H.R. 3967 — CREATE JOBS Act

This section makes permanent full expensing (i.e., 100% bonus depreciation under IRC §168(k)) for qualified property placed in service after September 27, 2017, by setting the applicable percentage at 100% indefinitely (previously phasing down to 0% for property placed in service in 2027 and later). It makes conforming amendments to remove phase-down provisions and date limitations for specified plants (previously through 2026), with changes effective as if included in section 13201 of P.L. 115-97 (Tax Cuts and Jobs Act).

This section establishes a neutral cost recovery depreciation adjustment under new IRC §168(n) for applicable property—residential rental property (27.5-year recovery period) or nonresidential real property (39-year recovery period)—that increases the annual deduction, for taxable years after the placed-in-service year, by multiplying the otherwise allowable amount by the applicable neutral cost recovery ratio (never less than 1). The ratio equals the ratio of the gross domestic product deflator for the relevant calendar quarter in the taxable year to that for the base quarter (the placement-in-service quarter, or for pre-enactment property, the enactment quarter), multiplied by 1.03 raised to the power of the number of full years elapsed between the quarters (rounded to the nearest 1/1000). Taxpayers may irrevocably elect out; the additional deduction does not affect adjusted basis or depreciation recapture under §§1245/1250 (including for pass-thru entities such as partnerships and REITs); and the adjustment applies similarly for alternative minimum tax purposes under §56(a)(1). The changes apply to property placed in service before, on, or after enactment for taxable years ending on or after the enactment date.

This section revises Section 174 to permit taxpayers to deduct research or experimental expenditures paid or incurred during the taxable year in connection with their trade or business (restoring immediate expensing available before tax years beginning after December 31, 2021, when such expenditures were required to be capitalized and amortized ratably over five years for domestic research and 15 years for foreign research). It retains the option to amortize capitalized expenditures over a period of not less than 60 months (at taxpayer election) and makes conforming amendments to the table of sections, Section 41 (defining qualified research expenses for the research tax credit), and Section 280C (coordinating the research credit with deductions).