IB 

Union Calendar No. 319 

113TH CONGRESS 

2D SESSION H. R. 4438 

[Report No. 113–431] 

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 

MAY 2, 2014 

Additional sponsors: Mr. BEN RAY LUJA ́N of New Mexico, Ms. JENKINS, Mr. 

REED, Ms. LINDA T. SA ́NCHEZ of California, Mr. KELLY of Pennsylvania, Mr. BOUSTANY, Mr. FRANKS of Arizona, Mr. YOUNG of Indiana, 

Mr. MARINO, Mr. HONDA, Mr. GRIFFIN of Arkansas, Mr. KIND, Mr. 

SWALWELL of California, Mr. COFFMAN, and Mr. JONES

MAY 2, 2014 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on April 9, 2014] 

mstockstill on DSK4VPTVN1PROD with BILLS

2 

•HR 4438 RH

A BILL 

To amend the Internal Revenue Code of 1986 to simplify 

and make permanent the research credit. 

mstockstill on DSK4VPTVN1PROD with BILLS

3 

•HR 4438 RH

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 and 

5 Competitiveness Act of 2014’’. 

6 SEC. 2. RESEARCH CREDIT SIMPLIFIED AND MADE PERMA7 NENT. 

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

9 Internal Revenue Code of 1986 is amended to read as fol10 lows: 

11 ‘‘(a) IN GENERAL.—For purposes of section 38, the re12 search credit determined under this section for the taxable 

13 year shall be an amount equal to the sum of— 

14 ‘‘(1) 20 percent of so much of the qualified re15 search expenses for the taxable year as exceeds 50 per16 cent of the average qualified research expenses for the 

17 3 taxable years preceding the taxable year for which 

18 the credit is being determined, 

19 ‘‘(2) 20 percent of so much of the basic research 

20 payments for the taxable year as exceeds 50 percent 

21 of the average basic research payments for the 3 tax22 able years preceding the taxable year for which the 

23 credit is being determined, plus 

24 ‘‘(3) 20 percent of the amounts paid or incurred 

25 by the taxpayer in carrying on any trade or business 

mstockstill on DSK4VPTVN1PROD with BILLS

4 

•HR 4438 RH

1 of the taxpayer during the taxable year (including as 

2 contributions) to an energy research consortium for 

3 energy research.’’. 

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

5 Code is amended by striking subsection (h). 

6 (c) CONFORMING AMENDMENTS.— 

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

8 amended to read as follows: 

9 ‘‘(c) DETERMINATION OF AVERAGE RESEARCH EX10 PENSES FOR PRIOR YEARS.— 

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

12 RESEARCH EXPENDITURES IN ANY OF 3 PRECEDING

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

14 has no qualified research expenses in any one of the 

15 3 taxable years preceding the taxable year for which 

16 the credit is being determined, the amount determined 

17 under subsection (a)(1) for such taxable year shall be 

18 equal to 10 percent of the qualified research expenses 

19 for the taxable year. 

20 ‘‘(2) CONSISTENT TREATMENT OF EXPENSES.— 

21 ‘‘(A) IN GENERAL.—Notwithstanding wheth22 er the period for filing a claim for credit or re23 fund has expired for any taxable year taken into 

24 account in determining the average qualified re25 search expenses, or average basic research paymstockstill on DSK4VPTVN1PROD with BILLS

5 

•HR 4438 RH

1 ments, taken into account under subsection (a), 

2 the qualified research expenses and basic research 

3 payments taken into account in determining 

4 such averages shall be determined on a basis con5 sistent with the determination of qualified re6 search expenses and basic research payments, re7 spectively, for the credit year. 

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

9 Secretary may prescribe regulations to prevent 

10 distortions in calculating a taxpayer’s qualified 

11 research expenses or basic research payments 

12 caused by a change in accounting methods used 

13 by such taxpayer between the current year and 

14 a year taken into account in determining the av15 erage qualified research expenses or average basic 

16 research payments taken into account under sub17 section (a).’’. 

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

19 (A) by striking all that precedes paragraph 

20 (6) and inserting the following: 

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

22 this section— 

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

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

25 any amount paid in cash during such taxable year 

mstockstill on DSK4VPTVN1PROD with BILLS

6 

•HR 4438 RH

1 by a corporation to any qualified organization for 

2 basic research but only if— 

3 ‘‘(A) such payment is pursuant to a written 

4 agreement between such corporation and such 

5 qualified organization, and 

6 ‘‘(B) such basic research is to be performed 

7 by such qualified organization. 

8 ‘‘(2) EXCEPTION TO REQUIREMENT THAT RE9 SEARCH BE PERFORMED BY THE ORGANIZATION.—In 

10 the case of a qualified organization described in sub11 paragraph (C) or (D) of paragraph (3), subpara12 graph (B) of paragraph (1) shall not apply.’’, 

13 (B) by redesignating paragraphs (6) and 

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

15 (C) in paragraph (4) as so redesignated, by 

16 striking subparagraphs (B) and (C) and by re17 designating subparagraphs (D) and (E) as sub18 paragraphs (B) and (C), respectively. 

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

20 (A)(i) by striking ‘‘, and the gross receipts’’ 

21 in subparagraph (A)(i) and all that follows 

22 through ‘‘determined under clause (iii)’’, 

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

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

mstockstill on DSK4VPTVN1PROD with BILLS

7 

•HR 4438 RH

1 thereof, as clauses (iii), (iv), and (v), respec2 tively, 

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

4 appears in subparagraph (A)(iv) (as so redesig5 nated) and inserting ‘‘and (iii)’’, 

6 (iv) by striking subclause (IV) of subpara7 graph (A)(iv) (as so redesignated), by striking ‘‘, 

8 and’’ at the end of subparagraph (A)(iv)(III) (as 

9 so redesignated) and inserting a period, and by 

10 adding ‘‘and’’ at the end of subparagraph 

11 (A)(iv)(II) (as so redesignated), 

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

13 (B) and inserting ‘‘(A)(v)’’, and 

14 (vi) by striking ‘‘(A)(iv)(II)’’ in subpara15 graph (B)(i)(II) and inserting ‘‘(A)(iii)(II)’’, 

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

17 the predecessor,’’ in subparagraph (A)(iv)(II) (as 

18 so redesignated), 

19 (C) by striking ‘‘, and the gross receipts of,’’ 

20 in subparagraph (B), 

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

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

23 (E) by striking subparagraph (C). 

24 (d) EFFECTIVE DATE.— 

mstockstill on DSK4VPTVN1PROD with BILLS

8 

•HR 4438 RH

1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section shall 

3 apply to taxable years beginning after December 31, 

4 2013. 

5 (2) SUBSECTION (b).—The amendment made by 

6 subsection (b) shall apply to amounts paid or in7 curred after December 31, 2013. 

mstockstill on DSK4VPTVN1PROD with BILLS

mstockstill on DSK4VPTVN1PROD with BILLS

Union Calendar No. 319 

113TH CONGRESS 

2D SESSION H. R. 4438 

[Report No. 113–431] 

A BILL 

To amend the Internal Revenue Code of 1986 to 

simplify and make permanent the research credit. 

MAY 2, 2014 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 

mstockstill on DSK4VPTVN1PROD with BILLS