II 

112TH CONGRESS 

1ST SESSION S. 1577 

To amend the Internal Revenue Code of 1986 to increase and make 

permanent the alternative simplified research credit, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 19, 2011 

Mr. BAUCUS (for himself, Mr. HATCH, Mr. KERRY, Ms. SNOWE, Mr. WYDEN, 

Mr. CRAPO, Ms. STABENOW, Mr. CORNYN, Ms. CANTWELL, and Mr. 

MENENDEZ) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to increase 

and make permanent the alternative simplified research 

credit, and for other purposes. 

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; AMENDMENT OF 1986 CODE. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Greater Research Opportunities With Tax Help Act’’ or 

6 ‘‘GROWTH Act’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment 


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1 to, or repeal of, a section or other provision, the reference 

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986. 

4 SEC. 2. PERMANENT EXTENSION AND MODIFICATION OF 

5 RESEARCH CREDIT. 

6 (a) SIMPLIFIED CREDIT FOR QUALIFIED RESEARCH

7 EXPENSES.—Subsection (a) of section 41 is amended to 

8 read as follows: 

9 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

10 the research credit determined under this section for the 

11 taxable year shall be an amount equal to 20 percent of 

12 so much of the qualified research expenses for the taxable 

13 year as exceeds 50 percent of the average qualified re14 search expenses for the 3 taxable years preceding the tax15 able year for which the credit is being determined.’’. 

16 (b) SPECIAL RULES AND TERMINATION OF BASE

17 AMOUNT CALCULATION.— 

18 (1) IN GENERAL.—Subsection (c) of section 41 

19 is amended to read as follows: 

20 ‘‘(c) SPECIAL RULE IN CASE OF NO QUALIFIED RE21 SEARCH EXPENSES IN ANY OF 3 PRECEDING TAXABLE

22 YEARS.— 

23 ‘‘(1) TAXPAYERS TO WHICH SUBSECTION AP24 PLIES.—The credit under this section shall be deter25 mined under this subsection, and not under subVerDate Mar 15 2010 05:45 Sep 21, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1577.IS S1577

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1 section (a), if, in any one of the 3 taxable years pre2 ceding the taxable year for which the credit is being 

3 determined, the taxpayer has no qualified research 

4 expenses. 

5 ‘‘(2) CREDIT RATE.—The credit determined 

6 under this subsection shall be equal to 10 percent of 

7 the qualified research expenses for the taxable 

8 year.’’. 

9 (2) CONSISTENT TREATMENT OF EXPENSES.— 

10 Subsection (b) of section 41 is amended by adding 

11 at the end the following new paragraph: 

12 ‘‘(5) CONSISTENT TREATMENT OF EXPENSES

13 REQUIRED.— 

14 ‘‘(A) IN GENERAL.—Notwithstanding 

15 whether the period for filing a claim for credit 

16 or refund has expired for any taxable year in 

17 the 3-taxable-year period taken into account 

18 under subsection (a), the qualified research ex19 penses taken into account for such year shall be 

20 determined on a basis consistent with the deter21 mination of qualified research expenses for the 

22 credit year. 

23 ‘‘(B) PREVENTION OF DISTORTIONS.—The 

24 Secretary may prescribe regulations to prevent 

25 distortions in calculating a taxpayer’s qualified 


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1 research expenses caused by a change in ac2 counting methods used by such taxpayer be3 tween the credit year and a year in such 3-tax4 able-year period.’’. 

5 (c) INCLUSION OF QUALIFIED RESEARCH EXPENSES

6 OF AN ACQUIRED PERSON.— 

7 (1) PARTIAL INCLUSION OF PRE-ACQUISITION

8 QUALIFIED RESEARCH EXPENSES.—Subparagraph 

9 (A) of section 41(f)(3) is amended to read as fol10 lows: 

11 ‘‘(A) ACQUISITIONS.— 

12 ‘‘(i) IN GENERAL.—If a person ac13 quires the major portion of a trade or busi14 ness of another person (hereinafter in this 

15 paragraph referred to as the ‘predecessor’) 

16 or the major portion of a separate unit of 

17 a trade or business of a predecessor, then 

18 the amount of qualified research expenses 

19 paid or incurred by the acquiring person 

20 during the 3 taxable years preceding the 

21 taxable year in which the credit under this 

22 section is determined shall be increased 

23 by— 

24 ‘‘(I) for purposes of applying this 

25 section for the taxable year in which 


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1 such acquisition is made, the amount 

2 determined under clause (ii), and 

3 ‘‘(II) for purposes of applying 

4 this section for any taxable year after 

5 the taxable year in which such acqui6 sition is made, so much of the quali7 fied research expenses paid or in8 curred by the predecessor with respect 

9 to the acquired trade or business dur10 ing the portion of the measurement 

11 period that is part of the 3-taxable12 year period preceding the taxable year 

13 for which the credit is determined as 

14 is attributable to the portion of such 

15 trade or business or separate unit ac16 quired by such person. 

17 ‘‘(ii) AMOUNT DETERMINED.—The 

18 amount determined under this clause is the 

19 amount equal to the product of— 

20 ‘‘(I) so much of the qualified re21 search expenses paid or incurred by 

22 the predecessor with respect to the ac23 quired trade or business during the 3 

24 taxable years before the taxable year 

25 in which the acquisition is made as is 


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1 attributable to the portion of such 

2 trade or business or separate unit ac3 quired by the acquiring person, and 

4 ‘‘(II) the number of months in 

5 the period beginning on the date of 

6 the acquisition and ending on the last 

7 day of the taxable year in which the 

8 acquisition is made, 

9 divided by 12. 

10 ‘‘(iii) SPECIAL RULES FOR COORDI11 NATING TAXABLE YEARS.—In the case of 

12 an acquiring person and a predecessor 

13 whose taxable years do not begin on the 

14 same date— 

15 ‘‘(I) each reference to a taxable 

16 year in clauses (i) and (ii) shall refer 

17 to the appropriate taxable year of the 

18 acquiring person, 

19 ‘‘(II) the qualified research ex20 penses paid or incurred by the prede21 cessor during each taxable year of the 

22 predecessor any portion of which is 

23 part of the measurement period shall 

24 be allocated equally among the 

25 months of such taxable year, and 


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1 ‘‘(III) the amount of such quali2 fied research expenses taken into ac3 count under clauses (i) and (ii) with 

4 respect to a taxable year of the ac5 quiring person shall be equal to the 

6 total of the expenses attributable 

7 under subclause (II) to the months oc8 curring during such taxable year. 

9 ‘‘(iv) MEASUREMENT PERIOD.—For 

10 purposes of this subparagraph, the term 

11 ‘measurement period’ means the taxable 

12 year of the acquiring person in which the 

13 acquisition is made and the 3 taxable years 

14 of the acquiring person preceding such tax15 able year.’’. 

16 (2) EXPENSES OF A DISPOSING PERSON.—Sub17 paragraph (B) of section 41(f)(3) is amended to 

18 read as follows: 

19 ‘‘(B) DISPOSITIONS.—If a person disposes 

20 of the major portion of any trade or business or 

21 the major portion of a separate unit of a trade 

22 or business in a transaction to which subpara23 graph (A) applies, and the disposing person fur24 nished to the acquiring person such information 

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1 graph (A), then, for purposes of applying this 

2 section for any taxable year ending after such 

3 disposition, the amount of qualified research ex4 penses paid or incurred by the disposing person 

5 during the 3 taxable years preceding such tax6 able year shall be decreased by the amount of 

7 the increase determined under subparagraph 

8 (A) with respect to the acquiring person for 

9 such taxable year.’’. 

10 (d) AGGREGATION OF EXPENDITURES.—Paragraph 

11 (1) of section 41(f) is amended— 

12 (1) by striking ‘‘shall be its proportionate 

13 shares of the qualified research expenses, basic re14 search payments, and amounts paid or incurred to 

15 energy research consortiums, giving rise to the cred16 it’’ in subparagraph (A)(ii) and inserting ‘‘shall be 

17 determined on a proportionate basis to its share of 

18 the aggregate qualified research expenses taken into 

19 account by such controlled group for purposes of 

20 this section’’, and 

21 (2) by striking ‘‘shall be its proportionate 

22 shares of the qualified research expenses, basic re23 search payments, and amounts paid or incurred to 

24 energy research consortiums, giving rise to the cred25 it’’ in subparagraph (B)(ii) and inserting ‘‘shall be 


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1 determined on a proportionate basis to its share of 

2 the aggregate qualified research expenses taken into 

3 account by all such persons under common control 

4 for purposes of this section’’. 

5 (e) PERMANENT EXTENSION.— 

6 (1) Section 41 is amended by striking sub7 section (h). 

8 (2) Paragraph (1) of section 45C(b) is amended 

9 by striking subparagraph (D). 

10 (f) CONFORMING AMENDMENTS.— 

11 (1) TERMINATION OF BASIC RESEARCH PAY12 MENT CALCULATION.—Section 41 is amended— 

13 (A) by striking subsection (e), 

14 (B) by redesignating subsection (g) as sub15 section (e), and 

16 (C) by relocating subsection (e), as so re17 designated, immediately after subsection (d). 

18 (2) SPECIAL RULES.— 

19 (A) Paragraph (4) of section 41(f) is 

20 amended by striking ‘‘and gross receipts’’. 

21 (B) Subsection (f) of section 41 is amend22 ed by striking paragraph (6). 

23 (3) CROSS-REFERENCES.— 

24 (A) Paragraph (2) of section 45C(c) is 

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1 penses’’ and inserting ‘‘average qualified re2 search expenses’’. 

3 (B) Subparagraph (A) of section 54(l)(3) 

4 is amended by striking ‘‘section 41(g)’’ and in5 serting ‘‘section 41(e)’’. 

6 (C) Clause (i) of section 170(e)(4)(B) is 

7 amended to read as follows: 

8 ‘‘(i) the contribution is to a qualified 

9 organization,’’. 

10 (D) Paragraph (4) of section 170(e) is 

11 amended by adding at the end the following 

12 new subparagraph: 

13 ‘‘(E) QUALIFIED ORGANIZATION.—For 

14 purposes of this paragraph, the term ‘qualified 

15 organization’ means— 

16 ‘‘(i) any educational organization 

17 which— 

18 ‘‘(I) is an institution of higher 

19 education (within the meaning of sec20 tion 3304(f)), and 

21 ‘‘(II) is described in subsection 

22 (b)(1)(A)(ii), or 

23 ‘‘(ii) any organization not described in 

24 clause (i) which— 


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1 ‘‘(I) is described in section 

2 501(c)(3) and is exempt from tax 

3 under section 501(a), 

4 ‘‘(II) is organized and operated 

5 primarily to conduct scientific re6 search, and 

7 ‘‘(III) is not a private founda8 tion.’’. 

9 (E) Section 280C is amended— 

10 (i) by striking ‘‘or basic research ex11 penses (as defined in section 41(e)(2))’’ in 

12 subsection (c)(1), 

13 (ii) by striking ‘‘section 41(a)(1)’’ in 

14 subsection (c)(2)(A) and inserting ‘‘section 

15 41(a)’’, and 

16 (iii) by striking ‘‘or basic research ex17 penses’’ in subsection (c)(2)(B). 

18 (F) Clause (i) of section 1400N(l)(7)(B) is 

19 amended by striking ‘‘section 41(g)’’ and insert20 ing ‘‘section 41(e)’’. 

21 (g) TECHNICAL CORRECTIONS.—Section 409 is 

22 amended— 

23 (1) by inserting ‘‘, as in effect before the enact24 ment of the Tax Reform Act of 1984)’’ after ‘‘sec25 tion 41(c)(1)(B)’’ in subsection (b)(1)(A), 


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1 (2) by inserting ‘‘, as in effect before the enact2 ment of the Tax Reform Act of 1984’’ after ‘‘relat3 ing to the employee stock ownership credit’’ in sub4 section (b)(4), 

5 (3) by inserting ‘‘(as in effect before the enact6 ment of the Tax Reform Act of 1984)’’ after ‘‘sec7 tion 41(c)(1)(B)’’ in subsection (i)(1)(A), 

8 (4) by inserting ‘‘(as in effect before the enact9 ment of the Tax Reform Act of 1984)’’ after ‘‘sec10 tion 41(c)(1)(B)’’ in subsection (m), 

11 (5) by inserting ‘‘(as so in effect)’’ after ‘‘sec12 tion 48(n)(1)’’ in subsection (m), 

13 (6) by inserting ‘‘(as in effect before the enact14 ment of the Tax Reform Act of 1984)’’ after ‘‘sec15 tion 48(n)’’ in subsection (q)(1), and 

16 (7) by inserting ‘‘(as in effect before the enact17 ment of the Tax Reform Act of 1984)’’ after ‘‘sec18 tion 41’’ in subsection (q)(3). 

19 (h) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as provided in para21 graphs (2) and (3), the amendments made by this 

22 section shall apply to taxable years beginning after 

23 December 31, 2011. 


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1 (2) PERMANENT EXTENSION.—The amend2 ments made by subsection (e) shall apply to amounts 

3 paid or incurred after December 31, 2011. 

4 (3) TECHNICAL CORRECTIONS.—The amend5 ments made by subsection (g) shall take effect on 

6 the date of the enactment of this Act. 

Æ 


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