Sec. 401. Simplification and expansion of deduction for start-up and organizational expenditures
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Section 195 of the Internal Revenue Code of 1986 is amended by redesignating subsections
(c)and
(d)as subsections
(d)and (e), respectively, and by striking all that precedes subsection
(d)(as so redesignated) and inserting the following: Except as otherwise provided in this section, no deduction shall be allowed for start-up or organizational expenditures. If a taxpayer elects the application of this subsection with respect to any active trade or business— the taxpayer shall be allowed a deduction for the taxable year in which such active trade or business begins in an amount equal to the lesser of— the aggregate amount of start-up and organizational expenditures paid or incurred in connection with such active trade or business, or $20,000, reduced (but not below zero) by the amount by which such aggregate amount exceeds $120,000, and the remainder of such start-up and organizational expenditures shall be charged to capital account and allowed as an amortization deduction determined by amortizing such expenditures ratably over the 180-month period beginning with the month in which the active trade or business begins. In the case of organizational expenditures with respect to any corporation or partnership, the active trade or business referred to in paragraph
(1)means the first active trade or business carried on by such corporation or partnership. In the case of any taxable year beginning after December 31, 2020, the $20,000 and $120,000 amounts in paragraph (1)(A)(ii) shall each be increased by an amount equal to— such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2019 for calendar year 2016 in subparagraph (A)(ii) thereof. If any amount as increased under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000. If any partnership or corporation is completely liquidated by the taxpayer, any start-up or organizational expenditures paid or incurred in connection with such partnership or corporation which were not allowed as a deduction by reason of this section may be deducted to the extent allowable under section 165. If any trade or business is completely disposed of or discontinued by the taxpayer, any start-up expenditures paid or incurred in connection with such trade or business which were not allowed as a deduction by reason of this section (and not taken into account in connection with a liquidation to which paragraph
(1)applies) may be deducted to the extent allowable under section 165. For purposes of this paragraph, in the case of any deduction allowed under subsection (b)(1) with respect to both start-up and organizational expenditures, the amount treated as so allowed with respect to start-up expenditures shall bear the same ratio to such deduction as the start-up expenditures taken into account in determining such deduction bears to the aggregate of the start-up and organizational expenditures so taken into account. . Section 195(d) of such Code, as redesignated by subsection (a), is amended by adding at the end the following new paragraphs: The term organizational expenditures means any expenditure which— is incident to the creation of a corporation or a partnership, is chargeable to capital account, and is of a character which, if expended incident to the creation of a corporation or a partnership having an ascertainable life, would be amortizable over such life. In the case of any entity with a single owner that is disregarded as an entity separate from its owner, this section shall be applied in the same manner as if such entity were a corporation. . Section 195(e)(2) of such Code, as redesignated by subsection (a), is amended to read as follows: In the case of any partnership or S corporation, the election under subsection
(b)shall be made (and this section shall be applied) at the entity level. . Part VIII of subchapter B of chapter 1 is amended by striking section 248 of such Code (and by striking the item relating to such section in the table of sections of such part). Section 170(b)(2)(D)(ii) of such Code is amended by striking (except section 248) . Section 312(n)(3) of such Code is amended by striking Sections 173 and 248 and inserting Sections 173 and 195 . Section 535(b)(3) of such Code is amended by striking (except section 248) . Section 545(b)(3) of such Code is amended by striking (except section 248) . Section 545(b)(4) of such Code is amended by striking (except section 248) . Section 834(c)(7) of such Code is amended by striking (except section 248) . Section 852(b)(2)(C) of such Code is amended by striking (except section 248) . Section 857(b)(2)(A) of such Code is amended by striking (except section 248) . Section 1363(b) of such Code is amended by adding and at the end of paragraph (2), by striking paragraph (3), and by redesignating paragraph
(4)as paragraph (3). Section 1375(b)(1)(B)(i) of such Code is amended by striking (other than the deduction allowed by section 248, relating to organization expenditures) . Section 709 of such Code is amended to read as follows: No deduction shall be allowed under this chapter to a partnership or to any partner of the partnership for any amounts paid or incurred to promote the sale of (or to sell) an interest in the partnership. . The item relating to section 709 in the table of sections for part I of subchapter K of chapter 1 of such Code is amended to read as follows: Sec. 709. Treatment of syndication fees. . Section 1202(e)(2)(A) of such Code is amended by striking section 195(c)(1)(A) and inserting section 195(d)(1)(A) . The item relating to section 195 in the table of contents of part VI of subchapter B of chapter 1 of such Code is amended to read as follows: Sec. 195. Start-up and organizational expenditures. . The amendments made by this section shall apply to expenditures paid or incurred in connection with active trades or businesses which begin in taxable years beginning after December 31, 2019.