II 

116TH CONGRESS 

1ST SESSION S. 2207 

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

increase simplification of the research credit for certain small businesses. 

IN THE SENATE OF THE UNITED STATES 

JULY 23, 2019 

Ms. HASSAN (for herself and Mr. TILLIS) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to expand 

refundability 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 2019’’. 

6 SEC. 2. EXPANSION OF REFUNDABLE RESEARCH CREDIT 

7 FOR NEW AND SMALL BUSINESSES. 

8 (a) DOUBLING CAP ON REFUNDABLE CREDIT.— 

9 (1) IN GENERAL.—Clause (i) of section 

10 41(h)(4)(B) of the Internal Revenue Code of 1986 


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1 is amended by striking ‘‘$250,000’’ and inserting 

2 ‘‘$500,000’’. 

3 (2) ADJUSTMENT FOR INFLATION.—Paragraph 

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

5 (A) by redesignating subparagraph (C) as 

6 subparagraph (D), 

7 (B) by redesignating clause (ii) of subpara8 graph (B) as subparagraph (C), and by moving 

9 such subparagraph 2 ems to the left, 

10 (C) by striking ‘‘LIMITATIONS’’ in the 

11 heading of subparagraph (B) and inserting 

12 ‘‘LIMITATION ON AMOUNT OF ELECTION’’, 

13 (D) by striking ‘‘AMOUNT’’ in the heading 

14 of clause (i) of subparagraph (B) and inserting 

15 ‘‘IN GENERAL’’, and 

16 (E) by adding at the end of subparagraph 

17 (B), as amended by the preceding subpara18 graphs of this paragraph, the following new 

19 clause: 

20 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 

21 In the case of a taxable year beginning 

22 after 2020, the $500,000 amount in clause 

23 (i) shall be increased by an amount equal 

24 to— 


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1 ‘‘(I) such dollar amount, multi2 plied by 

3 ‘‘(II) the cost-of-living adjust4 ment determined under section 1(f)(3) 

5 for the calendar year in which the tax6 able year begins, determined by sub7 stituting ‘2019’ for ‘2016’ in subpara8 graph (A)(ii) thereof. 

9 If any increase under the preceding sen10 tence is not a multiple of $100, such in11 crease shall be rounded to the nearest mul12 tiple of $100.’’. 

13 (3) CONFORMING AMENDMENT.—Clause (ii) of 

14 section 41(h)(5)(B) of such Code is amended by 

15 striking ‘‘the $250,000 amount’’ and inserting ‘‘the 

16 amount in effect’’. 

17 (b) CREDIT REFUNDABLE AGAINST MEDICARE AND

18 UNEMPLOYMENT TAXES.— 

19 (1) IN GENERAL.—Paragraph (1) of section 

20 3111(f) of the Internal Revenue Code of 1986 is 

21 amended by striking ‘‘subsection (a)’’ and inserting 

22 ‘‘subsections (a) and (b) and section 3301’’. 

23 (2) CONFORMING AMENDMENTS.— 

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

25 such Code is amended by striking ‘‘the tax imVerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207

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1 posed by subsection (a)’’ and inserting ‘‘the 

2 sum of the taxes imposed by subsection (a), 

3 subsection (b), and section 3301’’. 

4 (B) Section 3302 of such Code is amended 

5 by adding at the end the following new sub6 section: 

7 ‘‘(i) CREDIT FOR RESEARCH EXPENDITURES OF

8 QUALIFIED SMALL BUSINESSES.—Any portion of the 

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

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

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

12 to any such credit.’’. 

13 (c) DOUBLING ELIGIBILITY THRESHOLD.—Sub14 clause (I) of section 41(h)(3)(A)(i) of the Internal Rev15 enue Code of 1986 is amended by striking ‘‘$5,000,000’’ 

16 and inserting ‘‘$10,000,000’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2019. 

20 SEC. 3. MODIFICATIONS TO ALTERNATIVE SIMPLIFIED 

21 CREDIT FOR NEW AND SMALL BUSINESSES. 

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

23 the Internal Revenue Code of 1986 is amended by adding 

24 at the end the following new subparagraph: 


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1 ‘‘(D) SPECIAL RULES FOR QUALIFIED

2 SMALL BUSINESSES.—In the case of a qualified 

3 small business (as defined in subsection 

4 (h)(3))— 

5 ‘‘(i) CREDIT RATE.—Subparagraph 

6 (A) shall be applied by substituting ‘20 

7 percent’ for ‘14 percent’. 

8 ‘‘(ii) SPECIAL RULE FOR 1ST YEAR OF

9 QUALIFIED RESEARCH EXPENSES.—If the 

10 taxpayer has no qualified research ex11 penses in any taxable year preceding the 

12 taxable year for which the credit is being 

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

14 applied by substituting ‘20 percent’ for ‘6 

15 percent’. 

16 ‘‘(iii) SPECIAL RULE FOR OTHER

17 YEARS.—If the taxpayer is not described in 

18 clause (ii) for the taxable year, and sub19 paragraph (B) applies to such taxpayer for 

20 such year, at the election of the taxpayer— 

21 ‘‘(I) subparagraph (B)(ii) shall 

22 be applied by substituting ‘10 percent’ 

23 for ‘6 percent’, or 

24 ‘‘(II) subparagraph (B) shall not 

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1 graph (A) shall be determined by dis2 regarding any taxable year in the 3- 

3 year period described in such subpara4 graph in which there were no qualified 

5 research expenses.’’. 

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

7 this section shall apply to taxable years beginning after 

8 December 31, 2019. 

Æ 


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