Support Our Start-Ups Act

II 116TH CONGRESS 1ST SESSION S. 2841 To amend the Internal Revenue Code of 1986 to increase the limitations for deductible new business expenditures and to consolidate provisions for start-up and organizational expenditures. IN THE SENATE OF THE UNITED STATES NOVEMBER 13, 2019 Ms. BALDWIN (for herself and Mr. HOEVEN) 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 increase the limitations for deductible new business expenditures and to consolidate provisions for start-up and organiza- tional 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 ‘‘Support Our Start- 4 Ups Act’’. 5 SEC. 2. NEW BUSINESS EXPENDITURES. 6 (a) IN GENERAL.—Subsections (a) and (b) of section 7 195 of the Internal Revenue Code of 1986 are both 8 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 2 •S 2841 IS amended by inserting ‘‘and organizational’’ after ‘‘start- 1 up’’ each place it appears. 2 (b) ORGANIZATIONAL EXPENDITURES.—Subsection 3 (c) of section 195 of the Internal Revenue Code of 1986 4 is amended by adding at the end the following new para- 5 graph: 6 ‘‘(3) ORGANIZATIONAL EXPENDITURES.—The 7 term ‘organizational expenditures’ means any ex- 8 penditure which— 9 ‘‘(A) is incident to the creation of a cor- 10 poration, S corporation, or partnership, 11 ‘‘(B) is chargeable to capital account, and 12 ‘‘(C) is of a character which, if expended 13 incident to the creation of a corporation, S cor- 14 poration, or partnership having a limited life, 15 would be amortizable over such life.’’. 16 (c) DOLLAR AMOUNTS.— 17 (1) IN GENERAL.—Clause (ii) of section 18 195(b)(1)(A) of the Internal Revenue Code of 1986 19 is amended— 20 (A) by striking ‘‘$5,000’’ and inserting 21 ‘‘$20,000’’; and 22 (B) by striking ‘‘$50,000’’ and inserting 23 ‘‘$120,000’’. 24 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 3 •S 2841 IS (2) ADJUSTMENT FOR INFLATION.—Subsection 1 (b) of section 195 of such Code is amended by add- 2 ing at the end the following new paragraph: 3 ‘‘(4) ADJUSTMENT FOR INFLATION.—In the 4 case of a taxable year beginning after December 31, 5 2020, the $20,000 and $120,000 amounts in para- 6 graph (1)(A)(ii) shall each be increased by an 7 amount equal to— 8 ‘‘(A) such amount, multiplied by 9 ‘‘(B) the cost-of-living adjustment deter- 10 mined under section 1(f)(3) for the calendar 11 year in which the taxable year begins, deter- 12 mined by substituting ‘calendar year 2019’ for 13 ‘calendar year 2016’ in subparagraph (A)(ii) 14 thereof. 15 If any increase determined under the preceding sen- 16 tence is not a multiple of $1,000, such amount shall 17 be rounded to the nearest multiple of $1,000.’’. 18 (d) AMORTIZATION TREATMENT.—Subparagraph (B) 19 of section 195(b)(1) of the Internal Revenue Code of 20 1986, as amended by subsection (a), is amended to read 21 as follows: 22 ‘‘(B) the remainder of such start-up and 23 organizational expenditures shall be charged to 24 capital account and allowed as an amortization 25 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 4 •S 2841 IS deduction determined by amortizing such ex- 1 penditures ratably over the 15-year period be- 2 ginning with the midpoint of the taxable year in 3 which the active trade or business begins.’’. 4 (e) APPLICATION TO DISREGARDED ENTITIES.— 5 Subsection (c) of section 195 of the Internal Revenue Code 6 of 1986, as amended by subsection (b), is amended by 7 adding at the end the following new paragraph: 8 ‘‘(4) APPLICATION TO DISREGARDED ENTI- 9 TIES.—In the case of any entity with a single owner 10 which is disregarded as an entity separate from its 11 owner, this section shall be applied in the same man- 12 ner as if such entity were a corporation.’’. 13 (f) ALLOWANCE OF DEDUCTION UPON LIQUIDATION 14 OR DISPOSITION.—Section 195 of the Internal Revenue 15 Code of 1986 is amended by adding at the end the fol- 16 lowing new subsection: 17 ‘‘(e) ALLOWANCE OF DEDUCTION UPON LIQUIDA- 18 TION OR DISPOSITION.— 19 ‘‘(1) LIQUIDATION OF A BUSINESS ENTITY.—In 20 the case of a complete liquidation by the taxpayer of 21 any corporation, S corporation, or partnership, any 22 start-up and organizational expenditures paid or in- 23 curred in connection with such partnership, S cor- 24 poration, or corporation which were not allowed as 25 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 5 •S 2841 IS a deduction by reason of this section shall be allowed 1 as a loss to the extent provided under section 165. 2 ‘‘(2) DISPOSITION OF TRADE OR BUSINESS.—In 3 the case of a complete disposition by the taxpayer of 4 any trade or business, any start-up and organiza- 5 tional expenditures paid or incurred in connection 6 with such trade or business which were not allowed 7 as a deduction by reason of this section (and which 8 are not taken into account under paragraph (1)) 9 shall be allowed as a loss to the extent provided 10 under section 165.’’. 11 (g) CONFORMING AMENDMENTS.— 12 (1) Section 195(b)(1) of the Internal Revenue 13 Code of 1986 is amended— 14 (A) by inserting ‘‘(or, in the case of a part- 15 nership or S corporation, the entity elects)’’ 16 after ‘‘If a taxpayer elects’’, 17 (B) by inserting ‘‘(or the entity, as the 18 case may be)’’ after ‘‘the taxpayer’’ in subpara- 19 graph (A), and 20 (C) by adding at the end the following 21 flush sentence: 22 ‘‘In the case of a partnership or S corporation, the 23 election under the preceding sentence shall be made 24 at the entity level.’’. 25 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 6 •S 2841 IS (2) Section 195(b)(2) of such Code is amend- 1 ed— 2 (A) by striking ‘‘AMORTIZATION PERIOD.— 3 In any case’’ and inserting the following: ‘‘AM- 4 ORTIZATION PERIOD.— 5 ‘‘(A) IN GENERAL.—In any case’’; and 6 (B) by adding at the end the following new 7 subparagraph: 8 ‘‘(B) SPECIAL RULE.—In the case of a 9 partnership or S corporation, subparagraph (A) 10 shall be applied at the entity level.’’. 11 (3) Section 195(b) of such Code is amended by 12 striking paragraph (3). 13 (4)(A) Part VIII of subchapter B of chapter 1 14 of such Code is amended by striking section 248 15 (and by striking the item relating to such section in 16 the table of sections for such part). 17 (B) Section 56(g)(4)(D)(ii) of such Code is 18 amended by striking ‘‘Sections 173 and 248’’ and 19 inserting ‘‘Section 173’’. 20 (C) Section 170(b)(2)(C)(ii) of such Code is 21 amended by striking ‘‘(except section 248)’’. 22 (D) Section 312(n)(3) of such Code is amended 23 by striking ‘‘Sections 173 and 248’’ and inserting 24 ‘‘Section 173’’. 25 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 7 •S 2841 IS (E) Section 535(b)(3) of such Code is amended 1 by striking ‘‘(except section 248)’’. 2 (F) Section 545(b)(3) of such Code is amended 3 by striking ‘‘(except section 248)’’. 4 (G) Section 834(c)(7) of such Code is amended 5 by striking ‘‘(except section 248)’’. 6 (H) Section 852(b)(2)(C) of such Code is 7 amended by striking ‘‘(except section 248)’’. 8 (I) Section 857(b)(2)(A) of such Code is 9 amended by striking ‘‘(except section 248)’’. 10 (J) Section 1363(b) of such Code is amended 11 by inserting ‘‘and’’ at the end of paragraph (2), by 12 striking paragraph (3), and by redesignating para- 13 graph (4) as paragraph (3). 14 (K) Section 1375(b)(1)(B)(i) of such Code is 15 amended by striking ‘‘(other than the deduction al- 16 lowed by section 248, relating to organization ex- 17 penditures)’’. 18 (5) Part I of subchapter K of chapter 1 of such 19 Code is amended by striking section 709 (and by 20 striking the item relating to such section in the table 21 of sections for such part). 22 (6) The heading of section 195 of such Code 23 (and the item relating to such section in the table 24 of sections for part VI of subchapter B of chapter 25 VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS 8 •S 2841 IS 1 of such Code) are each amended by inserting ‘‘and 1 organizational’’ after ‘‘Start-up’’. 2 (h) EFFECTIVE DATE.—The amendments made by 3 this section shall apply to expenses paid or incurred in 4 taxable years beginning after December 31, 2019. 5 Æ VerDate Sep 11 2014 03:57 Nov 14, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S2841.IS S2841 kjohnson on DSK79L0C42 with BILLS