1. Short title
This Act may be cited as the “Start-up Jobs and Innovation Act”.
Start-up Jobs and Innovation Act
A BILL
To amend the Internal Revenue Code of 1986 to make permanent certain small business tax provisions, and for other purposes.
2. Permanent extension of increased expensing limitation
Dollar limitation— Section 179(b)(1) of the Internal Revenue Code of 1986 is amended by striking “shall not exceed” and all that follows and inserting “shall not exceed $500,000.”.
by striking subparagraph (C),
by striking “, and” at the end of subparagraph (B) and inserting a period,
by striking the comma at the end of subparagraph (A) and inserting “, and”, and
by inserting “beginning before 2014” after “The limitation under paragraph (1) for any taxable year”.
Adjustment for inflation— Subsection (b) of section 179 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(6) Adjustment for inflation—In the case of any taxable year beginning after December 31, 2014, the $500,000 amount in paragraph (1) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.”
Computer software— Section 179(d)(1)(A)(ii) of the Internal Revenue Code of 1986 is amended by striking “and before 2014”.
Election— Section 179(c)(2) of the Internal Revenue Code of 1986 is amended by striking “and before 2014”.
Special rules for treatment of qualified real property—
In general— Section 179(f)(1) of the Internal Revenue Code of 1986 is amended by striking “beginning in 2010, 2011, 2012, or 2013” and inserting “beginning after 2009”.
Repeal of limitation— Section 179(f) of such Code is amended by striking paragraph (3).
Conforming amendment— Section 179(f) of such Code is amended by striking paragraph (4).
Effective date— The amendments made by this section shall apply to property placed in service in taxable years beginning after December 31, 2013.
3. Permanent full exclusion applicable to qualified small business stock
by striking “and before January 1, 2014”, and
by striking “certain periods in 2010, 2011, 2012, and 2013” in the heading and inserting “certain periods after 2009”.
Conforming amendments—
The heading for section 1202 of the Internal Revenue Code of 1986 is amended by striking “partial”.
The item relating to section 1202 in the table of sections for part I of subchapter P of chapter 1 of such Code is amended by striking “Partial exclusion” and inserting “Exclusion”.
Section 1223(13) of such Code is amended by striking “1202(a)(2),”.
Increase in gross asset threshold—
In general— Paragraph (1) of section 1202(d) of the Internal Revenue Code of 1986 is amended by striking “$50,000,000” each place it appears and inserting “$150,000,000”.
Adjustment for inflation— Subsection (d) of section 1202 of such Code is amended by adding at the end the following new paragraph:
“(4) Adjustment for inflation—In the case of any taxable year beginning after December 31, 2014, the $150,000,000 amount in subparagraphs (A) and (B) of paragraph (1) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.”
Effective date— The amendments made by this section shall apply to stock acquired after December 31, 2013.
4. Unification of deduction for start-up and organizational expenditures
In general— Subsection (a) of section 195 of the Internal Revenue Code of 1986 is amended by inserting “and organizational” after “start-up”.
Organizational expenditures— Subsection (c) of section 195 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(3) Organizational expenditures—The term “organizational expenditures” means any expenditure which—
“(A) is incident to the creation of a corporation or a partnership,
“(B) is chargeable to capital account, and
“(C) is of a character which, if expended incident to the creation of a corporation or a partnership having a limited life, would be amortizable over such life.”
Dollar amounts— Clause (ii) of section 195(b)(1)(A) of the Internal Revenue Code of 1986 is amended—
by striking “$5,000” and inserting “$10,000”, and
by striking “$50,000” and inserting “$60,000”.
Adjustment for inflation— Paragraph (3) of section 195(b) is amended to read as follows:
“(3) Adjustment for inflation—In the case of any taxable year beginning after December 31, 2014, the $10,000 and $60,000 amounts in paragraph (1)(A)(ii) shall each be increased by an amount equal to—
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.”
Conforming amendments—
Section 195(b)(1) of the Internal Revenue Code of 1986 is amended—
by inserting “(or, in the case of a partnership, the partnership elects)” after “If a taxpayer elects”,
by inserting “(or the partnership, as the case may be)” after “the taxpayer” in subparagraph (A), and
by inserting “or organizational” after “start-up” each place it appears.
Section 195(b)(2) of such Code is amended—
by striking “amortization period.—In any case” and inserting
“(A) In general—In any case”
by adding at the end the following new subparagraph:
“(B) Special partnership rule—In the case of a partnership, subparagraph (A) shall be applied at the partnership level.”
Part VIII of subchapter B of chapter 1 of such Code is amended by striking section 248.
Section 170(b)(2)(C)(ii) of such Code is amended by striking “(except section 248)”.
Section 312(n)(3) of such Code is amended by striking “Sections 173 and 248” and inserting “Section 173”.
Section 535(b)(3) of such Code is amended by striking “(except section 248)”.
Section 545(b)(3) of such Code is amended by striking “(except section 248)”.
Section 834(c)(7) of such Code is amended by striking “(except section 248)”.
Section 852(b)(2)(C) of such Code is amended by striking “(except section 248)”.
Section 857(b)(2)(A) of such Code is amended by striking “(except section 248)”.
Section 1363(b) of such Code is amended by inserting “and” at the end of paragraph (2), by striking paragraph (3), and by redesignating paragraph (4) as paragraph (3).
Section 1375(b)(1)(B)(i) of such Code is amended by striking “(other than the deduction allowed by section 248, relating to organization expenditures)”.
The table of sections for part VIII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 248.
Part I of subchapter K of chapter 1 of such Code is amended by striking section 709.
The table of sections for part I of subchapter K of chapter 1 of such Code is amended by striking the item relating to section 709.
Clerical amendments—
The heading of section 195 of the Internal Revenue Code of 1986 is amended by striking “expenditures” and inserting “and organizational expenditures”.
The item relating to section 195 in the table of contents of part VI of subchapter B of chapter 1 of such Code is amended to read as follows:
Effective date— The amendments made by this section shall apply to expenses paid or incurred after December 31, 2013.
5. Expansion of gross receipts test
by striking “the $5,000,000 gross receipts test” and inserting “the gross receipts test”, and
by striking “does not exceed $5,000,000” and inserting “does not exceed $10,000,000”.
Adjustment for inflation— Subsection (c) of section 448 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
“(4) Adjustment for inflation—In the case of any taxable year beginning after December 31, 2014, the $10,000,000 amount in paragraph (1) shall be increased by an amount equal to—
“(A) such dollar amount, multiplied by
“(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.”
Conforming amendments—
Paragraph (3) of section 448(b) of the Internal Revenue Code of 1986 is amended by striking “the $5,000,000 gross receipts test” and inserting “the gross receipts test”.
The heading for paragraph (3) of section 448(b) of such Code is amended by striking “with gross receipts of not more than $5,000,000” and inserting “that pass gross receipts test”.
The heading for subsection (c) of section 448 of such Code is amended by striking “$5,000,000 gross” and inserting “Gross”.
Clause (iii) of section 172(b)(1)(F) of such Code is amended by inserting “, applied by substituting “$5,000,000” for “$10,000,000” each place it appears,” after “section 448(c)”.
Subclause (II) of section 172(b)(1)(H)(v) of such Code is amended by striking “$5,000,000” and inserting “$10,000,000”.
Effective date and special rules—
In general— The amendments made by this section shall apply to taxable years beginning after December 31, 2013.
Change in method of accounting— In the case of any taxpayer changing the taxpayer’s method of accounting for any taxable year under the amendments made by this section—
such change shall be treated as initiated by the taxpayer; and
such change shall be treated as made with the consent of the Secretary of the Treasury.
6. Clarification of inventory and accounting rules for small business
Cash accounting permitted— Section 446 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(g) Certain small business taxpayers permitted To use cash accounting method without limitation
“(1) In general—With respect to an eligible taxpayer who uses the cash receipts and disbursements method for any taxable year, such method shall be deemed to clearly reflect income and the taxpayer shall not be required to use an accrual method.
“(2) Eligible taxpayer—For purposes of this subsection, a taxpayer is an eligible taxpayer with respect to any taxable year if—
“(A) for all prior taxable years beginning after December 31, 2013, the taxpayer (or any predecessor) met the gross receipts test of section 448(c), and
“(B) the taxpayer is not subject to section 447 or 448.”
Inventory rules—
In general— Section 471 of the Internal Revenue Code of 1986 is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:
“(c) Small business taxpayers not required To use inventories
“(1) In general—A qualified taxpayer shall not be required to use inventories under this section for a taxable year.
“(2) Treatment of taxpayers not using inventories—If a qualified taxpayer does not use inventories with respect to any property for any taxable year beginning after December 31, 2013, such property shall be treated as a material or supply which is not incidental.
“(3) Qualified taxpayer—For purposes of this subsection, the term qualified taxpayer means—
“(A) any eligible taxpayer (as defined in section 446(g)(2)), and
“(B) any taxpayer described in section 448(b)(3).”
Increased eligibility for simplified dollar-value LIFO method— Section 474(c) of such Code is amended by striking “$5,000,000” and inserting “$10,000,000”.
Conforming amendment— Subsection (c) of section 263A of such Code is amended by adding at the end the following new paragraph:
“(7) Exclusion from inventory rules—Nothing in this section shall require the use of inventories for any taxable year by a qualified taxpayer (within the meaning of section 471(c)) who is not required to use inventories under section 471 for such taxable year.”
Effective date and special rules—
In general— The amendments made by this section shall apply to taxable years beginning after December 31, 2013.
Change in method of accounting— In the case of any taxpayer changing the taxpayer’s method of accounting for any taxable year under the amendments made by this section—
such change shall be treated as initiated by the taxpayer; and
such change shall be treated as made with the consent of the Secretary of the Treasury.
7. Exception from passive loss rules for investments in high technology research small business pass-thru entities
In general— Subsection (c) of section 469 is amended by redesignating paragraphs (4) through (7) as paragraphs (5) through (8), respectively, and by inserting after paragraph (3) the following new paragraph:
“(4) High technology research activities
“(A) In general—The term passive activity shall not include any qualified research activity of the taxpayer carried on by a high technology research small business pass-thru entity.
“(B) Treatment of losses and deductions
“(i) In general—Losses or deductions of a taxpayer relating to qualified research activities carried on by a high technology research small business pass-thru entity shall not be treated as losses or deductions, respectively, from a passive activity except as provided in clause (ii) and subparagraph (C).
“(ii) Limitation—Clause (i) shall apply to losses and deductions of a taxpayer relating to a high technology small business pass-thru entity for a taxable year only to the extent that the aggregate losses and deductions of the taxpayer relating to qualified research activities of such entity for such taxable year do not exceed the portion of the taxpayer's adjusted basis in the taxpayer's ownership interest in such entity that is attributable to money or other property contributed—
“(I) in exchange for such ownership interest, and
“(II) specifically for use in connection with qualified research activities.
“(C) Treatment of carryovers—Subparagraph (B)(i) shall not apply to the portion of any loss or deduction that is carried over under subsection (b) into a taxable year other than the taxable year in which such loss or deduction arose.
“(D) Qualified research activity—For purposes of this paragraph, the term qualified research activity means any activity constituting qualified research (within the meaning of section 41(d)(1)(B) and taking into account paragraphs (3) and (4) of section 41(d)) which involves a process of experimentation.
“(E) High technology research small business pass-thru entity—For purposes of this paragraph, the term high technology research small business pass-thru entity means any domestic pass-thru entity for any taxable year if—
“(i) either—
“(I) more than 75 percent of the entity’s expenditures (including salaries, rent and overhead) for such taxable year are paid or incurred in connection with qualified research (within the meaning of section 41(d)(1)(B), taking into account paragraphs (3) and (4) of section 41(d)) that involves a process of experimentation conducted by the entity, or
“(II) more than 50 percent of the entity’s expenditures for such taxable year constitute qualified research expenses (as defined in section 41(b), but determined without regard to the phrase “65 percent of” in paragraph (3)(A) thereof),
“(ii) such entity is a small business (within the meaning of section 41(b)(3)(D)(iii), applied by substituting “250” for “500” in subclause (I) thereof), and
“(iii) at no time during the taxable year does the entity have aggregate gross assets in excess of $150,000,000.
“(F) Provisions related to aggregate gross assets limitation—For purposes of this paragraph—
“(i) In general—Except as otherwise provided in this subparagraph, the term aggregate gross assets has the meaning given such term in section 1202(d)(2).
“(ii) Exception for certain intangibles—Any section 197 intangible (as defined in section 197(d) and determined without regard to section 197(e)) which is used directly in connection with the research referred to in subparagraph (E)(i) shall not be taken into account in determining aggregate gross assets.
“(iii) Exception for certain follow-on investments—Cash from a sale of equity interests shall not be taken into account in determining aggregate gross assets if—
“(I) the aggregate gross assets of such entity (determined immediately after such sale and without regard to this clause) do not exceed the sum of $150,000,000, plus 25 percent of the aggregate gross assets of such entity (determined immediately before such sale and without regard to this clause), and
“(II) the aggregate gross assets of such entity (determined immediately before such sale and without regard to this clause) do not exceed $150,000,000.
“(iv) Inflation adjustment—In the case of any taxable year beginning after 2014, the $150,000,000 amount in subparagraph (E)(iii) and subclauses (I) and (II) of clause (iii) shall each be increased by an amount equal to—
“(I) such dollar amount, multiplied by
“(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins determined by substituting “calendar year 2013” for “calendar year 1992” in subparagraph (B) thereof.
“(G) Capital expenditures taken into account for expenditures test—An expenditure shall not fail to be taken into account under subparagraph (E)(i) merely because such expenditure is chargeable to capital account.
“(H) Pass-thru entity—For purposes of this paragraph, the term pass-thru entity means any partnership, S corporation, or other entity identified by the Secretary as a pass-thru entity for purposes of this paragraph.
“(I) Aggregation rules
“(i) In general—All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as a single entity for purposes of subparagraphs (E) and (F)(iii).
“(ii) Limitation where entity would not qualify—No entity shall be treated as a high technology research small business pass-thru entity unless such entity qualifies as such both with and without the application of clause (i).
“(J) Activities not engaged in for profit and economic substance rules—Section 183 and the economic substance rules of section 7701(o) shall not apply to disallow the losses, deductions, and credits of a high technology research small business pass-thru entity solely as a result of losses incurred by such entity.”
Material participation not required— Paragraph (5) of section 469(c) of such Code, as redesignated by subsection (a), is amended by striking “and (3)” in the heading and text and inserting “, (3), and (4)”.
Certain research-Related deductions and credits of high technology research small business pass-Thru entities allowed for purposes of determining alternative minimum tax—
Deduction for research and experimental expenditures— Paragraph (2) of section 56(b) of such Code is amended by adding at the end the following new subparagraph:
“(E) Exception for high technology research small business pass-thru entities—In the case of a high technology research small business pass-thru entity (as defined in section 469(c)(4)), this paragraph shall not apply to any amount allowable as a deduction under section 174(a).”
Allowance of certain research-related credits— Subparagraph (B) of section 38(c)(4) of such Code is amended by redesignating clauses (ii) through (ix) as clauses (iii) through (x), respectively, and by inserting after clause (i) the following new clause:
“(ii) the credits of an individual taxpayer determined under sections 41 and 48D to the extent attributable to a high technology research small business pass-thru entity (as defined in section 469(c)(4)),”
Exception to limitation on pass-Thru of research credit— Subsection (g) of section 41 of such Code is amended by adding at the end the following: “Paragraphs (2) and (4) shall not apply with respect to any high technology research small business pass-thru entity (as defined in section 469(c)(4)).”
Effective date— The amendments made by this section shall apply to losses and credits arising in taxable years beginning on or after the date of the enactment of this Act.