,,ii #aacth ,,congress #ast ,session ,s4 #afeh ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,november #f1 #bjac ,mr4 ,toomey 7for himself and ,mr4 ,menendez7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to make permanent certain small business tax provisions1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,start-up ,jobs and ,innovation ,act4 #b4 ,permanent extension of increased expensing limitation 7a7 ,dollar limitation ,section #agi7;b77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking shall not exceed and all that follows and inserting shall not exceed #ejj1jjj44 7b7 ,reduction in limitation ,section #agi7;b77#b7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking subparagraph 7,c71 7#b7 by striking 1 and at the end of subparagraph 7,b7 and inserting a period1 7#c7 by striking the comma at the end of subparagraph 7,a7 and inserting 1 and1 and 7#d7 by inserting beginning before #bjad after ,the limitation under paragraph 7#a7 for any taxable year4 7c7 ,adjustment for inflation ,subsection 7b7 of section #agi of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#f7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjad1 the #ejj1jjj amount in paragraph 7#a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 4 7d7 ,computer software ,section #agi7;d77#a77;,a77ii7 of the ,internal ,revenue ,code of #aihf is amended by striking and before #bjad4 7e7 ,election ,section #agi7;c77#b7 of the ,internal ,revenue ,code of #aihf is amended by striking and before #bjad4 7f7 ,special rules for treatment of qualified real property 7#a7 ,in general ,section #agi7;f77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking beginning in #bjaj1 #bjaa1 #bjab1 or #bjac and inserting beginning after #bjji4 7#b7 ,repeal of limitation ,section #agi7;f7 of such ,code is amended by striking paragraph 7#c74 7#c7 ,conforming amendment ,section #agi7;f7 of such ,code is amended by striking paragraph 7#d74 7g7 ,effective date ,the amendments made by this section shall apply to property placed in service in taxable years beginning after ,december #ca1 #bjac4 #c4 ,permanent full exclusion applicable to qualified small business stock 7a7 ,in general ,paragraph 7#d7 of section #abjb7;a7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking and before ,january #a1 #bjad1 and 7#b7 by striking certain periods in #bjaj1 #bjaa1 #bjab1 and #bjac in the heading and inserting certain periods after #bjji4 7b7 ,conforming amendments 7#a7 ,the heading for section #abjb of the ,internal ,revenue ,code of #aihf is amended by striking partial4 7#b7 ,the item relating to section #abjb in the table of sections for part ,i of subchapter ,p of chapter #a of such ,code is amended by striking ,partial exclusion and inserting ,exclusion4 7#c7 ,section #abbc7ac7 of such ,code is amended by striking #abjb7;a77#b714 7c7 ,increase in gross asset threshold 7#a7 ,in general ,paragraph 7#a7 of section #abjb7;d7 of the ,internal ,revenue ,code of #aihf is amended by striking #ej1jjj1jjj each place it appears and inserting #aej1jjj1jjj4 7#b7 ,adjustment for inflation ,subsection 7d7 of section #abjb of such ,code is amended by adding at the end the following new paragraph3 7#d7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjad1 the #aej1jjj1jjj amount in subparagraphs 7,a7 and 7,b7 of paragraph 7#a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 4 7d7 ,effective date ,the amendments made by this section shall apply to stock acquired after ,december #ca1 #bjac4 #d4 ,unification of deduction for start-up and organizational expenditures 7a7 ,in general ,subsection 7a7 of section #aie of the ,internal ,revenue ,code of #aihf is amended by inserting and organizational after start-up4 7b7 ,organizational expenditures ,subsection 7c7 of section #aie of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#c7 ,organizational expenditures ,the term organizational expenditures means any expenditure which-- 7,a7 is incident to the creation of a corporation or a partnership1 7,b7 is chargeable to capital account1 and 7,c7 is of a character which1 if expended incident to the creation of a corporation or a partnership having a limited life1 would be amortizable over such life4 4 7c7 ,dollar amounts ,clause 7ii7 of section #aie7;b77#a77;,a7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking #e1jjj and inserting #aj1jjj1 and 7#b7 by striking #ej1jjj and inserting #fj1jjj4 7d7 ,adjustment for inflation ,paragraph 7#c7 of section #aie7;b7 is amended to read as follows3 7#c7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjad1 the #aj1jjj and #fj1jjj amounts in paragraph 7#a77;,a77ii7 shall each be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 4 7e7 ,conforming amendments 7#a7 ,section #aie7;b77#a7 of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by inserting 7or1 in the case of a partnership1 the partnership elects7 after ,if a taxpayer elects1 7,b7 by inserting 7or the partnership1 as the case may be7 after the taxpayer in subparagraph 7,a71 and 7,c7 by inserting or organizational after start-up each place it appears4 7#b7 ,section #aie7;b77#b7 of such ,code is amended-- 7,a7 by striking amortization period4--,in any case and inserting amortization period4-- 7,a7 ,in general ,in any case 1 and 7,b7 by adding at the end the following new subparagraph3 7,b7 ,special partnership rule ,in the case of a partnership1 subparagraph 7,a7 shall be applied at the partnership level4 4 7#c7 7,a7 ,part ,,viii of subchapter ,b of chapter #a of such ,code is amended by striking section #bdh4 7,b7 ,section #agj7;b77#b77;,c77ii7 of such ,code is amended by striking 7except section #bdh74 7,c7 ,section #cab7n77#c7 of such ,code is amended by striking ,sections #agc and #bdh and inserting ,section #agc4 7,d7 ,section #ece7;b77#c7 of such ,code is amended by striking 7except section #bdh74 7,e7 ,section #ede7;b77#c7 of such ,code is amended by striking 7except section #bdh74 7,f7 ,section #hcd7;c77#g7 of such ,code is amended by striking 7except section #bdh74 7,g7 ,section #heb7;b77#b77;,c7 of such ,code is amended by striking 7except section #bdh74 7,h7 ,section #heg7;b77#b77;,a7 of such ,code is amended by striking 7except section #bdh74 7,i7 ,section #acfc7;b7 of such ,code is amended by inserting and at the end of paragraph 7#b71 by striking paragraph 7#c71 and by redesignating paragraph 7#d7 as paragraph 7#c74 7,j7 ,section #acge7;b77#a77;,b77i7 of such ,code is amended by striking 7other than the deduction allowed by section #bdh1 relating to organization expenditures74 7,k7 ,the table of sections for part ,,viii of subchapter ,b of chapter #a of such ,code is amended by striking the item relating to section #bdh4 7#d7 ,part ,i of subchapter ,k of chapter #a of such ,code is amended by striking section #gji4 7#e7 ,the table of sections for part ,i of subchapter ,k of chapter #a of such ,code is amended by striking the item relating to section #gji4 7f7 ,clerical amendments 7#a7 ,the heading of section #aie of the ,internal ,revenue ,code of #aihf is amended by striking expenditures and inserting and organizational expenditures4 7#b7 ,the item relating to section #aie in the table of contents of part ,,vi of subchapter ,b of chapter #a of such ,code is amended to read as follows3 ,sec4 #aie4 ,start-up and organizational expenditures4 4 7g7 ,effective date ,the amendments made by this section shall apply to expenses paid or incurred after ,december #ca1 #bjac4 #e4 ,expansion of gross receipts test 7a7 ,in general ,paragraph 7#a7 of section #ddh7;c7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking the #e1jjj1jjj gross receipts test and inserting the gross receipts test1 and 7#b7 by striking does not exceed #e1jjj1jjj and inserting does not exceed #aj1jjj1jjj4 7b7 ,adjustment for inflation ,subsection 7c7 of section #ddh of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#d7 ,adjustment for inflation ,in the case of any taxable year beginning after ,december #ca1 #bjad1 the #aj1jjj1jjj amount in paragraph 7#a7 shall be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,if any amount as increased under the preceding sentence is not a multiple of #a1jjj1 such amount shall be rounded to the nearest multiple of #a1jjj4 4 7c7 ,conforming amendments 7#a7 ,paragraph 7#c7 of section #ddh7;b7 of the ,internal ,revenue ,code of #aihf is amended by striking the #e1jjj1jjj gross receipts test and inserting the gross receipts test4 7#b7 ,the heading for paragraph 7#c7 of section #ddh7;b7 of such ,code is amended by striking with gross receipts of not more than #e1jjj1jjj and inserting that pass gross receipts test4 7#c7 ,the heading for subsection 7c7 of section #ddh of such ,code is amended by striking #e1jjj1jjj gross and inserting ,gross4 7#d7 ,clause 7iii7 of section #agb7;b77#a77;,f7 of such ,code is amended by inserting 1 applied by substituting #e1jjj1jjj for #aj1jjj1jjj each place it appears1 after section #ddh7;c74 7#e7 ,subclause 7,,ii7 of section #agb7;b77#a77;,h77v7 of such ,code is amended by striking #e1jjj1jjj and inserting #aj1jjj1jjj4 7d7 ,effective date and special rules 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 7#b7 ,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-- 7,a7 such change shall be treated as initiated by the taxpayer2 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 #f4 ,clarification of inventory and accounting rules for small business 7a7 ,cash accounting permitted ,section #ddf of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7g7 ,certain small business taxpayers permitted ,to use cash accounting method without limitation 7#a7 ,in general ,with respect to an eligible taxpayer who uses the cash receipts and disbursements method for any taxable year1 such method shall be deemed to clearly reflect income and the taxpayer shall not be required to use an accrual method4 7#b7 ,eligible taxpayer ,for purposes of this subsection1 a taxpayer is an eligible taxpayer with respect to any taxable year if-- 7,a7 for all prior taxable years beginning after ,december #ca1 #bjac1 the taxpayer 7or any predecessor7 met the gross receipts test of section #ddh7;c71 and 7,b7 the taxpayer is not subject to section #ddg or #ddh4 4 7b7 ,inventory rules 7#a7 ,in general ,section #dga of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7c7 as subsection 7d7 and by inserting after subsection 7b7 the following new subsection3 7c7 ,small business taxpayers not required ,to use inventories 7#a7 ,in general ,a qualified taxpayer shall not be required to use inventories under this section for a taxable year4 7#b7 ,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 #ca1 #bjac1 such property shall be treated as a material or supply which is not incidental4 7#c7 ,qualified taxpayer ,for purposes of this subsection1 the term qualified taxpayer means-- 7,a7 any eligible taxpayer 7as defined in section #ddf7;g77#b771 and 7,b7 any taxpayer described in section #ddh7;b77#c74 4 7#b7 ,increased eligibility for simplified dollar-value ,,lifo method ,section #dgd7;c7 of such ,code is amended by striking #e1jjj1jjj and inserting #aj1jjj1jjj4 7#c7 ,conforming amendment ,subsection 7c7 of section #bfc;,a of such ,code is amended by adding at the end the following new paragraph3 7#g7 ,exclusion from inventory rules ,nothing in this section shall require the use of inventories for any taxable year by a qualified taxpayer 7within the meaning of section #dga7;c77 who is not required to use inventories under section #dga for such taxable year4 4 7c7 ,effective date and special rules 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 7#b7 ,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-- 7,a7 such change shall be treated as initiated by the taxpayer2 and 7,b7 such change shall be treated as made with the consent of the ,secretary of the ,treasury4 #g4 ,exception from passive loss rules for investments in high technology research small business pass-thru entities 7a7 ,in general ,subsection 7c7 of section #dfi is amended by redesignating paragraphs 7#d7 through 7#g7 as paragraphs 7#e7 through 7#h71 respectively1 and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,high technology research activities 7,a7 ,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 entity4 7,b7 ,treatment of losses and deductions 7i7 ,in general ,losses or deductions of a taxpayer relating to qualified research activities carried on by a high technology research small business pass-thru entity shall not be treated as losses or deductions1 respectively1 from a passive activity except as provided in clause 7ii7 and subparagraph 7,c74 7ii7 ,limitation ,clause 7i7 shall apply to losses and deductions of a taxpayer relating to 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 relating to 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-- 7,i7 in exchange for such ownership interest1 and 7,,ii7 specifically for use in connection with qualified research activities4 ,for purposes of the preceding sentence1 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 #geb7;a7 as a contribution of money4 7,c7 ,treatment of carryovers ,subparagraph 7,b77i7 shall not apply to the portion of any loss or deduction that is carried over under subsection 7b7 into a taxable year other than the taxable year in which such loss or deduction arose4 7,d7 ,qualified research activity ,for purposes of this paragraph1 the term qualified research activity means any activity constituting qualified research 7within the meaning of section #da7;d77#a77;,b7 and taking into account paragraphs 7#c7 and 7#d7 of section #da7;d77 which involves a process of experimentation4 7,e7 ,high technology research small business pass-thru entity ,for purposes of this paragraph1 the term high technology research small business pass-thru entity means any domestic pass-thru entity for any taxable year if-- 7i7 either-- 7,i7 more than #ge percent of the entity's expenditures 7including salaries1 rent and overhead7 for such taxable year are paid or incurred in connection with qualified research 7within the meaning of section #da7;d77#a77;,b71 taking into account paragraphs 7#c7 and 7#d7 of section #da7;d77 that involves a process of experimentation conducted by the entity1 or 7,,ii7 more than #ej percent of the entity's expenditures for such taxable year constitute qualified research expenses 7as defined in section #da7;b71 but determined without regard to the phrase #fe percent of in paragraph 7#c77;,a7 thereof71 7ii7 such entity is a small business 7within the meaning of section #da7;b77#c77;,d77iii71 applied by substituting #bej for #ejj in subclause 7,i7 thereof71 and 7iii7 at no time during the taxable year does the entity have aggregate gross assets in excess of #aej1jjj1jjj4 7,f7 ,provisions related to aggregate gross assets limitation ,for purposes of this paragraph-- 7i7 ,in general ,except as otherwise provided in this subparagraph1 the term aggregate gross assets has the meaning given such term in section #abjb7;d77#b74 7ii7 ,exception for certain intangibles ,any section #aig intangible 7as defined in section #aig7;d7 and determined without regard to section #aig7;e77 which is used directly in connection with the research referred to in subparagraph 7,e77i7 shall not be taken into account in determining aggregate gross assets4 7iii7 ,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-- 7,i7 the aggregate gross assets of such entity 7determined immediately after such sale and without regard to this clause7 do not exceed the sum of #aej1jjj1jjj1 plus #be percent of the aggregate gross assets of such entity 7determined immediately before such sale and without regard to this clause71 and 7,,ii7 the aggregate gross assets of such entity 7determined immediately before such sale and without regard to this clause7 do not exceed #aej1jjj1jjj4 ,sales of equity interests which are part of the same plan or arrangement1 or which are carried out with the principal purpose of increasing the amount of cash to which this clause applies 7determined without regard to this sentence71 shall be treated as a single sale for purposes of this clause4 7iv7 ,inflation adjustment ,in the case of any taxable year beginning after #bjad1 the #aej1jjj1jjj amount in subparagraph 7,e77iii7 and subclauses 7,i7 and 7,,ii7 of clause 7iii7 shall each be increased by an amount equal to-- 7,i7 such dollar amount1 multiplied by 7,,ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins determined by substituting calendar year #bjac for calendar year #aiib in subparagraph 7,b7 thereof4 ,any increase determined under the preceding sentence shall be rounded to the nearest #ajj1jjj4 7,g7 ,capital expenditures taken into account for expenditures test ,an expenditure shall not fail to be taken into account under subparagraph 7,e77i7 merely because such expenditure is chargeable to capital account4 7,h7 ,pass-thru entity ,for purposes of this paragraph1 the term pass-thru entity means any partnership1 ,s corporation1 or other entity identified by the ,secretary as a pass-thru entity for purposes of this paragraph4 7,i7 ,aggregation rules 7i7 ,in general ,all persons treated as a single employer under subsection 7a7 or 7b7 of section #eb1 or subsection 7m7 or 7o7 of section #dad1 shall be treated as a single entity for purposes of subparagraphs 7,e7 and 7,f77iii74 7ii7 ,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 7i74 7,j7 ,activities not engaged in for profit and economic substance rules ,section #ahc and the economic substance rules of section #ggja7o7 shall not apply to disallow the losses1 deductions1 and credits of a high technology research small business pass-thru entity solely as a result of losses incurred by such entity4 4 7b7 ,material participation not required ,paragraph 7#e7 of section #dfi7;c7 of such ,code1 as redesignated by subsection 7a71 is amended by striking and 7#c7 in the heading and text and inserting 1 7#c71 and 7#d74 7c7 ,certain research-,related deductions and credits of high technology research small business pass-,thru entities allowed for purposes of determining alternative minimum tax 7#a7 ,deduction for research and experimental expenditures ,paragraph 7#b7 of section #ef7;b7 of such ,code is amended by adding at the end the following new subparagraph3 7,e7 ,exception for high technology research small business pass-thru entities ,in the case of a high technology research small business pass-thru entity 7as defined in section #dfi7;c77#d771 this paragraph shall not apply to any amount allowable as a deduction under section #agd7;a74 4 7#b7 ,allowance of certain research-related credits ,subparagraph 7,b7 of section #ch7;c77#d7 of such ,code is amended by redesignating clauses 7ii7 through 7ix7 as clauses 7iii7 through 7x71 respectively1 and by inserting after clause 7i7 the following new clause3 7ii7 the credits of an individual taxpayer determined under sections #da and #dh;,d to the extent attributable to a high technology research small business pass-thru entity 7as defined in section #dfi7;c77#d771 4 7d7 ,exception to limitation on pass-,thru of research credit ,subsection 7g7 of section #da of such ,code is amended by adding at the end the following3 ,paragraphs 7#b7 and 7#d7 shall not apply with respect to any high technology research small business pass-thru entity 7as defined in section #dfi7;c77#d774 7e7 ,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 ,act4