I 

116TH CONGRESS 

1ST SESSION H. R. 4549 

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

for research and experimental expenditures. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 27, 2019 

Mr. LARSON of Connecticut (for himself and Mr. ESTES) 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 Competitiveness Act of 2019’’ or the ‘‘AICA Act of 

6 2019’’. 

7 SEC. 2. RESEARCH AND EXPERIMENTAL EXPENDITURES. 

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

9 as follows: 


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

2 ‘‘(a) TREATMENT AS EXPENSES.— 

3 ‘‘(1) IN GENERAL.—A taxpayer may treat re4 search or experimental expenditures which are paid 

5 or incurred by him during the taxable year in con6 nection with his trade or business as expenses which 

7 are not chargeable to capital account. The expendi8 tures so treated shall be allowed as a deduction. 

9 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 

10 ‘‘(A) WITHOUT CONSENT.—A taxpayer 

11 may, without the consent of the Secretary, 

12 adopt the method provided in this subsection 

13 for his first taxable year for which expenditures 

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

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

16 with the consent of the Secretary, adopt at any 

17 time the method provided in this subsection. 

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

19 subsection shall apply to all expenditures described 

20 in paragraph (1). The method adopted shall be ad21 hered to in computing taxable income for the taxable 

22 year and for all subsequent taxable years unless, 

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

24 different method is authorized with respect to part 

25 or all of such expenditures. 


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1 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND

2 EXPERIMENTAL EXPENDITURES.— 

3 ‘‘(1) IN GENERAL.—At the election of the tax4 payer, made in accordance with regulations pre5 scribed by the Secretary, research or experimental 

6 expenditures which are— 

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

8 connection with his trade or business, 

9 ‘‘(B) not treated as expenses under sub10 section (a), and 

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

12 chargeable to property of a character which is 

13 subject to the allowance under section 167 (re14 lating to allowance for depreciation, etc.) or sec15 tion 611 (relating to allowance for depletion), 

16 may be treated as deferred expenses. In computing 

17 taxable income, such deferred expenses shall be al18 lowed as a deduction ratably over such period of not 

19 less than 60 months as may be selected by the tax20 payer (beginning with the month in which the tax21 payer first realizes benefits from such expenditures). 

22 Such deferred expenses are expenditures properly 

23 chargeable to capital account for purposes of section 

24 1016(a)(1) (relating to adjustments to basis of prop25 erty). 


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

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

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

4 time prescribed by law for filing the return for such 

5 taxable year (including extensions thereof). The 

6 method so elected, and the period selected by the 

7 taxpayer, shall be adhered to in computing taxable 

8 income for the taxable year for which the election is 

9 made and for all subsequent taxable years unless, 

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

11 different method (or to a different period) is author12 ized with respect to part or all of such expenditures. 

13 The election shall not apply to any expenditure paid 

14 or incurred during any taxable year before the tax15 able year for which the taxpayer makes the election. 

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

17 shall not apply to any expenditure for the acquisition or 

18 improvement of land, or for the acquisition or improve19 ment of property to be used in connection with the re20 search or experimentation and of a character which is sub21 ject to the allowance under section 167 (relating to allow22 ance for depreciation, etc.) or section 611 (relating to al23 lowance for depletion); but for purposes of this section al24 lowances under section 167, and allowances under section 

25 611, shall be considered as expenditures. 


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

2 shall not apply to any expenditure paid or incurred for 

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

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

5 oil and gas). 

6 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES

7 ELIGIBLE.—This section shall apply to a research or ex8 perimental expenditure only to the extent that the amount 

9 thereof is reasonable under the circumstances.’’. 

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

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

12 striking the item relating to section 174 and inserting the 

13 following new item: 

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

14 (c) CONFORMING AMENDMENTS.— 

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

16 ‘‘specified research or experimental expenditures 

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

18 section 174’’. 

19 (2) Section 280C(c) is amended to read as fol20 lows: 

21 ‘‘(c) CREDIT FOR INCREASING RESEARCH ACTIVI22 TIES.— 

23 ‘‘(1) IN GENERAL.—No deduction shall be al24 lowed for that portion of the qualified research ex25 penses (as defined in section 41(b)) or basic reVerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549

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1 search expenses (as defined in section 41(e)(2)) oth2 erwise allowable as a deduction for the taxable year 

3 which is equal to the amount of the credit deter4 mined for such taxable year under section 41(a). 

5 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP6 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 

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

8 for the taxable year under section 41(a)(1), ex9 ceeds 

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

11 for such taxable year for qualified research ex12 penses or basic research expenses (determined 

13 without regard to paragraph (1)), 

14 the amount chargeable to capital account for the 

15 taxable year for such expenses shall be reduced by 

16 the amount of such excess. 

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

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

19 taxable year for which an election is made 

20 under this paragraph— 

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

22 apply, and 

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

24 section 41(a) shall be the amount deter25 mined under subparagraph (B). 


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

2 amount of credit determined under this sub3 paragraph for any taxable year shall be the 

4 amount equal to the excess of— 

5 ‘‘(i) the amount of credit determined 

6 under section 41(a) without regard to this 

7 paragraph, over 

8 ‘‘(ii) the product of— 

9 ‘‘(I) the amount described in 

10 clause (i), and 

11 ‘‘(II) the rate of tax under sec12 tion 11(b). 

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

14 paragraph for any taxable year shall be made 

15 not later than the time for filing the return of 

16 tax for such year (including extensions), shall 

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

18 such manner as the Secretary may prescribe. 

19 Such an election, once made, shall be irrev20 ocable. 

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

22 subsection (b) shall apply for purposes of this sub23 section.’’. 


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

2 this section shall apply to amounts paid or incurred in tax3 able years beginning after December 31, 2021. 

Æ 


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