Growing and Preserving Innovation in America Act of 2025
- Bill Number
- H.R. 1062
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-02-06: Referred to the House Committee on Ways and Means.
- Last Updated
- 2025-05-05T15:58:20Z
AI-Generated Summary
Purpose
The legislation, titled the "Growing and Preserving Innovation in America Act of 2025," aims to maintain a higher tax deduction for U.S. companies earning income from foreign sales of their intellectual property (like patents or trademarks). It prevents a planned future cut to this deduction, which is intended to support innovation and keep American businesses competitive globally.
Key Provisions
- Amendment to Tax Code: The bill changes Section 250(a)(3) of the Internal Revenue Code of 1986 (the main U.S. tax law) by replacing the existing language on the deduction for foreign-derived intangible income (FDII). FDII refers to profits from selling or licensing U.S.-created intangible assets abroad.
- Deduction Rate: It sets the deduction at 37.5% of FDII by substituting this rate for a higher temporary rate (50%), effectively locking in the current beneficial level instead of allowing a scheduled drop.
- Effective Date: The change applies starting from the date the bill becomes law.
Significant Changes to Existing Law
- Under current law (from the 2017 Tax Cuts and Jobs Act), the FDII deduction is temporarily at a level that provides an effective tax rate of 13.125% (due to the 37.5% deduction applied to a 21% corporate tax rate), but it is scheduled to decrease after 2025 to a lower rate (21.875% deduction, raising the effective rate to 16.406%).
- This bill repeals that scheduled reduction, making the 37.5% deduction permanent and avoiding the higher future tax burden on FDII.
Potential Impacts
- On Businesses and Citizens: U.S. companies with significant foreign sales of intellectual property (e.g., tech firms, pharmaceutical companies) will pay lower taxes long-term, potentially boosting profits, investment in research, and job creation. This could indirectly benefit consumers through more affordable or innovative products, but it might widen income inequality if gains concentrate in large corporations.
- On Government Agencies: The Internal Revenue Service (IRS) will administer the unchanged deduction rate, but overall federal tax revenue could decrease by an estimated amount (not specified in the bill), potentially affecting funding for public services.
- On International Relations: By making U.S. exports of intellectual property more tax-advantageous, it could strengthen U.S. trade positions and reduce incentives for companies to move operations overseas, though it might draw criticism from trading partners over perceived tax advantages.
Main Stakeholders Affected
- U.S. Corporations: Especially those in innovation-heavy sectors like technology, entertainment, and manufacturing that derive income from abroad (e.g., Apple, Pfizer).
- Taxpayers and Investors: Shareholders and employees of affected companies may see economic gains; individual taxpayers could face indirect effects through reduced government revenue.
- Government: Congress, the Treasury Department, and IRS, as they manage tax policy and collections.
- Small Businesses: Less impact, as FDII primarily benefits larger firms with global reach.
Notable Legal, Constitutional, or Political Implications
- Legal: This is a straightforward tax code amendment with no apparent conflicts with existing statutes; it aligns with Congress's broad authority to set tax rates under Article I of the Constitution.
- Constitutional: No major issues, as it involves fiscal policy rather than individual rights or federal powers.
- Political: The bill reflects bipartisan support (introduced by Republicans and Democrats) to promote economic growth and counter offshoring, but it could spark debate over corporate tax breaks versus revenue needs for social programs. If passed, it would extend a key part of the 2017 tax reform amid ongoing discussions on international tax rules.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (7)
Rep. Morelle, Joseph D. [D-NY-25], Rep. Buchanan, Vern [R-FL-16], Rep. Estes, Ron [R-KS-4], Rep. Tenney, Claudia [R-NY-24], Rep. Miller, Max L. [R-OH-7], Rep. Smucker, Lloyd [R-PA-11], Rep. Jack, Brian [R-GA-3]
Recent Actions
- 2025-02-06: Referred to the House Committee on Ways and Means.
- 2025-02-06: Introduced in House
- 2025-02-06: Introduced in House
Bill Versions
- Growing and Preserving Innovation in America Act of 2025 — issued 2025-02-06 — PDF (2 pages)