Text: H.R.3428 — 113th Congress (2013-2014)All Bill Information (Except Text)

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Introduced in House (10/30/2013)


113th CONGRESS
1st Session
H. R. 3428


To amend the Internal Revenue Code of 1986 to allow an increased credit for development and to extend and simplify the credit for increasing research.


IN THE HOUSE OF REPRESENTATIVES

October 30, 2013

Mr. McKinley (for himself and Mr. Enyart) 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 allow an increased credit for development and to extend and simplify the credit for increasing research.

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

SECTION 1. Credit for increasing development activities.

(a) In general.—Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 41 the following new section:

“SEC. 41A. Credit for increasing development activities.

“(a) In general.—For purposes of section 38, at the election of the taxpayer, the development credit determined under this section for the taxable year shall be an amount equal to 30 percent of so much of the qualified development expenses for the taxable year as exceeds 50 percent of the average qualified development expenses for the 3 taxable years preceding the taxable year for which the credit is being determined.

“(b) Qualified development expenses.—For purposes of this section—

“(1) IN GENERAL.—The term ‘qualified development expenses’ means the sum of the following amounts which are paid or incurred during the taxable year in carrying on any trade or business of the taxpayer:

“(A) Any in-house development expenses.

“(B) Any contract development expenses.

“(2) IN-HOUSE DEVELOPMENT EXPENSES; CONTRACT DEVELOPMENT EXPENSES.—The terms ‘in-house development expenses’ and ‘contract development expenses’ shall have the respective meaning given such terms in paragraphs (2) and (3) of section 41(b), except such paragraphs shall be applied by substituting ‘qualified development’ for ‘qualified research’.

“(c) Qualified development.—The term ‘qualified development’ means the systematic application of knowledge or understanding directed toward the production of useful material, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements. For purposes of the preceding sentence the rules of subparagraphs (A), (B), and (C) of section 41(d)(1) shall apply with respect to any development taken into account under this section.

“(d) Special rule in case of no qualified development expenses in any of 3 preceding years.—

“(1) TAXPAYERS TO WHICH THIS SUBPARAGRAPH APPLIES.—The credit under this section shall be determined under this subsection if the taxpayer has no qualified development expenses in any one of the 3 taxable years preceding the taxable year for which the credit is being determined.

“(2) CREDIT RATE.—The credit determined under this subparagraph shall be equal to 12 percent of the qualified development expenses for the taxable year.

“(e) Election.—An election under this section shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the Secretary.

“(f) Other special rules.—Rules similar to the rules of subsections (d)(4), (f), and (g) of section 41 shall apply for purposes of this section.

“(g) Termination.—This section shall not apply to taxable years beginning after December 31, 2018.”.

(b) Coordination with section 41.—Subsection (b) of section 41 of such Code is amended by adding at the end the following new paragraph:

“(5) COORDINATION WITH SECTION 41A.—In the case of any taxable year for which an election is in effect under section 41A, for purposes of determining the amount of qualified research expenses for such taxable year and the fixed-base percentage with respect to such taxable year, qualified research expenses shall not include any qualified development expenses (as defined in subsection (b) of such section).”.

(c) Coordination with deductions.—Section 280C is amended by adding at the end the following new subsection:

“(j) Credit for increasing development activities.—

“(1) IN GENERAL.—No deduction shall be allowed for that portion of the qualified development expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a).

“(2) SIMILAR RULE WHERE TAXPAYER CAPITALIZES RATHER THAN DEDUCTS EXPENSES.—If—

“(A) the amount of the credit determined for the taxable year under section 41A(a), exceeds

“(B) the amount allowable as a deduction for such taxable year for qualified development expenses (determined without regard to paragraph (1)),

the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.

“(3) ELECTION OF REDUCED CREDIT.—

“(A) IN GENERAL.—In the case of any taxable year for which an election is made under this paragraph—

“(i) paragraphs (1) and (2) shall not apply, and

“(ii) the amount of the credit under section 41A(a) shall be the amount determined under subparagraph (B).

“(B) AMOUNT OF REDUCED CREDIT.—The amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of—

“(i) the amount of credit determined under section 41A(a) without regard to this paragraph, over

“(ii) the product of—

“(I) the amount described in clause (i), and

“(II) the maximum rate of tax under section 11(b)(1).

“(C) ELECTION.—An election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made in such manner as the Secretary may prescribe. Such an election, once made, shall be irrevocable.

“(4) CONTROLLED GROUPS.—Paragraph (3) of subsection (b) shall apply for purposes of this subsection.”.

(d) Part of general business credit.—Subsection (b) of section 38 of such Code is amended by striking “plus” at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting “, plus”, and by adding at the end the following new paragraph:

“(37) the development credit determined under section 41A.”.

(e) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2013.

SEC. 2. Increase in alternative simplified credit for research.

(a) In general.—Subparagraph (A) of section 41(c)(5) of the Internal Revenue Code of 1986 is amended by striking “14 percent (12 percent in the case of taxable years ending before January 1, 2009)” and inserting “20 percent”.

(b) Special rule in case of no qualified research expenses in any of 3 preceding taxable years.—Clause (ii) of section 41(c)(5)(B) of such Code is amended by striking “6 percent” and inserting “8 percent”.

(c) Effective date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2013.

SEC. 3. Extension of credit for increasing research activities.

(a) In general.—Subparagraph (B) of section 41(h)(1) of the Internal Revenue Code of 1986 is amended by striking “December 31, 2013” and inserting “December 31, 2018”.

(b) Effective date.—The amendment made by this section shall apply to amounts paid or incurred after December 31, 2013.