I 

109TH CONGRESS 

1ST SESSION H. R. 1736 

To amend the Internal Revenue Code of 1986 to permanently extend the 

research credit, to increase the rates of the alternative incremental credit, 

and to provide an alternative simplified credit for qualified research 

expenses. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 20, 2005 

Mrs. JOHNSON of Connecticut (for herself, Mr. CARDIN, Mr. SHAW, Mr. 

LEVIN, Mr. HERGER, Mr. CAMP, Mr. RAMSTAD, Mr. SAM JOHNSON of 

Texas, Mr. MCDERMOTT, Mr. NEAL of Massachusetts, Mr. ENGLISH of 

Pennsylvania, Mr. JEFFERSON, Mr. HAYWORTH, Mr. WELLER, Mr. 

HULSHOF, Mr. REYNOLDS, Mr. LEWIS of Kentucky, Mr. BECERRA, Mr. 

FOLEY, Mr. POMEROY, Mr. BRADY of Texas, Mr. CANTOR, Mrs. JONES

of Ohio, Mr. CHOCOLA, Mr. LARSON of Connecticut, Ms. HART, Mr. 

BEAUPREZ, Mr. EMANUEL, Mr. SIMMONS, Mr. GORDON, Mr. SOUDER, 

Mr. UDALL of Colorado, Mr. EHLERS, Mr. KUHL of New York, Mr. 

JOHNSON of Illinois, Mr. MCHENRY, Mr. SESSIONS, Mr. FERGUSON, 

Miss MCMORRIS, Mr. LANTOS, Mr. BLUMENAUER, Mr. CROWLEY, Mr. 

WAXMAN, Mr. ETHERIDGE, Mr. RUPPERSBERGER, Mr. HASTINGS of 

Florida, Mr. MEEK of Florida, Mr. WESTMORELAND, Mr. SWEENEY, Mr. 

MENENDEZ, Mr. HAYES, Mr. PRICE of North Carolina, Mr. GOODLATTE, 

Mrs. MUSGRAVE, Mr. CANNON, Mr. HONDA, Mr. SHERMAN, and Mr. 

MORAN of Virginia) 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 permanently 

extend the research credit, to increase the rates of the 

alternative incremental credit, and to provide an alternative simplified credit for qualified research expenses. 
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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 ‘‘Investment in America 

5 Act of 2005’’. 

6 SEC. 2. FINDINGS. 

7 The Congress finds as follows: 

8 (1) Research and development performed in the 

9 United States results in quality jobs, better and 

10 safer products, increased ownership of technology11 based intellectual property, and higher productivity 

12 in the United States. 

13 (2) The extent to which companies perform and 

14 increase research and development activities in the 

15 United States is in part dependent on Federal tax 

16 policy. 

17 (3) The Congress should make permanent a re18 search and development credit that provides a mean19 ingful incentive to all types of taxpayers. 

20 SEC. 3. PERMANENT EXTENSION OF RESEARCH CREDIT. 

21 (a) IN GENERAL.—Section 41 of the Internal Rev22 enue Code of 1986 (relating to credit for increasing re23 search activities) is amended by striking subsection (h). 
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1 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

2 section 45C(b) of such Code is amended by striking sub3 paragraph (D). 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to amounts paid or incurred after 

6 the date of the enactment of this Act. 

7 SEC. 4. INCREASE IN RATES OF ALTERNATIVE INCRE8 MENTAL CREDIT. 

9 (a) IN GENERAL.—Subparagraph (A) of section 

10 41(c)(4) of the Internal Revenue Code of 1986 (relating 

11 to election of alternative incremental credit) is amended— 

12 (1) by striking ‘‘2.65 percent’’ and inserting ‘‘3 

13 percent’’, 

14 (2) by striking ‘‘3.2 percent’’ and inserting ‘‘4 

15 percent’’, and 

16 (3) by striking ‘‘3.75 percent’’ and inserting ‘‘5 

17 percent’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to taxable years ending after the 

20 date of the enactment of this Act. 

21 SEC. 5. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED 

22 RESEARCH EXPENSES. 

23 (a) IN GENERAL.—Subsection (c) of section 41 of the 

24 Internal Revenue Code of 1986 (relating to base amount) 

25 is amended by redesignating paragraphs (5) and (6) as 
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1 paragraphs (6) and (7), respectively, and by inserting 

2 after paragraph (4) the following new paragraph: 

3 ‘‘(5) ELECTION OF ALTERNATIVE SIMPLIFIED

4 CREDIT.— 

5 ‘‘(A) IN GENERAL.—At the election of the 

6 taxpayer, the credit determined under sub7 section (a)(1) shall be equal to 12 percent of so 

8 much of the qualified research expenses for the 

9 taxable year as exceeds 50 percent of the aver10 age qualified research expenses for the 3 tax11 able years preceding the taxable year for which 

12 the credit is being determined. 

13 ‘‘(B) SPECIAL RULE IN CASE OF NO

14 QUALIFIED RESEARCH EXPENSES IN ANY OF 3

15 PRECEDING TAXABLE YEARS.— 

16 ‘‘(i) TAXPAYERS TO WHICH SUBPARA17 GRAPH APPLIES.—The credit under this 

18 paragraph shall be determined under this 

19 subparagraph if the taxpayer has no quali20 fied research expenses in any one of the 3 

21 taxable years preceding the taxable year 

22 for which the credit is being determined. 

23 ‘‘(ii) CREDIT RATE.—The credit de24 termined under this subparagraph shall be 
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1 equal to 6 percent of the qualified research 

2 expenses for the taxable year. 

3 ‘‘(C) ELECTION.—An election under this 

4 paragraph shall apply to the taxable year for 

5 which made and all succeeding taxable years 

6 unless revoked with the consent of the Sec7 retary. An election under this paragraph may 

8 not be made for any taxable year to which an 

9 election under paragraph (4) applies.’’. 

10 (b) COORDINATION WITH ELECTION OF ALTER11 NATIVE INCREMENTAL CREDIT.— 

12 (1) IN GENERAL.—Section 41(c)(4)(B) of such 

13 Code (relating to election) is amended by adding at 

14 the end the following: ‘‘An election under this para15 graph may not be made for any taxable year to 

16 which an election under paragraph (5) applies.’’. 

17 (2) TRANSITION RULE.—In the case of an elec18 tion under section 41(c)(4) of the Internal Revenue 

19 Code of 1986 which applies to the taxable year 

20 which includes the date of the enactment of this Act, 

21 such election shall be treated as revoked with the 

22 consent of the Secretary of the Treasury if the tax23 payer makes an election under section 41(c)(5) of 

24 such Code (as added by subsection (a)) for such 

25 year. 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years ending after the 

3 date of the enactment of this Act. 

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