S. 2207 - Research and Development Tax Credit Expansion Act of 2019

116TH CONGRESS
1ST SESSION

S. 2207

To amend the Internal Revenue Code of 1986
to expand refundability and increase simplification of
the research credit for certain small businesses.

IN THE SENATE OF THE UNITED STATES

JULY 23, 2019

Ms. HASSAN (for herself and Mr. TILLIS) 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 expand refundability and increase simplification of the research credit for certain small businesses.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "Research and Development Tax Credit Expansion Act of 2019".

SEC. 2. EXPANSION OF REFUNDABLE RESEARCH CREDIT FOR NEW AND SMALL BUSINESSES.

(a) DOUBLING CAP ON REFUNDABLE CREDIT. —

(1) IN GENERAL. — Clause (i) of section 41(h)(4)(B) of the Internal Revenue Code of 1986 is amended by striking "$250,000" and inserting "$500,000".

(2) ADJUSTMENT FOR INFLATION. — Paragraph (4) of section 41(h) of such Code is amended —

(A) by redesignating subparagraph (C) as subparagraph (D),

(B) by redesignating clause (ii) of subparagraph (B) as subparagraph (C), and by moving such subparagraph 2 ems to the left,

(C) by striking "LIMITATIONS" in the heading of subparagraph (B) and inserting "LIMITATION ON AMOUNT OF ELECTION",

(D) by striking "AMOUNT" in the heading of clause (i) of subparagraph (B) and inserting "IN GENERAL", and

(E) by adding at the end of subparagraph (B), as amended by the preceding subparagraphs of this paragraph, the following new clause:

"(ii) ADJUSTMENT FOR INFLATION. —

In the case of a taxable year beginning after 2020, the $500,000 amount in clause (i) shall 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 '2019' for '2016' in subparagraph (A)(ii) thereof.

If any increase under the preceding sentence is not a multiple of $100, such increase shall be rounded to the nearest multiple of $100.".

(3) CONFORMING AMENDMENT. — Clause (ii) of section 41(h)(5)(B) of such Code is amended by striking "the $250,000 amount" and inserting "the amount in effect".

(b) CREDIT REFUNDABLE AGAINST MEDICARE AND UNEMPLOYMENT TAXES. —

(1) IN GENERAL. — Paragraph (1) of section 3111(f) of the Internal Revenue Code of 1986 is amended by striking "subsection (a)" and inserting "subsections (a) and (b) and section 3301".

(2) CONFORMING AMENDMENTS. —

(A) Paragraph (2) of section 3111(f) of such Code is amended by striking "the tax imposed by subsection (a)" and inserting "the sum of the taxes imposed by subsection (a), subsection (b), and section 3301".

(B) Section 3302 of such Code is amended by adding at the end the following new subsection:

"(i) CREDIT FOR RESEARCH EXPENDITURES OF QUALIFIED SMALL BUSINESSES. — Any portion of the credit under section 3111(f) which is credited under such section to the tax under section 3301 shall be treated as a credit under this section. Subsection (c) shall not apply to any such credit.".

(c) DOUBLING ELIGIBILITY THRESHOLD. — Subclause (I) of section 41(h)(3)(A)(i) of the Internal Revenue Code of 1986 is amended by striking "$5,000,000" and inserting "$10,000,000".

(d) EFFECTIVE DATE. — The amendments made by this section shall apply to taxable years beginning after December 31, 2019.

SEC. 3. MODIFICATIONS TO ALTERNATIVE SIMPLIFIED CREDIT FOR NEW AND SMALL BUSINESSES.

(a) IN GENERAL. — Paragraph (4) of section 41(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

"(D) SPECIAL RULES FOR QUALIFIED

SMALL BUSINESSES. — In the case of a qualified small business (as defined in subsection (h)(3)) —

"(i) CREDIT RATE. — Subparagraph (A) shall be applied by substituting '20 percent' for '14 percent'.

"(ii) SPECIAL RULE FOR 1ST YEAR OF QUALIFIED RESEARCH EXPENSES. — If the taxpayer has no qualified research expenses in any taxable year preceding the taxable year for which the credit is being determined, subparagraph (B)(ii) shall be applied by substituting '20 percent' for '6 percent'.

"(iii) SPECIAL RULE FOR OTHER YEARS. — If the taxpayer is not described in clause (ii) for the taxable year, and subparagraph (B) applies to such taxpayer for such year, at the election of the taxpayer —

"(I) subparagraph (B)(ii) shall be applied by substituting '10 percent' for '6 percent', or

"(II) subparagraph (B) shall not apply, and the average under subparagraph (A) shall be determined by disregarding any taxable year in the 3-year period described in such subparagraph in which there were no qualified research expenses.".

(b) EFFECTIVE DATE. — The amendment made by this section shall apply to taxable years beginning after December 31, 2019.