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The bill gives new and recent startups meaningful near-term tax relief and tightens rules to curb tax-motivated acquisitions, but does so at the cost of reduced federal revenue and added complexity that can raise taxes for future owners and increase compliance burdens.
Small-business owners can deduct up to $20,000 of start-up and organizational costs immediately (phased out above $120,000) and those thresholds are inflation-adjusted after 2026, reducing first-year tax bills and preserving deduction value over time.
New businesses can amortize remaining start-up and organizational costs over 180 months, providing predictable multi-year tax relief and smoothing tax liabilities for startups.
Businesses that begin operations before February 1, 2026 retain full access to their net operating losses (NOLs) and credits after ownership changes, protecting existing startups from losing tax attributes due to covered ownership transitions.
Higher upfront deductions for start-up costs reduce federal tax revenue and could widen the deficit or require offsets, affecting all taxpayers and federal fiscal capacity.
Start-ups that undergo ownership changes after January 31, 2026 may lose some NOL carryforwards and unused general business credits, increasing taxable income and tax liability for new owners and reducing available offsets for affected firms.
Repeal of prior rules, new cross-references, allocation/continuity tests, and transition calculations increase compliance complexity and administrative costs for taxpayers, tax professionals, software providers, and the IRS during the transition.
Based on analysis of 3 sections of legislative text.
Raises immediate start-up expense deduction to $20,000 (phased out over $120,000), amortizes the rest over 15 years, and limits post-change use of start-up-period NOLs and business credits.
Introduced March 25, 2026 by Marsha Blackburn · Last progress March 25, 2026
The bill revises federal tax treatment for start-up and organizational expenses so small businesses can deduct more immediately and amortize the rest over 15 years; it raises the immediate deduction to $20,000 (phased out above $120,000) and makes the election apply at the entity level for pass-throughs. It also stops certain tax-avoidance uses of start-up losses and unused credits by limiting how much start-up-period NOLs and general business credits an acquired corporation can use after an ownership change. The changes rewrite and consolidate rules in the Internal Revenue Code (moving and expanding what was in section 248 into section 195), add definitions and filing rules for partnerships and single-owner entities, create inflation adjustments for the deduction caps, and add specific allocation, continuity, and transition rules for reducing post-change NOLs and credits that arise during a start-up period.