I 

113TH CONGRESS 

1ST SESSION H. R. 2605 

To amend the Internal Revenue Code of 1986 to allow a deduction for 

patent box profit from the use of United States patents. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 28, 2013 

Ms. SCHWARTZ 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 a 

deduction for patent box profit from the use of United 

States patents. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Manufacturing Innova5 tion in America Act of 2013’’. 

6 SEC. 2. DEDUCTION FOR PATENT BOX PROFITS. 

7 (a) IN GENERAL.—Part VI of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by adding at the end the following new section: 


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1 ‘‘SEC. 200. PATENT BOX PROFITS. 

2 ‘‘(a) ALLOWANCE OF DEDUCTION.—If the taxpayer 

3 elects the application of this section, there shall be allowed 

4 as a deduction an amount equal to 71 percent of the lesser 

5 of— 

6 ‘‘(1) the patent box profit of the taxpayer for 

7 the taxable year, or 

8 ‘‘(2) taxable income (determined without regard 

9 to this section) for the taxable year. 

10 ‘‘(b) PATENT BOX PROFIT.—For purposes of this 

11 section— 

12 ‘‘(1) IN GENERAL.—Except as provided by 

13 paragraph (9), the term ‘patent box profit’ means, 

14 with respect to a taxable year, IP profit multiplied 

15 by the ratio— 

16 ‘‘(A) the numerator of which is the 5-year 

17 research and development expenditures of the 

18 taxpayer with respect to the taxable year, and 

19 ‘‘(B) the denominator of which is the 5- 

20 year total costs of the taxpayer with respect to 

21 the taxable year. 

22 ‘‘(2) IP PROFIT.—The term ‘IP profit’ means 

23 the excess (if any) of— 

24 ‘‘(A) patent gross receipts, over 

25 ‘‘(B) the sum of— 


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1 ‘‘(i) the taxpayer’s cost of goods sold 

2 for the taxable year that are properly allo3 cable to patent gross receipts, 

4 ‘‘(ii) other expenses, losses, or deduc5 tions (other than the deduction allowed 

6 under this section), which are properly al7 locable to patent gross receipts, plus 

8 ‘‘(iii) routine profit. 

9 ‘‘(3) ROUTINE PROFIT.—The term ‘routine 

10 profit’ means— 

11 ‘‘(A) the taxpayer’s cost of goods sold for 

12 the taxable year properly allocable to patent 

13 gross receipts reduced by the portion of cost of 

14 goods sold related to the sum of cost of raw 

15 materials, cost of items purchased for resale, 

16 and amounts incurred for intangible property 

17 rights (including royalties and amortization), 

18 multiplied by 

19 ‘‘(B) 15 percent. 

20 ‘‘(4) ALLOCATION METHOD.—The Secretary 

21 shall prescribe rules for the proper allocation of 

22 items described in this paragraph for purposes of de23 termining patent box profit. Such rules shall provide 

24 for the proper allocation of items whether or not 


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1 such items are directly allocable to patent gross re2 ceipts. 

3 ‘‘(5) SPECIAL RULES.— 

4 ‘‘(A) DETERMINATION OF COSTS.— 

5 ‘‘(i) IN GENERAL.—Cost shall be de6 termined in accordance with the principles 

7 of sections 263A and 471, as provided for 

8 by the Secretary under regulations or other 

9 guidance. 

10 ‘‘(ii) ITEMS BROUGHT INTO THE

11 UNITED STATES.—For purposes of deter12 mining cost of goods sold, any item or 

13 service brought into the United States 

14 shall be treated as acquired by purchase, 

15 and its cost shall be treated as not less 

16 than its value immediately after it entered 

17 the United States. A similar rule shall 

18 apply in determining the adjusted basis of 

19 leased or rented property where the lease 

20 or rental gives rise to patent gross re21 ceipts. 

22 ‘‘(iii) EXPORTS FOR FURTHER MANU23 FACTURE.—In the case of any property de24 scribed in clause (ii) that had been ex25 ported by the taxpayer for further manuVerDate Mar 15 2010 02:16 Jul 04, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2605.IH H2605

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1 facture, the increase in cost or adjusted 

2 basis under subparagraph (A) shall not ex3 ceed the difference between the value of 

4 the property when exported and the value 

5 of the property when brought back into the 

6 United States after the further manufac7 ture. 

8 ‘‘(B) 5-YEAR RESEARCH AND DEVELOP9 MENT EXPENDITURES.—The term ‘5-year re10 search and development expenditures’ means 

11 with respect to a taxable year the research and 

12 development expenditures paid or incurred by 

13 the taxpayer for the performance of research 

14 and development in the United States for which 

15 a deduction is allowed under subsection (a) or 

16 (b) of section 174 (determined without regard 

17 to section 41) for the 5-taxable-year period end18 ing with the taxable year. 

19 ‘‘(C) 5-YEAR TOTAL COSTS.—The term ‘5- 

20 year total costs’ means with respect to a taxable 

21 year the excess of— 

22 ‘‘(i) all costs paid or incurred by the 

23 taxpayer for the 5-taxable year period end24 ing with such taxable year, over 

25 ‘‘(ii) the sum of— 


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1 ‘‘(I) the taxpayer’s cost of goods 

2 sold for such 5-taxable year period, 

3 ‘‘(II) interest paid or accrued for 

4 such 5-taxable year period, 

5 ‘‘(III) taxes paid or accrued for 

6 such 5-taxable year period, and 

7 ‘‘(IV) the net gain or loss for 

8 such 5-taxable year period from the 

9 sale or exchange of capital assets. 

10 ‘‘(D) RULES RELATING TO 5-YEAR PE11 RIOD.—For purposes of this paragraph— 

12 ‘‘(i) NOT IN EXISTENCE FOR ENTIRE

13 5-YEAR PERIOD.—If the taxpayer was not 

14 in existence for the entire 5-year period re15 ferred to in subparagraphs (B) and (C), 

16 such subparagraphs shall be applied on the 

17 basis of the period during which such tax18 payer was in existence. 

19 ‘‘(ii) TREATMENT OF PREDE20 CESSORS.—Any reference in this para21 graph to a taxpayer shall include a ref22 erence to any predecessor of such taxpayer. 

23 ‘‘(6) PATENT GROSS RECEIPTS.— 

24 ‘‘(A) IN GENERAL.—The term ‘patent 

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1 payer for the taxable year which are derived 

2 from the sale, lease, license, or other disposition 

3 of qualified patent property. 

4 ‘‘(B) RELATED PERSONS.— 

5 ‘‘(i) IN GENERAL.—The term ‘patent 

6 gross receipts’ shall not include any gross 

7 receipts of the taxpayer derived from prop8 erty leased, licensed, or rented by the tax9 payer for use by any related person. 

10 ‘‘(ii) RELATED PERSON.—For pur11 poses of clause (i), a person shall be treat12 ed as related to another person if such per13 sons are treated as a single employer 

14 under subsection (a) or (b) of section 52 or 

15 subsection (m) or (o) of section 414, ex16 cept that determinations under subsections 

17 (a) and (b) of section 52 shall be made 

18 without regard to section 1563(b). 

19 ‘‘(7) QUALIFIED PATENT PROPERTY.— 

20 ‘‘(A) IN GENERAL.—The term ‘qualified 

21 patent property’ means property which is a 

22 product which incorporates a qualified patent or 

23 patents— 

24 ‘‘(i) if more than a substantial per25 centage of the value of the product is deVerDate Mar 15 2010 02:16 Jul 04, 2013 Jkt 029200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2605.IH H2605

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1 rived from the direct or indirect use of one 

2 or more qualified patents, and 

3 ‘‘(ii) the gross receipts of the taxpayer 

4 from the sale, lease, license, or other dis5 position of the product are domestic pro6 duction gross receipts under section 

7 199(c)(4). 

8 ‘‘(B) SPECIAL RULE RELATING TO CON9 TRACT MANUFACTURING.—For purposes of sub10 paragraph (A)(ii), if the product was produced 

11 to the taxpayer’s specifications within the 

12 United States under a contract, the taxpayer’s 

13 gross receipts from the sale, lease, license or 

14 other disposition of the product shall be treated 

15 as domestic production gross receipts if the con16 tract manufacturer certifies to the taxpayer 

17 that the contract manufacturer’s sale of such 

18 product to the taxpayer resulted in domestic 

19 production gross receipts of the contract manu20 facturer. 

21 ‘‘(C) DOMESTIC PRODUCTION GROSS RE22 CEIPTS.—For purposes of this paragraph, the 

23 term ‘domestic production gross receipts’ has 

24 the meaning given such term by section 

25 199(c)(4), except that the term ‘United States’ 


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1 as defined in subsection (d)(7) of this section 

2 shall be substituted for the term ‘United States’ 

3 as used in such section. 

4 ‘‘(8) QUALIFIED PATENT.— 

5 ‘‘(A) IN GENERAL.—The term ‘qualified 

6 patent’ means a patent— 

7 ‘‘(i) issued or extended by, or for 

8 which an application is pending before, the 

9 United States Patent and Trademark Of10 fice under title 35, United States Code, 

11 ‘‘(ii) with respect to which— 

12 ‘‘(I) the taxpayer is the patent 

13 owner or the holder of an exclusive li14 cense to exploit the patent within a 

15 specified territory or for a specific 

16 purpose, 

17 ‘‘(II) the taxpayer is actively in18 volved in the decisionmaking con19 nected with exploiting the patent, and 

20 ‘‘(III) either the taxpayer or a 

21 member of the affiliated group of 

22 which the taxpayer is a member per23 formed substantial activity to develop 

24 the patented invention, its application, 


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1 or a product incorporating the pat2 ented invention, and 

3 ‘‘(iii) for any taxable year beginning 

4 after the third taxable year beginning after 

5 the date of the enactment of this section, 

6 more than a substantial percentage of the 

7 activity to develop the patented invention 

8 or its application occurs in the United 

9 States. 

10 Clause (iii) shall not apply to a patent if a 

11 member of the taxpayer’s affiliated group per12 formed more than a substantial percentage of 

13 the activity to develop the patent outside the 

14 United States prior to the end of such third 

15 taxable year, and the taxpayer owns the patent 

16 in the United States at the end of such third 

17 taxable year. 

18 ‘‘(B) SPECIAL RULE FOR CERTAIN FOR19 EIGN PATENTS.—If the taxpayer— 

20 ‘‘(i) is the patent owner or the holder 

21 of an exclusive license to exploit a patent 

22 which meets the requirements of subpara23 graph (A), 

24 ‘‘(ii) is issued or extended by a foreign 

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1 tially similar invention or application as 

2 the patent described in clause (i), and 

3 ‘‘(iii) is the owner of, or the holder of 

4 an exclusive license to exploit, the foreign 

5 patent described in clause (ii), 

6 then the foreign patent described in clause (ii) 

7 shall be treated as a qualified patent for pur8 poses of this section. 

9 ‘‘(C) SPECIAL RULES RELATING TO LI10 CENSING.— 

11 ‘‘(i) LICENSEE TAXPAYER.—In the 

12 case of a license of a patent to the licensee 

13 taxpayer, the patent shall not be treated as 

14 a qualified patent in the hands of the li15 censee taxpayer unless the licensee satisfies 

16 the requirements of subparagraph (A)(ii) 

17 and the licensor— 

18 ‘‘(I) certifies to the licensee (in 

19 such form and manner as the Sec20 retary may prescribe) that the patent 

21 satisfies the requirements of clauses 

22 (i) and (iii) of subparagraph (A), and 

23 ‘‘(II) provides to the licensee 

24 such information as the Secretary 


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1 may require to determine whether the 

2 patent is a qualified patent. 

3 ‘‘(ii) LICENSOR TAXPAYER.—In the 

4 case of a license of a qualified patent by 

5 the licensor taxpayer, the amount of royal6 ties, profit shares, and similar amounts re7 ceived from the license that directly relate 

8 to the production of qualified patent prop9 erty by the licensee taxpayer shall be treat10 ed as patent gross receipts if— 

11 ‘‘(I) the licensor meets the re12 quirements of clause (i), 

13 ‘‘(II) the licensor developed or 

14 acquired and added substantial value 

15 to the qualified patent, but only so 

16 long as the licensor is regularly en17 gaged in the development and addi18 tion of substantial value to property 

19 of such kind, and 

20 ‘‘(III) the licensee certifies to the 

21 licensor (in such form and manner as 

22 the Secretary may prescribe) that the 

23 royalty relates to the production of 

24 qualified patent property by the li25 censee taxpayer. 


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1 ‘‘(D) SPECIAL RULES RELATING TO PAT2 ENT CLAIMS DENIED OR RULED INVALID.— 

3 ‘‘(i) RECAPTURE.—If— 

4 ‘‘(I) there is a recapture event 

5 with respect to any claim contained in 

6 a qualified patent, and 

7 ‘‘(II) a deduction was allowed 

8 under subsection (a) for any taxable 

9 year with respect to such claim, 

10 the tax imposed by this chapter for the 

11 taxable year in which such recapture event 

12 occurs shall be increased by the recapture 

13 amount. 

14 ‘‘(ii) RECAPTURE EVENT.—For pur15 poses of clause (i), the term ‘recapture 

16 event’ means, with respect to a claim 

17 that— 

18 ‘‘(I) the patent does not issue on 

19 the basis (in whole or in part) of such 

20 claim, or 

21 ‘‘(II) such claim is determined by 

22 the United States Patent and Trade23 mark Office or a court of competent 

24 jurisdiction not to be valid. 


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1 ‘‘(iii) RECAPTURE AMOUNT.—For 

2 purposes of clause (i), the recapture 

3 amount with respect to a claim is the sum 

4 of— 

5 ‘‘(I) the excess of the amount by 

6 which— 

7 ‘‘(aa) the total tax (deter8 mined without regard to sub9 section (a)) that would be shown 

10 on returns of tax of the taxpayer 

11 for all taxable years for which a 

12 deduction was allowed under sub13 section (a) with respect to such 

14 claim, exceeds 

15 ‘‘(bb) the total tax shown on 

16 all returns of tax of the taxpayer 

17 for all taxable years for which a 

18 deduction was allowed under sub19 section (a) with respect to such 

20 claim, determined with regard to 

21 subsection (a), plus 

22 ‘‘(II) in the case of a recapture 

23 event described in clause (ii)(I), inter24 est at the underpayment rate estab25 lished under section 6621 on the 


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1 amount determined under subclause 

2 (I) for each prior taxable year for the 

3 period beginning on the due date for 

4 filing the return for the prior taxable 

5 year involved. 

6 ‘‘(9) ALTERNATIVE DETERMINATION OF PAT7 ENT BOX PROFIT.— 

8 ‘‘(A) IN GENERAL.—In accordance with 

9 regulations or other guidance provided by the 

10 Secretary, the taxpayer may elect to determine 

11 patent box profit as the amount equal to the 

12 net income derived from patent gross receipts 

13 related to exploitation of the qualified patent 

14 that would be received for the taxable year if all 

15 transactions of the taxpayer for the taxable 

16 year were conducted at arm’s length under the 

17 principles of section 482. 

18 ‘‘(B) ELECTION.—An election under sub19 paragraph (A) for a taxable year shall apply 

20 with respect to all qualified patents. Such elec21 tion, once made, may be revoked only with the 

22 consent of the Secretary. 

23 ‘‘(c) ALTERNATIVE METHOD FOR CERTAIN TAX24 PAYERS.—In the case of a taxpayer which meets the 

25 $5,000,000 gross receipts test of section 448(c) for the 


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1 taxable year, patent box profit shall be the greater of the 

2 amount determined under subsection (b) or 50 percent of 

3 IP profit. 

4 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this section— 

6 ‘‘(1) APPLICATION OF SECTION TO PASS-THRU

7 ENTITIES.— 

8 ‘‘(A) PARTNERSHIPS AND S CORPORA9 TIONS.—In the case of a partnership or S cor10 poration— 

11 ‘‘(i) the deduction under subsection 

12 (a) shall be determined at the partner or 

13 shareholder level, 

14 ‘‘(ii) except as provided in clause (i), 

15 all determinations relating to receipts, ex16 penses, and whether a patent is a qualified 

17 patent shall be made at the entity level, 

18 and 

19 ‘‘(iii) each partner or shareholder 

20 shall take into account such person’s allo21 cable share of each item described in 

22 clause (i) or (ii) of subsection (b)(2)(A) 

23 (determined without regard to whether the 

24 items described in such clause (i) exceed 

25 the items described in such clause (ii)). 


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1 ‘‘(B) TRUSTS AND ESTATES.—In the case 

2 of a trust or estate— 

3 ‘‘(i) the items referred to in subpara4 graph (A)(ii) (as determined therein) shall 

5 be apportioned between the beneficiaries 

6 and the fiduciary (and among the bene7 ficiaries) under regulations prescribed by 

8 the Secretary, and 

9 ‘‘(ii) for purposes of paragraph (2), 

10 adjusted gross income of the trust or es11 tate shall be determined as provided in sec12 tion 67(e) with the adjustments described 

13 in such paragraph. 

14 ‘‘(C) APPLICATION TO INDIVIDUALS.—In 

15 the case of an individual, subsection (a)(2) shall 

16 be applied by substituting ‘adjusted gross in17 come’ for ‘taxable income’. For purposes of the 

18 preceding sentence, adjusted gross income shall 

19 be determined— 

20 ‘‘(i) after application of sections 86, 

21 135, 137, 199, 219, 221, 222, and 469, 

22 and 

23 ‘‘(ii) without regard to this section. 

24 ‘‘(D) AGRICULTURAL AND HORTI25 CULTURAL COOPERATIVES.— 


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1 ‘‘(i) DEDUCTION ALLOWED TO PA2 TRONS.—Any person who receives a quali3 fied payment from a specified agricultural 

4 or horticultural cooperative shall be al5 lowed for the taxable year in which such 

6 payment is received a deduction under sub7 section (a) equal to the portion of the de8 duction allowed under subsection (a) to 

9 such cooperative which is— 

10 ‘‘(I) allowed with respect to the 

11 portion of the patent box profit to 

12 which such payment is attributable, 

13 and 

14 ‘‘(II) identified by such coopera15 tive in a written notice mailed to such 

16 person during the payment period de17 scribed in section 1382(d). 

18 ‘‘(ii) COOPERATIVE DENIED DEDUC19 TION FOR PORTION OF QUALIFIED PAY20 MENTS.—The taxable income of a specified 

21 agricultural or horticultural cooperative 

22 shall not be reduced under section 1382 by 

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1 lowable under clause (i) with respect to 

2 such payment. 

3 ‘‘(iii) TAXABLE INCOME OF COOPERA4 TIVES DETERMINED WITHOUT REGARD TO

5 CERTAIN DEDUCTIONS.—For purposes of 

6 this section, the taxable income of a speci7 fied agricultural or horticultural coopera8 tive shall be computed without regard to 

9 any deduction allowable under subsection 

10 (b) or (c) of section 1382 (relating to pa11 tronage dividends, per-unit retain alloca12 tions, and nonpatronage distributions). 

13 ‘‘(iv) SPECIAL RULE FOR MARKETING

14 COOPERATIVES.—For purposes of this sec15 tion, a specified agricultural or horti16 cultural cooperative described in clause 

17 (vi)(II) shall be treated as having manufac18 tured, produced, grown, or extracted in 

19 whole or significant part any qualifying 

20 production property marketed by the orga21 nization which its patrons have so manu22 factured, produced, grown, or extracted. 

23 ‘‘(v) QUALIFIED PAYMENT.—For pur24 poses of this paragraph, the term ‘qualified 


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1 payment’ means, with respect to any per2 son, any amount which— 

3 ‘‘(I) is described in paragraph (1) 

4 or (3) of section 1385(a), 

5 ‘‘(II) is received by such person 

6 from a specified agricultural or horti7 cultural cooperative, and 

8 ‘‘(III) is attributable to patent 

9 box profits with respect to which a de10 duction is allowed to such cooperative 

11 under subsection (a). 

12 ‘‘(vi) SPECIFIED AGRICULTURAL OR

13 HORTICULTURAL COOPERATIVE.—For pur14 poses of this paragraph, the term ‘specified 

15 agricultural or horticultural cooperative’ 

16 means an organization to which part I of 

17 subchapter T applies which is the owner 

18 of, or the holder of an exclusive license to 

19 exploit, a qualified patent. 

20 ‘‘(E) REGULATIONS.—The Secretary may 

21 prescribe rules requiring or restricting the allo22 cation of items under this paragraph and may 

23 prescribe such reporting requirements as the 

24 Secretary determines appropriate. 


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1 ‘‘(2) SPECIAL RULE FOR AFFILIATED

2 GROUPS.— 

3 ‘‘(A) IN GENERAL.—All members of an ex4 panded affiliated group shall be treated as a 

5 single corporation for purposes of this section. 

6 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

7 For purposes of this section, the term ‘ex8 panded affiliated group’ means an affiliated 

9 group as defined in section 1504(a), deter10 mined— 

11 ‘‘(i) by substituting ‘more than 50 

12 percent’ for ‘at least 80 percent’ each place 

13 it appears, and 

14 ‘‘(ii) without regard to paragraphs (2) 

15 and (4) of section 1504(b). 

16 ‘‘(C) ALLOCATION OF DEDUCTION.—Ex17 cept as provided in regulations, the deduction 

18 under subsection (a) shall be allocated among 

19 the members of the expanded affiliated group in 

20 proportion to each member’s respective amount 

21 (if any) of patent box profit. 

22 ‘‘(3) COORDINATION WITH MINIMUM TAX.—For 

23 purposes of determining alternative minimum tax24 able income under section 55— 


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1 ‘‘(A) patent box profit shall be determined 

2 without regard to any adjustments under sec3 tions 56 through 59, and 

4 ‘‘(B) in the case of a corporation, sub5 section (a)(2) shall be applied by substituting 

6 ‘alternative minimum taxable income’ for ‘tax7 able income’. 

8 ‘‘(4) COORDINATION WITH DOMESTIC PRODUC9 TION ACTIVITIES DEDUCTION.—This section shall be 

10 applied without regard to the deduction allowed 

11 under section 199. 

12 ‘‘(5) UNRELATED BUSINESS TAXABLE IN13 COME.—For purposes of determining the tax im14 posed by section 511, subsection (a)(2) shall be ap15 plied by substituting ‘unrelated business taxable in16 come’ for ‘taxable income’. 

17 ‘‘(6) ACQUISITIONS AND DISPOSITIONS.—The 

18 Secretary shall provide for the application of this 

19 subsection in cases where the taxpayer acquires, or 

20 disposes of, the major portion of a trade or business 

21 or the major portion of a separate unit of a trade 

22 or business during the taxable year. 

23 ‘‘(7) UNITED STATES.—The term ‘United 

24 States’ includes the District of Columbia, Puerto 

25 Rico, the Virgin Islands, Guam, American Samoa, 


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1 the Commonwealth of the Northern Mariana Is2 lands, the Federated States of Micronesia, the Re3 public of the Marshall Islands, and Palau. 

4 ‘‘(e) ELECTION.— 

5 ‘‘(1) IN GENERAL.—The taxpayer may make an 

6 election to have this section apply for any taxable 

7 year. 

8 ‘‘(2) PASS-THRU ENTITIES.—In the case of a 

9 pass-thru entity, the election shall be made at the 

10 partner or shareholder level. 

11 ‘‘(3) REVOCATION.—An election under para12 graph (1), once made, may be revoked only with the 

13 consent of the Secretary. 

14 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

15 such regulations as may be appropriate to carry out this 

16 section, including regulations which prevent the abuse of 

17 the purposes of this section.’’. 

18 (b) CONFORMING AMENDMENTS.— 

19 (1) Section 56(d)(1)(A) of such Code is amend20 ed by striking ‘‘deduction under section 199’’ both 

21 places it appears and inserting ‘‘deductions under 

22 sections 199 and 200’’. 

23 (2) Section 56(g)(4)(C) of such Code is amend24 ed by adding at the end the following new clause: 


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1 ‘‘(vii) DEDUCTION FOR DOMESTIC

2 BUSINESS INCOME.—Clause (i) shall not 

3 apply to any amount allowable as a deduc4 tion under section 200.’’. 

5 (3) The following provisions of such Code are 

6 each amended by inserting ‘‘200,’’ after ‘‘199,’’. 

7 (A) Section 86(b)(2)(A). 

8 (B) Section 135(c)(4)(A). 

9 (C) Section 137(b)(3)(A). 

10 (D) Section 219(g)(3)(A)(ii). 

11 (E) Section 221(b)(2)(C)(i). 

12 (F) Section 222 (b)(2)(C)(i). 

13 (G) Section 246(b)(1). 

14 (H) Section 469(i)(3)(F)(iii). 

15 (4) Section 163(j)(6)(A)(i) of such Code is 

16 amended by striking ‘‘and’’ at the end of subclause 

17 (III) and by inserting after subclause (IV) the fol18 lowing new subclause: 

19 ‘‘(V) any deduction allowable 

20 under section 200, and’’. 

21 (5) Section 170(b)(2)(C) of such Code is 

22 amended by striking ‘‘and’’ at the end of clause (iv), 

23 by striking the period at the end of clause (v) and 

24 inserting ‘‘, and’’, and by inserting after clause (v) 

25 the following new clause: 


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1 ‘‘(vi) section 200.’’. 

2 (6) Section 172(d) of such Code is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(8) DOMESTIC BUSINESS INCOME.—The de5 duction under section 200 shall not be allowed.’’. 

6 (7) Section 199(c) of such Code is amended by 

7 adding at the end the following new paragraph: 

8 ‘‘(8) COORDINATION WITH PATENT BOX PROF9 ITS DEDUCTION.—Qualified production activities in10 come, taxable income, and domestic production gross 

11 receipts shall be determined without regard to sec12 tion 200.’’. 

13 (8) Section 199(d)(2)(B) of such Code is 

14 amended by striking ‘‘this section’’ and inserting 

15 ‘‘this section and section 200’’. 

16 (9) Section 613(a) of such Code is amended by 

17 striking ‘‘deduction under section 199’’ and insert18 ing ‘‘deductions under sections 199 and 200’’. 

19 (10) Section 613A(d)(1) of such Code is 

20 amended by redesignating subparagraphs (C), (D), 

21 and (E) as subparagraphs (D), (E), and (F), respec22 tively, and by inserting after subparagraph (B) the 

23 following new subparagraph: 

24 ‘‘(C) any deduction allowable under section 

25 200,’’. 


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26 

•HR 2605 IH

1 (11) Section 1402(a) of such Code is amended 

2 by striking ‘‘and’’ at the end of paragraph (16), by 

3 redesignating paragraph (17) as paragraph (18), 

4 and by inserting after paragraph (16) the following 

5 new paragraph: 

6 ‘‘(17) the deduction provided by section 200 

7 shall not be allowed; and’’. 

8 (c) CLERICAL AMENDMENT.—The table of sections 

9 for part VI of subchapter B of chapter 1 of such Code 

10 is amended by adding at the end the following new item: 

‘‘Sec. 200. Patent box profits.’’. 

11 (d) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

Æ 


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