Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act

Subjects: Taxation

Summary:  <p><b>Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act or the CREATE JOBS Act</b></p> <p>This bill allows permanent expensing of qualified property (i.e., property with a recovery period of 20 years or less and that is computer software, water utility property, or film, television, or live theatrical production property). It also modifies depreciation provisions for residential rental property and nonresidential real property. </p> <p>The bill repeals provisions for the amortization of research and experimental expenditures, thus providing for direct expensing of such expenditures.</p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 314 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                 S. 314

 To amend the Internal Revenue Code of 1986 to permanently allow a tax 
deduction at the time an investment in qualified property is made, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 9, 2023

   Mr. Cruz 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 permanently allow a tax 
deduction at the time an investment in qualified property is made, and 
                          for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Cost Recovery and Expensing 
Acceleration to Transform the Economy and Jumpstart Opportunities for 
Businesses and Startups Act'' or the ``CREATE JOBS Act''.

SEC. 2. PERMANENT FULL EXPENSING FOR QUALIFIED PROPERTY.

    (a) In General.--Paragraph (6) of section 168(k) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(6) Applicable percentage.--For purposes of this 
        subsection, the term `applicable percentage' means, in the case 
        of property placed in service (or, in the case of a specified 
        plant described in paragraph (5), a plant which is planted or 
        grafted) after September 27, 2017, 100 percent.''.
    (b) Conforming Amendments.--
            (1) Section 168(k) of the Internal Revenue Code of 1986 is 
        amended--
                    (A) in paragraph (2)--
                            (i) in subparagraph (A)--
                                    (I) in clause (i)(V), by inserting 
                                ``and'' at the end,
                                    (II) in clause (ii), by striking 
                                ``clause (ii) of subparagraph (E), 
                                and'' and inserting ``clause (i) of 
                                subparagraph (E).'', and
                                    (III) by striking clause (iii),
                            (ii) in subparagraph (B)--
                                    (I) in clause (i)--
                                            (aa) by striking subclauses 
                                        (II) and (III), and
                                            (bb) by redesignating 
                                        subclauses (IV) through (VI) as 
                                        subclauses (II) through (IV), 
                                        respectively,
                                    (II) by striking clause (ii), and
                                    (III) by redesignating clauses 
                                (iii) and (iv) as clauses (ii) and 
                                (iii), respectively,
                            (iii) in subparagraph (C)--
                                    (I) in clause (i), by striking 
                                ``and subclauses (II) and (III) of 
                                subparagraph (B)(i)'', and
                                    (II) in clause (ii), by striking 
                                ``subparagraph (B)(iii)'' and inserting 
                                ``subparagraph (B)(ii)'', and
                            (iv) in subparagraph (E)--
                                    (I) by striking clause (i), and
                                    (II) by redesignating clauses (ii) 
                                and (iii) as clauses (i) and (ii), 
                                respectively, and
                    (B) in paragraph (5)(A), by striking ``planted 
                before January 1, 2027, or is grafted before such date 
                to a plant that has already been planted,'' and 
                inserting ``planted or grafted''.
            (2) Section 460(c)(6)(B) of such Code is amended by 
        striking ``which'' and all that follows through the period and 
        inserting ``which has a recovery period of 7 years or less.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in section 13201 of Public Law 115-97.

SEC. 3. NEUTRAL COST RECOVERY DEPRECIATION ADJUSTMENT FOR RESIDENTIAL 
              RENTAL PROPERTY AND NONRESIDENTIAL REAL PROPERTY.

    (a) In General.--Section 168 of the Internal Revenue Code of 1986 
is amended by adding at the end thereof the following new subsection:
    ``(n) Neutral Cost Recovery Depreciation Adjustment for Residential 
Rental Property and Nonresidential Real Property.--
            ``(1) In general.--In the case of any applicable property, 
        the deduction under this section with respect to such property 
        for any taxable year after the taxable year during which the 
        property is placed in service shall be--
                    ``(A) the amount determined under this section for 
                such taxable year without regard to this subsection, 
                multiplied by
                    ``(B) the applicable neutral cost recovery ratio 
                for such taxable year.
            ``(2) Applicable neutral cost recovery ratio.--For purposes 
        of paragraph (1), the applicable neutral cost recovery ratio 
        for the applicable property for any taxable year is the number 
        determined by--
                    ``(A) dividing--
                            ``(i) the gross domestic product deflator 
                        for the calendar quarter ending in such taxable 
                        year which corresponds to the calendar quarter 
                        during which the property was placed in service 
                        by the taxpayer, by
                            ``(ii) the gross domestic product deflator 
                        for the calendar quarter during which the 
                        property was placed in service by the taxpayer, 
                        and
                    ``(B) then multiplying the number determined under 
                subparagraph (A) by the number equal to 1.03 to the nth 
                power where `n' is the number of full years in the 
                period beginning on the 1st day of the calendar quarter 
                during which the property was placed in service by the 
                taxpayer and ending on the day before the beginning of 
                the corresponding calendar quarter ending during such 
                taxable year.
        The applicable neutral cost recovery ratio shall never be less 
        than 1. The applicable neutral cost recovery ratio shall be 
        rounded to the nearest \1/1000\.
            ``(3) Special rule for existing property.--In the case of 
        any applicable property which is placed in service before the 
        date of enactment of this subsection, subparagraphs (A)(ii) and 
        (B) of paragraph (2) shall be applied by substituting `calendar 
        quarter which includes the date of enactment of this 
        subsection' for `calendar quarter during which the property was 
        placed in service by the taxpayer' each place it appears.
            ``(4) Gross domestic product deflator.--For purposes of 
        paragraph (2), the gross domestic product deflator for any 
        calendar quarter is the implicit price deflator for the gross 
        domestic product for such quarter (as shown in the first 
        revision thereof).
            ``(5) Election not to have subsection apply.--This 
        subsection shall not apply to any applicable property if the 
        taxpayer elects not to have this subsection apply to such 
        property. Such an election, once made, shall be irrevocable.
            ``(6) Additional deduction not to affect basis or 
        recapture.--
                    ``(A) In general.--The additional amount determined 
                under this section by reason of this subsection shall 
                not be taken into account in determining the adjusted 
                basis of any applicable property or of any interest in 
                a pass-thru entity which holds such property and shall 
                not be treated as a deduction for depreciation for 
                purposes of sections 1245 and 1250.
                    ``(B) Pass-thru entity defined.--For purposes of 
                subparagraph (A), the term `pass-thru entity' means--
                            ``(i) a regulated investment company,
                            ``(ii) a real estate investment trust,
                            ``(iii) an S corporation,
                            ``(iv) a partnership,
                            ``(v) an estate or trust, and
                            ``(vi) a common trust fund.
            ``(7) Applicable property.--For purposes of this 
        subsection, the term `applicable property' means residential 
        rental property or nonresidential real property (as such terms 
        are defined in subsection (e)(2)).''.
    (b) Minimum Tax Treatment.--Paragraph (1) of section 56(a) of the 
Internal Revenue Code of 1986 is amended by adding at the end thereof 
the following new subparagraph:
                    ``(E) Use of neutral cost recovery ratio.--In the 
                case of property to which section 168(n) applies, the 
                deduction allowable under this paragraph with respect 
                to such property for any taxable year (after the 
                taxable year during which the property is placed in 
                service) shall be--
                            ``(i) the amount so allowable for such 
                        taxable year without regard to this 
                        subparagraph, multiplied by
                            ``(ii) the applicable neutral cost recovery 
                        ratio for such taxable year (as determined 
                        under section 168(n)).
                This subparagraph shall not apply to any property with 
                respect to which there is an election in effect not to 
                have section 168(n) apply.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service before, on, or after the date of 
the enactment of this Act, with respect to taxable years ending on or 
after such date.

SEC. 4. ELIMINATION OF AMORTIZATION OF RESEARCH AND EXPERIMENTAL 
              EXPENDITURES.

    (a) In General.--Section 174 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES.

    ``(a) Treatment as Expenses.--
            ``(1) In general.--A taxpayer may treat research or 
        experimental expenditures which are paid or incurred by him 
        during the taxable year in connection with his trade or 
        business as expenses which are not chargeable to capital 
        account. The expenditures so treated shall be allowed as a 
        deduction.
            ``(2) When method may be adopted.--
                    ``(A) Without consent.--A taxpayer may, without the 
                consent of the Secretary, adopt the method provided in 
                this subsection for his first taxable year for which 
                expenditures described in paragraph (1) are paid or 
                incurred.
                    ``(B) With consent.--A taxpayer may, with the 
                consent of the Secretary, adopt at any time the method 
                provided in this subsection.
            ``(3) Scope.--The method adopted under this subsection 
        shall apply to all expenditures described in paragraph (1). The 
        method adopted shall be adhered to in computing taxable income 
        for the taxable year and for all subsequent taxable years 
        unless, with the approval of the Secretary, a change to a 
        different method is authorized with respect to part or all of 
        such expenditures.
    ``(b) Amortization of Certain Research and Experimental 
Expenditures.--
            ``(1) In general.--At the election of the taxpayer, made in 
        accordance with regulations prescribed by the Secretary, 
        research or experimental expenditures which are--
                    ``(A) paid or incurred by the taxpayer in 
                connection with his trade or business,
                    ``(B) not treated as expenses under subsection (a), 
                and
                    ``(C) chargeable to capital account but not 
                chargeable to property of a character which is subject 
                to the allowance under section 167 (relating to 
                allowance for depreciation, etc.) or section 611 
                (relating to allowance for depletion),
        may be treated as deferred expenses. In computing taxable 
        income, such deferred expenses shall be allowed as a deduction 
        ratably over such period of not less than 60 months as may be 
        selected by the taxpayer (beginning with the month in which the 
        taxpayer first realizes benefits from such expenditures). Such 
        deferred expenses are expenditures properly chargeable to 
        capital account for purposes of section 1016(a)(1) (relating to 
        adjustments to basis of property).
            ``(2) Time for and scope of election.--The election 
        provided by paragraph (1) may be made for any taxable year, but 
        only if made not later than the time prescribed by law for 
        filing the return for such taxable year (including extensions 
        thereof). The method so elected, and the period selected by the 
        taxpayer, shall be adhered to in computing taxable income for 
        the taxable year for which the election is made and for all 
        subsequent taxable years unless, with the approval of the 
        Secretary, a change to a different method (or to a different 
        period) is authorized with respect to part or all of such 
        expenditures. The election shall not apply to any expenditure 
        paid or incurred during any taxable year before the taxable 
        year for which the taxpayer makes the election.
    ``(c) Land and Other Property.--This section shall not apply to any 
expenditure for the acquisition or improvement of land, or for the 
acquisition or improvement of property to be used in connection with 
the research or experimentation and of a character which is subject to 
the allowance under section 167 (relating to allowance for 
depreciation, etc.) or section 611 (relating to allowance for 
depletion); but for purposes of this section allowances under section 
167, and allowances under section 611, shall be considered as 
expenditures.
    ``(d) Exploration Expenditures.--This section shall not apply to 
any expenditure paid or incurred for the purpose of ascertaining the 
existence, location, extent, or quality of any deposit of ore or other 
mineral (including oil and gas).
    ``(e) Only Reasonable Research Expenditures Eligible.--This section 
shall apply to a research or experimental expenditure only to the 
extent that the amount thereof is reasonable under the circumstances.
    ``(f) Cross References.--
            ``(1) For adjustments to basis of property for amounts 
        allowed as deductions as deferred expenses under subsection 
        (b), see section 1016(a)(14).
            ``(2) For election of 10-year amortization of expenditures 
        allowable as a deduction under subsection (a), see section 
        59(e).''.
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 174 and inserting the following new item:

``Sec. 174. Research and experimental expenditures''.
    (c) Conforming Amendments.--
            (1) Section 41(d)(1)(A) of such Code is amended by striking 
        ``specified research or experimental expenditures under section 
        174'' and inserting ``expenses under section 174''.
            (2) Section 280C(c) of such Code is amended to read as 
        follows:
    ``(c) Credit for Increasing Research Activities.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the qualified research expenses (as defined in 
        section 41(b)) or basic research expenses (as defined in 
        section 41(e)(2)) otherwise allowable as a deduction for the 
        taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 41(a).
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 41(a)(1), exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for qualified research expenses or basic 
                research expenses (determined without regard to 
                paragraph (1)),
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.
            ``(3) Election of reduced credit.--
                    ``(A) In general.--In the case of any taxable year 
                for which an election is made under this paragraph--
                            ``(i) paragraphs (1) and (2) shall not 
                        apply, and
                            ``(ii) the amount of the credit under 
                        section 41(a) shall be the amount determined 
                        under subparagraph (B).
                    ``(B) Amount of reduced credit.--The amount of 
                credit determined under this subparagraph for any 
                taxable year shall be the amount equal to the excess 
                of--
                            ``(i) the amount of credit determined under 
                        section 41(a) without regard to this paragraph, 
                        over
                            ``(ii) the product of--
                                    ``(I) the amount described in 
                                clause (i), and
                                    ``(II) the rate of tax under 
                                section 11(b).
                    ``(C) Election.--An election under this paragraph 
                for any taxable year shall be made not later than the 
                time for filing the return of tax for such year 
                (including extensions), shall be made on such return, 
                and shall be made in such manner as the Secretary may 
                prescribe. Such an election, once made, shall be 
                irrevocable.
            ``(4) Controlled groups.--Paragraph (3) of subsection (b) 
        shall apply for purposes of this subsection.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2021.
                                 &lt;all&gt;
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