Research and Development Tax Credit Expansion Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2207 To amend the Internal Revenue Code of 1986 to expand refundability and increase simplification of the research credit for certain small businesses. 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 A BILL To amend the Internal Revenue Code of 1986 to expand refundability and increase simplification of the research credit for certain small businesses. 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 ‘‘Research and Develop- 4 ment Tax Credit Expansion Act of 2019’’. 5 SEC. 2. EXPANSION OF REFUNDABLE RESEARCH CREDIT 6 FOR NEW AND SMALL BUSINESSES. 7 (a) DOUBLING CAP ON REFUNDABLE CREDIT.— 8 (1) IN GENERAL.—Clause (i) of section 9 41(h)(4)(B) of the Internal Revenue Code of 1986 10 VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS 2 •S 2207 IS is amended by striking ‘‘$250,000’’ and inserting 1 ‘‘$500,000’’. 2 (2) ADJUSTMENT FOR INFLATION.—Paragraph 3 (4) of section 41(h) of such Code is amended— 4 (A) by redesignating subparagraph (C) as 5 subparagraph (D), 6 (B) by redesignating clause (ii) of subpara- 7 graph (B) as subparagraph (C), and by moving 8 such subparagraph 2 ems to the left, 9 (C) by striking ‘‘LIMITATIONS’’ in the 10 heading of subparagraph (B) and inserting 11 ‘‘LIMITATION ON AMOUNT OF ELECTION’’, 12 (D) by striking ‘‘AMOUNT’’ in the heading 13 of clause (i) of subparagraph (B) and inserting 14 ‘‘IN GENERAL’’, and 15 (E) by adding at the end of subparagraph 16 (B), as amended by the preceding subpara- 17 graphs of this paragraph, the following new 18 clause: 19 ‘‘(ii) ADJUSTMENT FOR INFLATION.— 20 In the case of a taxable year beginning 21 after 2020, the $500,000 amount in clause 22 (i) shall be increased by an amount equal 23 to— 24 VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS 3 •S 2207 IS ‘‘(I) such dollar amount, multi- 1 plied by 2 ‘‘(II) the cost-of-living adjust- 3 ment determined under section 1(f)(3) 4 for the calendar year in which the tax- 5 able year begins, determined by sub- 6 stituting ‘2019’ for ‘2016’ in subpara- 7 graph (A)(ii) thereof. 8 If any increase under the preceding sen- 9 tence is not a multiple of $100, such in- 10 crease shall be rounded to the nearest mul- 11 tiple of $100.’’. 12 (3) CONFORMING AMENDMENT.—Clause (ii) of 13 section 41(h)(5)(B) of such Code is amended by 14 striking ‘‘the $250,000 amount’’ and inserting ‘‘the 15 amount in effect’’. 16 (b) CREDIT REFUNDABLE AGAINST MEDICARE AND 17 UNEMPLOYMENT TAXES.— 18 (1) IN GENERAL.—Paragraph (1) of section 19 3111(f) of the Internal Revenue Code of 1986 is 20 amended by striking ‘‘subsection (a)’’ and inserting 21 ‘‘subsections (a) and (b) and section 3301’’. 22 (2) CONFORMING AMENDMENTS.— 23 (A) Paragraph (2) of section 3111(f) of 24 such Code is amended by striking ‘‘the tax im- 25 VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS 4 •S 2207 IS posed by subsection (a)’’ and inserting ‘‘the 1 sum of the taxes imposed by subsection (a), 2 subsection (b), and section 3301’’. 3 (B) Section 3302 of such Code is amended 4 by adding at the end the following new sub- 5 section: 6 ‘‘(i) CREDIT FOR RESEARCH EXPENDITURES OF 7 QUALIFIED SMALL BUSINESSES.—Any portion of the 8 credit under section 3111(f) which is credited under such 9 section to the tax under section 3301 shall be treated as 10 a credit under this section. Subsection (c) shall not apply 11 to any such credit.’’. 12 (c) DOUBLING ELIGIBILITY THRESHOLD.—Sub- 13 clause (I) of section 41(h)(3)(A)(i) of the Internal Rev- 14 enue Code of 1986 is amended by striking ‘‘$5,000,000’’ 15 and inserting ‘‘$10,000,000’’. 16 (d) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to taxable years beginning after 18 December 31, 2019. 19 SEC. 3. MODIFICATIONS TO ALTERNATIVE SIMPLIFIED 20 CREDIT FOR NEW AND SMALL BUSINESSES. 21 (a) IN GENERAL.—Paragraph (4) of section 41(c) of 22 the Internal Revenue Code of 1986 is amended by adding 23 at the end the following new subparagraph: 24 VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS 5 •S 2207 IS ‘‘(D) SPECIAL RULES FOR QUALIFIED 1 SMALL BUSINESSES.—In the case of a qualified 2 small business (as defined in subsection 3 (h)(3))— 4 ‘‘(i) CREDIT RATE.—Subparagraph 5 (A) shall be applied by substituting ‘20 6 percent’ for ‘14 percent’. 7 ‘‘(ii) SPECIAL RULE FOR 1ST YEAR OF 8 QUALIFIED RESEARCH EXPENSES.—If the 9 taxpayer has no qualified research ex- 10 penses in any taxable year preceding the 11 taxable year for which the credit is being 12 determined, subparagraph (B)(ii) shall be 13 applied by substituting ‘20 percent’ for ‘6 14 percent’. 15 ‘‘(iii) SPECIAL RULE FOR OTHER 16 YEARS.—If the taxpayer is not described in 17 clause (ii) for the taxable year, and sub- 18 paragraph (B) applies to such taxpayer for 19 such year, at the election of the taxpayer— 20 ‘‘(I) subparagraph (B)(ii) shall 21 be applied by substituting ‘10 percent’ 22 for ‘6 percent’, or 23 ‘‘(II) subparagraph (B) shall not 24 apply, and the average under subpara- 25 VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS 6 •S 2207 IS graph (A) shall be determined by dis- 1 regarding any taxable year in the 3- 2 year period described in such subpara- 3 graph in which there were no qualified 4 research expenses.’’. 5 (b) EFFECTIVE DATE.—The amendment made by 6 this section shall apply to taxable years beginning after 7 December 31, 2019. 8 Æ VerDate Sep 11 2014 22:28 Jul 26, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\S2207.IS S2207 kjohnson on DSK79L0C42 with BILLS