This bill — known as the American Innovation Act of 2018 — would seek to to spur innovation by helping brand-new businesses with startup costs and capital by expanding tax deductions available to them. A breakdown of its three main components can be found below.
The bill would consolidate tax rules to allow startups to deduct up to $20,000 of startup and organizational costs from annual tax filings. Currently, the deduction limit is $5,000 each for startup and organizational costs. Expenses that can’t be deducted immediately would be amortized over 180 months.
It’d also allow small businesses that are completely liquidated before the end of the 180-month period to have any unamortized amounts deducted to the extent allowable by law. In the case of any active trade or business that’s completely disposed of or discontinued before the end of the 180-month period, any unamortized startup expenditures may be deducted to the extent allowable under law.
Additionally, new companies that experience changes in ownership would be eligible to claim certain tax breaks that were previously limited. Specifically, a startup business’ pre-change net operating loss carryforwards, net operating losses, general business credit carryforwards, and general business credits would be available for use in a post-change year. Currently, an ownership change subjects a company to significant limitations.