I 

113TH CONGRESS 

2D SESSION H. R. 4438 

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

permanent the research credit. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 9, 2014 

Mr. BRADY of Texas (for himself, Mr. LARSON of Connecticut, Mr. PAULSEN, 

Ms. ESHOO, Mr. MCCAUL, Ms. MATSUI, Mr. SAM JOHNSON of Texas, 

Mr. NEAL, and Mr. SCHOCK) 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 simplify 

and make permanent the research credit. 

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 ‘‘American Research 

5 and Competitiveness Act of 2014’’. 


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1 SEC. 2. RESEARCH CREDIT SIMPLIFIED AND MADE PERMA2 NENT. 

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

4 Internal Revenue Code of 1986 is amended to read as fol5 lows: 

6 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

7 research credit determined under this section for the tax8 able year shall be an amount equal to the sum of— 

9 ‘‘(1) 20 percent of so much of the qualified re10 search expenses for the taxable year as exceeds 50 

11 percent of the average qualified research expenses 

12 for the 3 taxable years preceding the taxable year 

13 for which the credit is being determined, 

14 ‘‘(2) 20 percent of so much of the basic re15 search payments for the taxable year as exceeds 50 

16 percent of the average basic research payments for 

17 the 3 taxable years preceding the taxable year for 

18 which the credit is being determined, plus 

19 ‘‘(3) 20 percent of the amounts paid or in20 curred by the taxpayer in carrying on any trade or 

21 business of the taxpayer during the taxable year (in22 cluding as contributions) to an energy research con23 sortium for energy research.’’. 

24 (b) REPEAL OF TERMINATION.—Section 41 of such 

25 Code is amended by striking subsection (h). 

26 (c) CONFORMING AMENDMENTS.— 


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1 (1) Subsection (c) of section 41 of such Code 

2 is amended to read as follows: 

3 ‘‘(c) DETERMINATION OF AVERAGE RESEARCH EX4 PENSES FOR PRIOR YEARS.— 

5 ‘‘(1) SPECIAL RULE IN CASE OF NO QUALIFIED

6 RESEARCH EXPENDITURES IN ANY OF 3 PRECEDING

7 TAXABLE YEARS.—In any case in which the taxpayer 

8 has no qualified research expenses in any one of the 

9 3 taxable years preceding the taxable year for which 

10 the credit is being determined, the amount deter11 mined under subsection (a)(1) for such taxable year 

12 shall be equal to 10 percent of the qualified research 

13 expenses for the taxable year. 

14 ‘‘(2) CONSISTENT TREATMENT OF EX15 PENSES.— 

16 ‘‘(A) IN GENERAL.—Notwithstanding 

17 whether the period for filing a claim for credit 

18 or refund has expired for any taxable year 

19 taken into account in determining the average 

20 qualified research expenses, or average basic re21 search payments, taken into account under sub22 section (a), the qualified research expenses and 

23 basic research payments taken into account in 

24 determining such averages shall be determined 

25 on a basis consistent with the determination of 


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1 qualified research expenses and basic research 

2 payments, respectively, for the credit year. 

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

4 Secretary may prescribe regulations to prevent 

5 distortions in calculating a taxpayer’s qualified 

6 research expenses or basic research payments 

7 caused by a change in accounting methods used 

8 by such taxpayer between the current year and 

9 a year taken into account in determining the 

10 average qualified research expenses or average 

11 basic research payments taken into account 

12 under subsection (a).’’. 

13 (2) Section 41(e) of such Code is amended— 

14 (A) by striking all that precedes paragraph 

15 (6) and inserting the following: 

16 ‘‘(e) BASIC RESEARCH PAYMENTS.—For purposes of 

17 this section— 

18 ‘‘(1) IN GENERAL.—The term ‘basic research 

19 payment’ means, with respect to any taxable year, 

20 any amount paid in cash during such taxable year 

21 by a corporation to any qualified organization for 

22 basic research but only if— 

23 ‘‘(A) such payment is pursuant to a writ24 ten agreement between such corporation and 

25 such qualified organization, and 


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1 ‘‘(B) such basic research is to be per2 formed by such qualified organization. 

3 ‘‘(2) EXCEPTION TO REQUIREMENT THAT RE4 SEARCH BE PERFORMED BY THE ORGANIZATION.— 

5 In the case of a qualified organization described in 

6 subparagraph (C) or (D) of paragraph (3), subpara7 graph (B) of paragraph (1) shall not apply.’’, 

8 (B) by redesignating paragraphs (6) and 

9 (7) as paragraphs (3) and (4), respectively, and 

10 (C) in paragraph (4) as so redesignated, 

11 by striking subparagraphs (B) and (C) and by 

12 redesignating subparagraphs (D) and (E) as 

13 subparagraphs (B) and (C), respectively. 

14 (3) Section 41(f)(3) of such Code is amended— 

15 (A)(i) by striking ‘‘, and the gross re16 ceipts’’ in subparagraph (A)(i) and all that fol17 lows through ‘‘determined under clause (iii)’’, 

18 (ii) by striking clause (iii) of subparagraph 

19 (A) and redesignating clauses (iv), (v), and (vi), 

20 thereof, as clauses (iii), (iv), and (v), respec21 tively, 

22 (iii) by striking ‘‘and (iv)’’ each place it 

23 appears in subparagraph (A)(iv) (as so redesig24 nated) and inserting ‘‘and (iii)’’, 


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1 (iv) by striking subclause (IV) of subpara2 graph (A)(iv) (as so redesignated), by striking 

3 ‘‘, and’’ at the end of subparagraph (A)(iv)(III) 

4 (as so redesignated) and inserting a period, and 

5 by adding ‘‘and’’ at the end of subparagraph 

6 (A)(v)(II) (as so redesignated), 

7 (v) by striking ‘‘(A)(vi)’’ in subparagraph 

8 (B) and inserting ‘‘(A)(v)’’, and 

9 (vi) by striking ‘‘(A)(iv)(II)’’ in subpara10 graph (B)(i)(II) and inserting ‘‘(A)(iii)(II)’’, 

11 (B) by striking ‘‘, and the gross receipts of 

12 the predecessor,’’ in subparagraph (A)(iv)(II) 

13 (as so redesignated), 

14 (C) by striking ‘‘, and the gross receipts 

15 of,’’ in subparagraph (B), 

16 (D) by striking ‘‘, or gross receipts of,’’ in 

17 subparagraph (B)(i)(I), and 

18 (E) by striking subparagraph (C). 

19 (d) EFFECTIVE DATE.— 

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

22 shall apply to taxable years beginning after Decem23 ber 31, 2013. 


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1 (2) SUBSECTION (b).—The amendment made 

2 by subsection (b) shall apply to amounts paid or in3 curred after December 31, 2013. 

Æ 


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