119-hr1778

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1778 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 1778

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

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 March 3, 2025

 Mr. Buchanan (for himself, Mr. Kelly of Pennsylvania, Mr. Smith of 
 Nebraska, Mr. Estes, Mrs. Miller of West Virginia, and Mr. Miller of 
 Ohio) 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 2025''.

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, 2026, 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 2025' 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, 
2025.

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, 2026.
 ``
            (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, 2026.''.

    (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, 2026.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after January 31, 2025.
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