S. 4376 - Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups (CREATE JOBS Act)

116TH CONGRESS
2D SESSION

S. 4376

To amend the Internal Revenue Code of 1986
to permanently allow a tax deduction at the time
an investment in qualified property is made,
and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 30, 2020

Mr. CRUZ (for himself and Ms. McSALLY) 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 permanently allow a tax deduction at the time an investment in qualified property is made, and for other purposes.

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 "Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups" or the "CREATE JOBS Act".

SEC. 2. PERMANENT FULL EXPENSING FOR QUALIFIED PROPERTY.

(a) IN GENERAL. — Paragraph (6) of section 168(k) of the Internal Revenue Code of 1986 is amended to read as follows:

"(6) APPLICABLE PERCENTAGE. — For purposes of this subsection, the term 'applicable percentage' means, in the case of property placed in service (or, in the case of a specified plant described in paragraph (5), a plant which is planted or grafted) after September 27, 2017, 100 percent.".

(b) CONFORMING AMENDMENTS. —

(1) Section 168(k) of the Internal Revenue Code of 1986 is amended —

(A) in paragraph (2) —

(i) in subparagraph (A) —

(I) in clause (i)(V), by inserting "and" at the end,

(II) in clause (ii), by striking "clause (ii) of subparagraph (E), and" and inserting "clause (i) of subparagraph (E).", and

(III) by striking clause (iii),  (ii) in subparagraph (B) —

(I) in clause (i) —

(aa) by striking subclauses (II) and (III), and

(bb) by redesignating subclauses (IV) through (VI) as subclauses (II) through (IV), respectively,

(II) by striking clause (ii), and

(III) by redesignating clauses (iii) and (iv) as clauses (ii) and (iii), respectively,

(iii) in subparagraph (C) —

(I) in clause (i), by striking "and subclauses (II) and (III) of subparagraph (B)(i)", and

(II) in clause (ii), by striking "subparagraph (B)(iii)" and inserting "subparagraph (B)(ii)", and

(iv) in subparagraph (E) —

(I) by striking clause (i), and

(II) by redesignating clauses (ii) and (iii) as clauses (i) and (ii), respectively, and

(B) in paragraph (5)(A), by striking "planted before January 1, 2027, or is grafted before such date to a plant that has already been planted," and inserting "planted or grafted".

(2) Section 460(c)(6)(B) of such Code is amended by striking "which" and all that follows through the period and inserting "which has a recovery period of 7 years or less.".

(c) EFFECTIVE DATE. — The amendments made by this section shall take effect as if included in section 13201 of Public Law 115-97.

SEC. 3. NEUTRAL COST RECOVERY DEPRECIATION ADJUSTMENT FOR RESIDENTIAL RENTAL PROPERTY AND NONRESIDENTIAL REAL PROPERTY.

(a) IN GENERAL. — Section 168 of the Internal Revenue Code of 1986 is amended by adding at the end thereof the following new subsection:

"(n) NEUTRAL COST RECOVERY DEPRECIATION ADJUSTMENT FOR RESIDENTIAL RENTAL PROPERTY AND NONRESIDENTIAL REAL PROPERTY. —

"(1) IN GENERAL. — In the case of any applicable property, the deduction under this section with respect to such property for any taxable year after the taxable year during which the property is placed in service shall be —

"(A) the amount determined under this section for such taxable year without regard to this subsection, multiplied by "(B) the applicable neutral cost recovery ratio for such taxable year.

"(2) APPLICABLE NEUTRAL COST RECOVERY RATIO. — For purposes of paragraph (1), the applicable neutral cost recovery ratio for the applicable property for any taxable year is the number determined by —

"(A) dividing —

"(i) the gross domestic product deflator for the calendar quarter ending in such taxable year which corresponds to the calendar quarter during which the property was placed in service by the taxpayer, by

"(ii) the gross domestic product deflator for the calendar quarter during which the property was placed in service by the taxpayer, and

"(B) then multiplying the number determined under subparagraph (A) by the number equal to 1.03 to the nth power where 'n' is the number of full years in the period beginning on the 1st day of the calendar quarter during which the property was placed in service by the taxpayer and ending on the day before the beginning of the corresponding calendar quarter ending during such taxable year.

The applicable neutral cost recovery ratio shall never be less than 1. The applicable neutral cost recovery ratio shall be rounded to the nearest 1⁄1000.

"(3) SPECIAL RULE FOR EXISTING PROPERTY. — In the case of any applicable property which is placed in service before the date of enactment of this subsection, subparagraphs (A)(ii) and (B) of paragraph (2) shall be applied by substituting 'calendar quarter which includes the date of enactment of this subsection' for 'calendar quarter during which the property was placed in service by the taxpayer' each place it appears.

"(4) GROSS DOMESTIC PRODUCT DEFLATOR. —

For purposes of paragraph (2), the gross domestic product deflator for any calendar quarter is the implicit price deflator for the gross domestic product for such quarter (as shown in the first revision thereof).

"(5) ELECTION NOT TO HAVE SUBSECTION APPLY. — This subsection shall not apply to any applicable property if the taxpayer elects not to have this subsection apply to such property. Such an election, once made, shall be irrevocable.

"(6) ADDITIONAL DEDUCTION NOT TO AFFECT BASIS OR RECAPTURE. —

"(A) IN GENERAL. — The additional amount determined under this section by reason of this subsection shall not be taken into account in determining the adjusted basis of any applicable property or of any interest in a passthru entity which holds such property and shall not be treated as a deduction for depreciation for purposes of sections 1245 and 1250.

"(B) PASS-THRU ENTITY DEFINED. — For purposes of subparagraph (A), the term 'passthru entity' means —

"(i) a regulated investment company,

"(ii) a real estate investment trust,

"(iii) an S corporation,

"(iv) a partnership,

"(v) an estate or trust, and

"(vi) a common trust fund.

"(7) APPLICABLE PROPERTY. — For purposes of this subsection, the term 'applicable property' means residential rental property or nonresidential real property (as such terms are defined in subsection (e)(2)).".

(b) MINIMUM TAX TREATMENT. — Paragraph (1) of section 56(a) of the Internal Revenue Code of 1986 is amended by adding at the end thereof the following new subparagraph:

"(E) USE OF NEUTRAL COST RECOVERY RATIO. — In the case of property to which section 168(n) applies, the deduction allowable under this paragraph with respect to such property for any taxable year (after the taxable year during which the property is placed in service) shall be —

"(i) the amount so allowable for such taxable year without regard to this subparagraph, multiplied by "(ii) the applicable neutral cost recovery ratio for such taxable year (as determined under section 168(n)).

This subparagraph shall not apply to any property with respect to which there is an election in effect not to have section 168(n) apply.".

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to property placed in service before, on, or after the date of the enactment of this Act, with respect to taxable years ending on or after such date.

SEC. 4. ELIMINATION OF AMORTIZATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.

(a) IN GENERAL. — Subpart A of part III of subtitle C of title I of Public Law 115-97 is amended by striking section 13206.

(b) EFFECTIVE DATE. — The amendment made by this section shall take effect on the date of the enactment of this Act.