American Innovation Act of 2023

Subjects: Taxation, Budget deficits and national debt, Business investment and capital, Capital gains tax, Corporate finance and management, Income tax credits, Income tax deductions, Inflation and prices

Summary:  <p><b>American Innovation Act of 2023</b></p> <p>This bill revises the tax treatment of business start-up or organizational expenditures. Specifically, it allows an election to deduct such expenditures in an amount equal to the lesser of the aggregate amount of such expenditures incurred by an active trade of business, or $20,000, reduced by the amount by which such aggregate amount exceeds $120,000. The remaining amount of such expenditures shall be amortized over the 180 month period after the trade or business begins. </p> <p>The bill also revises the tax treatment of partnership syndication fees and start-up net operating losses and tax credits after an ownership change.</p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 368 Introduced in House (IH)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                H. R. 368

  To amend the Internal Revenue Code of 1986 to promote new business 
                  innovation, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 13, 2023

 Mr. Buchanan 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 promote new business 
                  innovation, 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 ``American Innovation Act of 2023''.

SEC. 2. SIMPLIFICATION AND EXPANSION OF DEDUCTION FOR START-UP AND 
              ORGANIZATIONAL EXPENDITURES.

    (a) In General.--Section 195 of the Internal Revenue Code of 1986 
is amended by redesignating subsections (c) and (d) as subsections (d) 
and (e), respectively, and by striking all that precedes subsection (d) 
(as so redesignated) and inserting the following:

``SEC. 195. START-UP AND ORGANIZATIONAL EXPENDITURES.

    ``(a) Capitalization of Expenditures.--Except as otherwise provided 
in this section, no deduction shall be allowed for start-up or 
organizational expenditures.
    ``(b) Election To Deduct.--
            ``(1) In general.--If a taxpayer elects the application of 
        this subsection with respect to any active trade or business--
                    ``(A) the taxpayer shall be allowed a deduction for 
                the taxable year in which such active trade or business 
                begins in an amount equal to the lesser of--
                            ``(i) the aggregate amount of start-up and 
                        organizational expenditures paid or incurred in 
                        connection with such active trade or business, 
                        or
                            ``(ii) $20,000, reduced (but not below 
                        zero) by the amount by which such aggregate 
                        amount exceeds $120,000, and
                    ``(B) the remainder of such start-up and 
                organizational expenditures shall be charged to capital 
                account and allowed as an amortization deduction 
                determined by amortizing such expenditures ratably over 
                the 180-month period beginning with the month in which 
                the active trade or business begins.
            ``(2) Application to organizational expenditures.--In the 
        case of organizational expenditures with respect to any 
        corporation or partnership, the active trade or business 
        referred to in paragraph (1) means the first active trade or 
        business carried on by such corporation or partnership.
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning after December 31, 2023, the $20,000 and 
        $120,000 amounts in paragraph (1)(A)(ii) shall each be 
        increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2022' for `calendar year 2016' in 
                subparagraph (A)(ii) thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000, such amount shall be rounded to the 
        nearest multiple of $1,000.
    ``(c) Allowance of Deduction Upon Liquidation or Disposition.--
            ``(1) Liquidation of partnership or corporation.--If any 
        partnership or corporation is completely liquidated by the 
        taxpayer, any start-up or organizational expenditures paid or 
        incurred in connection with such partnership or corporation 
        which were not allowed as a deduction by reason of this section 
        may be deducted to the extent allowable under section 165.
            ``(2) Disposition of trade or business.--If any trade or 
        business is completely disposed of or discontinued by the 
        taxpayer, any start-up expenditures paid or incurred in 
        connection with such trade or business which were not allowed 
        as a deduction by reason of this section (and not taken into 
        account in connection with a liquidation to which paragraph (1) 
        applies) may be deducted to the extent allowable under section 
        165. For purposes of this paragraph, in the case of any 
        deduction allowed under subsection (b)(1) with respect to both 
        start-up and organizational expenditures, the amount treated as 
        so allowed with respect to start-up expenditures shall bear the 
        same ratio to such deduction as the start-up expenditures taken 
        into account in determining such deduction bears to the 
        aggregate of the start-up and organizational expenditures so 
        taken into account.''.
    (b) Organizational Expenditures.--Section 195(d) of such Code, as 
redesignated by subsection (a), is amended by adding at the end the 
following new paragraphs:
            ``(3) Organizational expenditures.--The term 
        `organizational expenditures' means any expenditure which--
                    ``(A) is incident to the creation of a corporation 
                or a partnership,
                    ``(B) is chargeable to capital account, and
                    ``(C) is of a character which, if expended incident 
                to the creation of a corporation or a partnership 
                having an ascertainable life, would be amortizable over 
                such life.
            ``(4) Application to certain disregarded entities.--In the 
        case of any entity with a single owner that is disregarded as 
        an entity separate from its owner, this section shall be 
        applied in the same manner as if such entity were a 
        corporation.''.
    (c) Election.--Section 195(e)(2) of such Code, as redesignated by 
subsection (a), is amended to read as follows:
            ``(2) Partnerships and s corporations.--In the case of any 
        partnership or S corporation, the election under subsection (b) 
        shall be made (and this section shall be applied) at the entity 
        level.''.
    (d) Conforming Amendments.--
            (1)(A) Part VIII of subchapter B of chapter 1 is amended by 
        striking section 248 of such Code (and by striking the item 
        relating to such section in the table of sections of such 
        part).
            (B) Section 170(b)(2)(D)(ii) of such Code is amended by 
        striking ``(except section 248)''.
            (C) Section 312(n)(3) of such Code is amended by striking 
        ``Sections 173 and 248'' and inserting ``Sections 173 and 
        195''.
            (D) Section 535(b)(3) of such Code is amended by striking 
        ``(except section 248)''.
            (E) Section 545(b)(3) of such Code is amended by striking 
        ``(except section 248)''.
            (F) Section 545(b)(4) of such Code is amended by striking 
        ``(except section 248)''.
            (G) Section 834(c)(7) of such Code is amended by striking 
        ``(except section 248)''.
            (H) Section 852(b)(2)(C) of such Code is amended by 
        striking ``(except section 248)''.
            (I) Section 857(b)(2)(A) of such Code is amended by 
        striking ``(except section 248)''.
            (J) Section 1363(b) of such Code is amended by adding 
        ``and'' at the end of paragraph (2), by striking paragraph (3), 
        and by redesignating paragraph (4) as paragraph (3).
            (K) Section 1375(b)(1)(B)(i) of such Code is amended by 
        striking ``(other than the deduction allowed by section 248, 
        relating to organization expenditures)''.
            (2)(A) Section 709 of such Code is amended to read as 
        follows:

``SEC. 709. TREATMENT OF SYNDICATION FEES.

    ``No deduction shall be allowed under this chapter to a partnership 
or to any partner of the partnership for any amounts paid or incurred 
to promote the sale of (or to sell) an interest in the partnership.''.
            (B) The item relating to section 709 in the table of 
        sections for part I of subchapter K of chapter 1 of such Code 
        is amended to read as follows:

``Sec. 709. Treatment of syndication fees.''.
            (3) Section 1202(e)(2)(A) of such Code is amended by 
        striking ``section 195(c)(1)(A)'' and inserting ``section 
        195(d)(1)(A)''.
            (4) The item relating to section 195 in the table of 
        contents of part VI of subchapter B of chapter 1 of such Code 
        is amended to read as follows:

``Sec. 195. Start-up and organizational expenditures.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to expenditures paid or incurred in connection with active trades 
or businesses which begin in taxable years beginning after December 31, 
2022.

SEC. 3. PRESERVATION OF START-UP NET OPERATING LOSSES AND TAX CREDITS 
              AFTER OWNERSHIP CHANGE.

    (a) Application to Net Operating Losses.--Section 382(d) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
            ``(4) Exception for start-up losses.--
                    ``(A) In general.--In the case of any net operating 
                loss carryforward described in paragraph (1)(A) which 
                arose in a start-up period taxable year, the amount of 
                such net operating loss carryforward otherwise taken 
                into account under such paragraph shall be reduced by 
                the net start-up loss determined with respect to the 
                trade or business referred to in subparagraph (B)(i) 
                for such start-up period taxable year.
                    ``(B) Start-up period taxable year.--The term 
                `start-up period taxable year' means any taxable year 
                of the old loss corporation which--
                            ``(i) begins before the close of the 3-year 
                        period beginning on the date on which any trade 
                        or business of such corporation begins as an 
                        active trade or business (as determined under 
                        section 195(d)(2) without regard to 
                        subparagraph (B) thereof), and
                            ``(ii) ends after January 31, 2023.
                    ``(C) Net start-up loss.--
                            ``(i) In general.--The term `net start-up 
                        loss' means, with respect to any trade or 
                        business referred to in subparagraph (B)(i) for 
                        any start-up period taxable year, the amount 
                        which bears the same ratio (but not greater 
                        than 1) to the net operating loss carryforward 
                        which arose in such start-up period taxable 
                        year as--
                                    ``(I) the net operating loss (if 
                                any) which would have been determined 
                                for such start-up period taxable year 
                                if only items of income, gain, 
                                deduction, and loss properly allocable 
                                to such trade or business were taken 
                                into account, bears to
                                    ``(II) the amount of the net 
                                operating loss determined for such 
                                start-up period taxable year.
                            ``(ii) Special rule for last taxable year 
                        in start-up period.--In the case of any start-
                        up period taxable year which ends after the 
                        close of the 3-year period described in 
                        subparagraph (B)(i) with respect to any trade 
                        or business, the net start-up loss with respect 
                        to such trade or business for such start-up 
                        period taxable year shall be the same 
                        proportion of such loss (determined without 
                        regard to this clause) as the proportion of 
                        such start-up period taxable year which is on 
                        or before the last day of such period.
                    ``(D) Application to net operating loss arising in 
                year of ownership change.--Subparagraph (A) shall apply 
                to any net operating loss described in paragraph (1)(B) 
                in the same manner as such subparagraph applies to net 
                operating loss carryforwards described in paragraph 
                (1)(A), but by only taking into account the amount of 
                such net operating loss (and the amount of the net 
                start-up loss) which is allocable under paragraph 
                (1)(B) to the period described in such paragraph. 
                Proper adjustment in the allocation of the net start-up 
                loss under the preceding sentence shall be made in the 
                case of a taxable year to which subparagraph (C)(ii) 
                applies.
                    ``(E) Application to taxable years which are start-
                up period taxable years with respect to more than 1 
                trade or business.--In the case of any net operating 
                loss carryforward which arose in a taxable year which 
                is a start-up period taxable year with respect to more 
                than 1 trade or business--
                            ``(i) this paragraph shall be applied 
                        separately with respect to each such trade or 
                        business, and
                            ``(ii) the aggregate reductions under 
                        subparagraph (A) shall not exceed such net 
                        operating loss carryforward.
                    ``(F) Continuity of business requirement.--If the 
                new loss corporation does not continue the trade or 
                business referred to in subparagraph (B)(i) at all 
                times during the 2-year period beginning on the change 
                date, this paragraph shall not apply with respect to 
                such trade or business.
                    ``(G) Certain title 11 or similar cases.--
                            ``(i) Multiple ownership changes.--In the 
                        case of a 2nd ownership change to which 
                        subsection (l)(5)(D) applies, this paragraph 
                        shall not apply for purposes of determining the 
                        pre-change loss with respect to such 2nd 
                        ownership change.
                            ``(ii) Certain insolvency transactions.--If 
                        subsection (l)(6) applies for purposes of 
                        determining the value of the old loss 
                        corporation under subsection (e), this 
                        paragraph shall not apply.
                    ``(H) Not applicable to disallowed interest.--This 
                paragraph shall not apply for purposes of applying the 
                rules of paragraph (1) to the carryover of disallowed 
                interest under paragraph (3).
                    ``(I) Transition rule.--This paragraph shall not 
                apply with respect to any trade or business if the date 
                on which such trade or business begins as an active 
                trade or business (as determined under section 
                195(d)(2) without regard to subparagraph (B) thereof) 
                is on or before January 31, 2023.''.
    (b) Application to Excess Credits.--Section 383 of such Code is 
amended by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection:
    ``(e) Exception for Start-Up Excess Credits.--
            ``(1) In general.--In the case of any unused general 
        business credit of the corporation under section 39 which arose 
        in a start-up period taxable year, the amount of such unused 
        general business credit otherwise taken into account under 
        subsection (a)(2)(A) shall be reduced by the start-up excess 
        credit determined with respect to any trade or business 
        referred to in section 382(d)(4)(B)(i) for such start-up period 
        taxable year.
            ``(2) Start-up period taxable year.--For purposes of this 
        subsection, the term `start-up period taxable year' has the 
        meaning given such term in section 382(d)(4)(B).
            ``(3) Start-up excess credit.--For purposes of this 
        subsection, the term `start-up excess credit' means, with 
        respect to any trade or business referred to in section 
        382(d)(4)(B)(i) for any start-up period taxable year, the 
        amount which bears the same ratio to the unused general 
        business credit which arose in such start-up period taxable 
        year as--
                    ``(A) the amount of the general business credit 
                which would have been determined for such start-up 
                period taxable year if only credits properly allocable 
                to such trade or business were taken into account, 
                bears to
                    ``(B) the amount of the general business credit 
                determined for such start-up period taxable year.
            ``(4) Application of certain rules.--Rules similar to the 
        rules of subparagraphs (C)(ii), (D), (E), and (F) of section 
        382(d)(4) shall apply for purposes of this subsection.
            ``(5) Transition rule.--This subsection shall not apply 
        with respect to any trade or business if the date on which such 
        trade or business begins as an active trade or business (as 
        determined under section 195(d)(2) without regard to 
        subparagraph (B) thereof) is on or before January 31, 2023.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after January 31, 2023.
                                 &lt;all&gt;
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