IN THE SENATE OF THE UNITED STATES
May 4, 2020
Mr. Coons (for himself, Mr. Roberts, Ms. Cortez Masto, Mr. Young, Ms. Hassan, and Mr. Daines) 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 and modify the credit for increasing research activities, and for other purposes.
This Act may be cited as the
Furthering Our Recovery With American Research & Development Act or the
Treatment of credit for qualified small businesses
Gross receipts test
Clause (i) of section 41(h)(3)(A) of the Internal Revenue Code of 1986 is amended—
$5,000,000 in subclause (I) and inserting
gross receipts in subclause (II) and inserting
gross receipts in excess of $25,000.
Definition of gross receipts
Clause (i) of section 41(h)(3)(A)(i) of such Code, as amended by paragraph (1), is further amended—
(as determined under the rules of section 448(c)(3), without regard to subparagraph (A) thereof) in subclause (I), and
(as so determined) in subclause (II).
Subparagraph (A) of section 41(h)(3) of such Code, as so amended, is further amended by adding at the end the following flush sentence:
For purposes of the preceding sentence, gross receipts shall be determined under the rules of section 448(c)(3) without regard to subparagraph (A) thereof, except that such term shall not include any contributions to the capital of a corporation (other than contributions by a shareholder) or any amount described in section 118(b) (other than receipts from customers in exchange for goods or services).
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
Limitation on election amount
Clause (i) of section 41(h)(4)(B) of the Internal Revenue Code of 1986 is amended by striking
$250,000 and inserting
Limitation on election
Clause (ii) of section 41(h)(4)(B) of the Internal Revenue Code of 1986 is amended by striking
5 or more and inserting
8 or more.
Payroll tax credit portion
Paragraph (2) of section 41(h) of the Internal Revenue Code of 1986 is amended—
by striking subparagraph (C),
or at the end of subparagraph (A), and
, or at the end of subparagraph (B) and inserting a period.
The amendments made by this section shall apply to taxable years beginning after December 31, 2019.
Inclusion of employee training expenses
Paragraph (1) of section 41(b) of the Internal Revenue Code of 1986 is amended—
and at the end of subparagraph (A),
by striking the period at the end of subparagraph (B) and inserting
, and, and
by adding at the end the following new subparagraph:
employee training expenses.
Employee training expenses
Subsection (b) of section 41 of the Internal Revenue Code of 1986 is amended—
by redesignating paragraph (4) as paragraph (5), and
by inserting after paragraph (3) the following new paragraph:
Employee training expenses
The term employee training expenses means any wages paid or incurred to an employee in connection with training for the employee to perform qualified services described in clause (i) or (ii) of paragraph (2)(B). Such term does not include wages paid or incurred in connection with general employer training which does not specifically pertain to such qualified services.
For purposes of this paragraph—
The term wages shall not include any amount taken into account under paragraph (2)(A)(i).
The rules of paragraph (2)(D) shall apply.
The amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after December 31, 2019.
Increased credit rate for certain research activities
Section 41 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
Special rules for certain high-Benefit research activities
Certain collaborative research
In the case of any qualified research expenses described in subparagraph (B), as applicable—
subsection (a)(1) shall be applied by substituting
25 percent for
subsection (c)(4)(A) shall be applied by substituting
17.5 percent for
14 percent, and
subsection (c)(4)(B)(ii) shall be applied by substituting
7.5 percent for
Qualified research expenses described in this subparagraph are qualified research expenses incurred by the taxpayer with respect to qualified research in collaboration with 1 or more other entities, which may include a qualified organization described in subparagraph (A), (B), or (C) of subsection (e)(6), an organization which is a Federal laboratory (within the meaning of subsection (b)(3)(D)(i)(III)), or a qualified research consortium (as defined in subsection (b)(3)(C)(ii)).
A collaboration shall be taken into account under clause (i) only if each entity involved in the collaboration provides or performs more than ½ of its pro rata share of the work hours for the research.
Research by United States manufacturers
In the case of a qualified domestic manufacturer, this section shall be applied—
by increasing the 20 percent amount in subsection (a)(1) by the bonus amount,
by increasing the 14 percent amount under subsection (c)(4)(A) by the alternative simplified bonus amount, and
by increasing the 6 percent amount under subsection (c)(4)(B)(ii) by the subsection (c)(4)(B) bonus amount.
Qualified domestic manufacturer
For purposes of this subsection—
The term qualified domestic manufacturer means a taxpayer who has domestic production gross receipts which are more than 50 percent of total gross receipts.
Domestic production gross receipts
The term domestic production gross receipts has the meaning given to such term under section 199(c)(4) (as in effect on December 31, 2017).
Bonus amount; alternative simplified bonus amount; subsection (c)(4)(B) amount
For purposes of subparagraph (A):
|If the percentage of total gross receipts which are domestic production gross receipts is:||The bonus amount is the following number of percentage points:||The alternative simplified bonus amount is the following number of percentage points:||The subsection (c)(4)(B) bonus amount is the following number of percentage points:|
|More than 50% but not more than 60%||1||0.7||0.3|
|More than 60% but not more than 70%||2||1.4||0.6|
|More than 70% but not more than 80%||3||2.1||0.9|
|More than 80% but not more than 90%||4||2.8||1.2|
|More than 90%||5||3.5||1.5.|
The amendments made by this section shall apply to taxable years beginning after December 31, 2020.
Transfers to federal old-age and survivors insurance trust fund
There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury from the taxes under section 3111(a) of the Internal Revenue Code of 1986 by reason of the amendments made by sections 2, 3, and 4. Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted.
Support for small business research and development
In this section—
the term Administrator means the Administrator of the Small Business Administration;
the term Commissioner means the Commissioner of Internal Revenue;
the term small business concern has the meaning given the term in section 3(a) of the Small Business Act (15 U.S.C. 632(a)); and
the term small business development center means a small business development center described in section 21 of the Small Business Act (15 U.S.C. 648).
IRS and SBA partnerships
Beginning not later than 180 days after the date of enactment of this Act, the Commissioner, in consultation with the Administrator, shall develop partnership agreements that—
provide for the development of—
basic training, including in-person or modular training sessions, relating to Federal income tax credits that benefit small business concerns and startups, especially credits for research and experimentation; and
informational materials relating to such credits, including Internal Revenue Service guidance documents;
provide the basic training and informational materials developed under paragraph (1)—
through electronic resources, including internet-based webinars; and
at physical locations, including small business development centers; and
make such materials available to—
business development programs administered by the Small Business Administration, including women’s business centers, Veteran Business Outreach Centers, and U.S. Export Assistance Centers, and nonprofit research partners such as the Service Corps of Retired Executives authorized under section 8(b)(1)(B) of the Small Business Act (15 U.S.C. 637(b)(1)(B)); and
business development entities that partner with Small Business Administration programs, including universities, nonprofits, business incubators, and business accelerators.
Not later than 180 days after the date of enactment of this Act, the Commissioner, in consultation with the Administrator, shall submit to Congress a report describing how the Internal Revenue Service in partnership with the Small Business Administration will provide outreach and educational materials to small business concerns, businesses of medium size, and startups regarding section 41(h) of the Internal Revenue Code of 1986.
Small Business Development Centers
Section 21(c)(3) of the Small Business Act (15 U.S.C. 648(c)(3)) is amended—
in subparagraph (T), by striking
and at the end;
in the first subparagraph (U) (relating to encouraging and assisting the provision of succession planning), by striking the period at the end of clause (v) and inserting a semicolon;
in the second subparagraph (U) (relating to providing training in conjunction with the United States Patent and Trademark Office)—
by redesignating that subparagraph as subparagraph (V); and
in clause (ii)(II), by striking the period at the end and inserting
; and; and
by adding at the end the following:
in conjunction with the Internal Revenue Service, providing informational materials, education, and basic training—
to small business concerns relating to Federal income tax credits available under the Internal Revenue Code of 1986, including—
credits available to businesses generally; and
credits available to small business concerns and startups specifically, especially credits for research and experimentation; and
that may be delivered—
in person; or
through a website.
Authorization of appropriations
There are authorized to be appropriated $2,000,000 per year to carry out the requirements of this section.