[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2823 Introduced in Senate (IS)]

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118th CONGRESS
  1st Session
                                S. 2823

To amend the Internal Revenue Code of 1986 to safeguard beneficial tax 
    treatment on certain expenses from bolstering the research and 
          development sectors in foreign entities of concern.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 14, 2023

   Mr. Rubio 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 safeguard beneficial tax 
    treatment on certain expenses from bolstering the research and 
          development sectors in foreign entities of concern.

    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 ``Securing America's R&D Advantage 
Act''.

SEC. 2. RESTORING IMMEDIATE EXPENSING FOR RESEARCH AND DEVELOPMENT 
              INVESTMENTS.

    (a) In General.--Section 174 of the Internal Revenue Code of 1986 
is amended to read as follows:

``SEC. 174. RESEARCH AND EXPERIMENTAL EXPENDITURES.

    ``(a) Treatment as Expenses.--
            ``(1) In general.--A taxpayer may treat research or 
        experimental expenditures which are paid or incurred by him 
        during the taxable year in connection with his trade or 
        business as expenses which are not chargeable to capital 
        account. The expenditures so treated shall be allowed as a 
        deduction.
            ``(2) When method may be adopted.--
                    ``(A) Without consent.--A taxpayer may, without the 
                consent of the Secretary, adopt the method provided in 
                this subsection for his first taxable year for which 
                expenditures described in paragraph (1) are paid or 
                incurred.
                    ``(B) With consent.--A taxpayer may, with the 
                consent of the Secretary, adopt at any time the method 
                provided in this subsection.
            ``(3) Scope.--The method adopted under this subsection 
        shall apply to all expenditures described in paragraph (1). The 
        method adopted shall be adhered to in computing taxable income 
        for the taxable year and for all subsequent taxable years 
        unless, with the approval of the Secretary, a change to a 
        different method is authorized with respect to part or all of 
        such expenditures.
    ``(b) Amortization of Certain Research and Experimental 
Expenditures.--
            ``(1) In general.--At the election of the taxpayer, made in 
        accordance with regulations prescribed by the Secretary, 
        research or experimental expenditures which are--
                    ``(A) paid or incurred by the taxpayer in 
                connection with his trade or business,
                    ``(B) not treated as expenses under subsection (a), 
                and
                    ``(C) chargeable to capital account but not 
                chargeable to property of a character which is subject 
                to the allowance under section 167 (relating to 
                allowance for depreciation, etc.) or section 611 
                (relating to allowance for depletion),
        may be treated as deferred expenses. In computing taxable 
        income, such deferred expenses shall be allowed as a deduction 
        ratably over such period of not less than 60 months as may be 
        selected by the taxpayer (beginning with the month in which the 
        taxpayer first realizes benefits from such expenditures). Such 
        deferred expenses are expenditures properly chargeable to 
        capital account for purposes of section 1016(a)(1) (relating to 
        adjustments to basis of property).
            ``(2) Time for and scope of election.--The election 
        provided by paragraph (1) may be made for any taxable year, but 
        only if made not later than the time prescribed by law for 
        filing the return for such taxable year (including extensions 
        thereof). The method so elected, and the period selected by the 
        taxpayer, shall be adhered to in computing taxable income for 
        the taxable year for which the election is made and for all 
        subsequent taxable years unless, with the approval of the 
        Secretary, a change to a different method (or to a different 
        period) is authorized with respect to part or all of such 
        expenditures. The election shall not apply to any expenditure 
        paid or incurred during any taxable year before the taxable 
        year for which the taxpayer makes the election.
    ``(c) Land and Other Property.--This section shall not apply to any 
expenditure for the acquisition or improvement of land, or for the 
acquisition or improvement of property to be used in connection with 
the research or experimentation and of a character which is subject to 
the allowance under section 167 (relating to allowance for 
depreciation, etc.) or section 611 (relating to allowance for 
depletion); but for purposes of this section allowances under section 
167, and allowances under section 611, shall be considered as 
expenditures.
    ``(d) Exploration Expenditures.--This section shall not apply to 
any expenditure paid or incurred for the purpose of ascertaining the 
existence, location, extent, or quality of any deposit of ore or other 
mineral (including oil and gas).
    ``(e) Foreign Adversaries.--This section shall not apply to any 
expenditure which is attributable to research or experimentation 
conducted in any covered nation (as defined in section 4872(d)(2) of 
title 10, United States Code).
    ``(f) Only Reasonable Research Expenditures Eligible.--This section 
shall apply to a research or experimental expenditure only to the 
extent that the amount thereof is reasonable under the circumstances.
    ``(g) Cross References.--
            ``(1) For adjustments to basis of property for amounts 
        allowed as deductions as deferred expenses under subsection 
        (b), see section 1016(a)(14).
            ``(2) For election of 10-year amortization of expenditures 
        allowable as a deduction under subsection (a), see section 
        59(e).''.
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 is amended by striking the item relating to 
section 174 and inserting the following new item:

``Sec. 174. Research and experimental expenditures''.
    (c) Conforming Amendments.--
            (1) Section 41(d)(1)(A) is amended by striking ``specified 
        research or experimental expenditures under section 174'' and 
        inserting ``expenses under section 174''.
            (2) Section 280C(c) is amended to read as follows:
    ``(c) Credit for Increasing Research Activities.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the qualified research expenses (as defined in 
        section 41(b)) or basic research expenses (as defined in 
        section 41(e)(2)) otherwise allowable as a deduction for the 
        taxable year which is equal to the amount of the credit 
        determined for such taxable year under section 41(a).
            ``(2) Similar rule where taxpayer capitalizes rather than 
        deducts expenses.--If--
                    ``(A) the amount of the credit determined for the 
                taxable year under section 41(a)(1), exceeds
                    ``(B) the amount allowable as a deduction for such 
                taxable year for qualified research expenses or basic 
                research expenses (determined without regard to 
                paragraph (1)),
        the amount chargeable to capital account for the taxable year 
        for such expenses shall be reduced by the amount of such 
        excess.
            ``(3) Election of reduced credit.--
                    ``(A) In general.--In the case of any taxable year 
                for which an election is made under this paragraph--
                            ``(i) paragraphs (1) and (2) shall not 
                        apply, and
                            ``(ii) the amount of the credit under 
                        section 41(a) shall be the amount determined 
                        under subparagraph (B).
                    ``(B) Amount of reduced credit.--The amount of 
                credit determined under this subparagraph for any 
                taxable year shall be the amount equal to the excess 
                of--
                            ``(i) the amount of credit determined under 
                        section 41(a) without regard to this paragraph, 
                        over
                            ``(ii) the product of--
                                    ``(I) the amount described in 
                                clause (i), and
                                    ``(II) the rate of tax under 
                                section 11(b).
                    ``(C) Election.--An election under this paragraph 
                for any taxable year shall be made not later than the 
                time for filing the return of tax for such year 
                (including extensions), shall be made on such return, 
                and shall be made in such manner as the Secretary may 
                prescribe. Such an election, once made, shall be 
                irrevocable.
            ``(4) Controlled groups.--Paragraph (3) of subsection (b) 
        shall apply for purposes of this subsection.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of enactment of this Act.

SEC. 3. EXPANDING REFUNDABLE RESEARCH CREDIT FOR NEW AND SMALL 
              BUSINESSES.

    (a) Increasing Cap on Refundable Credit.--
            (1) In general.--Subclause (I) of section 41(h)(4)(B)(i) of 
        the Internal Revenue Code of 1986 is amended by striking 
        ``$250,000'' and inserting ``the applicable amount''.
            (2) Applicable amount.--Subclause (II) of section 
        41(h)(4)(B)(i) of such Code is amended to read as follows:
                                    ``(II) Applicable amount.--For 
                                purposes of subclause (I), the 
                                applicable amount is--
                                            ``(aa) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2022, and before 
                                        January 1, 2024, $500,000,
                                            ``(bb) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2023, and before 
                                        January 1, 2025, $525,000,
                                            ``(cc) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2024, and before 
                                        January 1, 2026, $550,000,
                                            ``(dd) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2025, and before 
                                        January 1, 2027, $575,000,
                                            ``(ee) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2026, and before 
                                        January 1, 2028, $600,000,
                                            ``(ff) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2027, and before 
                                        January 1, 2029, $625,000,
                                            ``(gg) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2028, and before 
                                        January 1, 2030, $650,000,
                                            ``(hh) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2029, and before 
                                        January 1, 2031, $675,000,
                                            ``(ii) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2030, and before 
                                        January 1, 2032, $700,000,
                                            ``(jj) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2031, and before 
                                        January 1, 2033, $725,000, and
                                            ``(kk) in the case of any 
                                        taxable year beginning after 
                                        December 31, 2032, $750,000.''.
            (3) Conforming amendments.--
                    (A) Clause (ii) of section 41(h)(5)(B) of such Code 
                is amended by striking ``each of the $250,000 amounts'' 
                and inserting ``the applicable amount''.
                    (B) Section 3111(f) of such Code is amended--
                            (i) in paragraph (1)--
                                    (I) by striking ``(applied without 
                                regard to subclause (II) thereof), 
                                and'' and inserting a period,
                                    (II) by striking subparagraph (B), 
                                and
                                    (III) by striking ``for a taxable 
                                year'' and all that follows through 
                                ``allowed as a credit'' and inserting 
                                ``for a taxable year, there shall be 
                                allowed as a credit'',
                            (ii) in paragraph (2)--
                                    (I) by striking ``paragraph 
                                (1)(A)'' and inserting ``paragraph 
                                (1)'', and
                                    (II) by striking ``, and the credit 
                                allowed by paragraph (1)(B) shall not 
                                exceed the tax imposed by subsection 
                                (b) for any calendar quarter,'', and
                            (iii) in paragraph (4)--
                                    (I) by striking ``credits'' and 
                                inserting ``credit'', and
                                    (II) by striking ``or (b)''.
    (b) Extension of Eligibility and Applicability of Election.--
            (1) Startup date.--Subclause (II) of section 41(h)(3)(A)(i) 
        of the Internal Revenue Code of 1986 is amended by striking 
        ``5-taxable-year period'' and inserting ``8-taxable-year 
        period''.
            (2) Extension of limitation on election.--Clause (ii) of 
        section 41(h)(4)(B) of such Code is amended by striking ``5 or 
        more'' and inserting ``8 or more''.
    (c) Gross Receipts Test.--Clause (i) of section 41(h)(3)(A) of the 
Internal Revenue Code of 1986 is amended--
            (1) by striking ``$5,000,000'' in subclause (I) and 
        inserting ``$15,000,000'', and
            (2) by striking ``gross receipts'' in subclause (II) and 
        inserting ``gross receipts in excess of $25,000''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2022.

SEC. 4. INCREASING ACCESS TO THE RESEARCH CREDIT FOR STARTUPS.

    (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) subparagraph (A) shall be applied by 
                        substituting `20 percent' for `14 percent', and
                            ``(ii) if subparagraph (B) applies to such 
                        taxpayer, at the election of the taxpayer--
                                    ``(I) subparagraph (B)(ii) shall be 
                                applied by substituting `10 percent' 
                                for `6 percent', or
                                    ``(II) in lieu of applying 
                                subparagraph (B), 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 the date of the enactment of this Act.
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