[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2823 Introduced in Senate (IS)]
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118th CONGRESS
1st Session
S. 2823
To amend the Internal Revenue Code of 1986 to safeguard beneficial tax
treatment on certain expenses from bolstering the research and
development sectors in foreign entities of concern.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 14, 2023
Mr. Rubio 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 safeguard beneficial tax
treatment on certain expenses from bolstering the research and
development sectors in foreign entities of concern.
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 ``Securing America's R&D Advantage
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) Foreign Adversaries.--This section shall not apply to any
expenditure which is attributable to research or experimentation
conducted in any covered nation (as defined in section 4872(d)(2) of
title 10, United States Code).
``(f) 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.
``(g) 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 the
date of enactment of this Act.
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, 2022, and before
January 1, 2024, $500,000,
``(bb) in the case of any
taxable year beginning after
December 31, 2023, and before
January 1, 2025, $525,000,
``(cc) in the case of any
taxable year beginning after
December 31, 2024, and before
January 1, 2026, $550,000,
``(dd) in the case of any
taxable year beginning after
December 31, 2025, and before
January 1, 2027, $575,000,
``(ee) in the case of any
taxable year beginning after
December 31, 2026, and before
January 1, 2028, $600,000,
``(ff) in the case of any
taxable year beginning after
December 31, 2027, and before
January 1, 2029, $625,000,
``(gg) in the case of any
taxable year beginning after
December 31, 2028, and before
January 1, 2030, $650,000,
``(hh) in the case of any
taxable year beginning after
December 31, 2029, and before
January 1, 2031, $675,000,
``(ii) in the case of any
taxable year beginning after
December 31, 2030, and before
January 1, 2032, $700,000,
``(jj) in the case of any
taxable year beginning after
December 31, 2031, and before
January 1, 2033, $725,000, and
``(kk) in the case of any
taxable year beginning after
December 31, 2032, $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, 2022.
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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