American Innovation and R&D Competitiveness Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 2673 To amend the Internal Revenue Code of 1986 to restore the deduction for research and experimental expenditures. IN THE HOUSE OF REPRESENTATIVES APRIL 18, 2023 Mr. ESTES (for himself, Mr. LARSON of Connecticut, Mr. LAHOOD, Ms. DELBENE, Mr. ARRINGTON, Mr. PANETTA, Mr. BUCHANAN, Mr. BLU- MENAUER, Mr. SMITH of Nebraska, Mr. PASCRELL, Mr. KELLY of Penn- sylvania, Mr. DAVIS of Illinois, Mr. SCHWEIKERT, Ms. SEWELL, Mr. WENSTRUP, Mr. KILDEE, Mr. FERGUSON, Mr. BEYER, Mr. SMUCKER, Mr. EVANS, Mr. HERN, Ms. BONAMICI, Mrs. MILLER of West Virginia, Mr. STANTON, Mr. KUSTOFF, Ms. DAVIDS of Kansas, Mr. FITZPATRICK, Mr. VEASEY, Mr. MOORE of Utah, Mr. NEGUSE, Ms. VAN DUYNE, Ms. SLOTKIN, Mr. FEENSTRA, Ms. WEXTON, Mr. CAREY, Mr. CUELLAR, Mr. BARR, Mr. GOTTHEIMER, Mr. BACON, Ms. BROWNLEY, Mr. HUIZENGA, Mr. MORELLE, Mr. JOHNSON of Ohio, Mr. COURTNEY, Mr. CARTER of Georgia, Mr. CONNOLLY, Mrs. LESKO, Mr. TRONE, Mr. RESCHENTHALER, Ms. ROSS, Mrs. HARSHBARGER, Mr. MOULTON, Mr. CALVERT, Mr. KHANNA, Mr. CRAWFORD, Ms. SCHOLTEN, Mr. DAVID- SON, Ms. TITUS, Mr. MANN, Ms. STEVENS, Mr. MOOLENAAR, Ms. KAP- TUR, Mr. JOYCE of Pennsylvania, Ms. SHERRILL, Mr. BOST, and Ms. BLUNT ROCHESTER) 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 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 2673 IH SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘American Innovation 2 and R&D Competitiveness Act of 2023’’. 3 SEC. 2. RESEARCH AND EXPERIMENTAL EXPENDITURES. 4 (a) IN GENERAL.—Section 174 of the Internal Rev- 5 enue Code of 1986 is amended to read as follows: 6 ‘‘SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES. 7 ‘‘(a) TREATMENT AS EXPENSES.— 8 ‘‘(1) IN GENERAL.—A taxpayer may treat re- 9 search or experimental expenditures which are paid 10 or incurred by him during the taxable year in con- 11 nection with his trade or business as expenses which 12 are not chargeable to capital account. The expendi- 13 tures so treated shall be allowed as a deduction. 14 ‘‘(2) WHEN METHOD MAY BE ADOPTED.— 15 ‘‘(A) WITHOUT CONSENT.—A taxpayer 16 may, without the consent of the Secretary, 17 adopt the method provided in this subsection 18 for his first taxable year for which expenditures 19 described in paragraph (1) are paid or incurred. 20 ‘‘(B) WITH CONSENT.—A taxpayer may, 21 with the consent of the Secretary, adopt at any 22 time the method provided in this subsection. 23 ‘‘(3) SCOPE.—The method adopted under this 24 subsection shall apply to all expenditures described 25 in paragraph (1). The method adopted shall be ad- 26 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 2673 IH hered to in computing taxable income for the taxable 1 year and for all subsequent taxable years unless, 2 with the approval of the Secretary, a change to a 3 different method is authorized with respect to part 4 or all of such expenditures. 5 ‘‘(b) AMORTIZATION OF CERTAIN RESEARCH AND 6 EXPERIMENTAL EXPENDITURES.— 7 ‘‘(1) IN GENERAL.—At the election of the tax- 8 payer, made in accordance with regulations pre- 9 scribed by the Secretary, research or experimental 10 expenditures which are— 11 ‘‘(A) paid or incurred by the taxpayer in 12 connection with his trade or business, 13 ‘‘(B) not treated as expenses under sub- 14 section (a), and 15 ‘‘(C) chargeable to capital account but not 16 chargeable to property of a character which is 17 subject to the allowance under section 167 (re- 18 lating to allowance for depreciation, etc.) or sec- 19 tion 611 (relating to allowance for depletion), 20 may be treated as deferred expenses. In computing 21 taxable income, such deferred expenses shall be al- 22 lowed as a deduction ratably over such period of not 23 less than 60 months as may be selected by the tax- 24 payer (beginning with the month in which the tax- 25 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 2673 IH payer first realizes benefits from such expenditures). 1 Such deferred expenses are expenditures properly 2 chargeable to capital account for purposes of section 3 1016(a)(1) (relating to adjustments to basis of prop- 4 erty). 5 ‘‘(2) TIME FOR AND SCOPE OF ELECTION.—The 6 election provided by paragraph (1) may be made for 7 any taxable year, but only if made not later than the 8 time prescribed by law for filing the return for such 9 taxable year (including extensions thereof). The 10 method so elected, and the period selected by the 11 taxpayer, shall be adhered to in computing taxable 12 income for the taxable year for which the election is 13 made and for all subsequent taxable years unless, 14 with the approval of the Secretary, a change to a 15 different method (or to a different period) is author- 16 ized with respect to part or all of such expenditures. 17 The election shall not apply to any expenditure paid 18 or incurred during any taxable year before the tax- 19 able year for which the taxpayer makes the election. 20 ‘‘(c) LAND AND OTHER PROPERTY.—This section 21 shall not apply to any expenditure for the acquisition or 22 improvement of land, or for the acquisition or improve- 23 ment of property to be used in connection with the re- 24 search or experimentation and of a character which is sub- 25 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 2673 IH ject to the allowance under section 167 (relating to allow- 1 ance for depreciation, etc.) or section 611 (relating to al- 2 lowance for depletion); but for purposes of this section al- 3 lowances under section 167, and allowances under section 4 611, shall be considered as expenditures. 5 ‘‘(d) EXPLORATION EXPENDITURES.—This section 6 shall not apply to any expenditure paid or incurred for 7 the purpose of ascertaining the existence, location, extent, 8 or quality of any deposit of ore or other mineral (including 9 oil and gas). 10 ‘‘(e) ONLY REASONABLE RESEARCH EXPENDITURES 11 ELIGIBLE.—This section shall apply to a research or ex- 12 perimental expenditure only to the extent that the amount 13 thereof is reasonable under the circumstances.’’. 14 (b) CLERICAL AMENDMENT.—The table of sections 15 for part VI of subchapter B of chapter 1 of such Code 16 is amended by striking the item relating to section 174 17 and inserting the following new item: 18 ‘‘Sec. 174. Research and experimental expenditures’’. (c) CONFORMING AMENDMENTS.— 19 (1) Section 41(d)(1)(A) of such Code is amend- 20 ed by striking ‘‘specified research or experimental 21 expenditures under section 174’’ and inserting ‘‘ex- 22 penses under section 174’’. 23 (2) Section 280C(c) of such Code is amended to 24 read as follows: 25 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 2673 IH ‘‘(c) CREDIT FOR INCREASING RESEARCH ACTIVI- 1 TIES.— 2 ‘‘(1) IN GENERAL.—No deduction shall be al- 3 lowed for that portion of the qualified research ex- 4 penses (as defined in section 41(b)) or basic re- 5 search expenses (as defined in section 41(e)(2)) oth- 6 erwise allowable as a deduction for the taxable year 7 which is equal to the amount of the credit deter- 8 mined for such taxable year under section 41(a). 9 ‘‘(2) SIMILAR RULE WHERE TAXPAYER CAP- 10 ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 11 ‘‘(A) the amount of the credit determined 12 for the taxable year under section 41(a)(1), ex- 13 ceeds 14 ‘‘(B) the amount allowable as a deduction 15 for such taxable year for qualified research ex- 16 penses or basic research expenses (determined 17 without regard to paragraph (1)), 18 the amount chargeable to capital account for the 19 taxable year for such expenses shall be reduced by 20 the amount of such excess. 21 ‘‘(3) ELECTION OF REDUCED CREDIT.— 22 ‘‘(A) IN GENERAL.—In the case of any 23 taxable year for which an election is made 24 under this paragraph— 25 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 2673 IH ‘‘(i) paragraphs (1) and (2) shall not 1 apply, and 2 ‘‘(ii) the amount of the credit under 3 section 41(a) shall be the amount deter- 4 mined under subparagraph (B). 5 ‘‘(B) AMOUNT OF REDUCED CREDIT.—The 6 amount of credit determined under this sub- 7 paragraph for any taxable year shall be the 8 amount equal to the excess of— 9 ‘‘(i) the amount of credit determined 10 under section 41(a) without regard to this 11 paragraph, over 12 ‘‘(ii) the product of— 13 ‘‘(I) the amount described in 14 clause (i), and 15 ‘‘(II) the rate of tax under sec- 16 tion 11(b). 17 ‘‘(C) ELECTION.—An election under this 18 paragraph for any taxable year shall be made 19 not later than the time for filing the return of 20 tax for such year (including extensions), shall 21 be made on such return, and shall be made in 22 such manner as the Secretary may prescribe. 23 Such an election, once made, shall be irrev- 24 ocable. 25 VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 2673 IH ‘‘(4) CONTROLLED GROUPS.—Paragraph (3) of 1 subsection (b) shall apply for purposes of this sub- 2 section.’’. 3 (d) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to taxable years beginning after 5 December 31, 2021. 6 Æ VerDate Sep 11 2014 23:24 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\H2673.IH H2673 pbinns on DSKJLVW7X2PROD with $$_JOB