CREATE JOBS Act

II 118TH CONGRESS 1ST SESSION S. 314 To amend the Internal Revenue Code of 1986 to permanently allow a tax deduction at the time an investment in qualified property is made, and for other purposes. IN THE SENATE OF THE UNITED STATES FEBRUARY 9, 2023 Mr. CRUZ 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 permanently allow a tax deduction at the time an investment in quali- fied property is made, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Cost Recovery and Ex- 4 pensing Acceleration to Transform the Economy and 5 Jumpstart Opportunities for Businesses and Startups 6 Act’’ or the ‘‘CREATE JOBS Act’’. 7 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 314 IS SEC. 2. PERMANENT FULL EXPENSING FOR QUALIFIED 1 PROPERTY. 2 (a) IN GENERAL.—Paragraph (6) of section 168(k) 3 of the Internal Revenue Code of 1986 is amended to read 4 as follows: 5 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes 6 of this subsection, the term ‘applicable percentage’ 7 means, in the case of property placed in service (or, 8 in the case of a specified plant described in para- 9 graph (5), a plant which is planted or grafted) after 10 September 27, 2017, 100 percent.’’. 11 (b) CONFORMING AMENDMENTS.— 12 (1) Section 168(k) of the Internal Revenue 13 Code of 1986 is amended— 14 (A) in paragraph (2)— 15 (i) in subparagraph (A)— 16 (I) in clause (i)(V), by inserting 17 ‘‘and’’ at the end, 18 (II) in clause (ii), by striking 19 ‘‘clause (ii) of subparagraph (E), 20 and’’ and inserting ‘‘clause (i) of sub- 21 paragraph (E).’’, and 22 (III) by striking clause (iii), 23 (ii) in subparagraph (B)— 24 (I) in clause (i)— 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •S 314 IS (aa) by striking subclauses 1 (II) and (III), and 2 (bb) by redesignating sub- 3 clauses (IV) through (VI) as sub- 4 clauses (II) through (IV), respec- 5 tively, 6 (II) by striking clause (ii), and 7 (III) by redesignating clauses 8 (iii) and (iv) as clauses (ii) and (iii), 9 respectively, 10 (iii) in subparagraph (C)— 11 (I) in clause (i), by striking ‘‘and 12 subclauses (II) and (III) of subpara- 13 graph (B)(i)’’, and 14 (II) in clause (ii), by striking 15 ‘‘subparagraph (B)(iii)’’ and inserting 16 ‘‘subparagraph (B)(ii)’’, and 17 (iv) in subparagraph (E)— 18 (I) by striking clause (i), and 19 (II) by redesignating clauses (ii) 20 and (iii) as clauses (i) and (ii), respec- 21 tively, and 22 (B) in paragraph (5)(A), by striking 23 ‘‘planted before January 1, 2027, or is grafted 24 before such date to a plant that has already 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •S 314 IS been planted,’’ and inserting ‘‘planted or graft- 1 ed’’. 2 (2) Section 460(c)(6)(B) of such Code is 3 amended by striking ‘‘which’’ and all that follows 4 through the period and inserting ‘‘which has a recov- 5 ery period of 7 years or less.’’. 6 (c) EFFECTIVE DATE.—The amendments made by 7 this section shall take effect as if included in section 8 13201 of Public Law 115–97. 9 SEC. 3. NEUTRAL COST RECOVERY DEPRECIATION ADJUST- 10 MENT FOR RESIDENTIAL RENTAL PROPERTY 11 AND NONRESIDENTIAL REAL PROPERTY. 12 (a) IN GENERAL.—Section 168 of the Internal Rev- 13 enue Code of 1986 is amended by adding at the end there- 14 of the following new subsection: 15 ‘‘(n) NEUTRAL COST RECOVERY DEPRECIATION AD- 16 JUSTMENT FOR RESIDENTIAL RENTAL PROPERTY AND 17 NONRESIDENTIAL REAL PROPERTY.— 18 ‘‘(1) IN GENERAL.—In the case of any applica- 19 ble property, the deduction under this section with 20 respect to such property for any taxable year after 21 the taxable year during which the property is placed 22 in service shall be— 23 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •S 314 IS ‘‘(A) the amount determined under this 1 section for such taxable year without regard to 2 this subsection, multiplied by 3 ‘‘(B) the applicable neutral cost recovery 4 ratio for such taxable year. 5 ‘‘(2) APPLICABLE NEUTRAL COST RECOVERY 6 RATIO.—For purposes of paragraph (1), the applica- 7 ble neutral cost recovery ratio for the applicable 8 property for any taxable year is the number deter- 9 mined by— 10 ‘‘(A) dividing— 11 ‘‘(i) the gross domestic product 12 deflator for the calendar quarter ending in 13 such taxable year which corresponds to the 14 calendar quarter during which the property 15 was placed in service by the taxpayer, by 16 ‘‘(ii) the gross domestic product 17 deflator for the calendar quarter during 18 which the property was placed in service by 19 the taxpayer, and 20 ‘‘(B) then multiplying the number deter- 21 mined under subparagraph (A) by the number 22 equal to 1.03 to the nth power where ‘n’ is the 23 number of full years in the period beginning on 24 the 1st day of the calendar quarter during 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •S 314 IS which the property was placed in service by the 1 taxpayer and ending on the day before the be- 2 ginning of the corresponding calendar quarter 3 ending during such taxable year. 4 The applicable neutral cost recovery ratio shall never 5 be less than 1. The applicable neutral cost recovery 6 ratio shall be rounded to the nearest 1⁄1000. 7 ‘‘(3) SPECIAL RULE FOR EXISTING PROP- 8 ERTY.—In the case of any applicable property which 9 is placed in service before the date of enactment of 10 this subsection, subparagraphs (A)(ii) and (B) of 11 paragraph (2) shall be applied by substituting ‘cal- 12 endar quarter which includes the date of enactment 13 of this subsection’ for ‘calendar quarter during 14 which the property was placed in service by the tax- 15 payer’ each place it appears. 16 ‘‘(4) GROSS DOMESTIC PRODUCT DEFLATOR.— 17 For purposes of paragraph (2), the gross domestic 18 product deflator for any calendar quarter is the im- 19 plicit price deflator for the gross domestic product 20 for such quarter (as shown in the first revision 21 thereof). 22 ‘‘(5) ELECTION NOT TO HAVE SUBSECTION 23 APPLY.—This subsection shall not apply to any ap- 24 plicable property if the taxpayer elects not to have 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •S 314 IS this subsection apply to such property. Such an elec- 1 tion, once made, shall be irrevocable. 2 ‘‘(6) ADDITIONAL DEDUCTION NOT TO AFFECT 3 BASIS OR RECAPTURE.— 4 ‘‘(A) IN GENERAL.—The additional 5 amount determined under this section by reason 6 of this subsection shall not be taken into ac- 7 count in determining the adjusted basis of any 8 applicable property or of any interest in a pass- 9 thru entity which holds such property and shall 10 not be treated as a deduction for depreciation 11 for purposes of sections 1245 and 1250. 12 ‘‘(B) PASS-THRU ENTITY DEFINED.—For 13 purposes of subparagraph (A), the term ‘pass- 14 thru entity’ means— 15 ‘‘(i) a regulated investment company, 16 ‘‘(ii) a real estate investment trust, 17 ‘‘(iii) an S corporation, 18 ‘‘(iv) a partnership, 19 ‘‘(v) an estate or trust, and 20 ‘‘(vi) a common trust fund. 21 ‘‘(7) APPLICABLE PROPERTY.—For purposes of 22 this subsection, the term ‘applicable property’ means 23 residential rental property or nonresidential real 24 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •S 314 IS property (as such terms are defined in subsection 1 (e)(2)).’’. 2 (b) MINIMUM TAX TREATMENT.—Paragraph (1) of 3 section 56(a) of the Internal Revenue Code of 1986 is 4 amended by adding at the end thereof the following new 5 subparagraph: 6 ‘‘(E) USE OF NEUTRAL COST RECOVERY 7 RATIO.—In the case of property to which sec- 8 tion 168(n) applies, the deduction allowable 9 under this paragraph with respect to such prop- 10 erty for any taxable year (after the taxable year 11 during which the property is placed in service) 12 shall be— 13 ‘‘(i) the amount so allowable for such 14 taxable year without regard to this sub- 15 paragraph, multiplied by 16 ‘‘(ii) the applicable neutral cost recov- 17 ery ratio for such taxable year (as deter- 18 mined under section 168(n)). 19 This subparagraph shall not apply to any prop- 20 erty with respect to which there is an election 21 in effect not to have section 168(n) apply.’’. 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to property placed in service be- 24 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •S 314 IS fore, on, or after the date of the enactment of this Act, 1 with respect to taxable years ending on or after such date. 2 SEC. 4. ELIMINATION OF AMORTIZATION OF RESEARCH 3 AND EXPERIMENTAL EXPENDITURES. 4 (a) IN GENERAL.—Section 174 of the Internal Rev- 5 enue Code of 1986 is amended to read as follows: 6 ‘‘SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES. 7 ‘‘(a) TREATMENT AS EXPENSES.— 8 ‘‘(1) IN GENERAL.—A taxpayer may treat re- 9 search or experimental expenditures which are paid 10 or incurred by him during the taxable year in con- 11 nection with his trade or business as expenses which 12 are not chargeable to capital account. The expendi- 13 tures so treated shall be allowed as a deduction. 14 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 15 ‘‘(A) WITHOUT CONSENT.—A taxpayer 16 may, without the consent of the Secretary, 17 adopt the method provided in this subsection 18 for his first taxable year for which expenditures 19 described in paragraph (1) are paid or incurred. 20 ‘‘(B) WITH CONSENT.—A taxpayer may, 21 with the consent of the Secretary, adopt at any 22 time the method provided in this subsection. 23 ‘‘(3) SCOPE.—The method adopted under this 24 subsection shall apply to all expenditures described 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •S 314 IS in paragraph (1). The method adopted shall be ad- 1 hered to in computing taxable income for the taxable 2 year and for all subsequent taxable years unless, 3 with the approval of the Secretary, a change to a 4 different method is authorized with respect to part 5 or all of such expenditures. 6 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND 7 EXPERIMENTAL EXPENDITURES.— 8 ‘‘(1) IN GENERAL.—At the election of the tax- 9 payer, made in accordance with regulations pre- 10 scribed by the Secretary, research or experimental 11 expenditures which are— 12 ‘‘(A) paid or incurred by the taxpayer in 13 connection with his trade or business, 14 ‘‘(B) not treated as expenses under sub- 15 section (a), and 16 ‘‘(C) chargeable to capital account but not 17 chargeable to property of a character which is 18 subject to the allowance under section 167 (re- 19 lating to allowance for depreciation, etc.) or sec- 20 tion 611 (relating to allowance for depletion), 21 may be treated as deferred expenses. In computing 22 taxable income, such deferred expenses shall be al- 23 lowed as a deduction ratably over such period of not 24 less than 60 months as may be selected by the tax- 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •S 314 IS payer (beginning with the month in which the tax- 1 payer first realizes benefits from such expenditures). 2 Such deferred expenses are expenditures properly 3 chargeable to capital account for purposes of section 4 1016(a)(1) (relating to adjustments to basis of prop- 5 erty). 6 ‘‘(2) TIME FOR AND SCOPE OF ELECTION.—The 7 election provided by paragraph (1) may be made for 8 any taxable year, but only if made not later than the 9 time prescribed by law for filing the return for such 10 taxable year (including extensions thereof). The 11 method so elected, and the period selected by the 12 taxpayer, shall be adhered to in computing taxable 13 income for the taxable year for which the election is 14 made and for all subsequent taxable years unless, 15 with the approval of the Secretary, a change to a 16 different method (or to a different period) is author- 17 ized with respect to part or all of such expenditures. 18 The election shall not apply to any expenditure paid 19 or incurred during any taxable year before the tax- 20 able year for which the taxpayer makes the election. 21 ‘‘(c) LAND AND OTHER PROPERTY.—This section 22 shall not apply to any expenditure for the acquisition or 23 improvement of land, or for the acquisition or improve- 24 ment of property to be used in connection with the re- 25 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S314.IS S314 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •S 314 IS search or experimentation and of a character which is sub- 1 ject to the allowance under section 167 (relating to allow- 2 ance for depreciation, etc.) or section 611 (relating to al- 3 lowance for depletion); but for purposes of this section al- 4 lowances under section 167, and allowances under section 5 611, shall be considered as expenditures. 6 ‘‘(d) EXPLORATION EXPENDITURES.—This section 7 shall not apply to any expenditure paid or incurred for 8 the purpose of ascertaining the existence, location, extent, 9 or quality of any deposit of ore or other mineral (including 10 oil and gas). 11 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES 12 ELIGIBLE.—This section shall apply to a research or ex- 13 perimental expenditure only to the extent that the amount 14 thereof is reasonable under the circumstances. 15 ‘‘(f) CROSS REFERENCES.— 16 ‘‘(1) For adjustments to basis of property for 17 amounts allowed as deductions as deferred expenses 18 under subsection (b), see section 1016(a)(14). 19 ‘‘(2) For election of 10-year amortization of ex- 20 penditures allowable as a deduction under subsection 21 (a), see section 59(e).’’. 22 (b) CLERICAL AMENDMENT.—The table of sections 23 for part VI of subchapter B of chapter 1 of such Code 24 VerDate Sep 11 2014 05:41 Feb 17, 2023 Jkt 039200 [Text truncated for display. 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