“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 rules for deducting start-up expenditures (i.e., costs incurred before an active trade or business begins) and organizational expenditures (i.e., costs incident to creating a corporation or partnership) under IRC §195 by (1) consolidating them into a single regime, repealing IRC §248 (corporate organizational expenditures), and limiting IRC §709 to nondeductible partnership syndication fees; (2) increasing the immediate deduction limit to $20,000 (from $5,000) and phase-out threshold to $120,000 (from $50,000), with the remainder amortized over 180 months; (3) providing for inflation adjustments to the dollar limits for taxable years beginning after December 31, 2026 (using 2025 as the base year); (4) applying the rules to disregarded entities (i.e., single-owner entities) as if they were corporations; (5) requiring partnerships and S corporations to make the deduction election at the entity level; and (6) allowing a deduction (under IRC §165) for previously nondeducted amounts upon complete liquidation of a partnership or corporation or disposition of a trade or business. (Thus, more small businesses may fully deduct start-up and organizational costs immediately, rather than amortizing most over 15 years.)
This section establishes an exception under IRC §382(d) to the limitation on the use of pre-change net operating loss (NOL) carryforwards following an ownership change (generally, a >50 percentage point increase in stock ownership by 5% shareholders over a three-year testing period), for the portion of NOLs arising in a start-up period taxable year allocable to a trade or business that began active operations after January 31, 2026. (A start-up period taxable year is any taxable year of the old loss corporation that begins within the three-year period after the business begins active operations—determined under IRC §195(d)(2), disregarding subparagraph (B)—and ends after January 31, 2026; the exception reduces the amount of NOL subject to limitation by a pro rata "net start-up loss" allocable to the business, applies similarly to NOLs arising in the year of the ownership change, requires the new loss corporation to continue the business for the two-year period beginning on the change date, and includes special rules for multiple businesses, the final start-up year, Title 11 cases, and disallowed interest carryovers. Thus, qualifying start-up NOLs are fully usable post-change date without regard to the §382 limitation, subject to the continuity requirement.) This section makes parallel changes under new IRC §383(e) for unused general business credits under §39 arising in such start-up period taxable years, reducing the amount subject to limitation by a pro rata "start-up excess credit" allocable to the business (with conforming cross-references to §382(d)(4)).