I 

114TH CONGRESS 

1ST SESSION H. R. 256 

To amend the Internal Revenue Code of 1986 to allow a credit against 

income tax for equity investments in research intensive small business 

concerns. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 9, 2015 

Mr. HONDA 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 allow a 

credit against income tax for equity investments in research intensive small business concerns. 

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 ‘‘Creating Jobs From 

5 Innovative Small Businesses Act of 2015’’. 

6 SEC. 2. CREDIT FOR INVESTMENTS IN SMALL TECHNOLOGY 

7 INNOVATION COMPANIES. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 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. 45S. RESEARCH INTENSIVE INVESTMENT TAX CRED4 IT. 

5 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec6 tion 38, the research intensive investment tax credit deter7 mined under this section for the taxable year is an amount 

8 equal to 20 percent of the amount paid by the taxpayer 

9 during such year to acquire a qualified equity investment 

10 in a qualified research intensive small business concern. 

11 ‘‘(b) MAXIMUM CREDIT.— 

12 ‘‘(1) IN GENERAL.—The taxpayer’s credit de13 termined under this section for the taxable year 

14 shall not exceed the excess (if any) of— 

15 ‘‘(A) $100,000, over 

16 ‘‘(B) the taxpayer’s (and any prede17 cessor’s) aggregate credit determined under this 

18 section for all prior taxable years. 

19 ‘‘(2) RELATED PARTIES.— 

20 ‘‘(A) IN GENERAL.—For purposes of para21 graph (1), all related persons shall be treated as 

22 1 person, and the dollar amount in paragraph 

23 (1)(A) shall be allocated among such persons 

24 under regulations prescribed by the Secretary. 


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1 ‘‘(B) RELATED PERSONS.—A person shall 

2 be treated as related to another person if the 

3 relationship between such persons would result 

4 in the disallowance of losses under section 267 

5 or 707(b). 

6 ‘‘(c) DEFINITIONS.—For purposes of this section— 

7 ‘‘(1) QUALIFIED EQUITY INVESTMENT.— 

8 ‘‘(A) IN GENERAL.—The term ‘qualified 

9 equity investment’ means any equity investment 

10 in a qualified research intensive small business 

11 concern if— 

12 ‘‘(i) such investment is acquired by 

13 the taxpayer at its original issue (directly 

14 or through an underwriter) solely in ex15 change for cash, and 

16 ‘‘(ii) such investment is designated for 

17 purposes of this section by such concern. 

18 ‘‘(B) EQUITY INVESTMENT.—The term 

19 ‘equity investment’ means— 

20 ‘‘(i) any stock (other than non21 qualified preferred stock as defined in sec22 tion 351(g)(2)) in an entity which is a cor23 poration, and 

24 ‘‘(ii) any capital interest in an entity 

25 which is a partnership. 


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1 ‘‘(C) REDEMPTIONS.—A rule similar to the 

2 rule of section 1202(c)(3) shall apply for pur3 poses of this subsection. 

4 ‘‘(2) QUALIFIED RESEARCH INTENSIVE SMALL

5 BUSINESS CONCERN.—The term ‘qualified research 

6 intensive small business concern’ means, with re7 spect to any taxable year, any small business con8 cern (as defined in section 3 of the Small Business 

9 Act) if— 

10 ‘‘(A) such concern employs an average of 

11 fewer than 500 employees on business days dur12 ing such year, and 

13 ‘‘(B) at least 50 percent of the gross ex14 penditures of such entity for such year are re15 search or experimental expenditures under sec16 tion 174. 

17 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF INVEST18 MENTS DESIGNATED.— 

19 ‘‘(1) IN GENERAL.—There is a research inten20 sive investment tax credit limitation for each cal21 endar year. Such limitation is— 

22 ‘‘(A) $500,000,000 for 2015, 

23 ‘‘(B) $750,000,000 for 2016 and 2017, 

24 and 

25 ‘‘(C) $1,000,000,000 for 2018 and 2019. 


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1 ‘‘(2) ALLOCATION OF LIMITATION.—The limita2 tion under paragraph (1) shall be allocated by the 

3 Secretary among qualified research intensive small 

4 business concerns selected by the Secretary. 

5 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 

6 the research intensive investment tax credit limita7 tion for any calendar year exceeds the aggregate 

8 amount allocated under paragraph (2) for such year, 

9 such limitation for the succeeding calendar year 

10 shall be increased by the amount of such excess. No 

11 amount may be carried under the preceding sentence 

12 to any calendar year after 2023. 

13 ‘‘(e) CERTAIN TAXPAYERS NOT ELIGIBLE.—No cred14 it shall be determined under this section for any equity 

15 investment in any qualified research intensive small busi16 ness concern made by any individual who, at the time of 

17 the investment, is— 

18 ‘‘(1) an employee of such concern, or 

19 ‘‘(2) a member of the family (within the mean20 ing of section 267(c)(4)) of an employee of such con21 cern. 

22 ‘‘(f) BASIS REDUCTION.—The basis of any qualified 

23 equity investment shall be reduced by the amount of any 

24 credit determined under this section with respect to such 


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1 investment. This subsection shall not apply for purposes 

2 of sections 1202, 1400B, and 1400F. 

3 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

4 such regulations as may be appropriate to carry out this 

5 section, including regulations— 

6 ‘‘(1) which prevent the abuse of the purposes of 

7 this section, 

8 ‘‘(2) which impose appropriate reporting re9 quirements, and 

10 ‘‘(3) which apply the provisions of this section 

11 to newly formed entities.’’. 

12 (b) CREDIT MADE PART OF GENERAL BUSINESS

13 CREDIT.—Subsection (b) of section 38 of such Code (re14 lating to current year business credit) is amended by strik15 ing ‘‘plus’’ at the end of paragraph (35), by striking the 

16 period at the end of paragraph (36) and inserting ‘‘, plus’’, 

17 and by adding at the end the following new paragraph: 

18 ‘‘(37) the research intensive investment tax 

19 credit determined under section 45S.’’. 

20 (c) CLERICAL AMENDMENT.—The table of sections 

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

22 of such Code is amended by adding at the end the fol23 lowing new item: 

‘‘Sec. 45S. Research intensive investment tax credit.’’. 


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

2 this section shall apply to investments made after Decem3 ber 31, 2014, in taxable years ending after such date. 

Æ 


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