H. R. 256
IN THE HOUSE OF REPRESENTATIVES
January 9, 2015
Mr. Honda introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to allow a credit against income tax for equity investments in research intensive small business concerns.
This Act may be cited as the
Creating Jobs From Innovative Small Businesses Act of 2015.
Credit for investments in small technology innovation companies
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:
Research intensive investment tax credit
Allowance of credit
For purposes of section 38, the research intensive investment tax credit determined under this section for the taxable year is an amount equal to 20 percent of the amount paid by the taxpayer during such year to acquire a qualified equity investment in a qualified research intensive small business concern.
The taxpayer’s credit determined under this section for the taxable year shall not exceed the excess (if any) of—
the taxpayer’s (and any predecessor’s) aggregate credit determined under this section for all prior taxable years.
For purposes of paragraph (1), all related persons shall be treated as 1 person, and the dollar amount in paragraph (1)(A) shall be allocated among such persons under regulations prescribed by the Secretary.
A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b).
For purposes of this section—
Qualified equity investment
The term qualified equity investment means any equity investment in a qualified research intensive small business concern if—
such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash, and
such investment is designated for purposes of this section by such concern.
The term equity investment means—
any stock (other than nonqualified preferred stock as defined in section 351(g)(2)) in an entity which is a corporation, and
any capital interest in an entity which is a partnership.
A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this subsection.
Qualified research intensive small business concern
The term qualified research intensive small business concern means, with respect to any taxable year, any small business concern (as defined in section 3 of the Small Business Act) if—
such concern employs an average of fewer than 500 employees on business days during such year, and
at least 50 percent of the gross expenditures of such entity for such year are research or experimental expenditures under section 174.
National limitation on amount of investments designated
There is a research intensive investment tax credit limitation for each calendar year. Such limitation is—
$500,000,000 for 2015,
$750,000,000 for 2016 and 2017, and
$1,000,000,000 for 2018 and 2019.
Allocation of limitation
The limitation under paragraph (1) shall be allocated by the Secretary among qualified research intensive small business concerns selected by the Secretary.
Carryover of unused limitation
If the research intensive investment tax credit limitation for any calendar year exceeds the aggregate amount allocated under paragraph (2) for such year, such limitation for the succeeding calendar year shall be increased by the amount of such excess. No amount may be carried under the preceding sentence to any calendar year after 2023.
Certain taxpayers not eligible
No credit shall be determined under this section for any equity investment in any qualified research intensive small business concern made by any individual who, at the time of the investment, is—
an employee of such concern, or
a member of the family (within the meaning of section 267(c)(4)) of an employee of such concern.
The basis of any qualified equity investment shall be reduced by the amount of any credit determined under this section with respect to such investment. This subsection shall not apply for purposes of sections 1202, 1400B, and 1400F.
The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations—
which prevent the abuse of the purposes of this section,
which impose appropriate reporting requirements, and
which apply the provisions of this section to newly formed entities.
Credit made part of general business credit
Subsection (b) of section 38 of such Code (relating to current year business credit) is amended by striking
plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting
, plus, and by adding at the end the following new paragraph:
the research intensive investment tax credit determined under section 45S.
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. 45S. Research intensive investment tax credit..
The amendments made by this section shall apply to investments made after December 31, 2014, in taxable years ending after such date.