# Plain Language Summary: American Innovation Act of 2022

This bill makes it easier and cheaper for people to start new businesses by changing how the tax code treats startup costs. When you start a business, you typically have to pay for things like legal fees, accounting, licenses, and office setup before you make any money. Currently, these costs are hard to deduct from your taxes, which means new entrepreneurs pay more in taxes while their business is getting off the ground. This bill lets business owners immediately deduct up to $20,000 of these startup expenses in the year they start their business, rather than having to spread the deduction over many years. The remaining startup costs can still be deducted gradually over 15 years. The bill also automatically increases these dollar limits each year to account for inflation, so the benefit doesn't shrink over time.

The second major change helps startups that go through ownership changes—like when investors buy into a company or when a business gets acquired. Normally, when a company changes hands, the new owners can't use the old company's losses to reduce their taxes. This is a big problem for startups because they often operate at a loss for their first few years while building the business. This bill creates an exception: if a startup is still in its first three years and changes ownership, the new owners can still use those early losses to offset their taxes. This makes startups more attractive to investors because the tax benefits of those early losses don't disappear when ownership changes. The same protection applies to tax credits that startups earn during their early years.

These changes take effect for businesses that start after December 31, 2021, and are designed to reduce the tax burden on new entrepreneurs during the critical early years when businesses are most likely to fail. By making it easier to deduct startup costs and preserving tax benefits through ownership changes, the bill aims to encourage more people to start new businesses and help investors feel more confident putting money into startups.

American Innovation Act of 2022

Buchanan, Vern

American Innovation Act of 2022 This bill revises the tax treatment of business start-up or organizational expenditures. Specifically, it allows an election to deduct such expenditures in an amount equal to the lesser of the aggregate amount of such expenditures incurred by an active trade of business, or $20,000, reduced by the amount by which such aggregate amount exceeds $120,000. The remaining amount of such expenditures shall be amortized over the 180 month period after the trade or business begins. The bill also revises the tax treatment of partnership syndication fees and start-up net operating losses and tax credits after an ownership change.