119-s1639

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1639 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 1639

To amend the Internal Revenue Code of 1986 to enhance tax benefits for 
 research activities.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 May 7, 2025

 Mr. Young (for himself, Ms. Hassan, Mr. Lankford, Mrs. Shaheen, Mr. 
 Daines, Mr. Warner, Mr. Barrasso, Ms. Rosen, Mr. Tillis, Mr. Peters, 
 Mr. Marshall, Mr. Padilla, Mr. Tuberville, Mrs. Murray, Mr. Kennedy, 
 Ms. Klobuchar, Mr. Ricketts, Mr. Kelly, Mrs. Britt, Mr. Kaine, Mrs. 
 Capito, Ms. Cortez Masto, Mrs. Fischer, Ms. Baldwin, Mr. Moran, Mr. 
Lujan, Mr. Hagerty, Mr. Coons, Mr. Mullin, Ms. Slotkin, Mr. Wicker, Mr. 
 King, Mr. Budd, Mr. Ossoff, Mr. Husted, and Mr. Heinrich) 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 enhance tax benefits for 
 research activities.

 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 and Jobs Act''.

SEC. 2. RESTORING IMMEDIATE EXPENSING FOR RESEARCH AND DEVELOPMENT 
 INVESTMENTS.

    (a) In General.--

Section 174 of the Internal Revenue Code of 1986 
is amended to read as follows:

``

SEC. 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.
 ``

    (f) Cross References.--
 ``

    (1) For adjustments to basis of property for amounts 
 allowed as deductions as deferred expenses under subsection

    (b) , see 

section 1016

    (a)

    (14) .
 ``

    (2) For election of 10-year amortization of expenditures 
 allowable as a deduction under subsection

    (a) , see 

section 59

    (e) .''.

    (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.

SEC. 3. EXPANDING REFUNDABLE RESEARCH CREDIT FOR NEW AND SMALL 
 BUSINESSES.

    (a) Increasing Cap on Refundable Credit.--

    (1) In general.--Subclause
            (I) of 

section 41

    (h)

    (4)
        (B)
            (i) of 
 the Internal Revenue Code of 1986 is amended by striking 
 ``$250,000'' and inserting ``the applicable amount''.

    (2) Applicable amount.--Subclause
            (II) of 

section 41

    (h)

    (4)
        (B)
            (i) of such Code is amended to read as follows:
 ``
            (II) Applicable amount.--For 
 purposes of subclause
            (I) , the 
 applicable amount is--
 ``

    (aa) in the case of any 
 taxable year beginning after 
 December 31, 2024, and before 
 January 1, 2026, $500,000,
 ``

    (bb) in the case of any 
 taxable year beginning after 
 December 31, 2025, and before 
 January 1, 2027, $525,000,
 ``
            (cc) in the case of any 
 taxable year beginning after 
 December 31, 2026, and before 
 January 1, 2028, $550,000,
 ``
            (dd) in the case of any 
 taxable year beginning after 
 December 31, 2027, and before 
 January 1, 2029, $575,000,
 ``

    (ee) in the case of any 
 taxable year beginning after 
 December 31, 2028, and before 
 January 1, 2030, $600,000,
 ``

    (ff) in the case of any 
 taxable year beginning after 
 December 31, 2029, and before 
 January 1, 2031, $625,000,
 ``

    (gg) in the case of any 
 taxable year beginning after 
 December 31, 2030, and before 
 January 1, 2032, $650,000,
 ``

    (hh) in the case of any 
 taxable year beginning after 
 December 31, 2031, and before 
 January 1, 2033, $675,000,
 ``
            (ii) in the case of any 
 taxable year beginning after 
 December 31, 2032, and before 
 January 1, 2034, $700,000,
 ``

    (jj) in the case of any 
 taxable year beginning after 
 December 31, 2033, and before 
 January 1, 2035, $725,000, and
 ``

    (kk) in the case of any 
 taxable year beginning after 
 December 31, 2034, $750,000.''.

    (3) Conforming amendments.--
        (A) Clause
            (ii) of 

section 41

    (h)

    (5)
        (B) of such Code 
 is amended by striking ``each of the $250,000 amounts'' 
 and inserting ``the applicable amount''.
        (B) Section 3111

    (f) of such Code is amended--
            (i) in paragraph

    (1) --
            (I) by striking ``(applied without 
 regard to subclause
            (II) thereof), 
 and'' and inserting a period,
            (II) by striking subparagraph
        (B) , 
 and
            (III) by striking ``for a taxable 
 year'' and all that follows through 
 ``allowed as a credit'' and inserting 
 ``for a taxable year, there shall be 
 allowed as a credit'',
            (ii) in paragraph

    (2) --
            (I) by striking ``paragraph

    (1)
        (A) '' and inserting ``paragraph

    (1) '', and
            (II) by striking ``, and the credit 
 allowed by paragraph

    (1)
        (B) shall not 
 exceed the tax imposed by subsection

    (b) for any calendar quarter,'', and
            (iii) in paragraph

    (4) --
            (I) by striking ``credits'' and 
 inserting ``credit'', and
            (II) by striking ``or

    (b) ''.

    (b) Extension of Eligibility and Applicability of Election.--

    (1) 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''.

    (2) Extension of limitation on election.--Clause
            (ii) of 
 

section 41

    (h)

    (4)
        (B) of such Code is amended by striking ``5 or 
 more'' and inserting ``8 or more''.
            (c) Gross Receipts Test.--Clause
            (i) of 

section 41

    (h)

    (3)
        (A) of the 
Internal Revenue Code of 1986 is amended--

    (1) by striking ``$5,000,000'' in subclause
            (I) and 
 inserting ``$15,000,000'', and

    (2) by striking ``gross receipts'' in subclause
            (II) and 
 inserting ``gross receipts in excess of $25,000''.
            (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024.

SEC. 4. INCREASING ACCESS TO THE RESEARCH CREDIT FOR STARTUPS.

    (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) subparagraph
        (A) shall be applied by 
 substituting `20 percent' for `14 percent', and
 ``
            (ii) if subparagraph
        (B) applies to such 
 taxpayer, at the election of the taxpayer--
 ``
            (I) subparagraph
        (B)
            (ii) shall be 
 applied by substituting `10 percent' 
 for `6 percent', or
 ``
            (II) in lieu of applying 
 subparagraph
        (B) , 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 the date of the enactment of this Act.
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