Commitment to American GROWTH Act

Bill: 116-hr-11
Sponsor: full_name: Rep. Brady, Kevin [R-TX-8]
Introduced: 2020-10-09
Policy area: Taxation
Latest action: action_date: 2020-10-09
text: Referred to the House Committee on Ways and Means.

Summaries:
action_date: 2020-10-09
action_desc: Introduced in House
text: <p><b>Commitment to American Growth, Renewal, and Opportunities for Workers, Technology, and Health Act or the Commitment to American GROWTH Act</b></p> <p>This bill provides tax incentives for economic growth, research and development, and small business start-ups. </p> <p>Specifically, the bill </p> <ul> <li>makes permanent the expensing of qualified property (i.e., business property with a recovery period of 20 years or less, computer software, water utility property, and certain theatrical and film properties);</li> <li>allows full expensing (currently, amortization for 60 months) of certain research and experimental expenditures; </li> <li>increases to 40% the rate of the tax credit for increasing research activities and increases the payroll tax offset of such credit for small businesses; </li> <li>sets forth a rule for determining the fair market value of intangible property held by controlled foreign corporations that is transferred to U.S. shareholders; </li> <li>allows new tax credits for domestic medical and drug manufacturing and medical manufacturing equipment; </li> <li>exempts from the definition of<i> passive activity</i>, for purposes of the passive loss tax rules, medical research activity of a medical research small business pass-thru entity; and </li> <li>revises and provides for the capitalization of start-up and organizational expenditures.</li> </ul>

tv_txt: I 116th CONGRESS 2d Session H. R. 11 IN THE HOUSE OF REPRESENTATIVES October 9, 2020 Mr. Brady 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 encourage investment to renew, restore, and rebuild the American economy for our workers, families, and small businesses, maximize innovation through research and development, and secure America’s medical supplies.

1. Short title; table of contents (a) Short title This Act may be cited as the Commitment to American Growth, Renewal, and Opportunities for Workers, Technology, and Health Act or as the Commitment to American GROWTH Act . (b) Table of contents The table of contents of this Act is as follows: Sec. 1. Short title; table of contents. Title I—Growth in Business Investment to Boost American Wages and Jobs Sec. 101. Permanent full expensing for qualified property. Sec. 102. Limitation on business interest permanently applied without regard to deductions for depreciation, amortization, and depletion. Title II—Growth in Research in America Sec. 201. Repeal amortization of research and experimental expenditures. Sec. 202. Doubling the research and experimental tax credit and better access to credits for startups. Sec. 203. Special rules for transfers of intangible property from controlled foreign corporations to United States shareholders. Title III—Growth in America’s Medical Independence Sec. 301. Domestic medical and drug manufacturing credit. Sec. 302. Qualifying advanced medical manufacturing equipment credit. Sec. 303. New medical research expenditure component of credit for increasing research activities. Sec. 304. Refundable portion of research credit for small businesses engaging in specified medical research. Sec. 305. Exception from passive loss rules for investments in specified medical research small business pass-thru entities. Title IV—Growth in Innovation and Technology Breakthroughs Sec. 401. Simplification and expansion of deduction for start-up and organizational expenditures. Sec. 402. Preservation of start-up net operating losses and tax credits after ownership change. I Growth in Business Investment to Boost American Wages and Jobs 101. 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 . 102. Limitation on business interest permanently applied without regard to deductions for depreciation, amortization, and depletion (a) In general Section 163(j)(8)(A)(v) of the Internal Revenue Code of 1986 is amended by striking in the case of taxable years beginning before January 1, 2022 . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2021. II Growth in Research in America 201. Repeal amortization of research and experimental expenditures (a) In general Section 174 is amended to read as follows: 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. . (b) Clerical Amendment The table of sections for part VI of subchapter B of chapter 1 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) is amended by striking specified research or experimental expenditures under section 174 and inserting expenses under section 174 . (2) Section 280C(c) 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. 202. Doubling the research and experimental tax credit and better access to credits for startups (a) Credit rate increase (1) In general Section 41(a) of the Internal Revenue Code of 1986 is amended by striking 20 percent and inserting 40 percent . (2) Alternative simplified credit Section 41(c)(4)(A) of such Code is amended by striking 14 percent and inserting 28 percent . (3) Credit rate in case of no research expenses in 3 preceding years Section 41(c)(4)(B)(ii) of such Code is amended by striking 6 percent and inserting 1/2 the credit percentage in effect under subparagraph (A) . (b) Modification of small business portion allowed against payroll tax (1) Increase in limitation Paragraphs (4)(B)(i) and (5)(B)(ii) of section 41(h) of such Code are each amended by striking $250,000 and inserting $500,000 . (2) Qualified small business gross receipts threshold Section 41(h)(3)(A)(i)(I) of such Code is amended by striking $5,000,000 and inserting the dollar amount in effect for the taxable year under section 448(c)(1) . (c) Effective dates (1) Subsection (a) The amendments made by subsection (a) shall apply to taxable years beginning after December 31, 2020. (2) Subsection (b) The amendments made by subsection (b) shall apply to taxable years beginning after December 31, 2019. 203. Special rules for transfers of intangible property from controlled foreign corporations to United States shareholders (a) In general Subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 966. Transfers of intangible property to United States shareholders (a) In general If a controlled foreign corporation holds intangible property on the date of the enactment of this section and thereafter distributes such property to a domestic corporation which is a United States shareholder with respect to such controlled foreign corporation— (1) for purposes of part I of subchapter C and any other provision of this title specified by the Secretary, the fair market value of such property on the date of such distribution shall be treated as not exceeding the adjusted basis of such property immediately before such distribution, and (2) if any portion of such distribution is not a dividend— (A) no gain shall be recognized by such United States shareholder with respect to such distribution, and (B) the adjusted basis of such property in the hands of such United States shareholder immediately after such distribution shall be the adjusted basis of such property in the hands of such controlled foreign corporation immediately before such distribution reduced by the amount (if any) of gain not recognized by reason of subparagraph (A) (determined after the application of paragraph (1)). (b) Intangible property For purposes of this section, the term intangible property means any— (1) patent, copyright, license, invention, formula, process, design, pattern, know-how, or format, (2) method, program, system, procedure, campaign, survey, study, forecast, estimate, or technical data, (3) computer software (as defined in section 197(e)(3)(B)), or (4) any similar item, which has substantial value independent of the services of any individual. . (b) Conforming amendments (1) Section 197(f)(2)(B)(i) of such Code is amended by inserting 966(a), after 731, . (2) The table of sections for subpart F of part III of subchapter N of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 966. Transfers of intangible property to United States shareholders. . (c) Effective date The amendments made by this section shall apply to distributions made in taxable years of foreign corporations beginning after December 31, 2020, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. III Growth in America’s Medical Independence 301. Domestic medical and drug manufacturing credit (a) In general Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 45U. Domestic medical and drug manufacturing credit (a) In general For purposes of section 38, the domestic medical and drug manufacturing credit determined under this section for any taxable year is an amount equal to 10.5 percent of the lesser of— (1) the qualified medical and drug manufacturing income of the taxpayer for the taxable year, or (2) taxable income of the taxpayer for the taxable year. (b) Credit limited to wages paid (1) In general The amount of the credit allowable under subsection (a) for any taxable year shall not exceed 50 percent of the W–2 wages of the taxpayer for the taxable year. (2) W– 2 wages For purposes of this section— (A) In general The term W–2 wages means, with respect to any person for any taxable year of such person, the sum of the amounts described in paragraphs (3) and (8) of section 6051(a) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year. (B) Limitation to wages attributable to domestic production Such term shall not include any amount which is not properly allocable to domestic medical and drug manufacturing gross receipts for purposes of subsection (c)(1). (C) Return requirement Such term shall not include any amount which is not properly included in a return filed with the Social Security Administration on or before the 60th day after the due date (including extensions) for such return. (3) Acquisitions, dispositions, and short taxable years The Secretary shall provide for the application of this subsection in cases of a short taxable year or where the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year. (c) Qualified medical and drug manufacturing income For purposes of this section— (1) In general The term qualified medical and drug manufacturing income for any taxable year means an amount equal to the excess (if any) of— (A) the taxpayer’s domestic medical and drug manufacturing gross receipts for the taxable year, over (B) the sum of— (i) the cost of goods sold that are allocable to such receipts, and (ii) other expenses, losses, or deductions which are properly allocable to such receipts. (2) Allocation method The Secretary shall prescribe rules for the proper allocation of items described in paragraph (1)(B) for purposes of determining qualified medical and drug manufacturing income. Such rules shall provide for the proper allocation of items whether or not such items are directly allocable to domestic medical and drug manufacturing gross receipts. (3) Special rules for determining costs (A) In general For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. (B) Exports for further manufacture In the case of any property described in subparagraph (A) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under subparagraph (A) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture. (4) Domestic medical and drug manufacturing gross receipts (A) In general The term domestic medical and drug manufacturing gross receipts means the gross receipts of the taxpayer which are derived from any sale, exchange, or other disposition of— (i) any active pharmaceutical ingredient, or (ii) any qualified countermeasure, which was manufactured or produced by the taxpayer in whole or in significant part within the United States. (B) Active pharmaceutical ingredient The term active pharmaceutical ingredient means any substance or mixture of substances intended to be used in the manufacture of a drug product and (when so used) becomes an active ingredient in the drug product. (C) Qualified countermeasure The term qualified countermeasure has the meaning given such term in section 319F–1(a)(2) of the Public Health Service Act (42 U.S.C. 247d–6a(a)(2)).” (D) Partnerships owned by expanded affiliated groups For purposes of this paragraph, if all of the interests in the capital and profits of a partnership are owned by members of a single expanded affiliated group at all times during the taxable year of such partnership, the partnership and all members of such group shall be treated as a single taxpayer during such period. (d) Definitions and Special Rules For purposes of this section— (1) Application of section to pass-thru entities (A) Partnerships and s corporations In the case of a partnership or S corporation— (i) this section shall be applied at the partner or shareholder level, (ii) each partner or shareholder shall take into account such person’s allocable share of each item described in subparagraph (A) or (B) of subsection (c)(1) (determined without regard to whether the items described in such subparagraph (A) exceed the items described in such subparagraph (B)), and (iii) each partner or shareholder shall be treated for purposes of subsection (b) as having W–2 wages for the taxable year in an amount equal to such person’s allocable share of the W–2 wages of the partnership or S corporation for the taxable year (as determined under regulations prescribed by the Secretary). (B) Trusts and estates In the case of a trust or estate— (i) the items referred to in subparagraph (A)(ii) (as determined therein) and the W–2 wages of the trust or estate for the taxable year, shall be apportioned between the beneficiaries and the fiduciary (and among the beneficiaries) under regulations prescribed by the Secretary, and (ii) for purposes of paragraph (2), adjusted gross income of the trust or estate shall be determined as provided in section 67(e) with the adjustments described in such paragraph. (C) Regulations The Secretary may prescribe rules requiring or restricting the allocation of items and wages under this paragraph and may prescribe such reporting requirements as the Secretary determines appropriate. (2) Application to individuals In the case of an individual, subsection (a)(2) shall be applied by substituting adjusted gross income for taxable income . For purposes of the preceding sentence, adjusted gross income shall be determined after application of sections 86, 135, 137, 219, 221, 222, and 469. (3) Special rule for affiliated groups (A) In general All members of an expanded affiliated group shall be treated as a single corporation for purposes of this section. (B) Expanded affiliated group For purposes of this section, the term expanded affiliated group means an affiliated group as defined in section 1504(a), determined— (i) by substituting more than 50 percent for at least 80 percent each place it appears, and (ii) without regard to paragraphs (2) and (4) of section 1504(b). (C) Allocation of credit Except as provided in regulations, the credit under subsection (a) shall be allocated among the members of the expanded affiliated group in proportion to each member’s respective amount (if any) of qualified medical and drug manufacturing income. (4) Trade or business requirement This section shall be applied by only taking into account items which are attributable to the actual conduct of a trade or business. (5) Coordination with minimum tax For purposes of determining alternative minimum taxable income under section 55, qualified medical and drug manufacturing income shall be determined without regard to any adjustments under sections 56 through 59. (6) Unrelated business taxable income For purposes of determining the tax imposed by section 511, subsection (a)(1)(B) shall be applied by substituting unrelated business taxable income for taxable income . (7) Regulations The Secretary shall prescribe such regulations as are necessary to carry out the purposes of this section, including regulations which prevent more than 1 taxpayer from being allowed a credit under this section with respect to any activity described in subsection (c)(4)(A). . (b) Treatment under base erosion tax Section 59A(b)(1)(B)(ii) of such Code is amended by striking plus at the end of subclause (I), by redesignating subclause (II) as subclause (III), and by inserting after subclause (I) the following new subclause: (II) the credit allowed under section 38 for the taxable year which is properly allocable to the domestic medical and drug manufacturing credit determined under section 45U(a), plus . (c) Part of general business credit Section 38(b) of such Code is amended by striking plus at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting , plus , and by adding at the end the following new paragraph: (34) the domestic medical and drug manufacturing credit determined under section 45U(a). . (d) Credit allowed against alternative minimum tax Section 38(c)(4)(B) of such Code is amended by redesignating clauses (x) through (xii) as clauses (xi) through (xiii), respectively, and by inserting after clause (ix) the following new clause: (x) the credit determined under section 45U, . (e) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 45U. Domestic medical and drug manufacturing credit. . (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2020. 302. Qualifying advanced medical manufacturing equipment credit (a) In general Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 48D. Qualifying advanced medical manufacturing equipment credit (a) In general For purposes of section 46, the qualifying advanced medical manufacturing equipment credit determined under this section for any taxable year is the applicable percentage of the basis of any qualifying advanced medical manufacturing equipment placed in service during such taxable year. (b) Applicable percentage For purposes of subsection (a), the applicable percentage is— (1) 30 percent in the case of equipment which is placed in service before January 1, 2028, (2) 20 percent in the case of equipment which is placed in service during calendar year 2028, (3) 10 percent in the case of equipment which is placed in service during calendar year 2029, and (4) 0 percent in the case of equipment which is placed in service after December 31, 2029. (c) Qualifying advanced medical manufacturing equipment For purposes of this section, the term qualifying advanced medical manufacturing equipment means property of a character subject to the allowance for depreciation— (1) which is machinery or equipment that is designed and used to manufacture a— (A) drug (as such term is defined in section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act), (B) device (as such term is defined in section 201(h) of such Act), or (C) biological product (as such term is defined in section 351(i) of the Public Health Service Act), (2) which has been identified by the Secretary (after consultation with the Secretary of Health and Human Services) as machinery or equipment that— (A) incorporates novel technology or uses an established technique or technology in a new or innovative way, or (B) that can improve medical product quality, address shortages of medicines, and speed time-to-market, (3) which is placed in service in the United States by the taxpayer, and (4) with respect to which depreciation is allowable. (d) Certain qualified progress expenditures rules made applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section. (e) Regulations The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including regulations which prevent abuse or fraud. . (b) Treatment under base erosion tax Section 59A(b)(1)(B)(ii) of such Code, as amended by section 7 of this Act, is further amended by striking plus at the end of subclause (II), by redesignating subclause (III) as subclause (IV), and by inserting after subclause (II) the following new subclause: (III) the credit allowed under section 46 for the taxable year which is properly allocable to the qualifying advanced medical manufacturing equipment credit determined under section 48D(a), plus . (c) Part of investment credit Section 46 of such Code is amended by striking and at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting , and , and by adding at the end the following new paragraph: (7) the qualifying advanced medical manufacturing equipment credit. . (d) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 48D. Qualifying advanced medical manufacturing equipment credit. . (e) Effective date The amendments made by this section shall apply to periods after the date of the enactment of this section under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the date of the enactment fo the Revenue Reconciliation Act of 1990). 303. New medical research expenditure component of credit for increasing research activities (a) In general Section 41(a) of the Internal Revenue Code of 1986 is amended by striking and at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting , and , and by adding at the end the following new paragraph: (4) 14 percent of specified medical research expenditures. . (b) Specified medical research expenditures Section 41(f) of such Code is amended by adding at the end the following new paragraph: (7) Specified medical research expenditures (A) In general The term specified medical research expenditures means amounts paid or incurred for qualified research with respect to any qualified countermeasure. (B) Qualified countermeasure The term qualified countermeasure has the meaning given to such term in section 319F–1(a)(2) of the Public Health Service Act (42 U.S.C. 247d–6a(a)(2)). . (c) Denial of double benefit (1) Taxable years beginning before January 1, 2021 In the case of specified medical research expenditures (as defined in section 41(f)(7) of such Code (as added by this section)) paid or incurred in taxable years beginning before January 1, 2021— (A) such expenditures shall be treated in the same manner as qualified research expenses and basic research expenses under section 280C(c)(1) of such Code (as in effect on the day before the enactment of the Tax Cuts and Jobs Act), and (B) the amount determined under section 280C(c)(2)(A) (as in effect on such day) for the taxable year shall be increased by the amount of credit determined for the taxable year under section 41(a)(4) (as added by this section). (2) Taxable years beginning after December 31, 2020 Section 280C(c)(1) of such Code is amended by striking section 41(a)(1) and inserting paragraphs (1) and (4) of section 41(a) . (d) Conforming amendment Section 41(f)(1) of such Code is amended by striking and amounts paid or incurred to energy research consortiums each place it appears and inserting , amounts paid or incurred to energy research consortiums, and specified medical research expenditures . (e) Effective date The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act, in taxable years ending after such date. 304. Refundable portion of research credit for small businesses engaging in specified medical research (a) In general Section 41 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: (i) Refundable portion for small businesses engaging in specified medical research (1) In general At the election of a medical research small business, the portion of the credit determined under this section for the taxable year which is properly allocable to specified medical research shall be treated (other than for purposes of section 280C) as a credit allowed under subpart C (and not this subpart). (2) Medical research small business For purposes of this subsection, the term medical research small business means any domestic C corporation— (A) which conducts any specified medical research during the taxable year, and (B) the gross receipts of which (determined under the rules of subsection (c)) for the taxable year do not exceed $1,000,000. (3) Specified medical research For purposes of this subsection, the term specified medical research means any qualified research with respect to qualified countermeasures (as defined in section 319F–1(a)(2) of the Public Health Service Act (42 U.S.C. 247d–6a(a)(2))). (4) Election Any election under this subsection for any taxable year— (A) shall specify the amount of the credit to which such election applies, (B) shall be made on or before the due date (including extensions) of the return of tax for the taxable year, (C) may not be made for any taxable year with respect to any portion of the credit determined under this section with respect to which an election is made under subsection (h), and (D) may be revoked only with the consent of the Secretary. (5) Regulations The Secretary shall prescribe such regulations for purposes of this subsection as may be necessary or appropriate for determining proper allocation to specified medical research of the portion of any credit allowed to a taxpayer for a taxable year under this section. . (b) Conforming amendment Section 1324(b) of title 31, United States Code, is amended by inserting 41(i), after 6428, . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2020. 305. Exception from passive loss rules for investments in specified medical research small business pass-thru entities (a) In general Subsection (c) of section 469 of the Internal Revenue Code of 1986 is amended by redesignating paragraphs (4) through (7) as paragraphs (5) through (8), respectively, and by inserting after paragraph (3) the following new paragraph: (4) Specified medical research activities (A) In general The term passive activity shall not include any qualified medical research activity of the taxpayer carried on by a specified medical research small business pass-thru entity. (B) Treatment of losses and deductions (i) In general Losses or deductions of a taxpayer in connection with qualified medical research activities carried on by a specified medical research small business pass-thru entity shall not be treated as losses or deductions, respectively, from a passive activity except as provided in clause (ii) and subparagraph (C). (ii) Limitation Clause (i) shall apply to losses and deductions of a taxpayer in connection with a specified medical small business pass-thru entity for a taxable year only to the extent that the aggregate losses and deductions of the taxpayer in connection with qualified medical research activities of such entity for such taxable year do not exceed the portion of the taxpayer’s adjusted basis in the taxpayer’s ownership interest in such entity that is attributable to money or other property contributed— (I) in exchange for such ownership interest, and (II) specifically for use in connection with qualified medical research activities. For purposes of the preceding sentence, the taxpayer’s basis shall not include any portion of such basis which is attributable to an increase in a partner’s share of the liabilities of a partnership that is considered under section 752(a) as a contribution of money. (C) Treatment of carryovers Subparagraph (B)(i) shall not apply to the portion of any loss or deduction that is carried over under subsection (b) into a taxable year other than the taxable year in which such loss or deduction arose. (D) Qualified medical research activity For purposes of this paragraph, the term qualified medical research activity means any qualified research (within the meaning of section 41(d)) with respect to qualified countermeasures (as defined in section 319F–1(a)(2) of the Public Health Service Act (42 U.S.C. 247d–6a(a)(2))). (E) Specified medical research small business pass-thru entity For purposes of this paragraph, the term specified medical research small business pass-thru entity means any domestic pass-thru entity for any taxable year if— (i) more than 80 percent of such entity’s expenditures on qualified research for such taxable year are paid or incurred in connection with qualified medical research activities, and (ii) the gross receipts (as determined under the rules of section 41(h)(3)) of such entity for the taxable year (and each preceding taxable year) is less than $1,000,000. (F) Capital expenditures taken into account for expenditures test An expenditure shall not fail to be taken into account under subparagraph (E)(i) merely because such expenditure is chargeable to capital account. (G) Pass-thru entity For purposes of this paragraph, the term pass-thru entity means any partnership, S corporation, or other entity identified by the Secretary as a pass-thru entity for purposes of this paragraph. (H) Aggregation rules (i) In general All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as a single entity for purposes of subparagraphs (E) and (F)(iii). (ii) Limitation where entity would not qualify No entity shall be treated as a specified medical research small business pass-thru entity unless such entity qualifies as such both with and without the application of clause (i). . (b) Material participation not required Paragraph (5) of section 469(c) of the Internal Revenue Code of 1986, as redesignated by subsection (a), is amended by striking and (3) in the heading and text and inserting , (3), and (4) . (c) Certain research-Related deductions and credits of specified medical research small business pass-Thru entities allowed for purposes of determining alternative minimum tax (1) Deduction for research and experimental expenditures Paragraph (2) of section 56(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: (E) Exception for specified medical research small business pass-thru entities In the case of a specified medical research small business pass-thru entity (as defined in section 469(c)(4)), this paragraph shall not apply to any amount allowable as a deduction under section 174(a). . (2) Allowance of certain research-related credits Subparagraph (B) of section 38(c)(4) of such Code is amended by redesignating clauses (ii) through (ix) as clauses (iii) through (x), respectively, and by inserting after clause (i) the following new clause: (ii) the credit of an individual taxpayer determined under section 41 to the extent attributable to a specified medical research small business pass-thru entity (as defined in section 469(c)(4)), . (d) Exception to limitation on pass-Thru of research credit Subsection (g) of section 41 of such Code is amended by adding at the end the following: Paragraphs (2) and (4) shall not apply with respect to any specified medical research small business pass-thru entity (as defined in section 469(c)(4)). . (e) Effective date The amendments made by this section shall apply to losses and credits arising in taxable years beginning after December 31, 2020. IV Growth in Innovation and Technology Breakthroughs 401. 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: 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, 2020, 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 2019 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: 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, 2019. 402. 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 May 31, 2020. (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 May 31, 2020. . (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 May 31, 2020. . (c) Effective date The amendments made by this section shall apply to taxable years ending after May 31, 2020.