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103D CONGRESS

1ST SESSION H. R. 691

To amend the Internal Revenue Code of 1986 to encourage immediate investments in new manufacturing and other productive equipment by temporarily allowing an investment tax credit to taxpayers who increase the

amount of such investments.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 27, 1993

Mr. RIDGE 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 encourage

immediate investments in new manufacturing and other

productive equipment by temporarily allowing an investment tax credit to taxpayers who increase the amount

of such investments.

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 ‘‘Competitiveness Tax

5 Credit Act’’.
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1 SEC. 2. TEMPORARY INVESTMENT CREDIT FOR NEW MANU2 FACTURING AND OTHER PRODUCTIVE EQUIP3 MENT.

4 (a) ALLOWANCE OF CREDIT.—Section 46 of the In5 ternal Revenue Code of 1986 (relating to amount of in6 vestment credit) is amended by striking ‘‘and’’ at the end

7 of paragraph (2), by striking the period at the end of para8 graph (3) and inserting ‘‘, and’’, and by adding at the

9 end the following new paragraph:

10 ‘‘(4) the manufacturing and other productive

11 equipment credit.’’

12 (b) AMOUNT OF CREDIT.—Section 48 of such Code

13 is amended by adding at the end the following new sub14 section:

15 ‘‘(c) MANUFACTURING AND OTHER PRODUCTIVE

16 EQUIPMENT CREDIT.—

17 ‘‘(1) IN GENERAL.—For purposes of section 46,

18 the manufacturing and other productive equipment

19 credit for any taxable year is an amount equal to the

20 sum of—

21 ‘‘(A) the domestic equipment credit, and

22 ‘‘(B) the nondomestic equipment credit.

23 ‘‘(2) AMOUNT OF DOMESTIC AND NONDOMESTIC

24 EQUIPMENT CREDITS.—For purposes of this sub25 section—

26 ‘‘(A) DOMESTIC EQUIPMENT CREDIT.—
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1 ‘‘(i) IN GENERAL.—The domestic

2 equipment credit for any taxable year is 10

3 percent of the amount equal to the product

4 of—

5 ‘‘(I) the domestic equipment

6 ratio, and

7 ‘‘(II) the qualified increase

8 amount.

9 ‘‘(ii) DOMESTIC EQUIPMENT RATIO.—

10 The domestic equipment ratio for any tax11 able year is a fraction in which—

12 ‘‘(I) the numerator is the aggre13 gate bases of the qualified manufac14 turing and other productive equip15 ment properties placed in service dur16 ing such taxable year which are of do17 mestic origin, and

18 ‘‘(II) the denominator is the ag19 gregate bases of all qualified manufac20 turing and other productive equip21 ment properties placed in service dur22 ing such taxable year.

23 ‘‘(B) NONDOMESTIC EQUIPMENT CRED24 IT.—
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1 ‘‘(i) IN GENERAL.—The nondomestic

2 equipment credit for any taxable year is 7

3 percent of the amount equal to the product

4 of—

5 ‘‘(I) the nondomestic equipment

6 ratio, and

7 ‘‘(II) the qualified increase

8 amount.

9 ‘‘(ii) NONDOMESTIC EQUIPMENT

10 RATIO.—The nondomestic equipment ratio

11 for any taxable year is a fraction in

12 which—

13 ‘‘(I) the numerator is the aggre14 gate bases of the qualified manufac15 turing and other productive equip16 ment properties placed in service dur17 ing such taxable year which are not of

18 domestic origin, and

19 ‘‘(II) the denominator is the ag20 gregate bases of all qualified manufac21 turing and other productuve equip22 ment properties placed in service dur23 ing such taxable year.

24 ‘‘(C) DETERMINATION OF DOMESTIC ORI25 GIN.—
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1 ‘‘(i) IN GENERAL.—Property shall be

2 treated as being of domestic origin only

3 if—

4 ‘‘(I) the property was completed

5 in the United States, and

6 ‘‘(II) at least 50 percent of the

7 basis of the property is attributable to

8 value added within the United States.

9 ‘‘(ii) UNITED STATES.—The term

10 ‘United States’ includes the Common11 wealth of Puerto Rico and the possessions

12 of the United States.

13 ‘‘(3) QUALIFIED MANUFACTURING AND OTHER

14 PRODUCTIVE EQUIPMENT PROPERTY.—For purposes

15 of this subsection—

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

17 manufacturing and other productive equipment

18 property’ means any property—

19 ‘‘(i) which is used as an integral part

20 of the manufacture or production of tan21 gible personal property and increases the

22 efficiency of the manufacturing or produc23 tion process;

24 ‘‘(ii) which is tangible property to

25 which section 168 applies, other than 3-
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1 year property (within the meaning of sec2 tion 168(e)),

3 ‘‘(iii) which is section 1245 property

4 (as defined in section 1245(a)(3)), and

5 ‘‘(iv)(I) the construction, reconstruc6 tion, or erection of which is completed by

7 the taxpayer, or

8 ‘‘(II) which is acquired by the tax9 payer, if the original use of such property

10 commences with the taxpayer.

11 ‘‘(B) SPECIAL RULE FOR COMPUTER SOFT12 WARE.—In the case of any computer software—

13 ‘‘(i) which is used to control or mon14 itor a manufacturing or production proc15 ess,

16 ‘‘(ii) which increases the efficiency of

17 the manufacturing or production process,

18 and

19 ‘‘(iii) with respect to which deprecia20 tion (or amortization in lieu of deprecia21 tion) is allowable,

22 such software shall be treated as qualified man23 ufacturing and other productive equipment

24 property.
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1 ‘‘(4) QUALIFIED INCREASE AMOUNT.—For pur2 poses of this subsection—

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

4 increase amount’ means the excess (if any) of—

5 ‘‘(i) the aggregate bases of qualified

6 manufacturing and other productive equip7 ment properties placed in service during

8 the taxable year, over

9 ‘‘(ii) the base amount.

10 ‘‘(B) BASE AMOUNT.—The term ‘base

11 amount’ means the product of—

12 ‘‘(i) the fixed-base percentage, and

13 ‘‘(ii) the average annual gross receipts

14 of the taxpayer for the 4 taxable years pre15 ceding the taxable year for which the cred16 it is being determined (in this subsection

17 referred to as the ‘credit year’).

18 ‘‘(C) MINIMUM BASE AMOUNT.—In no

19 event shall the base amount be less than 50

20 percent of the amount determined under sub21 paragraph (A)(i).

22 ‘‘(D) FIXED-BASE PERCENTAGE.—

23 ‘‘(i) IN GENERAL.—The fixed-base

24 percentage is the percentage which the ag25 gregate amounts described in subpara-
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1 graph (A)(i) for taxable years beginning

2 after December 31, 1987, and before Jan3 uary 1, 1993, is of the aggregate gross re4 ceipts of the taxpayer for such taxable

5 years.

6 ‘‘(ii) ROUNDING.—The percentages

7 determined under clause (i) shall be rounded to the nearest 1 8 ⁄100 of 1 percent.

9 ‘‘(E) OTHER RULES.—Rules similar to the

10 rules of paragraphs (4) and (5) of section 41(c)

11 shall apply for purposes of this paragraph.

12 ‘‘(5) COORDINATION WITH OTHER CREDITS.—

13 This subsection shall not apply to any property to

14 which the energy credit or rehabilitation credit

15 would apply unless the taxpayer elects to waive the

16 application of such credits to such property.

17 ‘‘(6) CERTAIN PROGRESS EXPENDITURE RULES

18 MADE APPLICABLE.—Rules similar to rules of sub19 sections (c)(4) and (d) of section 46 (as in effect on

20 the day before the date of the enactment of the Rev21 enue Reconciliation Act of 1990) shall apply for pur22 poses of this subsection.

23 ‘‘(7) TERMINATION DATE.—This subsection

24 shall not apply to any property placed in service
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1 after the expiration of the 2-year period beginning

2 on the date of the enactment of this Act.’’

3 (c) TECHNICAL AMENDMENTS.—

4 (1) Clause (ii) of section 49(a)(1)(C) of such

5 Code is amended by inserting ‘‘or qualified manufac6 turing and other productive equipment property’’

7 after ‘‘energy property’’.

8 (2) Subparagraph (E) of section 50(a)(2) of

9 such Code is amended by inserting ‘‘or 48(c)(6)’’ be10 fore the period at the end.

11 (3)(A) The section heading for section 48 of

12 such Code is amended to read as follows:

13 ‘‘SEC. 48. OTHER CREDITS.’’

14 (B) The table of sections for subpart E of part

15 IV of subchapter A of chapter 1 of such Code is

16 amended by striking the item relating to section 48

17 and inserting the following:

‘‘Sec. 48. Other credits.’’

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

19 this section shall apply to—

20 (1) property acquired by the taxpayer after the

21 date of the enactment of this Act, and

22 (2) property the construction, reconstruction, or

23 erection of which is completed by the taxpayer after

24 the date of the enactment of this Act, but only to
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1 the extent of the basis thereof attributable to con2 struction, reconstruction, or erection after such date.

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