IN THE SENATE OF THE UNITED STATES
July 23, 2019
Ms. Hassan (for herself and Mr. Tillis) introduced the following bill; which was read twice and referred to the Committee on Finance
To amend the Internal Revenue Code of 1986 to expand refundability and increase simplification of the research credit for certain small businesses.
This Act may be cited as the
Research and Development Tax Credit Expansion Act of 2019.
Expansion of refundable research credit for new and small businesses
Doubling cap on refundable credit
Clause (i) of section 41(h)(4)(B) of the Internal Revenue Code of 1986 is amended by striking
$250,000 and inserting
Adjustment for inflation
Paragraph (4) of section 41(h) of such Code is amended—
by redesignating subparagraph (C) as subparagraph (D),
by redesignating clause (ii) of subparagraph (B) as subparagraph (C), and by moving such subparagraph 2 ems to the left,
Limitations in the heading of subparagraph (B) and inserting
Limitation on amount of election,
Amount in the heading of clause (i) of subparagraph (B) and inserting
In general, and
by adding at the end of subparagraph (B), as amended by the preceding subparagraphs of this paragraph, the following new clause:
Adjustment for inflation
In the case of a taxable year beginning after 2020, the $500,000 amount in clause (i) shall be increased by an amount equal to—
such dollar amount, multiplied by
the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting
2016 in subparagraph (A)(ii) thereof.
Clause (ii) of section 41(h)(5)(B) of such Code is amended by striking
the $250,000 amount and inserting
the amount in effect.
Credit refundable against Medicare and unemployment taxes
Paragraph (1) of section 3111(f) of the Internal Revenue Code of 1986 is amended by striking
subsection (a) and inserting
subsections (a) and (b) and section 3301.
Paragraph (2) of section 3111(f) of such Code is amended by striking
the tax imposed by subsection (a) and inserting
the sum of the taxes imposed by subsection (a), subsection (b), and section 3301.
Section 3302 of such Code is amended by adding at the end the following new subsection:
Credit for research expenditures of qualified small businesses
Any portion of the credit under section 3111(f) which is credited under such section to the tax under section 3301 shall be treated as a credit under this section. Subsection (c) shall not apply to any such credit.
Doubling eligibility threshold
Subclause (I) of section 41(h)(3)(A)(i) of the Internal Revenue Code of 1986 is amended by striking
$5,000,000 and inserting
The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
Modifications to alternative simplified credit for new and small businesses
Paragraph (4) of section 41(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:
Special rules for qualified small businesses
In the case of a qualified small business (as defined in subsection (h)(3))—
Subparagraph (A) shall be applied by substituting
20 percent for
Special rule for 1st year of qualified research expenses
If the taxpayer has no qualified research expenses in any taxable year preceding the taxable year for which the credit is being determined, subparagraph (B)(ii) shall be applied by substituting
20 percent for
Special rule for other years
If the taxpayer is not described in clause (ii) for the taxable year, and subparagraph (B) applies to such taxpayer for such year, at the election of the taxpayer—
subparagraph (B)(ii) shall be applied by substituting
10 percent for
6 percent, or
subparagraph (B) shall not apply, and 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.
The amendment made by this section shall apply to taxable years beginning after December 31, 2019.