Title: Research and Development Tax Credit Expansion Act of 2019
Policy area: Taxation

Summary:
Research and Development Tax Credit Expansion Act of 2019
This bill modifies the refundable research tax credit for new and small businesses to (1) increase the limit on refundability to $500,000, with an adjustment for inflation; (2) allow refundable amounts to cover all payroll taxes paid by such businesses; and (3) extend eligibility for the credit to small businesses with less than $10 million in gross receipts (currently, less than $5 million).
The bill also increases the rate of the alternative simplified tax credit for such businesses.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2207 Introduced in Senate (IS)]

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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.

    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 ``Research and Development Tax Credit 
Expansion Act of 2019''.

SEC. 2. EXPANSION OF REFUNDABLE RESEARCH CREDIT FOR NEW AND SMALL 
              BUSINESSES.

    (a) Doubling Cap on Refundable Credit.--
            (1) In general.--Clause (i) of section 41(h)(4)(B) of the 
        Internal Revenue Code of 1986 is amended by striking 
        ``$250,000'' and inserting ``$500,000''.
            (2) Adjustment for inflation.--Paragraph (4) of section 
        41(h) of such Code is amended--
                    (A) by redesignating subparagraph (C) as 
                subparagraph (D),
                    (B) by redesignating clause (ii) of subparagraph 
                (B) as subparagraph (C), and by moving such 
                subparagraph 2 ems to the left,
                    (C) by striking ``Limitations'' in the heading of 
                subparagraph (B) and inserting ``Limitation on amount 
                of election'',
                    (D) by striking ``Amount'' in the heading of clause 
                (i) of subparagraph (B) and inserting ``In general'', 
                and
                    (E) by adding at the end of subparagraph (B), as 
                amended by the preceding subparagraphs of this 
                paragraph, the following new clause:
                            ``(ii) Adjustment for inflation.--In the 
                        case of a taxable year beginning after 2020, 
                        the $500,000 amount in clause (i) shall be 
                        increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `2019' for `2016' in 
                                subparagraph (A)(ii) thereof.
                        If any increase under the preceding sentence is 
                        not a multiple of $100, such increase shall be 
                        rounded to the nearest multiple of $100.''.
            (3) Conforming amendment.--Clause (ii) of section 
        41(h)(5)(B) of such Code is amended by striking ``the $250,000 
        amount'' and inserting ``the amount in effect''.
    (b) Credit Refundable Against Medicare and Unemployment Taxes.--
            (1) In general.--Paragraph (1) of section 3111(f) of the 
        Internal Revenue Code of 1986 is amended by striking 
        ``subsection (a)'' and inserting ``subsections (a) and (b) and 
        section 3301''.
            (2) Conforming amendments.--
                    (A) Paragraph (2) of section 3111(f) of such Code 
                is amended by striking ``the tax imposed by subsection 
                (a)'' and inserting ``the sum of the taxes imposed by 
                subsection (a), subsection (b), and section 3301''.
                    (B) Section 3302 of such Code is amended by adding 
                at the end the following new subsection:
    ``(i) Credit for Research Expenditures of Qualified Small 
Businesses.--Any portion of the credit under section 3111(f) which is 
credited under such section to the tax under section 3301 shall be 
treated as a credit under this section. Subsection (c) shall not apply 
to any such credit.''.
    (c) Doubling Eligibility Threshold.--Subclause (I) of section 
41(h)(3)(A)(i) of the Internal Revenue Code of 1986 is amended by 
striking ``$5,000,000'' and inserting ``$10,000,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2019.

SEC. 3. MODIFICATIONS TO ALTERNATIVE SIMPLIFIED CREDIT FOR NEW AND 
              SMALL BUSINESSES.

    (a) In General.--Paragraph (4) of section 41(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(D) Special rules for qualified small 
                businesses.--In the case of a qualified small business 
                (as defined in subsection (h)(3))--
                            ``(i) Credit rate.--Subparagraph (A) shall 
                        be applied by substituting `20 percent' for `14 
                        percent'.
                            ``(ii) Special rule for 1st year of 
                        qualified research expenses.--If the taxpayer 
                        has no qualified research expenses in any 
                        taxable year preceding the taxable year for 
                        which the credit is being determined, 
                        subparagraph (B)(ii) shall be applied by 
                        substituting `20 percent' for `6 percent'.
                            ``(iii) Special rule for other years.--If 
                        the taxpayer is not described in clause (ii) 
                        for the taxable year, and subparagraph (B) 
                        applies to such taxpayer for such year, at the 
                        election of the taxpayer--
                                    ``(I) subparagraph (B)(ii) shall be 
                                applied by substituting `10 percent' 
                                for `6 percent', or
                                    ``(II) subparagraph (B) shall not 
                                apply, and the average under 
                                subparagraph (A) shall be determined by 
                                disregarding any taxable year in the 3-
                                year period described in such 
                                subparagraph in which there were no 
                                qualified research expenses.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2019.
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