I 

118TH CONGRESS 

1ST SESSION H. R. 6685 

To amend the Internal Revenue Code of 1986 to expand eligibility and 

increase simplification of the research credit for certain small businesses. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 7, 2023 

Mr. NEGUSE 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 expand 

eligibility and increase simplification of the research credit for certain small businesses. 

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 ‘‘Research and Develop5 ment Tax Credit Expansion Act of 2023’’. 

6 SEC. 2. EXPANSION OF REFUNDABLE RESEARCH CREDIT 

7 FOR NEW AND SMALL BUSINESSES. 

8 (a) ADJUSTMENT FOR INFLATION.—Paragraph (4) 

9 of section 41(h) of such Code is amended— 

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1 (1) by redesignating subparagraph (C) as sub2 paragraph (D), 

3 (2) by redesignating clause (ii) of subparagraph 

4 (B) as subparagraph (C), and by moving such sub5 paragraph 2 ems to the left, 

6 (3) by striking ‘‘LIMITATIONS’’ in the heading 

7 of subparagraph (B) and inserting ‘‘LIMITATION ON

8 AMOUNT OF ELECTION’’, 

9 (4) by striking ‘‘AMOUNT’’ in the heading of 

10 clause (i) of subparagraph (B) and inserting ‘‘IN

11 GENERAL’’, and 

12 (5) by adding at the end of subparagraph (B), 

13 as amended by the preceding subparagraphs of this 

14 paragraph, the following new clause: 

15 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 

16 In the case of a taxable year beginning 

17 after 2024, the dollar amounts in clause (i) 

18 shall be increased by an amount equal to— 

19 ‘‘(I) such dollar amount, multi20 plied by 

21 ‘‘(II) the cost-of-living adjust22 ment determined under section 1(f)(3) 

23 for the calendar year in which the tax24 able year begins, determined by subVerDate Sep 11 2014 04:36 Dec 27, 2023 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H6685.IH H6685
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1 stituting ‘2023’ for ‘2016’ in subpara2 graph (A)(ii) thereof. 

3 If any increase under the preceding sen4 tence is not a multiple of $100, such in5 crease shall be rounded to the nearest mul6 tiple of $100.’’. 

7 (b) CREDIT REFUNDABLE AGAINST UNEMPLOYMENT

8 TAXES.— 

9 (1) IN GENERAL.—Section 3111(f)(1)(B) of the 

10 Internal Revenue Code of 1986 is amended by strik11 ing ‘‘subsection (b)’’ and inserting ‘‘subsection (b) 

12 and section 3301’’. 

13 (2) CONFORMING AMENDMENTS.— 

14 (A) Paragraph (2) of section 3111(f) of 

15 such Code is amended by striking ‘‘the tax im16 posed by subsection (b)’’ and inserting ‘‘the 

17 sum of the taxes imposed by Comprehensive 

18 Legislation Ensuring Accountability and Re19 sponsiveness Act of 2023subsection (b) and sec20 tion 3301’’. 

21 (B) Section 3302 of such Code is amended 

22 by adding at the end the following new sub23 section: 

24 ‘‘(i) CREDIT FOR RESEARCH EXPENDITURES OF

25 QUALIFIED SMALL BUSINESSES.—Any portion of the 

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1 credit under section 3111(f) which is credited under such 

2 section to the tax under section 3301 shall be treated as 

3 a credit under this section. Subsection (c) shall not apply 

4 to any such credit.’’. 

5 (c) QUALIFIED SMALL BUSINESS DEFINITION EX6 PANDED.—Section 41(h)(3)(A) of such Code is amend7 ed— 

8 (1) in clause (i)(I), by striking ‘‘$5,000,000’’ 

9 and inserting ‘‘$10,000,000’’, 

10 (2) by amending clause (i)(II) to read as fol11 lows: 

12 ‘‘(II) such entity did not have 

13 gross receipts (as so determined) ex14 ceeding an aggregate of $25,000 for 

15 any taxable year preceding the 10-tax16 able-year period ending with such tax17 able year, and’’, and 

18 (3) by adding at the end the following flush 

19 sentence: 

20 ‘‘For purposes of the preceding sentence, gross receipts 

21 shall be determined under the rules of section 448(c)(3) 

22 without regard to subparagraph (A) thereof, except that 

23 such term shall not include any contributions to the cap24 ital of a corporation (other than contributions by a share25 holder) or any amount described in section 118(b) (other 

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1 than receipts from customers in exchange for goods or 

2 services).’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2023. 

6 SEC. 3. MODIFICATIONS TO ALTERNATIVE SIMPLIFIED 

7 CREDIT FOR NEW AND SMALL BUSINESSES. 

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

9 the Internal Revenue Code of 1986 is amended by adding 

10 at the end the following new subparagraph: 

11 ‘‘(D) SPECIAL RULES FOR QUALIFIED

12 SMALL BUSINESSES.—In the case of a qualified 

13 small business— 

14 ‘‘(i) CREDIT RATE.—Subparagraph 

15 (A) shall be applied by substituting ‘20 

16 percent’ for ‘14 percent’. 

17 ‘‘(ii) SPECIAL RULE FOR 1ST YEAR OF

18 QUALIFIED RESEARCH EXPENSES.—If the 

19 taxpayer has no qualified research ex20 penses in any taxable year preceding the 

21 taxable year for which the credit is being 

22 determined, subparagraph (B)(ii) shall be 

23 applied by substituting ‘20 percent’ for ‘6 

24 percent’. 

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1 ‘‘(iii) SPECIAL RULE FOR OTHER

2 YEARS.—If the taxpayer is not described in 

3 clause (ii) for the taxable year, and sub4 paragraph (B) applies to such taxpayer for 

5 such year, at the election of the taxpayer— 

6 ‘‘(I) subparagraph (B)(ii) shall 

7 be applied by substituting ‘10 percent’ 

8 for ‘6 percent’, or 

9 ‘‘(II) subparagraph (B) shall not 

10 apply, and the average under subpara11 graph (A) shall be determined by dis12 regarding any taxable year in the 3- 

13 year period described in such subpara14 graph in which there were no qualified 

15 research expenses.’’. 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2023. 

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