CREATE JOBS Act
S. 2056, titled the Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act (CREATE JOBS Act), would make several broad changes to the tax code aimed at accelerating investment and research activity. The core provisions are: (1) permanently allowing 100% bonus depreciation (full expensing) for qualified property when placed in service, (2) adding a new neutral cost recovery depreciation adjustment for residential and nonresidential real property to account for inflation and time since placing property in service, (3) eliminating the ongoing amortization of research and development expenditures (R&E) and instead providing current expensing (with an optional 60-month amortization for certain cases), and (4) making conforming technical changes to align related rules with the new expensing regime. The bill also embeds specific language about how these changes interact with various cross-references in the Internal Revenue Code and sets an effective date that aligns with prior TCJA provisions, with applicability to property placed in service both before and after enactment. In practical terms, if enacted, businesses would generally be able to deduct in the year of purchase the full cost of most qualifying property (equipment, plants, and certain other tangible property), rather than depreciating it over multiple years. For real estate, there would be a new inflation-adjusted depreciation framework (the neutral cost recovery adjustment) intended to maintain depreciation value over time. Research expenditures would shift away from amortization toward immediate expensing (with certain optional alternatives), changing how R&D costs are treated for tax purposes.
Key Points
- 1Permanent full expensing for qualified property: The bill amends the 168(k) depreciation rules so that the applicable percentage is 100% for property placed in service after September 27, 2017 (with plant/planted-grafted property provisions for agricultural contexts). This effectively makes bonus depreciation a permanent feature for most qualifying property, rather than a temporary incentive.
- 2Neutral cost recovery depreciation adjustment for real property (168(n)): For residential rental property and nonresidential real property, the bill adds a new subsection that adjusts deductions using an “applicable neutral cost recovery ratio” tied to the GDP deflator. The ratio is calculated relative to when the property was placed in service and is multiplied by a factor (1.03 raised to the number of full years in the placed-in-service window). The ratio can never be less than 1, and it is rounded to the nearest 0.001. There are special rules for existing property and for how this interacts with minimum tax computations (56) if the property is subject to 168(n).
- 3Interaction with minimum tax and property eligibility: The minimum tax provision (section 56) is amended to apply the neutral cost recovery ratio to the applicable property, so the enhanced or adjusted depreciation deduction under 168(n) would be used in the calculation of a minimum tax for property that falls under this new regime (subject to irrevocable elections to opt out).
- 4Elimination of amortization for R&E expenditures: Section 174 is rewritten to allow (a) current expensing of research and experimental expenditures (deductible in the year paid/incurred) and (b) an optional amortization method for certain expenditures that are not expensed (to be paid or incurred and capitalized but amortized ratably over a minimum 60-month period). This represents a significant shift away from amortizing R&E costs over time.
- 5Broad conforming amendments and effective date: The bill includes numerous conforming amendments to reorganize and align cross-references in the code with the new expensing framework and neutral depreciation rules. The effective date is designed to be treated as if included in prior legislation (and applies to property placed in service both before and after enactment), with the overall intent to harmonize the changes with the TCJA framework that began in 2017.