116th CONGRESS 1st Session |
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.
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
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.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the “Support Our Start-Ups Act”.
SEC. 2. New business expenditures.
(a) In general.—Subsections (a) and (b) of section 195 of the Internal Revenue Code of 1986 are both amended by inserting “and organizational” after “start-up” each place it appears.
(b) 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, S corporation, or partnership,
“(B) is chargeable to capital account, and
“(C) is of a character which, if expended incident to the creation of a corporation, S corporation, or partnership having a limited life, would be amortizable over such life.”.
(1) IN GENERAL.—Clause (ii) of section 195(b)(1)(A) of the Internal Revenue Code of 1986 is amended—
(A) by striking “$5,000” and inserting “$20,000”; and
(B) by striking “$50,000” and inserting “$120,000”.
(2) ADJUSTMENT FOR INFLATION.—Subsection (b) of section 195 of such Code is amended by adding at the end the following new paragraph:
“(4) ADJUSTMENT FOR INFLATION.—In the case of a taxable year beginning after December 31, 2020, the $20,000 and $120,000 amounts in paragraph (1)(A)(ii) shall each be increased by an amount equal to—
“(A) such 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, determined by substituting ‘calendar year 2019’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.”.
(d) Amortization treatment.—Subparagraph (B) of section 195(b)(1) of the Internal Revenue Code of 1986, as amended by subsection (a), is amended to read as follows:
“(B) the remainder of such start-up and organizational expenditures shall be charged to capital account and allowed as an amortization deduction determined by amortizing such expenditures ratably over the 15-year period beginning with the midpoint of the taxable year in which the active trade or business begins.”.
(e) Application to disregarded entities.—Subsection (c) of section 195 of the Internal Revenue Code of 1986, as amended by subsection (b), is amended by adding at the end the following new paragraph:
“(4) APPLICATION TO DISREGARDED ENTITIES.—In the case of any entity with a single owner which is disregarded as an entity separate from its owner, this section shall be applied in the same manner as if such entity were a corporation.”.
(f) Allowance of deduction upon liquidation or disposition.—Section 195 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
“(e) Allowance of deduction upon liquidation or disposition.—
“(1) LIQUIDATION OF A BUSINESS ENTITY.—In the case of a complete liquidation by the taxpayer of any corporation, S corporation, or partnership, any start-up and organizational expenditures paid or incurred in connection with such partnership, S corporation, or corporation which were not allowed as a deduction by reason of this section shall be allowed as a loss to the extent provided under section 165.
“(2) DISPOSITION OF TRADE OR BUSINESS.—In the case of a complete disposition by the taxpayer of any trade or business, any start-up and organizational expenditures paid or incurred in connection with such trade or business which were not allowed as a deduction by reason of this section (and which are not taken into account under paragraph (1)) shall be allowed as a loss to the extent provided under section 165.”.
(1) Section 195(b)(1) of the Internal Revenue Code of 1986 is amended—
(A) by inserting “(or, in the case of a partnership or S corporation, the entity elects)” after “If a taxpayer elects”,
(B) by inserting “(or the entity, as the case may be)” after “the taxpayer” in subparagraph (A), and
(C) by adding at the end the following flush sentence:
“In the case of a partnership or S corporation, the election under the preceding sentence shall be made at the entity level.”.
(2) Section 195(b)(2) of such Code is amended—
(A) by striking “amortization period.—In any case” and inserting the following: “amortization period.—
“(A) IN GENERAL.—In any case”; and
(B) by adding at the end the following new subparagraph:
“(B) SPECIAL RULE.—In the case of a partnership or S corporation, subparagraph (A) shall be applied at the entity level.”.
(3) Section 195(b) of such Code is amended by striking paragraph (3).
(4) (A) Part VIII of subchapter B of chapter 1 of such Code is amended by striking section 248 (and by striking the item relating to such section in the table of sections for such part).
(B) Section 56(g)(4)(D)(ii) of such Code is amended by striking “Sections 173 and 248” and inserting “Section 173”.
(C) Section 170(b)(2)(C)(ii) of such Code is amended by striking “(except section 248)”.
(D) Section 312(n)(3) of such Code is amended by striking “Sections 173 and 248” and inserting “Section 173”.
(E) Section 535(b)(3) of such Code is amended by striking “(except section 248)”.
(F) Section 545(b)(3) of such Code is amended by striking “(except section 248)”.
(G) Section 834(c)(7) of such Code is amended by striking “(except section 248)”.
(H) Section 852(b)(2)(C) of such Code is amended by striking “(except section 248)”.
(I) Section 857(b)(2)(A) of such Code is amended by striking “(except section 248)”.
(J) 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).
(K) 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)”.
(5) Part I of subchapter K of chapter 1 of such Code is amended by striking section 709 (and by striking the item relating to such section in the table of sections for such part).
(6) The heading of section 195 of such Code (and the item relating to such section in the table of sections for part VI of subchapter B of chapter 1 of such Code) are each amended by inserting “and organizational” after “Start-up”.
(h) Effective date.—The amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after December 31, 2019.