[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 341 Introduced in Senate (IS)]

114th CONGRESS
  1st Session
                                 S. 341

 To amend the Internal Revenue Code of 1986 to make permanent certain 
         small business tax provisions, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 3, 2015

  Mr. Toomey (for himself, Mr. Menendez, Mr. Roberts, and Mr. Carper) 
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 make permanent certain 
         small business tax provisions, and for other purposes.

    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 ``Start-up Jobs and Innovation Act''.

SEC. 2. PERMANENT EXTENSION OF INCREASED EXPENSING LIMITATION.

    (a) 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.''.
    (b) Reduction in Limitation.--Section 179(b)(2) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking subparagraph (C),
            (2) by striking ``, and'' at the end of subparagraph (B) 
        and inserting a period,
            (3) by striking the comma at the end of subparagraph (A) 
        and inserting ``, and'', and
            (4) by inserting ``beginning before 2016'' after ``The 
        limitation under paragraph (1) for any taxable year''.
    (c) 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, 2016, 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 
                2014' for `calendar year 1992' in subparagraph (B) 
                thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000, such amount shall be rounded to the 
        nearest multiple of $1,000.''.
    (d) Computer Software.--Section 179(d)(1)(A)(ii) of the Internal 
Revenue Code of 1986 is amended by striking ``and before 2015''.
    (e) Election.--Section 179(c)(2) of the Internal Revenue Code of 
1986 is amended by striking ``and before 2015''.
    (f) Special Rules for Treatment of Qualified Real Property.--
            (1) In general.--Section 179(f)(1) of the Internal Revenue 
        Code of 1986 is amended by striking ``beginning after 2009 and 
        before 2015'' and inserting ``beginning after 2009''.
            (2) Repeal of limitation.--Section 179(f) of such Code is 
        amended by striking paragraph (3).
            (3) Conforming amendment.--Section 179(f) of such Code is 
        amended by striking paragraph (4).
    (g) Effective Date.--The amendments made by this section shall 
apply to property placed in service in taxable years beginning after 
December 31, 2014.

SEC. 3. PERMANENT FULL EXCLUSION APPLICABLE TO QUALIFIED SMALL BUSINESS 
              STOCK.

    (a) In General.--Paragraph (4) of section 1202(a) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``and before January 1, 2015'', and
            (2) by striking ``certain periods in 2010, 2011, 2012, 
        2013, and 2014'' in the heading and inserting ``certain periods 
        after 2009''.
    (b) Conforming Amendments.--
            (1) The heading for section 1202 of the Internal Revenue 
        Code of 1986 is amended by striking ``partial''.
            (2) 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''.
            (3) Section 1223(13) of such Code is amended by striking 
        ``1202(a)(2),''.
    (c) Increase in Gross Asset Threshold.--
            (1) 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''.
            (2) 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, 2016, 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 
                2015' for `calendar year 1992' in subparagraph (B) 
                thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000, such amount shall be rounded to the 
        nearest multiple of $1,000.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to stock acquired after December 31, 2015.

SEC. 4. UNIFICATION OF DEDUCTION FOR START-UP AND ORGANIZATIONAL 
              EXPENDITURES.

    (a) In General.--Subsection (a) of section 195 of the Internal 
Revenue Code of 1986 is amended by inserting ``and organizational'' 
after ``start-up''.
    (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 
                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.''.
    (c) Dollar Amounts.--Clause (ii) of section 195(b)(1)(A) of the 
Internal Revenue Code of 1986 is amended--
            (1) by striking ``$5,000'' and inserting ``$10,000'', and
            (2) by striking ``$50,000'' and inserting ``$60,000''.
    (d) 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, 2016, 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 
                2015' for `calendar year 1992' in subparagraph (B) 
                thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000, such amount shall be rounded to the 
        nearest multiple of $1,000.''.
    (e) Conforming Amendments.--
            (1) Section 195(b)(1) of the Internal Revenue Code of 1986 
        is amended--
                    (A) by inserting ``(or, in the case of a 
                partnership, the partnership elects)'' after ``If a 
                taxpayer elects'',
                    (B) by inserting ``(or the partnership, as the case 
                may be)'' after ``the taxpayer'' in subparagraph (A), 
                and
                    (C) by inserting ``or organizational'' after 
                ``start-up'' each place it appears.
            (2) Section 195(b)(2) of such Code is amended--
                    (A) by striking ``amortization period.--In any 
                case'' and inserting ``amortization period.--
                    ``(A) In general.--In any case'', and
                    (B) 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.''.
            (3)(A) Part VIII of subchapter B of chapter 1 of such Code 
        is amended by striking section 248.
            (B) Section 170(b)(2)(C)(ii) of such Code is amended by 
        striking ``(except section 248)''.
            (C) Section 312(n)(3) of such Code is amended by striking 
        ``Sections 173 and 248'' and inserting ``Section 173''.
            (D) Section 535(b)(3) of such Code is amended by striking 
        ``(except section 248)''.
            (E) Section 545(b)(3) of such Code is amended by striking 
        ``(except section 248)''.
            (F) Section 834(c)(7) of such Code is amended by striking 
        ``(except section 248)''.
            (G) Section 852(b)(2)(C) of such Code is amended by 
        striking ``(except section 248)''.
            (H) Section 857(b)(2)(A) of such Code is amended by 
        striking ``(except section 248)''.
            (I) 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).
            (J) 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)''.
            (K) 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.
            (4) Part I of subchapter K of chapter 1 of such Code is 
        amended by striking section 709.
            (5) 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.
    (f) Clerical Amendments.--
            (1) The heading of section 195 of the Internal Revenue Code 
        of 1986 is amended by striking ``expenditures'' and inserting 
        ``and organizational expenditures''.
            (2) 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:

``Sec. 195. Start-up and organizational expenditures.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to expenses paid or incurred after December 31, 2015.

SEC. 5. EXPANSION OF GROSS RECEIPTS TEST.

    (a) In General.--Paragraph (1) of section 448(c) of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking ``the $5,000,000 gross receipts test'' and 
        inserting ``the gross receipts test'', and
            (2) by striking ``does not exceed $5,000,000'' and 
        inserting ``does not exceed $10,000,000''.
    (b) 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, 2016, 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 
                2015' for `calendar year 1992' in subparagraph (B) 
                thereof.
        If any amount as increased under the preceding sentence is not 
        a multiple of $1,000, such amount shall be rounded to the 
        nearest multiple of $1,000.''.
    (c) Conforming Amendments.--
            (1) 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''.
            (2) 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''.
            (3) The heading for subsection (c) of section 448 of such 
        Code is amended by striking ``$5,000,000 Gross'' and inserting 
        ``Gross''.
            (4) 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)''.
            (5) Subclause (II) of section 172(b)(1)(H)(v) of such Code 
        is amended by striking ``$5,000,000'' and inserting 
        ``$10,000,000''.
    (d) Effective Date and Special Rules.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2015.
            (2) 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--
                    (A) such change shall be treated as initiated by 
                the taxpayer; and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.

SEC. 6. CLARIFICATION OF INVENTORY AND ACCOUNTING RULES FOR SMALL 
              BUSINESS.

    (a) 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, 2015, 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.''.
    (b) Inventory Rules.--
            (1) 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, 
        2015, 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).''.
            (2) 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''.
            (3) 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.''.
    (c) Effective Date and Special Rules.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2015.
            (2) 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--
                    (A) such change shall be treated as initiated by 
                the taxpayer; and
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury.

SEC. 7. EXCEPTION FROM PASSIVE LOSS RULES FOR INVESTMENTS IN HIGH 
              TECHNOLOGY RESEARCH SMALL BUSINESS PASS-THRU ENTITIES.

    (a) 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 in connection with 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 in 
                        connection with 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 in connection 
                        with 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.
                        For purposes of the preceding sentence, the 
                        taxpayer's basis shall not include any portion 
                        of such basis which is attributable to an 
                        increase in a partner's share of the 
                        liabilities of a partnership that is considered 
                        under section 752(a) as a contribution of 
                        money.
                    ``(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.
                        Sales of equity interests which are part of the 
                        same plan or arrangement, or which are carried 
                        out with the principal purpose of increasing 
                        the amount of cash to which this clause applies 
                        (determined without regard to this sentence), 
                        shall be treated as a single sale for purposes 
                        of this clause.
                            ``(iv) Inflation adjustment.--In the case 
                        of any taxable year beginning after 2016, 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 2015' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                        Any increase determined under the preceding 
                        sentence shall be rounded to the nearest 
                        $100,000.
                    ``(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.''.
    (b) 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)''.
    (c) Certain Research-Related Deductions and Credits of High 
Technology Research Small Business Pass-Thru Entities Allowed for 
Purposes of Determining Alternative Minimum Tax.--
            (1) 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).''.
            (2) 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 section 41 to the 
                        extent attributable to a high technology 
                        research small business pass-thru entity (as 
                        defined in section 469(c)(4)),''.
    (d) 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)).''.
    (e) 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.
                                 <all>