“A bill to amend the Internal Revenue Code of 1986 to promote new business innovation, and for other purposes.”
No CRS summary available for this bill.
This section revises the treatment of start-up expenditures (i.e., costs incurred in investigating or creating an active trade or business) and organizational expenditures (i.e., costs incident to creating a corporation or partnership) under IRC §195 by (1) increasing the immediate deduction limit to $20,000 (from $5,000 under prior §195 and §248) with phaseout beginning at $120,000 (from $50,000), (2) requiring the remainder to be amortized over 180 months beginning when the active trade or business starts, (3) applying the rules uniformly to both expenditure types and to disregarded entities (treated as corporations), (4) requiring partnerships and S corporations to make the election at the entity level, (5) indexing the $20,000 and $120,000 amounts for inflation after 2026 (using 2025 as the base year), and (6) allowing a deduction under IRC §165 for previously nondeductible amounts upon complete liquidation or disposition of the business or entity. The section also repeals IRC §248 (corporate organizational expenditures) and IRC §709(a) (partnership organizational expenditures), limits §709 to nondeductibility of syndication fees, and makes conforming amendments.
This section establishes an exception to the IRC §382 limitation on pre-change net operating losses (NOLs) following an ownership change for NOL carryforwards arising in a start-up period taxable year of a trade or business that begins active operations after January 31, 2026 (per IRC §195(d)(2), disregarding subparagraph (B)). A start-up period taxable year is any taxable year beginning before the end of the three-year period after the trade or business begins active operations and ending after January 31, 2026; the exception reduces the NOL amount subject to limitation by the net start-up loss (i.e., the portion of the NOL attributable to that trade or business on a pro rata basis), provided the new loss corporation continues the trade or business for the two-year period beginning on the change date. (As background, IRC §382 generally limits annual use of a loss corporation's pre-change NOLs to the corporation's equity value times the federal long-term tax-exempt rate, to prevent trafficking in tax losses; thus, this exception preserves fuller use of qualifying start-up NOLs, with special allocation rules for the year of change, multiple trades or businesses, and the final start-up year, but inapplicable to certain Title 11 cases, disallowed interest, or pre-February 1, 2026, startups.) This section makes parallel changes to IRC §383 to except a pro rata portion of unused general business credits (under IRC §39) arising in such start-up period taxable years from the excess credit limitation following an ownership change, subject to the same definitions and requirements.