AICA Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 4549 To amend the Internal Revenue Code of 1986 to restore the deduction for research and experimental expenditures. IN THE HOUSE OF REPRESENTATIVES SEPTEMBER 27, 2019 Mr. LARSON of Connecticut (for himself and Mr. ESTES) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to restore the deduction for research and experimental expenditures. 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 ‘‘American Innovation 4 and Competitiveness Act of 2019’’ or the ‘‘AICA Act of 5 2019’’. 6 SEC. 2. RESEARCH AND EXPERIMENTAL EXPENDITURES. 7 (a) IN GENERAL.—Section 174 is amended to read 8 as follows: 9 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 4549 IH ‘‘SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES. 1 ‘‘(a) TREATMENT AS EXPENSES.— 2 ‘‘(1) IN GENERAL.—A taxpayer may treat re- 3 search or experimental expenditures which are paid 4 or incurred by him during the taxable year in con- 5 nection with his trade or business as expenses which 6 are not chargeable to capital account. The expendi- 7 tures so treated shall be allowed as a deduction. 8 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 9 ‘‘(A) WITHOUT CONSENT.—A taxpayer 10 may, without the consent of the Secretary, 11 adopt the method provided in this subsection 12 for his first taxable year for which expenditures 13 described in paragraph (1) are paid or incurred. 14 ‘‘(B) WITH CONSENT.—A taxpayer may, 15 with the consent of the Secretary, adopt at any 16 time the method provided in this subsection. 17 ‘‘(3) SCOPE.—The method adopted under this 18 subsection shall apply to all expenditures described 19 in paragraph (1). The method adopted shall be ad- 20 hered to in computing taxable income for the taxable 21 year and for all subsequent taxable years unless, 22 with the approval of the Secretary, a change to a 23 different method is authorized with respect to part 24 or all of such expenditures. 25 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 4549 IH ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND 1 EXPERIMENTAL EXPENDITURES.— 2 ‘‘(1) IN GENERAL.—At the election of the tax- 3 payer, made in accordance with regulations pre- 4 scribed by the Secretary, research or experimental 5 expenditures which are— 6 ‘‘(A) paid or incurred by the taxpayer in 7 connection with his trade or business, 8 ‘‘(B) not treated as expenses under sub- 9 section (a), and 10 ‘‘(C) chargeable to capital account but not 11 chargeable to property of a character which is 12 subject to the allowance under section 167 (re- 13 lating to allowance for depreciation, etc.) or sec- 14 tion 611 (relating to allowance for depletion), 15 may be treated as deferred expenses. In computing 16 taxable income, such deferred expenses shall be al- 17 lowed as a deduction ratably over such period of not 18 less than 60 months as may be selected by the tax- 19 payer (beginning with the month in which the tax- 20 payer first realizes benefits from such expenditures). 21 Such deferred expenses are expenditures properly 22 chargeable to capital account for purposes of section 23 1016(a)(1) (relating to adjustments to basis of prop- 24 erty). 25 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 4549 IH ‘‘(2) TIME FOR AND SCOPE OF ELECTION.—The 1 election provided by paragraph (1) may be made for 2 any taxable year, but only if made not later than the 3 time prescribed by law for filing the return for such 4 taxable year (including extensions thereof). The 5 method so elected, and the period selected by the 6 taxpayer, shall be adhered to in computing taxable 7 income for the taxable year for which the election is 8 made and for all subsequent taxable years unless, 9 with the approval of the Secretary, a change to a 10 different method (or to a different period) is author- 11 ized with respect to part or all of such expenditures. 12 The election shall not apply to any expenditure paid 13 or incurred during any taxable year before the tax- 14 able year for which the taxpayer makes the election. 15 ‘‘(c) LAND AND OTHER PROPERTY.—This section 16 shall not apply to any expenditure for the acquisition or 17 improvement of land, or for the acquisition or improve- 18 ment of property to be used in connection with the re- 19 search or experimentation and of a character which is sub- 20 ject to the allowance under section 167 (relating to allow- 21 ance for depreciation, etc.) or section 611 (relating to al- 22 lowance for depletion); but for purposes of this section al- 23 lowances under section 167, and allowances under section 24 611, shall be considered as expenditures. 25 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 4549 IH ‘‘(d) EXPLORATION EXPENDITURES.—This section 1 shall not apply to any expenditure paid or incurred for 2 the purpose of ascertaining the existence, location, extent, 3 or quality of any deposit of ore or other mineral (including 4 oil and gas). 5 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES 6 ELIGIBLE.—This section shall apply to a research or ex- 7 perimental expenditure only to the extent that the amount 8 thereof is reasonable under the circumstances.’’. 9 (b) CLERICAL AMENDMENT.—The table of sections 10 for part VI of subchapter B of chapter 1 is amended by 11 striking the item relating to section 174 and inserting the 12 following new item: 13 ‘‘Sec. 174. Research and experimental expenditures’’. (c) CONFORMING AMENDMENTS.— 14 (1) Section 41(d)(1)(A) is amended by striking 15 ‘‘specified research or experimental expenditures 16 under section 174’’ and inserting ‘‘expenses under 17 section 174’’. 18 (2) Section 280C(c) is amended to read as fol- 19 lows: 20 ‘‘(c) CREDIT FOR INCREASING RESEARCH ACTIVI- 21 TIES.— 22 ‘‘(1) IN GENERAL.—No deduction shall be al- 23 lowed for that portion of the qualified research ex- 24 penses (as defined in section 41(b)) or basic re- 25 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 4549 IH search expenses (as defined in section 41(e)(2)) oth- 1 erwise allowable as a deduction for the taxable year 2 which is equal to the amount of the credit deter- 3 mined for such taxable year under section 41(a). 4 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP- 5 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 6 ‘‘(A) the amount of the credit determined 7 for the taxable year under section 41(a)(1), ex- 8 ceeds 9 ‘‘(B) the amount allowable as a deduction 10 for such taxable year for qualified research ex- 11 penses or basic research expenses (determined 12 without regard to paragraph (1)), 13 the amount chargeable to capital account for the 14 taxable year for such expenses shall be reduced by 15 the amount of such excess. 16 ‘‘(3) ELECTION OF REDUCED CREDIT.— 17 ‘‘(A) IN GENERAL.—In the case of any 18 taxable year for which an election is made 19 under this paragraph— 20 ‘‘(i) paragraphs (1) and (2) shall not 21 apply, and 22 ‘‘(ii) the amount of the credit under 23 section 41(a) shall be the amount deter- 24 mined under subparagraph (B). 25 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 4549 IH ‘‘(B) AMOUNT OF REDUCED CREDIT.—The 1 amount of credit determined under this sub- 2 paragraph for any taxable year shall be the 3 amount equal to the excess of— 4 ‘‘(i) the amount of credit determined 5 under section 41(a) without regard to this 6 paragraph, over 7 ‘‘(ii) the product of— 8 ‘‘(I) the amount described in 9 clause (i), and 10 ‘‘(II) the rate of tax under sec- 11 tion 11(b). 12 ‘‘(C) ELECTION.—An election under this 13 paragraph for any taxable year shall be made 14 not later than the time for filing the return of 15 tax for such year (including extensions), shall 16 be made on such return, and shall be made in 17 such manner as the Secretary may prescribe. 18 Such an election, once made, shall be irrev- 19 ocable. 20 ‘‘(4) CONTROLLED GROUPS.—Paragraph (3) of 21 subsection (b) shall apply for purposes of this sub- 22 section.’’. 23 VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 4549 IH (d) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to amounts paid or incurred in tax- 2 able years beginning after December 31, 2021. 3 Æ VerDate Sep 11 2014 21:57 Oct 02, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H4549.IH H4549 pamtmann on DSKBC07HB2PROD with BILLS