FORWARD Act
Bill: S.1979 | Sponsor: Sen. Coons, Christopher A. (D-DE)
Policy area: Taxation

Summary:
Furthering Our Recovery With American Research & Development Act or the FORWARD Act
This bill makes several changes to the income tax credit for business expenses for increasing research activities.
Specifically, the bill
The bill appropriates to the Social Security trust funds amounts equal to the reduction in revenues from payroll taxes by reason of this bill.
The Internal Revenue Service (IRS) shall develop partnership agreements to provide for development of basic training relating to federal tax credits benefitting small business concerns and startups, especially credits for research and experimentation, and informational materials relating to such credits, including IRS guidance documents.
Small business development centers shall provide informational materials, education, and basic training to small business concerns relating to federal tax credits, including those available to (1) businesses generally; and (2) small business concerns and startups specifically, especially credits for research and experimentation.

To amend the Internal Revenue Code of 1986 to expand and modify the 
   credit for increasing research activities, 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 ``Furthering Our Recovery With 
American Research & Development Act'' or the ``FORWARD Act''.

SEC. 2. TREATMENT OF CREDIT FOR QUALIFIED SMALL BUSINESSES.

    (a) Gross Receipts Test.--
            (1) In general.--Clause (i) of section 41(h)(3)(A) of the 
        Internal Revenue Code of 1986 is amended--
                    (A) by striking ``$5,000,000'' in subclause (I) and 
                inserting ``$20,000,000'', and
                    (B) by striking ``gross receipts'' in subclause 
                (II) and inserting ``gross receipts in excess of 
                $25,000''.
            (2) Definition of gross receipts.--
                    (A) In general.--Clause (i) of section 
                41(h)(3)(A)(i) of such Code, as amended by paragraph 
                (1), is further amended--
                            (i) by striking ``(as determined under the 
                        rules of section 448(c)(3), without regard to 
                        subparagraph (A) thereof)'' in subclause (I), 
                        and
                            (ii) by striking ``(as so determined)'' in 
                        subclause (II).
                    (B) Definition.--Subparagraph (A) of section 
                41(h)(3) of such Code, as so amended, is further 
                amended by adding at the end the following flush 
                sentence:
                ``For purposes of the preceding sentence, gross 
                receipts shall be determined under the rules of section 
                448(c)(3) without regard to subparagraph (A) thereof, 
                except that such term shall not include any 
                contributions to the capital of a corporation (other 
                than contributions by a shareholder) or any amount 
                described in section 118(b) (other than receipts from 
                customers in exchange for goods or services).''.
    (b) Startup Date.--Subclause (II) of section 41(h)(3)(A)(i) of the 
Internal Revenue Code of 1986 is amended by striking ``5-taxable-year 
period'' and inserting ``8-taxable-year period''.
    (c) Limitation on Election Amount.--Clause (i) of section 
41(h)(4)(B) of the Internal Revenue Code of 1986 is amended by striking 
``$250,000'' and inserting ``$1,000,000''.
    (d) Limitation on Election.--Clause (ii) of section 41(h)(4)(B) of 
the Internal Revenue Code of 1986 is amended by striking ``5 or more'' 
and inserting ``8 or more''.
    (e) Payroll Tax Credit Portion.--Paragraph (2) of section 41(h) of 
the Internal Revenue Code of 1986 is amended--
            (1) by striking subparagraph (C),
            (2) by adding ``or'' at the end of subparagraph (A), and
            (3) by striking ``, or'' at the end of subparagraph (B) and 
        inserting a period.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2020.

SEC. 3. INCLUSION OF EMPLOYEE TRAINING EXPENSES.

    (a) In General.--Paragraph (1) of section 41(b) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``and'' at the end of subparagraph (A),
            (2) by striking the period at the end of subparagraph (B) 
        and inserting ``, and'', and
            (3) by adding at the end the following new subparagraph:
                    ``(C) employee training expenses.''.
    (b) Employee Training Expenses.--Subsection (b) of section 41 of 
the Internal Revenue Code of 1986 is amended--
            (1) by redesignating paragraph (4) as paragraph (5), and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Employee training expenses.--
                    ``(A) In general.--The term `employee training 
                expenses' means any wages paid or incurred to an 
                employee in connection with training for the employee 
                to perform qualified services described in clause (i) 
                or (ii) of paragraph (2)(B). Such term does not include 
                wages paid or incurred in connection with general 
                employer training which does not specifically pertain 
                to such qualified services.
                    ``(B) Wages, etc.--For purposes of this paragraph--
                            ``(i) In general.--The term `wages' shall 
                        not include any amount taken into account under 
                        paragraph (2)(A)(i).
                            ``(ii) Rules.--The rules of paragraph 
                        (2)(D) shall apply.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred in taxable years beginning after 
December 31, 2020.

SEC. 4. INCREASED CREDIT RATE FOR CERTAIN RESEARCH ACTIVITIES.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(i) Special Rules for Certain High-Benefit Research Activities.--
            ``(1) Certain collaborative research.--
                    ``(A) In general.--In the case of any qualified 
                research expenses described in subparagraph (B), as 
                applicable--
                            ``(i) subsection (a)(1) shall be applied by 
                        substituting `25 percent' for `20 percent',
                            ``(ii) subsection (c)(4)(A) shall be 
                        applied by substituting `17.5 percent' for `14 
                        percent', and
                            ``(iii) subsection (c)(4)(B)(ii) shall be 
                        applied by substituting `7.5 percent' for `6 
                        percent'.
                    ``(B) Expenses described.--
                            ``(i) In general.--Qualified research 
                        expenses described in this subparagraph are 
                        qualified research expenses incurred by the 
                        taxpayer with respect to qualified research in 
                        collaboration with 1 or more other entities, 
                        which may include a qualified organization 
                        described in subparagraph (A), (B), or (C) of 
                        subsection (e)(6), an organization which is a 
                        Federal laboratory (within the meaning of 
                        subsection (b)(3)(D)(i)(III)), or a qualified 
                        research consortium (as defined in subsection 
                        (b)(3)(C)(ii)).
                            ``(ii) Contribution requirement.--A 
                        collaboration shall be taken into account under 
                        clause (i) only if each entity involved in the 
                        collaboration provides or performs more than 
                        \1/2\ of its pro rata share of the work hours 
                        for the research.
            ``(2) Research by united states manufacturers.--
                    ``(A) In general.--In the case of a qualified 
                domestic manufacturer, this section shall be applied--
                            ``(i) by increasing the 20 percent amount 
                        in subsection (a)(1) by the bonus amount,
                            ``(ii) by increasing the 14 percent amount 
                        under subsection (c)(4)(A) by the alternative 
                        simplified bonus amount, and
                            ``(iii) by increasing the 6 percent amount 
                        under subsection (c)(4)(B)(ii) by the 
                        subsection (c)(4)(B) bonus amount.
                    ``(B) Qualified domestic manufacturer.--For 
                purposes of this subsection--
                            ``(i) In general.--The term `qualified 
                        domestic manufacturer' means a taxpayer who has 
                        domestic production gross receipts which are 
                        more than 50 percent of total gross receipts.
                            ``(ii) Domestic production gross 
                        receipts.--The term `domestic production gross 
                        receipts' has the meaning given to such term 
                        under section 199(c)(4) (as in effect on 
                        December 31, 2017).
                    ``(C) Bonus amount; alternative simplified bonus 
                amount; subsection (c)(4)(B) amount.--For purposes of 
                subparagraph (A):


 
                                        The bonus amount is       The alternative       The subsection (c)(4)(B)
  ``If the percentage of total gross       the following      simplified bonus amount     bonus amount is the
receipts which are domestic production       number of        is the following number     following number of
          gross receipts is:             percentage points:    of percentage points:       percentage points:
 
More than 50% but not more than 60%...  1                    0.7                       0.3
More than 60% but not more than 70%...  2                    1.4                       0.6
More than 70% but not more than 80%...  3                    2.1                       0.9
More than 80% but not more than 90%...  4                    2.8                       1.2
More than 90%.........................  5                    3.5                       1.5.''.
 

    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.

SEC. 5. TRANSFERS TO FEDERAL OLD-AGE AND SURVIVORS INSURANCE TRUST 
              FUND.

    There are hereby appropriated to the Federal Old-Age and Survivors 
Trust Fund and the Federal Disability Insurance Trust Fund established 
under section 201 of the Social Security Act (42 U.S.C. 401) amounts 
equal to the reduction in revenues to the Treasury from the taxes under 
section 3111(a) of the Internal Revenue Code of 1986 by reason of the 
amendments made by sections 2, 3, and 4. Amounts appropriated by the 
preceding sentence shall be transferred from the general fund at such 
times and in such manner as to replicate to the extent possible the 
transfers which would have occurred to such Trust Fund had such 
amendments not been enacted.

SEC. 6. SUPPORT FOR SMALL BUSINESS RESEARCH AND DEVELOPMENT.

    (a) Definitions.--In this section--
            (1) the term ``Administrator'' means the Administrator of 
        the Small Business Administration;
            (2) the term ``Commissioner'' means the Commissioner of 
        Internal Revenue;
            (3) the term ``small business concern'' has the meaning 
        given the term in section 3(a) of the Small Business Act (15 
        U.S.C. 632(a)); and
            (4) the term ``small business development center'' means a 
        small business development center described in section 21 of 
        the Small Business Act (15 U.S.C. 648).
    (b) IRS and SBA Partnerships.--Beginning not later than 180 days 
after the date of enactment of this Act, the Commissioner, in 
consultation with the Administrator, shall develop partnership 
agreements that--
            (1) provide for the development of--
                    (A) basic training, including in-person or modular 
                training sessions, relating to Federal income tax 
                credits that benefit small business concerns and 
                startups, especially credits for research and 
                experimentation; and
                    (B) informational materials relating to such 
                credits, including Internal Revenue Service guidance 
                documents;
            (2) provide the basic training and informational materials 
        developed under paragraph (1)--
                    (A) through electronic resources, including 
                internet-based webinars; and
                    (B) at physical locations, including small business 
                development centers; and
            (3) make such materials available to--
                    (A) business development programs administered by 
                the Small Business Administration, including women's 
                business centers, Veteran Business Outreach Centers, 
                and U.S. Export Assistance Centers, and nonprofit 
                research partners such as the Service Corps of Retired 
                Executives authorized under section 8(b)(1)(B) of the 
                Small Business Act (15 U.S.C. 637(b)(1)(B)); and
                    (B) business development entities that partner with 
                Small Business Administration programs, including 
                universities, nonprofits, business incubators, and 
                business accelerators.
    (c) Reporting Requirement.--Not later than 180 days after the date 
of enactment of this Act, the Commissioner, in consultation with the 
Administrator, shall submit to Congress a report describing how the 
Internal Revenue Service in partnership with the Small Business 
Administration will provide outreach and educational materials to small 
business concerns, businesses of medium size, and startups regarding 
section 41(h) of the Internal Revenue Code of 1986.
    (d) Small Business Development Centers.--Section 21(c)(3) of the 
Small Business Act (15 U.S.C. 648(c)(3)) is amended--
            (1) in subparagraph (T), by striking ``and'' at the end;
            (2) in the first subparagraph (U) (relating to encouraging 
        and assisting the provision of succession planning), by 
        striking the period at the end of clause (v) and inserting a 
        semicolon;
            (3) in the second subparagraph (U) (relating to providing 
        training in conjunction with the United States Patent and 
        Trademark Office)--
                    (A) by redesignating that subparagraph as 
                subparagraph (V); and
                    (B) in clause (ii)(II), by striking the period at 
                the end and inserting ``; and''; and
            (4) by adding at the end the following:
                    ``(W) in conjunction with the Internal Revenue 
                Service, providing informational materials, education, 
                and basic training--
                            ``(i) to small business concerns relating 
                        to Federal income tax credits available under 
                        the Internal Revenue Code of 1986, including--
                                    ``(I) credits available to 
                                businesses generally; and
                                    ``(II) credits available to small 
                                business concerns and startups 
                                specifically, especially credits for 
                                research and experimentation; and
                            ``(ii) that may be delivered--
                                    ``(I) in person; or
                                    ``(II) through a website.''.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 per year to carry out the requirements of this 
section.
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