[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6685 Introduced in House (IH)]

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118th CONGRESS
  1st Session
                                H. R. 6685

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


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 7, 2023

  Mr. Neguse introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to expand eligibility 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 2023''.

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

    (a) Adjustment for Inflation.--Paragraph (4) of section 41(h) of 
such Code is amended--
            (1) by redesignating subparagraph (C) as subparagraph (D),
            (2) by redesignating clause (ii) of subparagraph (B) as 
        subparagraph (C), and by moving such subparagraph 2 ems to the 
        left,
            (3) by striking ``Limitations'' in the heading of 
        subparagraph (B) and inserting ``Limitation on amount of 
        election'',
            (4) by striking ``Amount'' in the heading of clause (i) of 
        subparagraph (B) and inserting ``In general'', and
            (5) 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 2024, 
                        the dollar amounts 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 `2023' 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.''.
    (b) Credit Refundable Against Unemployment Taxes.--
            (1) In general.--Section 3111(f)(1)(B) of the Internal 
        Revenue Code of 1986 is amended by striking ``subsection (b)'' 
        and inserting ``subsection (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 
                (b)'' and inserting ``the sum of the taxes imposed by 
                Comprehensive Legislation Ensuring Accountability and 
                Responsiveness Act of 2023subsection (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) Qualified Small Business Definition Expanded.--Section 
41(h)(3)(A) of such Code is amended--
            (1) in clause (i)(I), by striking ``$5,000,000'' and 
        inserting ``$10,000,000'',
            (2) by amending clause (i)(II) to read as follows:
                                    ``(II) such entity did not have 
                                gross receipts (as so determined) 
                                exceeding an aggregate of $25,000 for 
                                any taxable year preceding the 10-
                                taxable-year period ending with such 
                                taxable year, and'', and
            (3) by adding at the end the following flush sentence:
``For purposes of the preceding sentence, gross receipts shall be 
determined under the rules of section 448(c)(3) without regard to 
subparagraph (A) thereof, except that such term shall not include any 
contributions to the capital of a corporation (other than contributions 
by a shareholder) or any amount described in section 118(b) (other than 
receipts from customers in exchange for goods or services).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.

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--
                            ``(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, 2023.
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