph (5)(A), by striking 

20 ‘‘planted before January 1, 2027, or is grafted 

21 before such date to a plant that has already 

22 been planted,’’ and inserting ‘‘planted or graft23 ed’’. 

24 (2) Section 460(c)(6)(B) of such Code is 

25 amended by striking ‘‘which’’ and all that follows 


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1 through the period and inserting ‘‘which has a recov2 ery period of 7 years or less.’’. 

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

4 this section shall take effect as if included in section 

5 13201 of Public Law 115–97. 

6 SEC. 102. LIMITATION ON BUSINESS INTEREST PERMA7 NENTLY APPLIED WITHOUT REGARD TO DE8 DUCTIONS FOR DEPRECIATION, AMORTIZA9 TION, AND DEPLETION. 

10 (a) IN GENERAL.—Section 163(j)(8)(A)(v) of the In11 ternal Revenue Code of 1986 is amended by striking ‘‘in 

12 the case of taxable years beginning before January 1, 

13 2022’’. 

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

15 this section shall apply to taxable years beginning after 

16 December 31, 2021. 

17 TITLE II—GROWTH IN 

18 RESEARCH IN AMERICA 

19 SEC. 201. REPEAL AMORTIZATION OF RESEARCH AND EX20 PERIMENTAL EXPENDITURES. 

21 (a) IN GENERAL.—Section 174 is amended to read 

22 as follows: 

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

24 ‘‘(a) TREATMENT AS EXPENSES.— 


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1 ‘‘(1) IN GENERAL.—A taxpayer may treat re2 search or experimental expenditures which are paid 

3 or incurred by him during the taxable year in con4 nection with his trade or business as expenses which 

5 are not chargeable to capital account. The expendi6 tures so treated shall be allowed as a deduction. 

7 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 

8 ‘‘(A) WITHOUT CONSENT.—A taxpayer 

9 may, without the consent of the Secretary, 

10 adopt the method provided in this subsection 

11 for his first taxable year for which expenditures 

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

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

14 with the consent of the Secretary, adopt at any 

15 time the method provided in this subsection. 

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

17 subsection shall apply to all expenditures described 

18 in paragraph (1). The method adopted shall be ad19 hered to in computing taxable income for the taxable 

20 year and for all subsequent taxable years unless, 

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

22 different method is authorized with respect to part 

23 or all of such expenditures. 

24 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND

25 EXPERIMENTAL EXPENDITURES.— 


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1 ‘‘(1) IN GENERAL.—At the election of the tax2 payer, made in accordance with regulations pre3 scribed by the Secretary, research or experimental 

4 expenditures which are— 

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

6 connection with his trade or business, 

7 ‘‘(B) not treated as expenses under sub8 section (a), and 

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

10 chargeable to property of a character which is 

11 subject to the allowance under section 167 (re12 lating to allowance for depreciation, etc.) or sec13 tion 611 (relating to allowance for depletion), 

14 may be treated as deferred expenses. In computing 

15 taxable income, such deferred expenses shall be al16 lowed as a deduction ratably over such period of not 

17 less than 60 months as may be selected by the tax18 payer (beginning with the month in which the tax19 payer first realizes benefits from such expenditures). 

20 Such deferred expenses are expenditures properly 

21 chargeable to capital account for purposes of section 

22 1016(a)(1) (relating to adjustments to basis of prop23 erty). 

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

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


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

2 time prescribed by law for filing the return for such 

3 taxable year (including extensions thereof). The 

4 method so elected, and the period selected by the 

5 taxpayer, shall be adhered to in computing taxable 

6 income for the taxable year for which the election is 

7 made and for all subsequent taxable years unless, 

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

9 different method (or to a different period) is author10 ized with respect to part or all of such expenditures. 

11 The election shall not apply to any expenditure paid 

12 or incurred during any taxable year before the tax13 able year for which the taxpayer makes the election. 

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

15 shall not apply to any expenditure for the acquisition or 

16 improvement of land, or for the acquisition or improve17 ment of property to be used in connection with the re18 search or experimentation and of a character which is sub19 ject to the allowance under section 167 (relating to allow20 ance for depreciation, etc.) or section 611 (relating to al21 lowance for depletion); but for purposes of this section al22 lowances under section 167, and allowances under section 

23 611, shall be considered as expenditures. 

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

25 shall not apply to any expenditure paid or incurred for 


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

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

3 oil and gas). 

4 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES

5 ELIGIBLE.—This section shall apply to a research or ex6 perimental expenditure only to the extent that the amount 

7 thereof is reasonable under the circumstances.’’. 

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

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

10 striking the item relating to section 174 and inserting the 

11 following new item: 

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

12 (c) CONFORMING AMENDMENTS.— 

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

14 ‘‘specified research or experimental expenditures 

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

16 section 174’’. 

17 (2) Section 280C(c) is amended to read as fol18 lows: 

19 ‘‘(c) CREDIT FOR INCREASING RESEARCH ACTIVI20 TIES.— 

21 ‘‘(1) IN GENERAL.—No deduction shall be al22 lowed for that portion of the qualified research ex23 penses (as defined in section 41(b)) or basic re24 search expenses (as defined in section 41(e)(2)) oth25 erwise allowable as a deduction for the taxable year 


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1 which is equal to the amount of the credit deter2 mined for such taxable year under section 41(a). 

3 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP4 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 

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

6 for the taxable year under section 41(a)(1), ex7 ceeds 

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

9 for such taxable year for qualified research ex10 penses or basic research expenses (determined 

11 without regard to paragraph (1)), 

12 the amount chargeable to capital account for the 

13 taxable year for such expenses shall be reduced by 

14 the amount of such excess. 

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

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

17 taxable year for which an election is made 

18 under this paragraph— 

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

20 apply, and 

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

22 section 41(a) shall be the amount deter23 mined under subparagraph (B). 

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

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1 paragraph for any taxable year shall be the 

2 amount equal to the excess of— 

3 ‘‘(i) the amount of credit determined 

4 under section 41(a) without regard to this 

5 paragraph, over 

6 ‘‘(ii) the product of— 

7 ‘‘(I) the amount described in 

8 clause (i), and 

9 ‘‘(II) the rate of tax under sec10 tion 11(b). 

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

12 paragraph for any taxable year shall be made 

13 not later than the time for filing the return of 

14 tax for such year (including extensions), shall 

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

16 such manner as the Secretary may prescribe. 

17 Such an election, once made, shall be irrev18 ocable. 

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

20 subsection (b) shall apply for purposes of this sub21 section.’’. 

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

23 this section shall apply to amounts paid or incurred in tax24 able years beginning after December 31, 2021. 


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1 SEC. 202. DOUBLING THE RESEARCH AND EXPERIMENTAL 

2 TAX CREDIT AND BETTER ACCESS TO CRED3 ITS FOR STARTUPS. 

4 (a) CREDIT RATE INCREASE.— 

5 (1) IN GENERAL.—Section 41(a) of the Internal 

6 Revenue Code of 1986 is amended by striking ‘‘20 

7 percent’’ and inserting ‘‘40 percent’’. 

8 (2) ALTERNATIVE SIMPLIFIED CREDIT.—Sec9 tion 41(c)(4)(A) of such Code is amended by strik10 ing ‘‘14 percent’’ and inserting ‘‘28 percent’’. 

11 (3) CREDIT RATE IN CASE OF NO RESEARCH

12 EXPENSES IN 3 PRECEDING YEARS.—Section 

13 41(c)(4)(B)(ii) of such Code is amended by striking 

‘‘6 percent’’ and inserting ‘‘1 14 ⁄2 the credit percentage 

15 in effect under subparagraph (A)’’. 

16 (b) MODIFICATION OF SMALL BUSINESS PORTION

17 ALLOWED AGAINST PAYROLL TAX.— 

18 (1) INCREASE IN LIMITATION.—Paragraphs 

19 (4)(B)(i) and (5)(B)(ii) of section 41(h) of such 

20 Code are each amended by striking ‘‘$250,000’’ and 

21 inserting ‘‘$500,000’’. 

22 (2) QUALIFIED SMALL BUSINESS GROSS RE23 CEIPTS THRESHOLD.—Section 41(h)(3)(A)(i)(I) of 

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

25 inserting ‘‘the dollar amount in effect for the taxable 

26 year under section 448(c)(1)’’. 


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1 (c) EFFECTIVE DATES.— 

2 (1) SUBSECTION (a).—The amendments made 

3 by subsection (a) shall apply to taxable years begin4 ning after December 31, 2020. 

5 (2) SUBSECTION (b).—The amendments made 

6 by subsection (b) shall apply to taxable years begin7 ning after December 31, 2019. 

8 SEC. 203. SPECIAL RULES FOR TRANSFERS OF INTANGIBLE 

9 PROPERTY FROM CONTROLLED FOREIGN 

10 CORPORATIONS TO UNITED STATES SHARE11 HOLDERS. 

12 (a) IN GENERAL.—Subpart F of part III of sub13 chapter N of chapter 1 of the Internal Revenue Code of 

14 1986 is amended by adding at the end the following new 

15 section: 

16 ‘‘SEC. 966. TRANSFERS OF INTANGIBLE PROPERTY TO 

17 UNITED STATES SHAREHOLDERS. 

18 ‘‘(a) IN GENERAL.—If a controlled foreign corpora19 tion holds intangible property on the date of the enact20 ment of this section and thereafter distributes such prop21 erty to a domestic corporation which is a United States 

22 shareholder with respect to such controlled foreign cor23 poration— 

24 ‘‘(1) for purposes of part I of subchapter C and 

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1 retary, the fair market value of such property on the 

2 date of such distribution shall be treated as not ex3 ceeding the adjusted basis of such property imme4 diately before such distribution, and 

5 ‘‘(2) if any portion of such distribution is not 

6 a dividend— 

7 ‘‘(A) no gain shall be recognized by such 

8 United States shareholder with respect to such 

9 distribution, and 

10 ‘‘(B) the adjusted basis of such property in 

11 the hands of such United States shareholder 

12 immediately after such distribution shall be the 

13 adjusted basis of such property in the hands of 

14 such controlled foreign corporation immediately 

15 before such distribution reduced by the amount 

16 (if any) of gain not recognized by reason of 

17 subparagraph (A) (determined after the appli18 cation of paragraph (1)). 

19 ‘‘(b) INTANGIBLE PROPERTY.—For purposes of this 

20 section, the term ‘intangible property’ means any— 

21 ‘‘(1) patent, copyright, license, invention, for22 mula, process, design, pattern, know-how, or format, 

23 ‘‘(2) method, program, system, procedure, cam24 paign, survey, study, forecast, estimate, or technical 

25 data, 


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1 ‘‘(3) computer software (as defined in section 

2 197(e)(3)(B)), or 

3 ‘‘(4) any similar item, which has substantial 

4 value independent of the services of any individual.’’. 

5 (b) CONFORMING AMENDMENTS.— 

6 (1) Section 197(f)(2)(B)(i) of such Code is 

7 amended by inserting ‘‘966(a),’’ after ‘‘731,’’. 

8 (2) The table of sections for subpart F of part 

9 III of subchapter N of chapter 1 of such Code is 

10 amended by adding at the end the following new 

11 item: 

‘‘Sec. 966. Transfers of intangible property to United States shareholders.’’. 

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

13 this section shall apply to distributions made in taxable 

14 years of foreign corporations beginning after December 

15 31, 2020, and to taxable years of United States share16 holders in which or with which such taxable years of for17 eign corporations end. 

18 TITLE III—GROWTH IN AMER19 ICA’S MEDICAL INDEPEND20 ENCE 

21 SEC. 301. DOMESTIC MEDICAL AND DRUG MANUFAC22 TURING CREDIT. 

23 (a) IN GENERAL.—Subpart D of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by adding at the end the following new 

2 section: 

3 ‘‘SEC. 45U. DOMESTIC MEDICAL AND DRUG MANUFAC4 TURING CREDIT. 

5 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

6 domestic medical and drug manufacturing credit deter7 mined under this section for any taxable year is an amount 

8 equal to 10.5 percent of the lesser of— 

9 ‘‘(1) the qualified medical and drug manufac10 turing income of the taxpayer for the taxable year, 

11 or 

12 ‘‘(2) taxable income of the taxpayer for the tax13 able year. 

14 ‘‘(b) CREDIT LIMITED TO WAGES PAID.— 

15 ‘‘(1) IN GENERAL.—The amount of the credit 

16 allowable under subsection (a) for any taxable year 

17 shall not exceed 50 percent of the W–2 wages of the 

18 taxpayer for the taxable year. 

19 ‘‘(2) W–2 WAGES.—For purposes of this sec20 tion— 

21 ‘‘(A) IN GENERAL.—The term ‘W–2 

22 wages’ means, with respect to any person for 

23 any taxable year of such person, the sum of the 

24 amounts described in paragraphs (3) and (8) of 

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1 spect to employment of employees by such per2 son during the calendar year ending during 

3 such taxable year. 

4 ‘‘(B) LIMITATION TO WAGES ATTRIB5 UTABLE TO DOMESTIC PRODUCTION.—Such 

6 term shall not include any amount which is not 

7 properly allocable to domestic medical and drug 

8 manufacturing gross receipts for purposes of 

9 subsection (c)(1). 

10 ‘‘(C) RETURN REQUIREMENT.—Such term 

11 shall not include any amount which is not prop12 erly included in a return filed with the Social 

13 Security Administration on or before the 60th 

14 day after the due date (including extensions) 

15 for such return. 

16 ‘‘(3) ACQUISITIONS, DISPOSITIONS, AND SHORT

17 TAXABLE YEARS.—The Secretary shall provide for 

18 the application of this subsection in cases of a short 

19 taxable year or where the taxpayer acquires, or dis20 poses of, the major portion of a trade or business or 

21 the major portion of a separate unit of a trade or 

22 business during the taxable year. 

23 ‘‘(c) QUALIFIED MEDICAL AND DRUG MANUFAC24 TURING INCOME.—For purposes of this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘qualified medical 

2 and drug manufacturing income’ for any taxable 

3 year means an amount equal to the excess (if any) 

4 of— 

5 ‘‘(A) the taxpayer’s domestic medical and 

6 drug manufacturing gross receipts for the tax7 able year, over 

8 ‘‘(B) the sum of— 

9 ‘‘(i) the cost of goods sold that are al10 locable to such receipts, and 

11 ‘‘(ii) other expenses, losses, or deduc12 tions which are properly allocable to such 

13 receipts. 

14 ‘‘(2) ALLOCATION METHOD.—The Secretary 

15 shall prescribe rules for the proper allocation of 

16 items described in paragraph (1)(B) for purposes of 

17 determining qualified medical and drug manufac18 turing income. Such rules shall provide for the prop19 er allocation of items whether or not such items are 

20 directly allocable to domestic medical and drug man21 ufacturing gross receipts. 

22 ‘‘(3) SPECIAL RULES FOR DETERMINING

23 COSTS.— 

24 ‘‘(A) IN GENERAL.—For purposes of deter25 mining costs under clause (i) of paragraph 


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1 (1)(B), any item or service brought into the 

2 United States shall be treated as acquired by 

3 purchase, and its cost shall be treated as not 

4 less than its value immediately after it entered 

5 the United States. 

6 ‘‘(B) EXPORTS FOR FURTHER MANUFAC7 TURE.—In the case of any property described 

8 in subparagraph (A) that had been exported by 

9 the taxpayer for further manufacture, the in10 crease in cost or adjusted basis under subpara11 graph (A) shall not exceed the difference be12 tween the value of the property when exported 

13 and the value of the property when brought 

14 back into the United States after the further 

15 manufacture. 

16 ‘‘(4) DOMESTIC MEDICAL AND DRUG MANUFAC17 TURING GROSS RECEIPTS.— 

18 ‘‘(A) IN GENERAL.—The term ‘domestic 

19 medical and drug manufacturing gross receipts’ 

20 means the gross receipts of the taxpayer which 

21 are derived from any sale, exchange, or other 

22 disposition of— 

23 ‘‘(i) any active pharmaceutical ingre24 dient, or 

25 ‘‘(ii) any qualified countermeasure, 


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1 which was manufactured or produced by the 

2 taxpayer in whole or in significant part within 

3 the United States. 

4 ‘‘(B) ACTIVE PHARMACEUTICAL INGRE5 DIENT.—The term ‘active pharmaceutical ingre6 dient’ means any substance or mixture of sub7 stances intended to be used in the manufacture 

8 of a drug product and (when so used) becomes 

9 an active ingredient in the drug product. 

10 ‘‘(C) QUALIFIED COUNTERMEASURE.—The 

11 term ‘qualified countermeasure’ has the mean12 ing given such term in section 319F–1(a)(2) of 

13 the Public Health Service Act (42 U.S.C. 

14 247d–6a(a)(2)).’’ 

15 ‘‘(D) PARTNERSHIPS OWNED BY EX16 PANDED AFFILIATED GROUPS.—For purposes 

17 of this paragraph, if all of the interests in the 

18 capital and profits of a partnership are owned 

19 by members of a single expanded affiliated 

20 group at all times during the taxable year of 

21 such partnership, the partnership and all mem22 bers of such group shall be treated as a single 

23 taxpayer during such period. 

24 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur25 poses of this section— 


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1 ‘‘(1) APPLICATION OF SECTION TO PASS-THRU

2 ENTITIES.— 

3 ‘‘(A) PARTNERSHIPS AND S CORPORA4 TIONS.—In the case of a partnership or S cor5 poration— 

6 ‘‘(i) this section shall be applied at the 

7 partner or shareholder level, 

8 ‘‘(ii) each partner or shareholder shall 

9 take into account such person’s allocable 

10 share of each item described in subpara11 graph (A) or (B) of subsection (c)(1) (de12 termined without regard to whether the 

13 items described in such subparagraph (A) 

14 exceed the items described in such sub15 paragraph (B)), and 

16 ‘‘(iii) each partner or shareholder 

17 shall be treated for purposes of subsection 

18 (b) as having W–2 wages for the taxable 

19 year in an amount equal to such person’s 

20 allocable share of the W–2 wages of the 

21 partnership or S corporation for the tax22 able year (as determined under regulations 

23 prescribed by the Secretary). 

24 ‘‘(B) TRUSTS AND ESTATES.—In the case 

25 of a trust or estate— 


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1 ‘‘(i) the items referred to in subpara2 graph (A)(ii) (as determined therein) and 

3 the W–2 wages of the trust or estate for 

4 the taxable year, shall be apportioned be5 tween the beneficiaries and the fiduciary 

6 (and among the beneficiaries) under regu7 lations prescribed by the Secretary, and 

8 ‘‘(ii) for purposes of paragraph (2), 

9 adjusted gross income of the trust or es10 tate shall be determined as provided in sec11 tion 67(e) with the adjustments described 

12 in such paragraph. 

13 ‘‘(C) REGULATIONS.—The Secretary may 

14 prescribe rules requiring or restricting the allo15 cation of items and wages under this paragraph 

16 and may prescribe such reporting requirements 

17 as the Secretary determines appropriate. 

18 ‘‘(2) APPLICATION TO INDIVIDUALS.—In the 

19 case of an individual, subsection (a)(2) shall be ap20 plied by substituting ‘adjusted gross income’ for 

21 ‘taxable income’. For purposes of the preceding sen22 tence, adjusted gross income shall be determined 

23 after application of sections 86, 135, 137, 219, 221, 

24 222, and 469. 


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1 ‘‘(3) SPECIAL RULE FOR AFFILIATED

2 GROUPS.— 

3 ‘‘(A) IN GENERAL.—All members of an ex4 panded affiliated group shall be treated as a 

5 single corporation for purposes of this section. 

6 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

7 For purposes of this section, the term ‘ex8 panded affiliated group’ means an affiliated 

9 group as defined in section 1504(a), deter10 mined— 

11 ‘‘(i) by substituting ‘more than 50 

12 percent’ for ‘at least 80 percent’ each place 

13 it appears, and 

14 ‘‘(ii) without regard to paragraphs (2) 

15 and (4) of section 1504(b). 

16 ‘‘(C) ALLOCATION OF CREDIT.—Except as 

17 provided in regulations, the credit under sub18 section (a) shall be allocated among the mem19 bers of the expanded affiliated group in propor20 tion to each member’s respective amount (if 

21 any) of qualified medical and drug manufac22 turing income. 

23 ‘‘(4) TRADE OR BUSINESS REQUIREMENT.— 

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1 count items which are attributable to the actual con2 duct of a trade or business. 

3 ‘‘(5) COORDINATION WITH MINIMUM TAX.—For 

4 purposes of determining alternative minimum tax5 able income under section 55, qualified medical and 

6 drug manufacturing income shall be determined 

7 without regard to any adjustments under sections 56 

8 through 59. 

9 ‘‘(6) UNRELATED BUSINESS TAXABLE IN10 COME.—For purposes of determining the tax im11 posed by section 511, subsection (a)(1)(B) shall be 

12 applied by substituting ‘unrelated business taxable 

13 income’ for ‘taxable income’. 

14 ‘‘(7) REGULATIONS.—The Secretary shall pre15 scribe such regulations as are necessary to carry out 

16 the purposes of this section, including regulations 

17 which prevent more than 1 taxpayer from being al18 lowed a credit under this section with respect to any 

19 activity described in subsection (c)(4)(A).’’. 

20 (b) TREATMENT UNDER BASE EROSION TAX.—Sec21 tion 59A(b)(1)(B)(ii) of such Code is amended by striking 

22 ‘‘plus’’ at the end of subclause (I), by redesignating sub23 clause (II) as subclause (III), and by inserting after sub24 clause (I) the following new subclause: 


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1 ‘‘(II) the credit allowed under 

2 section 38 for the taxable year which 

3 is properly allocable to the domestic 

4 medical and drug manufacturing cred5 it determined under section 45U(a), 

6 plus’’. 

7 (c) PART OF GENERAL BUSINESS CREDIT.—Section 

8 38(b) of such Code is amended by striking ‘‘plus’’ at the 

9 end of paragraph (32), by striking the period at the end 

10 of paragraph (33) and inserting ‘‘, plus’’, and by adding 

11 at the end the following new paragraph: 

12 ‘‘(34) the domestic medical and drug manufac13 turing credit determined under section 45U(a).’’. 

14 (d) CREDIT ALLOWED AGAINST ALTERNATIVE MIN15 IMUM TAX.—Section 38(c)(4)(B) of such Code is amended 

16 by redesignating clauses (x) through (xii) as clauses (xi) 

17 through (xiii), respectively, and by inserting after clause 

18 (ix) the following new clause: 

19 ‘‘(x) the credit determined under sec20 tion 45U,’’. 

21 (e) CLERICAL AMENDMENT.—The table of sections 

22 for subpart D of part IV of subchapter A of chapter 1 

23 of such Code is amended by adding at the end the fol24 lowing new item: 

‘‘Sec. 45U. Domestic medical and drug manufacturing credit.’’. 


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1 (f) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2020. 

4 SEC. 302. QUALIFYING ADVANCED MEDICAL MANUFAC5 TURING EQUIPMENT CREDIT. 

6 (a) IN GENERAL.—Subpart E of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of 

8 1986 is amended by adding at the end the following new 

9 section: 

10 ‘‘SEC. 48D. QUALIFYING ADVANCED MEDICAL MANUFAC11 TURING EQUIPMENT CREDIT. 

12 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

13 qualifying advanced medical manufacturing equipment 

14 credit determined under this section for any taxable year 

15 is the applicable percentage of the basis of any qualifying 

16 advanced medical manufacturing equipment placed in 

17 service during such taxable year. 

18 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

19 subsection (a), the applicable percentage is— 

20 ‘‘(1) 30 percent in the case of equipment which 

21 is placed in service before January 1, 2028, 

22 ‘‘(2) 20 percent in the case of equipment which 

23 is placed in service during calendar year 2028, 

24 ‘‘(3) 10 percent in the case of equipment which 

25 is placed in service during calendar year 2029, and 


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1 ‘‘(4) 0 percent in the case of equipment which 

2 is placed in service after December 31, 2029. 

3 ‘‘(c) QUALIFYING ADVANCED MEDICAL MANUFAC4 TURING EQUIPMENT.—For purposes of this section, the 

5 term ‘qualifying advanced medical manufacturing equip6 ment’ means property of a character subject to the allow7 ance for depreciation— 

8 ‘‘(1) which is machinery or equipment that is 

9 designed and used to manufacture a— 

10 ‘‘(A) drug (as such term is defined in sec11 tion 201(g)(1) of the Federal Food, Drug, and 

12 Cosmetic Act), 

13 ‘‘(B) device (as such term is defined in sec14 tion 201(h) of such Act), or 

15 ‘‘(C) biological product (as such term is 

16 defined in section 351(i) of the Public Health 

17 Service Act), 

18 ‘‘(2) which has been identified by the Secretary 

19 (after consultation with the Secretary of Health and 

20 Human Services) as machinery or equipment that— 

21 ‘‘(A) incorporates novel technology or uses 

22 an established technique or technology in a new 

23 or innovative way, or 


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1 ‘‘(B) that can improve medical product 

2 quality, address shortages of medicines, and 

3 speed time-to-market, 

4 ‘‘(3) which is placed in service in the United 

5 States by the taxpayer, and 

6 ‘‘(4) with respect to which depreciation is allow7 able. 

8 ‘‘(d) CERTAIN QUALIFIED PROGRESS EXPENDI9 TURES RULES MADE APPLICABLE.—Rules similar to the 

10 rules of subsections (c)(4) and (d) of section 46 (as in 

11 effect on the day before the enactment of the Revenue 

12 Reconciliation Act of 1990) shall apply for purposes of 

13 this section. 

14 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

15 such regulations or other guidance as may be necessary 

16 to carry out the purposes of this section, including regula17 tions which prevent abuse or fraud.’’. 

18 (b) TREATMENT UNDER BASE EROSION TAX.—Sec19 tion 59A(b)(1)(B)(ii) of such Code, as amended by section 

20 7 of this Act, is further amended by striking ‘‘plus’’ at 

21 the end of subclause (II), by redesignating subclause (III) 

22 as subclause (IV), and by inserting after subclause (II) 

23 the following new subclause: 

24 ‘‘(III) the credit allowed under 

25 section 46 for the taxable year which 


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1 is properly allocable to the qualifying 

2 advanced medical manufacturing 

3 equipment credit determined under 

4 section 48D(a), plus’’. 

5 (c) PART OF INVESTMENT CREDIT.—Section 46 of 

6 such Code is amended by striking ‘‘and’’ at the end of 

7 paragraph (5), by striking the period at the end of para8 graph (6) and inserting ‘‘, and’’, and by adding at the 

9 end the following new paragraph: 

10 ‘‘(7) the qualifying advanced medical manufac11 turing equipment credit.’’. 

12 (d) CLERICAL AMENDMENT.—The table of sections 

13 for subpart D of part IV of subchapter A of chapter 1 

14 of such Code is amended by adding at the end the fol15 lowing new item: 

‘‘Sec. 48D. Qualifying advanced medical manufacturing equipment credit.’’. 

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

17 this section shall apply to periods after the date of the 

18 enactment of this section under rules similar to the rules 

19 of section 48(m) of the Internal Revenue Code of 1986 

20 (as in effect on the date of the enactment fo the Revenue 

21 Reconciliation Act of 1990). 


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1 SEC. 303. NEW MEDICAL RESEARCH EXPENDITURE COMPO2 NENT OF CREDIT FOR INCREASING RE3 SEARCH ACTIVITIES. 

4 (a) IN GENERAL.—Section 41(a) of the Internal Rev5 enue Code of 1986 is amended by striking ‘‘and’’ at the 

6 end of paragraph (2), by striking the period at the end 

7 of paragraph (3) and inserting ‘‘, and’’, and by adding 

8 at the end the following new paragraph: 

9 ‘‘(4) 14 percent of specified medical research 

10 expenditures.’’. 

11 (b) SPECIFIED MEDICAL RESEARCH EXPENDI12 TURES.—Section 41(f) of such Code is amended by adding 

13 at the end the following new paragraph: 

14 ‘‘(7) SPECIFIED MEDICAL RESEARCH EXPENDI15 TURES.— 

16 ‘‘(A) IN GENERAL.—The term ‘specified 

17 medical research expenditures’ means amounts 

18 paid or incurred for qualified research with re19 spect to any qualified countermeasure. 

20 ‘‘(B) QUALIFIED COUNTERMEASURE.—The 

21 term ‘qualified countermeasure’ has the mean22 ing given to such term in section 319F–1(a)(2) 

23 of the Public Health Service Act (42 U.S.C. 

24 247d–6a(a)(2)).’’. 

25 (c) DENIAL OF DOUBLE BENEFIT.— 


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1 (1) TAXABLE YEARS BEGINNING BEFORE JANU2 ARY 1, 2021.—In the case of specified medical re3 search expenditures (as defined in section 41(f)(7) 

4 of such Code (as added by this section)) paid or in5 curred in taxable years beginning before January 1, 

6 2021— 

7 (A) such expenditures shall be treated in 

8 the same manner as qualified research expenses 

9 and basic research expenses under section 

10 280C(c)(1) of such Code (as in effect on the 

11 day before the enactment of the Tax Cuts and 

12 Jobs Act), and 

13 (B) the amount determined under section 

14 280C(c)(2)(A) (as in effect on such day) for the 

15 taxable year shall be increased by the amount 

16 of credit determined for the taxable year under 

17 section 41(a)(4) (as added by this section). 

18 (2) TAXABLE YEARS BEGINNING AFTER DECEM19 BER 31, 2020.—Section 280C(c)(1) of such Code is 

20 amended by striking ‘‘section 41(a)(1)’’ and insert21 ing ‘‘paragraphs (1) and (4) of section 41(a)’’. 

22 (d) CONFORMING AMENDMENT.—Section 41(f)(1) of 

23 such Code is amended by striking ‘‘and amounts paid or 

24 incurred to energy research consortiums’’ each place it ap25 pears and inserting ‘‘, amounts paid or incurred to energy 


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1 research consortiums, and specified medical research ex2 penditures’’. 

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

4 this section shall apply to amounts paid or incurred after 

5 the date of the enactment of this Act, in taxable years 

6 ending after such date. 

7 SEC. 304. REFUNDABLE PORTION OF RESEARCH CREDIT 

8 FOR SMALL BUSINESSES ENGAGING IN SPEC9 IFIED MEDICAL RESEARCH. 

10 (a) IN GENERAL.—Section 41 of the Internal Rev11 enue Code of 1986 is amended by adding at the end the 

12 following new subsection: 

13 ‘‘(i) REFUNDABLE PORTION FOR SMALL BUSI14 NESSES ENGAGING IN SPECIFIED MEDICAL RESEARCH.— 

15 ‘‘(1) IN GENERAL.—At the election of a medical 

16 research small business, the portion of the credit de17 termined under this section for the taxable year 

18 which is properly allocable to specified medical re19 search shall be treated (other than for purposes of 

20 section 280C) as a credit allowed under subpart C 

21 (and not this subpart). 

22 ‘‘(2) MEDICAL RESEARCH SMALL BUSINESS.— 

23 For purposes of this subsection, the term ‘medical 

24 research small business’ means any domestic C cor25 poration— 


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1 ‘‘(A) which conducts any specified medical 

2 research during the taxable year, and 

3 ‘‘(B) the gross receipts of which (deter4 mined under the rules of subsection (c)) for the 

5 taxable year do not exceed $1,000,000. 

6 ‘‘(3) SPECIFIED MEDICAL RESEARCH.—For 

7 purposes of this subsection, the term ‘specified med8 ical research’ means any qualified research with re9 spect to qualified countermeasures (as defined in 

10 section 319F–1(a)(2) of the Public Health Service 

11 Act (42 U.S.C. 247d–6a(a)(2))). 

12 ‘‘(4) ELECTION.—Any election under this sub13 section for any taxable year— 

14 ‘‘(A) shall specify the amount of the credit 

15 to which such election applies, 

16 ‘‘(B) shall be made on or before the due 

17 date (including extensions) of the return of tax 

18 for the taxable year, 

19 ‘‘(C) may not be made for any taxable year 

20 with respect to any portion of the credit deter21 mined under this section with respect to which 

22 an election is made under subsection (h), and 

23 ‘‘(D) may be revoked only with the consent 

24 of the Secretary. 


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1 ‘‘(5) REGULATIONS.—The Secretary shall pre2 scribe such regulations for purposes of this sub3 section as may be necessary or appropriate for de4 termining proper allocation to specified medical re5 search of the portion of any credit allowed to a tax6 payer for a taxable year under this section.’’. 

7 (b) CONFORMING AMENDMENT.—Section 1324(b) of 

8 title 31, United States Code, is amended by inserting 

9 ‘‘41(i),’’ after ‘‘6428,’’. 

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

11 this section shall apply to taxable years beginning after 

12 December 31, 2020. 

13 SEC. 305. EXCEPTION FROM PASSIVE LOSS RULES FOR IN14 VESTMENTS IN SPECIFIED MEDICAL RE15 SEARCH SMALL BUSINESS PASS-THRU ENTI16 TIES. 

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

18 the Internal Revenue Code of 1986 is amended by redesig19 nating paragraphs (4) through (7) as paragraphs (5) 

20 through (8), respectively, and by inserting after paragraph 

21 (3) the following new paragraph: 

22 ‘‘(4) SPECIFIED MEDICAL RESEARCH ACTIVI23 TIES.— 

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1 search activity of the taxpayer carried on by a 

2 specified medical research small business pass3 thru entity. 

4 ‘‘(B) TREATMENT OF LOSSES AND DEDUC5 TIONS.— 

6 ‘‘(i) IN GENERAL.—Losses or deduc7 tions of a taxpayer in connection with 

8 qualified medical research activities carried 

9 on by a specified medical research small 

10 business pass-thru entity shall not be 

11 treated as losses or deductions, respec12 tively, from a passive activity except as 

13 provided in clause (ii) and subparagraph 

14 (C). 

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

16 apply to losses and deductions of a tax17 payer in connection with a specified med18 ical small business pass-thru entity for a 

19 taxable year only to the extent that the ag20 gregate losses and deductions of the tax21 payer in connection with qualified medical 

22 research activities of such entity for such 

23 taxable year do not exceed the portion of 

24 the taxpayer’s adjusted basis in the tax25 payer’s ownership interest in such entity 


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1 that is attributable to money or other 

2 property contributed— 

3 ‘‘(I) in exchange for such owner4 ship interest, and 

5 ‘‘(II) specifically for use in con6 nection with qualified medical re7 search activities. 

8 For purposes of the preceding sentence, 

9 the taxpayer’s basis shall not include any 

10 portion of such basis which is attributable 

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

12 liabilities of a partnership that is consid13 ered under section 752(a) as a contribution 

14 of money. 

15 ‘‘(C) TREATMENT OF CARRYOVERS.—Sub16 paragraph (B)(i) shall not apply to the portion 

17 of any loss or deduction that is carried over 

18 under subsection (b) into a taxable year other 

19 than the taxable year in which such loss or de20 duction arose. 

21 ‘‘(D) QUALIFIED MEDICAL RESEARCH AC22 TIVITY.—For purposes of this paragraph, the 

23 term ‘qualified medical research activity’ means 

24 any qualified research (within the meaning of 

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1 measures (as defined in section 319F–1(a)(2) 

2 of the Public Health Service Act (42 U.S.C. 

3 247d–6a(a)(2))). 

4 ‘‘(E) SPECIFIED MEDICAL RESEARCH

5 SMALL BUSINESS PASS-THRU ENTITY.—For 

6 purposes of this paragraph, the term ‘specified 

7 medical research small business pass-thru enti8 ty’ means any domestic pass-thru entity for any 

9 taxable year if— 

10 ‘‘(i) more than 80 percent of such en11 tity’s expenditures on qualified research for 

12 such taxable year are paid or incurred in 

13 connection with qualified medical research 

14 activities, and 

15 ‘‘(ii) the gross receipts (as determined 

16 under the rules of section 41(h)(3)) of 

17 such entity for the taxable year (and each 

18 preceding taxable year) is less than 

19 $1,000,000. 

20 ‘‘(F) CAPITAL EXPENDITURES TAKEN INTO

21 ACCOUNT FOR EXPENDITURES TEST.—An ex22 penditure shall not fail to be taken into account 

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

24 expenditure is chargeable to capital account. 


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1 ‘‘(G) PASS-THRU ENTITY.—For purposes 

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

3 means any partnership, S corporation, or other 

4 entity identified by the Secretary as a pass-thru 

5 entity for purposes of this paragraph. 

6 ‘‘(H) AGGREGATION RULES.— 

7 ‘‘(i) IN GENERAL.—All persons treat8 ed as a single employer under subsection 

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

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

11 single entity for purposes of subparagraphs 

12 (E) and (F)(iii). 

13 ‘‘(ii) LIMITATION WHERE ENTITY

14 WOULD NOT QUALIFY.—No entity shall be 

15 treated as a specified medical research 

16 small business pass-thru entity unless such 

17 entity qualifies as such both with and with18 out the application of clause (i).’’. 

19 (b) MATERIAL PARTICIPATION NOT REQUIRED.— 

20 Paragraph (5) of section 469(c) of the Internal Revenue 

21 Code of 1986, as redesignated by subsection (a), is amend22 ed by striking ‘‘and (3)’’ in the heading and text and in23 serting ‘‘, (3), and (4)’’. 

24 (c) CERTAIN RESEARCH-RELATED DEDUCTIONS AND

25 CREDITS OF SPECIFIED MEDICAL RESEARCH SMALL


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1 BUSINESS PASS-THRU ENTITIES ALLOWED FOR PUR2 POSES OF DETERMINING ALTERNATIVE MINIMUM TAX.— 

3 (1) DEDUCTION FOR RESEARCH AND EXPERI4 MENTAL EXPENDITURES.—Paragraph (2) of section 

5 56(b) of the Internal Revenue Code of 1986 is 

6 amended by adding at the end the following new 

7 subparagraph: 

8 ‘‘(E) EXCEPTION FOR SPECIFIED MEDICAL

9 RESEARCH SMALL BUSINESS PASS-THRU ENTI10 TIES.—In the case of a specified medical re11 search small business pass-thru entity (as de12 fined in section 469(c)(4)), this paragraph shall 

13 not apply to any amount allowable as a deduc14 tion under section 174(a).’’. 

15 (2) ALLOWANCE OF CERTAIN RESEARCH-RE16 LATED CREDITS.—Subparagraph (B) of section 

17 38(c)(4) of such Code is amended by redesignating 

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

19 respectively, and by inserting after clause (i) the fol20 lowing new clause: 

21 ‘‘(ii) the credit of an individual tax22 payer determined under section 41 to the 

23 extent attributable to a specified medical 

24 research small business pass-thru entity 

25 (as defined in section 469(c)(4)),’’. 


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

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

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

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

5 any specified medical research small business pass-thru 

6 entity (as defined in section 469(c)(4)).’’. 

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

8 this section shall apply to losses and credits arising in tax9 able years beginning after December 31, 2020. 

10 TITLE IV—GROWTH IN INNOVA11 TION AND TECHNOLOGY 

12 BREAKTHROUGHS 

13 SEC. 401. SIMPLIFICATION AND EXPANSION OF DEDUCTION 

14 FOR START-UP AND ORGANIZATIONAL EX15 PENDITURES. 

16 (a) IN GENERAL.—Section 195 of the Internal Rev17 enue Code of 1986 is amended by redesignating sub18 sections (c) and (d) as subsections (d) and (e), respec19 tively, and by striking all that precedes subsection (d) (as 

20 so redesignated) and inserting the following: 

21 ‘‘SEC. 195. START-UP AND ORGANIZATIONAL EXPENDI22 TURES. 

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

24 as otherwise provided in this section, no deduction shall 

25 be allowed for start-up or organizational expenditures. 


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1 ‘‘(b) ELECTION TO DEDUCT.— 

2 ‘‘(1) IN GENERAL.—If a taxpayer elects the ap3 plication of this subsection with respect to any active 

4 trade or business— 

5 ‘‘(A) the taxpayer shall be allowed a deduc6 tion for the taxable year in which such active 

7 trade or business begins in an amount equal to 

8 the lesser of— 

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

10 and organizational expenditures paid or in11 curred in connection with such active trade 

12 or business, or 

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

14 zero) by the amount by which such aggre15 gate amount exceeds $120,000, and 

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

17 organizational expenditures shall be charged to 

18 capital account and allowed as an amortization 

19 deduction determined by amortizing such ex20 penditures ratably over the 180-month period 

21 beginning with the month in which the active 

22 trade or business begins. 

23 ‘‘(2) APPLICATION TO ORGANIZATIONAL EX24 PENDITURES.—In the case of organizational expend25 itures with respect to any corporation or partnerVerDate Sep 11 2014 23:08 Oct 10, 2020 Jkt 019200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\H11.IH H11

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1 ship, the active trade or business referred to in para2 graph (1) means the first active trade or business 

3 carried on by such corporation or partnership. 

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

5 any taxable year beginning after December 31, 

6 2020, the $20,000 and $120,000 amounts in para7 graph (1)(A)(ii) shall each be increased by an 

8 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, deter13 mined by substituting ‘calendar year 2019’ for 

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

15 thereof. 

16 If any amount as increased under the preceding sen17 tence is not a multiple of $1,000, such amount shall 

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

19 ‘‘(c) ALLOWANCE OF DEDUCTION UPON LIQUIDA20 TION OR DISPOSITION.— 

21 ‘‘(1) LIQUIDATION OF PARTNERSHIP OR COR22 PORATION.—If any partnership or corporation is 

23 completely liquidated by the taxpayer, any start-up 

24 or organizational expenditures paid or incurred in 

25 connection with such partnership or corporation 


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1 which were not allowed as a deduction by reason of 

2 this section may be deducted to the extent allowable 

3 under section 165. 

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

5 any trade or business is completely disposed of or 

6 discontinued by the taxpayer, any start-up expendi7 tures paid or incurred in connection with such trade 

8 or business which were not allowed as a deduction 

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

10 in connection with a liquidation to which paragraph 

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

12 under section 165. For purposes of this paragraph, 

13 in the case of any deduction allowed under sub14 section (b)(1) with respect to both start-up and or15 ganizational expenditures, the amount treated as so 

16 allowed with respect to start-up expenditures shall 

17 bear the same ratio to such deduction as the start18 up expenditures taken into account in determining 

19 such deduction bears to the aggregate of the start20 up and organizational expenditures so taken into ac21 count.’’. 

22 (b) ORGANIZATIONAL EXPENDITURES.—Section 

23 195(d) of such Code, as redesignated by subsection (a), 

24 is amended by adding at the end the following new para25 graphs: 


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1 ‘‘(3) ORGANIZATIONAL EXPENDITURES.—The 

2 term ‘organizational expenditures’ means any ex3 penditure which— 

4 ‘‘(A) is incident to the creation of a cor5 poration or a partnership, 

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

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

8 incident to the creation of a corporation or a 

9 partnership having an ascertainable life, would 

10 be amortizable over such life. 

11 ‘‘(4) APPLICATION TO CERTAIN DISREGARDED

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

13 owner that is disregarded as an entity separate from 

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

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

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

17 redesignated by subsection (a), is amended to read as fol18 lows: 

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

20 the case of any partnership or S corporation, the 

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

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

23 (d) CONFORMING AMENDMENTS.— 

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

25 is amended by striking section 248 of such Code 


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

2 the table of sections of such part). 

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

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

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

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

7 ‘‘Sections 173 and 195’’. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

22 striking paragraph (3), and by redesignating para23 graph (4) as paragraph (3). 

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

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1 lowed by section 248, relating to organization ex2 penditures)’’. 

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

4 read as follows: 

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

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

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

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

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

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

11 table of sections for part I of subchapter K of chap12 ter 1 of such Code is amended to read as follows: 

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

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

14 amended by striking ‘‘section 195(c)(1)(A)’’ and in15 serting ‘‘section 195(d)(1)(A)’’. 

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

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

18 of such Code is amended to read as follows: 

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

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

20 this section shall apply to expenditures paid or incurred 

21 in connection with active trades or businesses which begin 

22 in taxable years beginning after December 31, 2019. 


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1 SEC. 402. PRESERVATION OF START-UP NET OPERATING 

2 LOSSES AND TAX CREDITS AFTER OWNER3 SHIP CHANGE. 

4 (a) APPLICATION TO NET OPERATING LOSSES.— 

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

6 amended by adding at the end the following new para7 graph: 

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

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

10 operating loss carryforward described in para11 graph (1)(A) which arose in a start-up period 

12 taxable year, the amount of such net operating 

13 loss carryforward otherwise taken into account 

14 under such paragraph shall be reduced by the 

15 net start-up loss determined with respect to the 

16 trade or business referred to in subparagraph 

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

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

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

20 any taxable year of the old loss corporation 

21 which— 

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

23 year period beginning on the date on which 

24 any trade or business of such corporation 

25 begins as an active trade or business (as 

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1 out regard to subparagraph (B) thereof), 

2 and 

3 ‘‘(ii) ends after May 31, 2020. 

4 ‘‘(C) NET START-UP LOSS.— 

5 ‘‘(i) IN GENERAL.—The term ‘net 

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

7 trade or business referred to in subpara8 graph (B)(i) for any start-up period tax9 able year, the amount which bears the 

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

11 net operating loss carryforward which 

12 arose in such start-up period taxable year 

13 as— 

14 ‘‘(I) the net operating loss (if 

15 any) which would have been deter16 mined for such start-up period taxable 

17 year if only items of income, gain, de18 duction, and loss properly allocable to 

19 such trade or business were taken into 

20 account, bears to 

21 ‘‘(II) the amount of the net oper22 ating loss determined for such start23 up period taxable year. 

24 ‘‘(ii) SPECIAL RULE FOR LAST TAX25 ABLE YEAR IN START-UP PERIOD.—In the 


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1 case of any start-up period taxable year 

2 which ends after the close of the 3-year pe3 riod described in subparagraph (B)(i) with 

4 respect to any trade or business, the net 

5 start-up loss with respect to such trade or 

6 business for such start-up period taxable 

7 year shall be the same proportion of such 

8 loss (determined without regard to this 

9 clause) as the proportion of such start-up 

10 period taxable year which is on or before 

11 the last day of such period. 

12 ‘‘(D) APPLICATION TO NET OPERATING

13 LOSS ARISING IN YEAR OF OWNERSHIP

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

15 net operating loss described in paragraph 

16 (1)(B) in the same manner as such subpara17 graph applies to net operating loss 

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

19 but by only taking into account the amount of 

20 such net operating loss (and the amount of the 

21 net start-up loss) which is allocable under para22 graph (1)(B) to the period described in such 

23 paragraph. Proper adjustment in the allocation 

24 of the net start-up loss under the preceding 


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1 sentence shall be made in the case of a taxable 

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

3 ‘‘(E) APPLICATION TO TAXABLE YEARS

4 WHICH ARE START-UP PERIOD TAXABLE YEARS

5 WITH RESPECT TO MORE THAN 1 TRADE OR

6 BUSINESS.—In the case of any net operating 

7 loss carryforward which arose in a taxable year 

8 which is a start-up period taxable year with re9 spect to more than 1 trade or business— 

10 ‘‘(i) this paragraph shall be applied 

11 separately with respect to each such trade 

12 or business, and 

13 ‘‘(ii) the aggregate reductions under 

14 subparagraph (A) shall not exceed such net 

15 operating loss carryforward. 

16 ‘‘(F) CONTINUITY OF BUSINESS REQUIRE17 MENT.—If the new loss corporation does not 

18 continue the trade or business referred to in 

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

20 year period beginning on the change date, this 

21 paragraph shall not apply with respect to such 

22 trade or business. 

23 ‘‘(G) CERTAIN TITLE 11 OR SIMILAR

24 CASES.— 


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1 ‘‘(i) MULTIPLE OWNERSHIP

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

3 change to which subsection (l)(5)(D) ap4 plies, this paragraph shall not apply for 

5 purposes of determining the pre-change 

6 loss with respect to such 2nd ownership 

7 change. 

8 ‘‘(ii) CERTAIN INSOLVENCY TRANS9 ACTIONS.—If subsection (l)(6) applies for 

10 purposes of determining the value of the 

11 old loss corporation under subsection (e), 

12 this paragraph shall not apply. 

13 ‘‘(H) NOT APPLICABLE TO DISALLOWED

14 INTEREST.—This paragraph shall not apply for 

15 purposes of applying the rules of paragraph (1) 

16 to the carryover of disallowed interest under 

17 paragraph (3). 

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

19 shall not apply with respect to any trade or 

20 business if the date on which such trade or 

21 business begins as an active trade or business 

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

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

24 before May 31, 2020.’’. 


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

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

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

4 following new subsection: 

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

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

7 general business credit of the corporation under sec8 tion 39 which arose in a start-up period taxable 

9 year, the amount of such unused general business 

10 credit otherwise taken into account under subsection 

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

12 credit determined with respect to any trade or busi13 ness referred to in section 382(d)(4)(B)(i) for such 

14 start-up period taxable year. 

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

16 purposes of this subsection, the term ‘start-up pe17 riod taxable year’ has the meaning given such term 

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

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

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

21 means, with respect to any trade or business re22 ferred to in section 382(d)(4)(B)(i) for any start-up 

23 period taxable year, the amount which bears the 

24 same ratio to the unused general business credit 


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1 which arose in such start-up period taxable year 

2 as— 

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

4 credit which would have been determined for 

5 such start-up period taxable year if only credits 

6 properly allocable to such trade or business 

7 were taken into account, bears to 

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

9 credit determined for such start-up period tax10 able year. 

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

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

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

14 purposes of this subsection. 

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

16 not apply with respect to any trade or business if 

17 the date on which such trade or business begins as 

18 an active trade or business (as determined under 

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

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

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

22 this section shall apply to taxable years ending after May 

23 31, 2020. 

Æ 


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