I 

117TH CONGRESS 

1ST SESSION H. R. 1304 

To amend the Internal Revenue Code of 1986 to restore the deduction 

for research and experimental expenditures. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 24, 2021 

Mr. LARSON of Connecticut (for himself, Mr. PANETTA, Ms. DELBENE, Mr. 

ESTES, Mr. LAHOOD, and Mr. ARRINGTON) 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 restore 

the deduction for research and experimental expenditures. 

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

3 SECTION 1. SHORT TITLE. 

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

5 and R&D Competitiveness Act of 2021’’. 

6 SEC. 2. RESEARCH AND EXPERIMENTAL EXPENDITURES. 

7 (a) IN GENERAL.—Section 174 of the Internal Rev8 enue Code of 1986 is amended to read as follows: 

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

10 ‘‘(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 of such Code 

10 is amended by striking the item relating to section 174 

11 and inserting the following new item: 

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

12 (c) CONFORMING AMENDMENTS.— 

13 (1) Section 41(d)(1)(A) of such Code is amend14 ed by striking ‘‘specified research or experimental 

15 expenditures under section 174’’ and inserting ‘‘ex16 penses under section 174’’. 

17 (2) Section 280C(c) of such Code is amended to 

18 read as follows: 

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 

25 amount of credit determined under this subVerDate Sep 11 2014 19:42 Apr 08, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1304.IH H1304

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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. 

Æ 


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