U.S. Representatives Mike Kelly (R-PA) and Vern Buchanan (R-FL) have announced growing support for the American Innovation Act (H.R. 1778), a bill designed to increase the amount small business owners can deduct for start-up costs in their first year of operations. The legislation, which would raise the deduction limit from $5,000 to $20,000 and increase the phase-out threshold from $50,000 to $120,000, has received endorsements from several national organizations that focus on pro-growth policies and small business advocacy.
Senator Marsha Blackburn (R-TN), a member of the Senate Finance Committee, also supports the measure and plans to introduce companion legislation in the Senate.
The proposed changes would also make partnerships and S corporations eligible for these deductions. Representative Kelly said, “The American Innovation Act allows for investments in research and development to help small businesses grow and allow entrepreneurs to take that next step in their American Dream. This pro-growth tax policy will kickstart Main Street businesses, and it make it easier for these businesses to create jobs, support families and grow our local economies.”
Representative Buchanan added, “Entrepreneurship is at the heart of the American Dream. During National Entrepreneurship Week, we should be focused on removing barriers for the job creators who drive the American economy. My American Innovation Act cuts taxes on start-up costs so small businesses can reinvest in their companies, hire workers and strengthen their local communities.”
Senator Blackburn stated, “Small businesses are the backbone of our nation’s economy. The American Innovation Act would promote new business innovation by expanding tax incentives and putting more money back in the pockets of Tennesseans who are working to get their startups off the ground.”
Co-sponsors include Reps. Don Bacon (R-Neb.), Ron Estes (R-Kan.), David Kustoff (R-Tenn.), Ryan Mackenzie (R-Pa.), Carol Miller (R-W.Va.), Max Miller (R-Ohio), Blake Moore (R-Utah), Adrian Smith (R-Neb.) and Claudia Tenney (R-N.Y.).
According to data from federal agencies, more than half of new small businesses established between 1994 and 2021 failed within five years. Additionally, nearly half of all businesses started with less than $25,000 in capital at inception. These statistics highlight challenges faced by entrepreneurs during early stages.
Organizations endorsing the bill include the S Corporation Association, National Electrical Contractors Association, National Association of Wholesalers, National Venture Capital Association, Angel Capital Association, National Taxpayers Union, Center for a Free Economy and Americans for Prosperity.
Brian Reardon of the S Corporation Association commented: “Nearly all job creation in the US comes from start-ups. Without them, millions of Americans would struggle to find work. The American Innovation Act encourages entrepreneurship and job creation by reducing the costs of starting a business. It’s an essential part of our economy, and the S Corporation Association supports it.”
Marco A. Giamberardino from NECA said: “NECA thanks Representative Buchanan for his commitment to the small business community and urges the swift passage of H.R. 1778. We look forward to working with Congress to advance this measure and fully unlock America’s infrastructure and energy potential.”
Alex Hendrie with National Association of Wholesaler-Distributors noted: “Small businesses incur significant startup costs in their first year of operations, yet they can deduct only a small fraction of these costs from their taxable income. The American Innovation Act helps address this issue by increasing the deductible amount to $20,000, raising the phase-out threshold of the deduction to $120,000, and making partnerships and S corporations eligible to claim the deduction. Representatives Vern Buchanan and Mike Kelly should be applauded for leading this pro–small business legislation, which should be supported and co-sponsored by all members of the House of Representatives.”
Bobby Franklin from NVCA said: “Representative Buchanan’s American Innovation Act would strengthen the entrepreneurial ecosystem by modernizing and expanding the startup cost deduction, giving founders greater flexibility to invest in their teams, operations, and local communities from day one. Venture capital is committed to backing founders who turn innovative ideas into high-growth companies, and NVCA is proud to support legislation that expands access to capital and reduces early-stage barriers so more founders can build and scale next generation companies in every corner of the country.”
Pat Gouhin with Angel Capital Association stated: “The Angel Capital Association is the leading professional association representing over 14,000 accredited individual investors… ACA commends Congressman Buchanan and Congressman Kelly for their reintroduction of the American Innovation Act. Expanding the ability for early stage small businesses to deduct their start-up costs will provide entrepreneurs with a much needed capital boost… As Congress continues to look for ways to support fast-growing USA based innovative companies this legislation is an important part of equation.”
Thomas Aiello with National Taxpayers Union added: “Small businesses are the backbone of Main Street America… The American Innovation Act builds on success… providing additional targeted tax relief… Representatives Vern Buchanan & Mike Kelly should be applauded… which should be supported & co-sponsored by all members…”
Mike Kelly has represented Pennsylvania’s 16th district since 2011 after succeeding Kathy Dahlkemper https://kelly.house.gov/about. He was born in Pittsburgh in 1948 https://www.politico.com/news/2023/07/13/mike-kelly-congress-pennsylvania-profile-00105853.
Kelly graduated from Notre Dame University with a BA degree in 1970.
