Text: H.R.2632 — 112th Congress (2011-2012)All Bill Information (Except Text)

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Introduced in House (07/25/2011)


112th CONGRESS
1st Session
H. R. 2632

To amend the Internal Revenue Code of 1986 to provide incentives for life sciences research.


IN THE HOUSE OF REPRESENTATIVES
July 25, 2011

Mr. Nunes (for himself, Ms. Schwartz, Mr. Meehan, Mr. Pascrell, Mr. Gerlach, Mr. Altmire, Mr. Dent, and Mr. Fattah) introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to provide incentives for life sciences research.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Life Sciences Jobs and Investment Act of 2011”.

SEC. 2. Increased credit for initial life sciences research.

(a) In general.—Section 41 of the Internal Revenue Code of 1986 is amended by redesignating subsection (h) as subsection (i) and inserting after subsection (g) the following new subsection:

“(h) Special rules for increased initial life sciences research.—

“(1) IN GENERAL.—In the case of qualified initial life sciences research expenses for any taxable year with respect to which the taxpayer elects the application of this subsection—

“(A) INCREASED CREDIT.—Subsection (a) shall be applied by substituting ‘40 percent’ for ‘20 percent’.

“(B) AMOUNTS PAID WITH RESPECT TO QUALIFIED LIFE SCIENCES RESEARCH TO CERTAIN RESEARCH CONSORTIA, ELIGIBLE SMALL BUSINESSES, UNIVERSITIES, AND FEDERAL LABORATORIES.—Subsection (b)(3)(A) shall be applied by substituting ‘100 percent’ for ‘65 percent’, in the case of amounts paid or incurred to persons described in subclauses (I) and (III) of subsection (b)(3)(C)(ii) or subclause (I), (II), or (III) of subsection (b)(3)(D)(i), with respect to qualified life sciences research.

“(C) ALTERNATIVE SIMPLIFIED CREDIT IN CASE OF QUALIFIED INITIAL LIFE SCIENCE RESEARCH.—Paragraph (5) of subsection (c) shall be applied—

“(i) by substituting ‘28 percent’ for ‘14 percent’ in subparagraph (A), and

“(ii) by substituting ‘12 percent’ for ‘6 percent’ in subparagraph (B)(ii).

“(2) DEFINITIONS.—For purposes of this subsection—

“(A) QUALIFIED INITIAL LIFE SCIENCES RESEARCH EXPENSES.—

“(i) IN GENERAL.—The term ‘qualified initial life sciences research expenses’ means so much of the amounts taken into account under subsection (a) as—

“(I) are attributable to qualified life sciences research, and

“(II) do not exceed $150,000,000.

“(ii) EXCLUDED EXPENSES.—Such term does not include any amount paid or incurred by the taxpayer to compensate any covered employee (as defined in section 162(m)(3)) for services, to pay dividends to the shareholders of the taxpayer, or to pay interest or principal on any debt security of the taxpayer.

“(iii) SUBSTANTIATION OF COMPLIANCE.—

“(I) IN GENERAL.—The taxpayer must substantiate its compliance with clause (ii) with written documents and such other credible evidence as the Secretary may reasonably require, and shall bear the burden of proof with respect to such substantiation.

“(II) CERTIFICATION.—The chief executive officer and the independent director serving as head of the audit committee of the taxpayer, or comparable entity officials, shall attest in writing to the taxpayer’s compliance with the requirements of clause (ii).

“(B) QUALIFIED LIFE SCIENCES RESEARCH.—

“(i) IN GENERAL.—The term ‘qualified life sciences research’ means any qualified research—

“(I) with respect to the branch of knowledge or study of biology, biochemistry, biophysics, bioengineering, biotechnology, microbiology, genetics, or physiology (in each case as such knowledge or study relates to human beings), and

“(II) that is considered scientific research and development for purposes of North American Industry Classification System code 5417.

“(ii) EXCEPTIONS.—Such term does not include sociology or psychology.

“(3) COORDINATION WITH 965A.—This subsection shall not apply with respect to any taxpayer for any taxable year for which an election is in effect under section 965A (relating to limited deduction for life sciences jobs and investment in United States).

“(4) ELECTION.—Any election under this subsection shall be made in such manner as may be prescribed by the Secretary, and shall be made with respect to a taxable year not later than the due date (including extensions of time) for filing the taxpayer’s return for such taxable year.

“(5) TERMINATION.—This subsection shall not apply to any taxable year beginning after December 31, 2016.”.

(b) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 3. Incentives to invest in life sciences jobs, research, and facilities.

(a) In general.—Subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

“SEC. 965A. Limited deduction for life sciences jobs and investment in United States.

“(a) Deduction.—

“(1) IN GENERAL.—In the case of a corporation which is a United States shareholder and for which the election under this section is in effect for the taxable year, there shall be allowed as a deduction an amount equal to 85 percent of the cash dividends which are received during such taxable year by such shareholder from controlled foreign corporations.

“(2) DIVIDENDS PAID INDIRECTLY FROM CONTROLLED FOREIGN CORPORATIONS.—If, within the taxable year for which the election under this section is in effect, a United States shareholder receives a cash distribution from a controlled foreign corporation which is excluded from gross income under section 959(a), such distribution shall be treated for purposes of this section as a cash dividend to the extent of any amount included in income by such United States shareholder under section 951(a)(1)(A), including as a result of any cash dividend during such taxable year to—

“(A) such controlled foreign corporation from another controlled foreign corporation that is in a chain of ownership described in section 958(a), or

“(B) any other controlled foreign corporation in such chain of ownership from another controlled foreign corporation in such chain of ownership, but only to the extent of cash distributions described in section 959(b) which are made during such taxable year to the controlled foreign corporation from which such United States shareholder received such distribution.

“(b) Limitations.—

“(1) IN GENERAL.—The amount of dividends taken into account under subsection (a) shall not exceed the lesser of—

“(A) $150,000,000, or

“(B) the amount shown on the applicable financial statement as earnings permanently reinvested outside the United States.

The amounts described in subparagraph (B) shall be treated as being zero if there is no such statement or such statement fails to show a specific amount of such earnings.

“(2) DIVIDENDS MUST BE EXTRAORDINARY.—The amount of dividends taken into account under subsection (a) shall not exceed the excess (if any) of—

“(A) the cash dividends received during the taxable year by such shareholder from controlled foreign corporations, over

“(B) the sum of—

“(i) the dividends received during the base period year by such shareholder from controlled foreign corporations,

“(ii) the amounts includible in such shareholder's gross income for the base period year under section 951(a)(1)(B) with respect to controlled foreign corporations, and

“(iii) the amounts that would have been included for the base period year but for section 959(a) with respect to controlled foreign corporations.

Amounts described in subparagraph (B) shall be such amounts as shown on the most recent return filed for the base period year; except that amended returns filed after December 31, 2010, shall not be taken into account.

“(3) REQUIREMENT TO INVEST IN LIFE SCIENCES.—Subsection (a) shall not apply to any dividend received by a United States shareholder unless the amount of the dividend is invested solely in the United States and solely for the purpose of—

“(A) the new hiring of additional scientists, researchers, and comparable personnel engaged in qualified life sciences research,

“(B) payments to persons described in section 41(h)(1)(B) and to other qualified organizations which are used by such persons or organizations for qualified life sciences research, or

“(C) the building or leasing of new facilities to be used primarily in the conduct of qualified life sciences research.

“(4) PROHIBITED USES.—Subsection (a) shall not apply to the amount of any dividend which is used by the taxpayer to pay remuneration for services of any covered employee (as defined in section 162(m)(3)), to pay dividends to the shareholders of the taxpayer, or to pay interest or principal on any debt security of the taxpayer.

“(5) NO RESERVE.—Subsection (a) shall not apply to any dividend if the taxpayer’s compliance with this section is uncertain and requires a provision or reserve on the taxpayer’s applicable financial statements.

“(6) SEPARATE ACCOUNT.—Subsection (a) shall not apply to any dividend unless the amount of the dividend is held in a separate account, trust, or other arrangement that segregates the amount from other funds of the taxpayer until the amount is used solely for the purposes described in paragraph (3).

“(c) Substantiation of compliance.—

“(1) IN GENERAL.—The taxpayer must substantiate its compliance with subsection (b) with written documents and such other credible evidence as the Secretary may reasonably require, and shall bear the burden of proof with respect to such substantiation.

“(2) CERTIFICATION.—The chief executive officer and the independent director serving as head of the audit committee of the taxpayer, or comparable entity officials, shall attest in writing to the taxpayer’s compliance with each of the requirements of subsection (b).

“(d) Definitions.—For purposes of this section—

“(1) QUALIFIED LIFE SCIENCES RESEARCH.—The term ‘qualified life sciences research’ shall have the meaning given such term by section 41(h).

“(2) QUALIFIED ORGANIZATION.—The term ‘qualified organization’ means any organization described in subparagraph (A), (B), or (C) of section 41(e)(6).

“(3) BASE PERIOD YEAR.—The term ‘base period year’ means the taxable year which—

“(A) is among the 3 most recent taxable years ending on or before December 31, 2010, and

“(B) results in the determination of the highest amount under subsection (b)(2)(B).

Rules similar to the rules of subparagraph (C) of section 965(c)(2) shall apply for purposes of this paragraph.

“(4) APPLICABLE FINANCIAL STATEMENT.—The term ‘applicable financial statement’ has the meaning given such term by section 965(c)(1), applied by substituting ‘the last day of the taxable year with respect to which the deduction under section 965A is determined’ for ‘June 30, 2003’ each place it appears.

“(5) DIVIDEND.—The term ‘dividend’ has the meaning given such term by section 965(c)(3).

“(e) Special rules.—For purposes of this section—

“(1) rules similar to the rules of paragraph (3) of section 965(b) shall apply, except that such paragraph shall be applied by substituting ‘December 31, 2010’ for ‘October 3, 2004’, and

“(2) rules similar to the rules of paragraphs (4) and (5) of section 965(c) shall apply, except that such paragraph (5) shall be applied—

“(A) by substituting ‘$150,000,000’ for ‘$500,000,000’, and

“(B) without regard to the reference to subparagraph (C) of section 965(b)(1).

“(f) Denial of foreign tax credit.—

“(1) IN GENERAL.—No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to the deductible portion of—

“(A) any dividend, or

“(B) any amount described in subsection (a)(2) which is included in income under section 951(a)(1)(A).

No deduction shall be allowed under this chapter for any tax for which credit is not allowable by reason of the preceding sentence.

“(2) EXPENSES.—No deduction shall be allowed for expenses directly allocable to the deductible portion described in paragraph (1).

“(3) DEDUCTIBLE PORTION.—For purposes of paragraph (1), unless the taxpayer otherwise specifies, the deductible portion of any dividend or other amount is the amount which bears the same ratio to the amount of such dividend or other amount as the amount allowed as a deduction under subsection (a) for the taxable year bears to the amount described in subsection (b)(2)(A) for such year.

“(4) COORDINATION WITH SECTION 78.—Section 78 shall not apply to any tax which is not allowable as a credit under section 901 by reason of this subsection.

“(g) Election.—Any election under this section shall be made in such manner as may be prescribed by the Secretary, and shall be made with respect to a taxable year not later than the due date (including extensions of time) for filing the taxpayer’s return for such taxable year.

“(h) Termination.—This section shall not apply to any taxable year beginning after December 31, 2016.”.

(b) Clerical amendment.—The table of sections for subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:


“Sec. 965A. Limited deduction for life sciences jobs and investment in United States.”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 4. Compliance and report to Congress.

The Commissioner of Internal Revenue shall take such steps as are necessary to ensure full compliance with the provisions under section 41(h) and section 965A of the Internal Revenue Code of 1986 (as added by this Act). The Commissioner of Internal Revenue shall provide reports to Congress on the status of such compliance and related enforcement not later than 90 days following the final due date of tax filings for the first taxable year in which an entity may elect application of section 41(h) or of section 965A of the Internal Revenue Code of 1986 (as so added).