IGNITE American Innovation Act

I 116TH CONGRESS 2D SESSION H. R. 7917 To amend the Internal Revenue Code of 1986 to provide for advance refunds of certain net operating losses and research expenditures relating to COVID–19, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 31, 2020 Mr. PHILLIPS (for himself and Mrs. WALORSKI) 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 provide for advance refunds of certain net operating losses and research expenditures relating to COVID–19, 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 ‘‘Innovation and Growth 4 Now by Investing in Tomorrow’s Enterprises Act’’ or the 5 ‘‘IGNITE American Innovation Act’’. 6 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 2 •HR 7917 IH SEC. 2. ADVANCE REFUNDS OF NET OPERATING LOSSES 1 FOR C CORPORATION TAXPAYERS. 2 (a) IN GENERAL.— 3 (1) NET OPERATING LOSS CARRYOVERS.—Sec- 4 tion 172 of the Internal Revenue Code of 1986 is 5 amended by redesignating subsection (g) as sub- 6 section (h) and by inserting after subsection (f) the 7 following: 8 ‘‘(g) ADVANCE REFUND FOR C CORPORATIONS RE- 9 LATING TO CERTAIN CARRYOVERS ARISING DURING 2015 10 THROUGH 2021.— 11 ‘‘(1) IN GENERAL.— 12 ‘‘(A) ELECTION.—A taxpayer to whom this 13 paragraph applies may elect an advance refund 14 of net operating loss carryovers in the amounts 15 and manner determined under subparagraphs 16 (B) and (C). 17 ‘‘(B) NET OPERATING LOSS CARRYOVERS 18 ARISING DURING 2015 THROUGH 2021.—The ad- 19 vance refund determined under this subpara- 20 graph is an amount elected by the taxpayer in 21 lieu of an election with respect to a net oper- 22 ating loss carryback under subsection 23 (b)(1)(D), in the amount equal to— 24 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 3 •HR 7917 IH ‘‘(i) the rate set forth in section 11 1 (as in effect on the date of the enactment 2 of this paragraph), multiplied by 3 ‘‘(ii) any net operating loss carryovers 4 that arose— 5 ‘‘(I) in a taxable year beginning 6 on or after January 1, 2015, and be- 7 fore January 1, 2020, or 8 ‘‘(II) in a taxable year beginning 9 on or after January 1, 2019, and be- 10 fore January 1, 2022. 11 ‘‘(C) COVID–19 RESEARCH EXPENDI- 12 TURES FOR 2020 AND 2021.—The advance re- 13 fund under this subparagraph is the amount of 14 the advance refund with respect to the portion 15 of any net operating loss attributable to and 16 arising from qualified COVID–19 research ex- 17 penditures that are paid or incurred on or after 18 February 15, 2020 and before January 1, 19 2022, that is equal to 200 percent of the 20 amount otherwise taken into account under 21 paragraph (1)(B)(ii). A net operating loss shall 22 be treated as arising from qualified COVID–19 23 research expenditures to the extent that such 24 expenses are paid or incurred by the taxpayer. 25 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 4 •HR 7917 IH ‘‘(2) QUALIFIED COVID–19 RESEARCH EXPENDI- 1 TURES.—For purposes of this subsection, the term 2 ‘qualified COVID–19 research expenditures’ means 3 expenditures paid or incurred in connection with the 4 research and development of products regulated by 5 the Food and Drug Administration (including bio- 6 logics, drugs, and devices) that are intended to be 7 used in the diagnosis, prevention and treatment of 8 coronavirus disease 2019 (COVID–19), and such 9 other similar expenditures as prescribed by the Sec- 10 retary in regulations. 11 ‘‘(3) TAXPAYER DESCRIBED.—For purposes of 12 paragraph (1), this subsection applies to a taxpayer 13 if— 14 ‘‘(A) the taxpayer is a C corporation, 15 ‘‘(B) the average number of full-time em- 16 ployees (as determined for purposes of deter- 17 mining whether an employer is an applicable 18 large employer for purposes of section 19 4980H(c)(2) of the Internal Revenue Code of 20 1986) employed by the taxpayer during cal- 21 endar year 2019 or 2020, whichever is greater, 22 is greater than five and did not exceed 1,500, 23 and 24 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 5 •HR 7917 IH ‘‘(C) the taxpayer has complied to date 1 with filing of all forms or return requirements 2 under section 3102, 3111, 3301, and 3402 with 3 respect to calendar years 2019 and 2020. 4 ‘‘(4) SPECIAL RULES.—For purposes of this 5 subsection— 6 ‘‘(A) CERTAIN CONTRIBUTIONS OF CAP- 7 ITAL NOT TAKEN INTO ACCOUNT IN DETER- 8 MINING OWNERSHIP CHANGE UNDER SECTION 9 382.—For purposes of determining whether an 10 ownership change has occurred with respect to 11 the loss corporation under section 382(g) in 12 computing the amount of any advance refund 13 under this section, a transfer of stock in ex- 14 change for a capital contribution to such loss 15 corporation shall not be taken into account if— 16 ‘‘(i) the value of the stock transferred 17 is commensurate with the amount of cap- 18 ital being contributed, and 19 ‘‘(ii) such exchange is not part of a 20 plan to redeem other shareholders. 21 ‘‘(B) AGGREGATE LIMITATION.—The ag- 22 gregate amount of net operating loss or net op- 23 erating loss carryover for which an advance re- 24 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 6 •HR 7917 IH fund is elected pursuant to this subsection shall 1 not exceed $100,000,000. 2 ‘‘(C) REDUCTION OF NET OPERATING 3 LOSS.—The net operating losses of the taxpayer 4 determined under subsection (c) shall be re- 5 duced by the amount of any net operating loss 6 or net operating loss carryover for which an ad- 7 vance refund is elected pursuant to this sub- 8 section, including the amount of any net oper- 9 ating loss to which paragraph (1)(C) applies. 10 ‘‘(D) AGGREGATION RULE.—All corpora- 11 tions treated as a single employer under sub- 12 section (a) of section 52 or subsection (m) or 13 (o) under section 414 shall be treated as a sin- 14 gle taxpayer for purposes of this section. 15 ‘‘(5) REGULATIONS AND GUIDANCE.—The Sec- 16 retary shall issue such regulations and other guid- 17 ance as may be necessary to carry out the purposes 18 of this section, including regulations and other guid- 19 ance to carry out the purposes of this subsection— 20 ‘‘(A) to allow for the making of an election 21 for the application of this subsection in such 22 manner as the Secretary may by regulations 23 prescribe, 24 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 7 •HR 7917 IH ‘‘(B) to allow the payment of the advance 1 refund in accordance with section 6429 based 2 on such information as the Secretary shall re- 3 quire, 4 ‘‘(C) to allow advance refunds permitted 5 under this subsection to be claimed on such 6 forms as the Secretary shall prescribe, and 7 ‘‘(D) to provide for the application of this 8 subsection to taxpayers that file consolidated 9 returns. 10 ‘‘(6) ADVANCE REFUND.—See section 6429 for 11 rules for claiming the advance refund.’’. 12 (2) CONFORMING AMENDMENT.—Section 13 172(c) of such Code is amended by inserting before 14 the period at the end the following: ‘‘and with the 15 reduction required by subsection (g)’’. 16 (b) ADVANCE REFUND OF RESEARCH CREDITS AND 17 ORPHAN DRUG CREDITS FOR C CORPORATION TAX- 18 PAYERS.—Section 39 of such Code is amended by adding 19 at the end the following: 20 ‘‘(e) ADVANCE REFUND OF RESEARCH AND ORPHAN 21 DRUG CREDITS.— 22 ‘‘(1) IN GENERAL.—A taxpayer that is a C cor- 23 poration may elect an advance refund of the portion 24 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 8 •HR 7917 IH of any unused business credit carryforward under 1 section 39 that— 2 ‘‘(A) is attributable to the credit deter- 3 mined under section 41 or the credit deter- 4 mined under section 45C, and 5 ‘‘(B) is an unused business credit 6 carryforward carried to a taxable year begin- 7 ning on or after January 1, 2020, and before 8 January 1, 2022, and that arose in taxable 9 years beginning after January 1, 2015. 10 ‘‘(2) LIMITATION.—The amount elected under 11 paragraph (1) for a taxable year may not exceed the 12 excess of $25,000,000 reduced by the amount elect- 13 ed for the taxable year as an advance refund of net 14 operating loss carryovers under section 172(g). 15 ‘‘(3) INAPPLICABILITY OF SECTIONS 38(c) AND 16 383(a).—For purposes of this subsection, the 17 amount of any advance refund shall be computed 18 without respect to the limitations under sections 19 38(c) and 383(a). 20 ‘‘(4) REGULATIONS AND GUIDANCE.—The Sec- 21 retary shall issue such regulations and other guid- 22 ance as may be necessary— 23 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 9 •HR 7917 IH ‘‘(A) to allow for the making of an election 1 under paragraph (1) in such manner as the 2 Secretary may by regulations prescribe, 3 ‘‘(B) to allow the advance refund under 4 this subsection and section 6429 based on such 5 information as the Secretary shall require, and 6 ‘‘(C) to allow advance refunds under this 7 section to be claimed on such forms as the Sec- 8 retary shall prescribe.’’. 9 (c) ADVANCE REFUND OF CERTAIN NET OPERATING 10 LOSSES, RESEARCH CREDIT, AND ORPHAN DRUG CRED- 11 IT.— 12 (1) IN GENERAL.—Subchapter B of chapter 65 13 of such Code is amended by inserting after section 14 6428 the following new section: 15 ‘‘SEC. 6429. ADVANCE REFUND OF CERTAIN NET OPER- 16 ATING LOSSES, RESEARCH CREDIT, AND OR- 17 PHAN DRUG CREDIT. 18 ‘‘(a) IN GENERAL.—In the case of a C corporation, 19 the advance refund sum may be claimed by the taxpayer 20 as follows: 21 ‘‘(1) PAYROLL TAXES.—First, by reducing de- 22 posits or payments of— 23 ‘‘(A) the applicable employment taxes im- 24 posed under sections 3101(a), 3101(b), 25 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 10 •HR 7917 IH 3111(a), and 3111(b) (reduced by any credits 1 allowed under subsections (e) and (f) of section 2 3111, sections 7001 and 7003 of the Families 3 First Coronavirus Response Act and section 4 2301 of the Coronavirus, Aid, Relief, and Eco- 5 nomic Security Act) on the wages paid with re- 6 spect to the employment of all the employees of 7 the taxpayer for a calendar quarter, and 8 ‘‘(B) the withholding taxes required to be 9 paid by an employer pursuant to section 3403, 10 with the balance of the advance refund payable 11 to the taxpayer. 12 ‘‘(2) ADVANCE REFUNDABILITY OF EXCESS 13 LOSSES.—Second, any remaining amount to be re- 14 funded to the taxpayer after the application of para- 15 graph (1) shall be treated as an overpayment and 16 shall be refunded in a manner similar to that pre- 17 scribed in subsection 2301(b)(3) of the Coronavirus, 18 Aid, Relief, and Economic Security Act. 19 ‘‘(b) ADVANCE REFUND SUM.—For purposes of sub- 20 section (a), the term ‘advance refund sum’ means the sum 21 of— 22 ‘‘(1) the amount elected by the taxpayer as an 23 advance refund of net operating loss carryovers 24 under section 172(g), and 25 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 11 •HR 7917 IH ‘‘(2) the amount of any unused business credit 1 carryforward elected under section 39(e) that is at- 2 tributable to the research credit determined under 3 section 41 or the orphan drug credit determined 4 under section 45C. 5 ‘‘(c) RECAPTURE.— 6 ‘‘(1) IN GENERAL.—The Secretary shall, by 7 regulations, provide for recapturing the benefit of 8 any advance refund allowable under this section if 9 there is a sale or full or partial liquidation of the 10 corporation during the recapture period. The recap- 11 ture amount shall not exceed the lesser of— 12 ‘‘(A) the amount of any proceeds or dis- 13 tributions received by shareholders of the cor- 14 poration attributable to such sale or liquidation, 15 or 16 ‘‘(B) the amount that the advance refund 17 exceeds the aggregate amount spent by the cor- 18 poration on payroll, research expenses, and 19 property, plant and equipment during the re- 20 capture period. 21 ‘‘(2) RECAPTURE PERIOD.—For purposes of 22 paragraph (1), the term ‘recapture period’ means 23 the two-year period beginning on the date of the ad- 24 vance refund.’’. 25 VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 12 •HR 7917 IH (2) TRANSFERS TO FEDERAL OLD-AGE AND 1 SURVIVORS INSURANCE TRUST FUND.—There are 2 hereby appropriated to the Federal Old-Age and 3 Survivors Insurance Trust Fund and the Federal 4 Disability Insurance Trust Fund established under 5 section 201 of the Social Security Act (42 U.S.C. 6 401), the Federal Hospital Insurance Trust Fund 7 established under section 1817(a) of the Social Se- 8 curity Act (42 U.S.C. 1395i(a)), and the Social Se- 9 curity Equivalent Benefit Account established under 10 section 15A(a) of the Railroad Retirement Act of 11 1974 (45 U.S.C. 14 231n–1(a)) amounts equal to 12 the reduction in revenues to the Treasury by reason 13 of this section (without regard to this subsection). 14 Amounts appropriated by the preceding sentence 15 shall be transferred from the general fund at such 16 times and in such manner as to replicate to the ex- 17 tent possible the transfers which would have oc- 18 curred to such Trust Fund or Account had this sec- 19 tion not been enacted. 20 (3) CLERICAL AMENDMENT.—The table of sec- 21 tions for subchapter B of chapter 65 of such Code 22 is amended by inserting after the item relating to 23 section 6428 the following new item: 24 ‘‘Sec. 6429. Advance refund of certain net operating losses, research credit, and orphan drug credit.’’. VerDate Sep 11 2014 02:34 Aug 21, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6211 E:\BILLS\H7917.IH H7917 SSpencer on DSK126QN23PROD with BILLS 13 •HR 7917 IH (d) EFFECTIVE DATE.—The amendments made by [Text truncated for display. Full text available on Congress.gov.]