I
118THCONGRESS
1
STSESSION H. R. 368
To amend the Internal Revenue Code of 1986 to promote new business
innovation, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY13, 2023
Mr. B
UCHANANintroduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to promote
new business innovation, 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 ‘‘American Innovation 4
Act of 2023’’. 5
SEC. 2. SIMPLIFICATION AND EXPANSION OF DEDUCTION 6
FOR START-UP AND ORGANIZATIONAL EX-7
PENDITURES. 8
(a) I
NGENERAL.—Section 195 of the Internal Rev-9
enue Code of 1986 is amended by redesignating sub-10
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sections (c) and (d) as subsections (d) and (e), respec-1
tively, and by striking all that precedes subsection (d) (as 2
so redesignated) and inserting the following: 3
‘‘SEC. 195. START-UP AND ORGANIZATIONAL EXPENDI-4
TURES. 5
‘‘(a) C
APITALIZATION OF EXPENDITURES.—Except 6
as otherwise provided in this section, no deduction shall 7
be allowed for start-up or organizational expenditures. 8
‘‘(b) E
LECTIONTODEDUCT.— 9
‘‘(1) I
N GENERAL.—If a taxpayer elects the ap-10
plication of this subsection with respect to any active 11
trade or business— 12
‘‘(A) the taxpayer shall be allowed a deduc-13
tion for the taxable year in which such active 14
trade or business begins in an amount equal to 15
the lesser of— 16
‘‘(i) the aggregate amount of start-up 17
and organizational expenditures paid or in-18
curred in connection with such active trade 19
or business, or 20
‘‘(ii) $20,000, reduced (but not below 21
zero) by the amount by which such aggre-22
gate amount exceeds $120,000, and 23
‘‘(B) the remainder of such start-up and 24
organizational expenditures shall be charged to 25
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capital account and allowed as an amortization 1
deduction determined by amortizing such ex-2
penditures ratably over the 180-month period 3
beginning with the month in which the active 4
trade or business begins. 5
‘‘(2) A
PPLICATION TO ORGANIZATIONAL EX -6
PENDITURES.—In the case of organizational expend-7
itures with respect to any corporation or partner-8
ship, the active trade or business referred to in para-9
graph (1) means the first active trade or business 10
carried on by such corporation or partnership. 11
‘‘(3) I
NFLATION ADJUSTMENT .—In the case of 12
any taxable year beginning after December 31, 13
2023, the $20,000 and $120,000 amounts in para-14
graph (1)(A)(ii) shall each be increased by an 15
amount equal to— 16
‘‘(A) such dollar amount, multiplied by 17
‘‘(B) the cost-of-living adjustment deter-18
mined under section 1(f)(3) for the calendar 19
year in which the taxable year begins, deter-20
mined by substituting ‘calendar year 2022’ for 21
‘calendar year 2016’ in subparagraph (A)(ii) 22
thereof. 23
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If any amount as increased under the preceding sen-1
tence is not a multiple of $1,000, such amount shall 2
be rounded to the nearest multiple of $1,000. 3
‘‘(c) A
LLOWANCE OF DEDUCTIONUPONLIQUIDA-4
TION ORDISPOSITION.— 5
‘‘(1) L
IQUIDATION OF PARTNERSHIP OR COR -6
PORATION.—If any partnership or corporation is 7
completely liquidated by the taxpayer, any start-up 8
or organizational expenditures paid or incurred in 9
connection with such partnership or corporation 10
which were not allowed as a deduction by reason of 11
this section may be deducted to the extent allowable 12
under section 165. 13
‘‘(2) D
ISPOSITION OF TRADE OR BUSINESS .—If 14
any trade or business is completely disposed of or 15
discontinued by the taxpayer, any start-up expendi-16
tures paid or incurred in connection with such trade 17
or business which were not allowed as a deduction 18
by reason of this section (and not taken into account 19
in connection with a liquidation to which paragraph 20
(1) applies) may be deducted to the extent allowable 21
under section 165. For purposes of this paragraph, 22
in the case of any deduction allowed under sub-23
section (b)(1) with respect to both start-up and or-24
ganizational expenditures, the amount treated as so 25
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allowed with respect to start-up expenditures shall 1
bear the same ratio to such deduction as the start- 2
up expenditures taken into account in determining 3
such deduction bears to the aggregate of the start- 4
up and organizational expenditures so taken into ac-5
count.’’. 6
(b) O
RGANIZATIONAL EXPENDITURES.—Section 7
195(d) of such Code, as redesignated by subsection (a), 8
is amended by adding at the end the following new para-9
graphs: 10
‘‘(3) O
RGANIZATIONAL EXPENDITURES .—The 11
term ‘organizational expenditures’ means any ex-12
penditure which— 13
‘‘(A) is incident to the creation of a cor-14
poration or a partnership, 15
‘‘(B) is chargeable to capital account, and 16
‘‘(C) is of a character which, if expended 17
incident to the creation of a corporation or a 18
partnership having an ascertainable life, would 19
be amortizable over such life. 20
‘‘(4) A
PPLICATION TO CERTAIN DISREGARDED 21
ENTITIES.—In the case of any entity with a single 22
owner that is disregarded as an entity separate from 23
its owner, this section shall be applied in the same 24
manner as if such entity were a corporation.’’. 25
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(c) ELECTION.—Section 195(e)(2) of such Code, as 1
redesignated by subsection (a), is amended to read as fol-2
lows: 3
‘‘(2) P
ARTNERSHIPS AND S CORPORATIONS .—In 4
the case of any partnership or S corporation, the 5
election under subsection (b) shall be made (and this 6
section shall be applied) at the entity level.’’. 7
(d) C
ONFORMINGAMENDMENTS.— 8
(1)(A) Part VIII of subchapter B of chapter 1 9
is amended by striking section 248 of such Code 10
(and by striking the item relating to such section in 11
the table of sections of such part). 12
(B) Section 170(b)(2)(D)(ii) of such Code is 13
amended by striking ‘‘(except section 248)’’. 14
(C) Section 312(n)(3) of such Code is amended 15
by striking ‘‘Sections 173 and 248’’ and inserting 16
‘‘Sections 173 and 195’’. 17
(D) Section 535(b)(3) of such Code is amended 18
by striking ‘‘(except section 248)’’. 19
(E) Section 545(b)(3) of such Code is amended 20
by striking ‘‘(except section 248)’’. 21
(F) Section 545(b)(4) of such Code is amended 22
by striking ‘‘(except section 248)’’. 23
(G) Section 834(c)(7) of such Code is amended 24
by striking ‘‘(except section 248)’’. 25
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(H) Section 852(b)(2)(C) of such Code is 1
amended by striking ‘‘(except section 248)’’. 2
(I) Section 857(b)(2)(A) of such Code is 3
amended by striking ‘‘(except section 248)’’. 4
(J) Section 1363(b) of such Code is amended 5
by adding ‘‘and’’ at the end of paragraph (2), by 6
striking paragraph (3), and by redesignating para-7
graph (4) as paragraph (3). 8
(K) Section 1375(b)(1)(B)(i) of such Code is 9
amended by striking ‘‘(other than the deduction al-10
lowed by section 248, relating to organization ex-11
penditures)’’. 12
(2)(A) Section 709 of such Code is amended to 13
read as follows: 14
‘‘SEC. 709. TREATMENT OF SYNDICATION FEES. 15
‘‘No deduction shall be allowed under this chapter to 16
a partnership or to any partner of the partnership for any 17
amounts paid or incurred to promote the sale of (or to 18
sell) an interest in the partnership.’’. 19
(B) The item relating to section 709 in the 20
table of sections for part I of subchapter K of chap-21
ter 1 of such Code is amended to read as follows: 22
‘‘Sec. 709. Treatment of syndication fees.’’.
(3) Section 1202(e)(2)(A) of such Code is 23
amended by striking ‘‘section 195(c)(1)(A)’’ and in-24
serting ‘‘section 195(d)(1)(A)’’. 25
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(4) The item relating to section 195 in the table 1
of contents of part VI of subchapter B of chapter 1 2
of such Code is amended to read as follows: 3
‘‘Sec. 195. Start-up and organizational expenditures.’’.
(e) EFFECTIVEDATE.—The amendments made by 4
this section shall apply to expenditures paid or incurred 5
in connection with active trades or businesses which begin 6
in taxable years beginning after December 31, 2022. 7
SEC. 3. PRESERVATION OF START-UP NET OPERATING 8
LOSSES AND TAX CREDITS AFTER OWNER-9
SHIP CHANGE. 10
(a) A
PPLICATION TO NETOPERATINGLOSSES.— 11
Section 382(d) of the Internal Revenue Code of 1986 is 12
amended by adding at the end the following new para-13
graph: 14
‘‘(4) E
XCEPTION FOR START-UP LOSSES.— 15
‘‘(A) I
N GENERAL.—In the case of any net 16
operating loss carryforward described in para-17
graph (1)(A) which arose in a start-up period 18
taxable year, the amount of such net operating 19
loss carryforward otherwise taken into account 20
under such paragraph shall be reduced by the 21
net start-up loss determined with respect to the 22
trade or business referred to in subparagraph 23
(B)(i) for such start-up period taxable year. 24
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‘‘(B) START-UP PERIOD TAXABLE YEAR .— 1
The term ‘start-up period taxable year’ means 2
any taxable year of the old loss corporation 3
which— 4
‘‘(i) begins before the close of the 3- 5
year period beginning on the date on which 6
any trade or business of such corporation 7
begins as an active trade or business (as 8
determined under section 195(d)(2) with-9
out regard to subparagraph (B) thereof), 10
and 11
‘‘(ii) ends after January 31, 2023. 12
‘‘(C) N
ET START-UP LOSS.— 13
‘‘(i) I
N GENERAL.—The term ‘net 14
start-up loss’ means, with respect to any 15
trade or business referred to in subpara-16
graph (B)(i) for any start-up period tax-17
able year, the amount which bears the 18
same ratio (but not greater than 1) to the 19
net operating loss carryforward which 20
arose in such start-up period taxable year 21
as— 22
‘‘(I) the net operating loss (if 23
any) which would have been deter-24
mined for such start-up period taxable 25
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year if only items of income, gain, de-1
duction, and loss properly allocable to 2
such trade or business were taken into 3
account, bears to 4
‘‘(II) the amount of the net oper-5
ating loss determined for such start- 6
up period taxable year. 7
‘‘(ii) S
PECIAL RULE FOR LAST TAX -8
ABLE YEAR IN START-UP PERIOD.—In the 9
case of any start-up period taxable year 10
which ends after the close of the 3-year pe-11
riod described in subparagraph (B)(i) with 12
respect to any trade or business, the net 13
start-up loss with respect to such trade or 14
business for such start-up period taxable 15
year shall be the same proportion of such 16
loss (determined without regard to this 17
clause) as the proportion of such start-up 18
period taxable year which is on or before 19
the last day of such period. 20
‘‘(D) A
PPLICATION TO NET OPERATING 21
LOSS ARISING IN YEAR OF OWNERSHIP 22
CHANGE.—Subparagraph (A) shall apply to any 23
net operating loss described in paragraph 24
(1)(B) in the same manner as such subpara-25
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graph applies to net operating loss 1
carryforwards described in paragraph (1)(A), 2
but by only taking into account the amount of 3
such net operating loss (and the amount of the 4
net start-up loss) which is allocable under para-5
graph (1)(B) to the period described in such 6
paragraph. Proper adjustment in the allocation 7
of the net start-up loss under the preceding 8
sentence shall be made in the case of a taxable 9
year to which subparagraph (C)(ii) applies. 10
‘‘(E) A
PPLICATION TO TAXABLE YEARS 11
WHICH ARE START-UP PERIOD TAXABLE YEARS 12
WITH RESPECT TO MORE THAN 1 TRADE OR 13
BUSINESS.—In the case of any net operating 14
loss carryforward which arose in a taxable year 15
which is a start-up period taxable year with re-16
spect to more than 1 trade or business— 17
‘‘(i) this paragraph shall be applied 18
separately with respect to each such trade 19
or business, and 20
‘‘(ii) the aggregate reductions under 21
subparagraph (A) shall not exceed such net 22
operating loss carryforward. 23
‘‘(F) C
ONTINUITY OF BUSINESS REQUIRE -24
MENT.—If the new loss corporation does not 25
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continue the trade or business referred to in 1
subparagraph (B)(i) at all times during the 2- 2
year period beginning on the change date, this 3
paragraph shall not apply with respect to such 4
trade or business. 5
‘‘(G) C
ERTAIN TITLE 11 OR SIMILAR 6
CASES.— 7
‘‘(i) M
ULTIPLE OWNERSHIP 8
CHANGES.—In the case of a 2nd ownership 9
change to which subsection (l)(5)(D) ap-10
plies, this paragraph shall not apply for 11
purposes of determining the pre-change 12
loss with respect to such 2nd ownership 13
change. 14
‘‘(ii) C
ERTAIN INSOLVENCY TRANS -15
ACTIONS.—If subsection (l)(6) applies for 16
purposes of determining the value of the 17
old loss corporation under subsection (e), 18
this paragraph shall not apply. 19
‘‘(H) N
OT APPLICABLE TO DISALLOWED 20
INTEREST.—This paragraph shall not apply for 21
purposes of applying the rules of paragraph (1) 22
to the carryover of disallowed interest under 23
paragraph (3). 24
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‘‘(I) TRANSITION RULE.—This paragraph 1
shall not apply with respect to any trade or 2
business if the date on which such trade or 3
business begins as an active trade or business 4
(as determined under section 195(d)(2) without 5
regard to subparagraph (B) thereof) is on or 6
before January 31, 2023.’’. 7
(b) A
PPLICATION TOEXCESSCREDITS.—Section 383 8
of such Code is amended by redesignating subsection (e) 9
as subsection (f) and by inserting after subsection (d) the 10
following new subsection: 11
‘‘(e) E
XCEPTION FORSTART-UPEXCESSCREDITS.— 12
‘‘(1) I
N GENERAL.—In the case of any unused 13
general business credit of the corporation under sec-14
tion 39 which arose in a start-up period taxable 15
year, the amount of such unused general business 16
credit otherwise taken into account under subsection 17
(a)(2)(A) shall be reduced by the start-up excess 18
credit determined with respect to any trade or busi-19
ness referred to in section 382(d)(4)(B)(i) for such 20
start-up period taxable year. 21
‘‘(2) S
TART-UP PERIOD TAXABLE YEAR .—For 22
purposes of this subsection, the term ‘start-up pe-23
riod taxable year’ has the meaning given such term 24
in section 382(d)(4)(B). 25
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‘‘(3) START-UP EXCESS CREDIT.—For purposes 1
of this subsection, the term ‘start-up excess credit’ 2
means, with respect to any trade or business re-3
ferred to in section 382(d)(4)(B)(i) for any start-up 4
period taxable year, the amount which bears the 5
same ratio to the unused general business credit 6
which arose in such start-up period taxable year 7
as— 8
‘‘(A) the amount of the general business 9
credit which would have been determined for 10
such start-up period taxable year if only credits 11
properly allocable to such trade or business 12
were taken into account, bears to 13
‘‘(B) the amount of the general business 14
credit determined for such start-up period tax-15
able year. 16
‘‘(4) A
PPLICATION OF CERTAIN RULES .—Rules 17
similar to the rules of subparagraphs (C)(ii), (D), 18
(E), and (F) of section 382(d)(4) shall apply for 19
purposes of this subsection. 20
‘‘(5) T
RANSITION RULE.—This subsection shall 21
not apply with respect to any trade or business if 22
the date on which such trade or business begins as 23
an active trade or business (as determined under 24
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section 195(d)(2) without regard to subparagraph 1
(B) thereof) is on or before January 31, 2023.’’. 2
(c) E
FFECTIVEDATE.—The amendments made by 3
this section shall apply to taxable years ending after Janu-4
ary 31, 2023. 5
Æ
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