II 

114TH CONGRESS 

1ST SESSION S. 537 

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 

FEBRUARY 24, 2015 

Mr. CARPER (for himself and Mr. TOOMEY) 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 

5 the‘‘Competitiveness and Opportunity by Modernizing and 

6 Permanently Extending the Tax Credit for Experimen7 tation Act of 2015’’ or the ‘‘COMPETE Act of 2015’’. 

8 (b) AMENDMENT OF 1986 CODE.—Except as other9 wise expressly provided, whenever in this Act an amend10 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 25 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 Sep 11 2014 00:14 Feb 28, 2015 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S537.IS S537

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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 PREDECESSOR.—Subpara17 graph (B) of section 41(f)(3) is amended to read as 

18 follows: 

19 ‘‘(B) DISPOSITIONS.—If the predecessor 

20 furnished to the acquiring person such informa21 tion as is necessary for the application of sub22 paragraph (A), then, for purposes of applying 

23 this section for any taxable year ending after 

24 such disposition, the amount of qualified re25 search expenses paid or incurred by the predeVerDate Sep 11 2014 00:14 Feb 28, 2015 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S537.IS S537

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1 cessor during the 3 taxable years preceding 

2 such taxable year shall be reduced— 

3 ‘‘(i) in the case of the taxable year in 

4 which such disposition is made, by an 

5 amount equal to the product of— 

6 ‘‘(I) the amount of qualified re7 search expenses paid or incurred dur8 ing such 3 taxable years with respect 

9 to the acquired business, and 

10 ‘‘(II) the number of days in the 

11 period beginning on the date of acqui12 sition (as determined for purposes of 

13 subparagraph (A)(ii)(II)) and ending 

14 on the last day of the taxable year of 

15 the predecessor in which the disposi16 tion is made, 

17 divided by the number of days in the tax18 able year of the predecessor, and 

19 ‘‘(ii) in the case of any taxable year 

20 ending after the taxable year in which such 

21 disposition is made, the amount described 

22 in clause (i)(I).’’. 

23 (d) AGGREGATION OF EXPENDITURES.—Paragraph 

24 (1) of section 41(f) is amended— 


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1 (1) by striking ‘‘of the qualified research ex2 penses, basic research payments, and amounts paid 

3 or incurred to energy research consortiums,’’ in sub4 paragraph (A)(ii) and inserting ‘‘qualified research 

5 expenses’’, and 

6 (2) by striking ‘‘of the qualified research ex7 penses, basic research payments, and amounts paid 

8 or incurred to energy research consortiums,’’ in sub9 paragraph (B)(ii) and inserting ‘‘qualified research 

10 expenses’’. 

11 (e) SPLIT 100 PERCENT CREDIT FOR CONTRACT RE12 SEARCH EXPENSES.—Subparagraph (A) of section 

13 41(b)(3) is amended to read as follows: 

14 ‘‘(A) IN GENERAL.— 

15 ‘‘(i) TAXPAYERS PAYING FOR CON16 TRACTED RESEARCH.—The term ‘contract 

17 research expenses’ means 65 percent of 

18 any amount paid or incurred by the tax19 payer to any person (other than an em20 ployee of the taxpayer) for qualified re21 search. 

22 ‘‘(ii) TAXPAYERS PERFORMING CON23 TRACTED RESEARCH.—In the case of a 

24 taxpayer (other than an entity described in 

25 subparagraph (C) or (D) or paragraph 


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1 (5)(C)) who receives amounts from any 

2 person (other than an employer of the tax3 payer) for qualified research on behalf of 

4 such person, the term ‘contract research 

5 expenses’ means so much of the qualified 

6 research expenses paid or incurred by the 

7 taxpayer as does not exceed 35 percent of 

8 the amounts so received from such person. 

9 ‘‘(iii) SPECIAL RULES.—For purposes 

10 of clause (ii)— 

11 ‘‘(I) TRADE OR BUSINESS.—The 

12 qualified research expenses of the tax13 payer shall be determined as if the 

14 trade or business of the taxpayer were 

15 the conduct of qualified research on 

16 behalf of other persons. 

17 ‘‘(II) RESEARCH NOT TREATED

18 AS FUNDED RESEARCH.—Subpara19 graph (H) of subsection (d)(4) shall 

20 not apply. 

21 ‘‘(III) QUALIFIED RESEARCH.— 

22 The qualified research expenses of a 

23 taxpayer shall be determined as if the 

24 conditions of subparagraph (B) of 

25 subsection (d)(1) are satisfied if the 


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1 business component described in sub2 paragraph (B)(ii) thereof is a business 

3 component of either of the taxpayers 

4 described in clauses (i) and (ii). 

5 ‘‘(IV) LIMITATION.—The quali6 fied research expenses of a taxpayer 

7 shall not include any expenses that 

8 would not be eligible as in-house re9 search expenses for purposes of para10 graph (2). 

11 ‘‘(iv) DENIAL OF DOUBLE BENEFIT.— 

12 The amount of any in-house research ex13 penses taken into account under this sec14 tion with respect to a taxpayer described in 

15 clause (ii) shall be reduced by the amount 

16 of the contract research expenses taken 

17 into account under such clause with re18 spect to such taxpayer for the taxable 

19 year.’’. 

20 (f) INCLUSION OF BASIC RESEARCH PAYMENTS.— 

21 Subsection (b) of section 41 is amended by redesignating 

22 paragraph (5), as added by this section, as paragraph (6), 

23 and by inserting after paragraph (4) the following new 

24 paragraph: 

25 ‘‘(5) BASIC RESEARCH PAYMENTS.— 


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1 ‘‘(A) IN GENERAL.—In the case of basic 

2 research payments made by the taxpayer, para3 graph (3)(A) shall be applied by substituting 

4 ‘100 percent’ for ‘65 percent’. 

5 ‘‘(B) BASIC RESEARCH PAYMENTS.—For 

6 purposes of this paragraph, the term ‘basic re7 search payment’ means, with respect to any 

8 taxable year, any amount paid in cash during 

9 such taxable year by a corporation to any quali10 fied organization for basic research, but only 

11 if— 

12 ‘‘(i) such payment is made pursuant 

13 to a written agreement between such cor14 poration and such qualified organization, 

15 and 

16 ‘‘(ii) except in the case of a payment 

17 to a qualified organization described in 

18 clause (iii) or (iv) of subparagraph (C), 

19 such basic research is to be performed by 

20 such qualified organization. 

21 ‘‘(C) QUALIFIED ORGANIZATION.—For 

22 purposes of this paragraph, the term ‘qualified 

23 organization’ means any of the following orga24 nizations: 


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1 ‘‘(i) EDUCATIONAL INSTITUTIONS.— 

2 Any educational organization which— 

3 ‘‘(I) is an institution of higher 

4 education (within the meaning of sec5 tion 3304(f)), and 

6 ‘‘(II) is described in section 

7 170(b)(1)(A)(ii). 

8 ‘‘(ii) CERTAIN SCIENTIFIC RESEARCH

9 ORGANIZATIONS.—Any organization not 

10 described in clause (i) which— 

11 ‘‘(I) is described in section 

12 501(c)(3) and is exempt from tax 

13 under section 501(a), 

14 ‘‘(II) is organized and operated 

15 primarily to conduct scientific re16 search, and 

17 ‘‘(III) is not a private founda18 tion. 

19 ‘‘(iii) SCIENTIFIC TAX-EXEMPT ORGA20 NIZATIONS.—Any organization which— 

21 ‘‘(I) is described in section 

22 501(c)(3) (other than a private foun23 dation) or section 501(c)(6), 

24 ‘‘(II) is exempt from tax under 

25 section 501(a), 


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1 ‘‘(III) is organized and operated 

2 primarily to promote scientific re3 search by qualified organizations de4 scribed in clause (i) pursuant to writ5 ten research agreements, and 

6 ‘‘(IV) currently expends substan7 tially all of its funds or substantially 

8 all of the basic research payments re9 ceived by it for grants to, or contracts 

10 for basic research with, an organiza11 tion described in clause (i). 

12 ‘‘(iv) CERTAIN GRANT ORGANIZA13 TIONS.—Any organization not described in 

14 clause (ii) or (iii) which— 

15 ‘‘(I) is described in section 

16 501(c)(3) and is exempt from tax 

17 under section 501(a) (other than a 

18 private foundation), 

19 ‘‘(II) is established and main20 tained by an organization established 

21 before July 10, 1981, which meets the 

22 requirements of subclause (I), 

23 ‘‘(III) is organized and operated 

24 exclusively for the purpose of making 

25 grants to organizations described in 


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1 clause (i) pursuant to written research 

2 agreements for purposes of basic re3 search, and 

4 ‘‘(IV) makes an election, rev5 ocable only with the consent of the 

6 Secretary, to be treated as a private 

7 foundation for purposes of this title 

8 (other than section 4940, relating to 

9 excise tax based on investment in10 come). 

11 ‘‘(D) DEFINITIONS AND SPECIAL RULES.— 

12 For purposes of this paragraph— 

13 ‘‘(i) BASIC RESEARCH.—The term 

14 ‘basic research’ means any original inves15 tigation for the advancement of scientific 

16 knowledge not having a specific commercial 

17 objective, except that such term shall not 

18 include— 

19 ‘‘(I) basic research conducted 

20 outside of the United States, and 

21 ‘‘(II) basic research in the social 

22 sciences, arts, or humanities. 

23 ‘‘(ii) TRADE OR BUSINESS QUALIFICA24 TION.—For purposes of applying para25 graph (1) to this paragraph, any basic reVerDate Sep 11 2014 00:14 Feb 28, 2015 Jkt 049200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S537.IS S537

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1 search payments shall be treated as an 

2 amount paid in carrying on a trade or 

3 business of the taxpayer in the taxable 

4 year in which it is paid (without regard to 

5 the provisions of paragraph (3)(B)). 

6 ‘‘(iii) CERTAIN CORPORATIONS NOT

7 ELIGIBLE.—The term ‘corporation’ shall 

8 not include— 

9 ‘‘(I) an S corporation, 

10 ‘‘(II) a personal holding company 

11 (as defined in section 542), or 

12 ‘‘(III) a service organization (as 

13 defined in section 414(m)(3)).’’. 

14 (g) PERMANENT EXTENSION.— 

15 (1) Section 41 is amended by striking sub16 section (h). 

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

18 by striking subparagraph (D). 

19 (h) CONFORMING AMENDMENTS.— 

20 (1) TERMINATION OF BASIC RESEARCH PAY21 MENT CALCULATION.—Section 41 is amended— 

22 (A) by striking subsection (e), 

23 (B) by redesignating subsection (g) as sub24 section (e), and 


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1 (C) by relocating subsection (e), as so re2 designated, immediately after subsection (d). 

3 (2) SPECIAL RULES.— 

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

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

6 (B) Subsection (f) of section 41 is amend7 ed by striking paragraph (6). 

8 (3) CROSS-REFERENCES.— 

9 (A) Subparagraph (B) of section 45C(b)(1) 

10 is amended— 

11 (i) by striking ‘‘paragraph (3)(A)’’ in 

12 clause (ii) and inserting ‘‘paragraph 

13 (3)(A)(i)’’, 

14 (ii) by striking the period at the end 

15 of clause (ii) and inserting ‘‘, and’’, 

16 (iii) by striking ‘‘and’’ at the end of 

17 clause (i), and 

18 (iv) by adding at the end the following 

19 new clause: 

20 ‘‘(iii) by disregarding clauses (ii), (iii), 

21 and (iv) of paragraph (3)(A) of such sub22 section.’’. 

23 (B) Paragraph (2) of section 45C(c) is 

24 amended by striking ‘‘base period research exVerDate Sep 11 2014 00:14 Feb 28, 2015 Jkt 049200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S537.IS S537

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

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

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

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

7 amended by striking ‘‘subparagraph (A) or sub8 paragraph (B) of section 41(e)(6)’’ and insert9 ing ‘‘clause (i) or clause (ii) of section 

10 41(b)(5)(C)’’. 

11 (E) Section 280C is amended— 

12 (i) by striking ‘‘or basic research ex13 penses (as defined in section 41(e)(2))’’ in 

14 subsection (c)(1), 

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

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

17 41(a)’’, and 

18 (iii) by striking ‘‘or basic research ex19 penses’’ in subsection (c)(2)(B). 

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

21 amended by striking ‘‘section 41(g)’’ and insert22 ing ‘‘section 41(e)’’. 

23 (i) TECHNICAL CORRECTIONS.—Section 409 is 

24 amended— 


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1 (1) by inserting ‘‘, as in effect before the enact2 ment of the Tax Reform Act of 1984)’’ after ‘‘sec3 tion 41(c)(1)(B)’’ in subsection (b)(1)(A), 

4 (2) by inserting ‘‘, as in effect before the enact5 ment of the Tax Reform Act of 1984’’ after ‘‘relat6 ing to the employee stock ownership credit’’ in sub7 section (b)(4), 

8 (3) 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 (i)(1)(A), 

11 (4) by inserting ‘‘(as in effect before the enact12 ment of the Tax Reform Act of 1984)’’ after ‘‘sec13 tion 41(c)(1)(B)’’ in subsection (m), and 

14 (5) by inserting ‘‘(as so in effect)’’ after ‘‘sec15 tion 48(n)(1)’’ in subsection (m). 

16 (j) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—Except as provided in para18 graphs (2) and (3), the amendments made by this 

19 section shall apply to taxable years beginning after 

20 December 31, 2015. 

21 (2) PERMANENT EXTENSION.—The amend22 ments made by subsection (g) shall apply to 

23 amounts paid or incurred after December 31, 2014. 


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1 (3) TECHNICAL CORRECTIONS.—The amend2 ments made by subsection (i) shall take effect on the 

3 date of the enactment of this Act. 

4 SEC. 3. EXCEPTION FROM PASSIVE LOSS RULES FOR IN5 VESTMENTS IN HIGH TECHNOLOGY RE6 SEARCH SMALL BUSINESS PASS-THRU ENTI7 TIES. 

8 (a) IN GENERAL.—Subsection (c) of section 469 is 

9 amended by redesignating paragraphs (4) through (7) as 

10 paragraphs (5) through (8), respectively, and by inserting 

11 after paragraph (3) the following new paragraph: 

12 ‘‘(4) HIGH TECHNOLOGY RESEARCH ACTIVI13 TIES.— 

14 ‘‘(A) IN GENERAL.—The term ‘passive ac15 tivity’ shall not include any qualified research 

16 activity of the taxpayer carried on by a high 

17 technology research small business pass-thru 

18 entity. 

19 ‘‘(B) TREATMENT OF LOSSES AND DEDUC20 TIONS.— 

21 ‘‘(i) IN GENERAL.—Losses or deduc22 tions of a taxpayer in connection with 

23 qualified research activities carried on by a 

24 high technology research small business 

25 pass-thru entity shall not be treated as 


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1 losses or deductions, respectively, from a 

2 passive activity except as provided in 

3 clause (ii) and subparagraph (C). 

4 ‘‘(ii) LIMITATION.—Clause (i) shall 

5 apply to losses and deductions of a tax6 payer in connection with a high technology 

7 small business pass-thru entity for a tax8 able year only to the extent that the aggre9 gate losses and deductions of the taxpayer 

10 in connection with qualified research activi11 ties of such entity for such taxable year do 

12 not exceed the portion of the taxpayer’s 

13 adjusted basis in the taxpayer’s ownership 

14 interest in such entity that is attributable 

15 to money or other property contributed— 

16 ‘‘(I) in exchange for such owner17 ship interest, and 

18 ‘‘(II) specifically for use in con19 nection with qualified research activi20 ties. 

21 For purposes of the preceding sentence, 

22 the taxpayer’s basis shall not include any 

23 portion of such basis which is attributable 

24 to an increase in a partner’s share of the 

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1 ered under section 752(a) as a contribution 

2 of money. 

3 ‘‘(C) TREATMENT OF CARRYOVERS.—Sub4 paragraph (B)(i) shall not apply to the portion 

5 of any loss or deduction that is carried over 

6 under subsection (b) into a taxable year other 

7 than the taxable year in which such loss or de8 duction arose. 

9 ‘‘(D) QUALIFIED RESEARCH ACTIVITY.— 

10 For purposes of this paragraph, the term 

11 ‘qualified research activity’ means any activity 

12 constituting qualified research (within the 

13 meaning of section 41(d)(1)(B) and taking into 

14 account paragraphs (3) and (4) of section 

15 41(d)) which involves a process of experimen16 tation. 

17 ‘‘(E) HIGH TECHNOLOGY RESEARCH

18 SMALL BUSINESS PASS-THRU ENTITY.—For 

19 purposes of this paragraph, the term ‘high tech20 nology research small business pass-thru entity’ 

21 means any domestic pass-thru entity for any 

22 taxable year if— 

23 ‘‘(i) either— 

24 ‘‘(I) more than 75 percent of the 

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1 ries, rent and overhead) for such tax2 able year are paid or incurred in con3 nection with qualified research (within 

4 the meaning of section 41(d)(1)(B), 

5 taking into account paragraphs (3) 

6 and (4) of section 41(d)) that involves 

7 a process of experimentation con8 ducted by the entity, or 

9 ‘‘(II) more than 50 percent of 

10 the entity’s expenditures for such tax11 able year constitute qualified research 

12 expenses (as defined in section 41(b), 

13 but determined without regard to the 

14 phrase ‘65 percent of’ in paragraph 

15 (3)(A) thereof), 

16 ‘‘(ii) such entity is a small business 

17 (within the meaning of section 

18 41(b)(3)(D)(iii), applied by substituting 

19 ‘250’ for ‘500’ in subclause (I) thereof), 

20 and 

21 ‘‘(iii) at no time during the taxable 

22 year does the entity have aggregate gross 

23 assets in excess of $150,000,000. 


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1 ‘‘(F) PROVISIONS RELATED TO AGGRE2 GATE GROSS ASSETS LIMITATION.—For pur3 poses of this paragraph— 

4 ‘‘(i) IN GENERAL.—Except as other5 wise provided in this subparagraph, the 

6 term ‘aggregate gross assets’ has the 

7 meaning given such term in section 

8 1202(d)(2). 

9 ‘‘(ii) EXCEPTION FOR CERTAIN IN10 TANGIBLES.—Any section 197 intangible 

11 (as defined in section 197(d) and deter12 mined without regard to section 197(e)) 

13 which is used directly in connection with 

14 the research referred to in subparagraph 

15 (E)(i) shall not be taken into account in 

16 determining aggregate gross assets. 

17 ‘‘(iii) EXCEPTION FOR CERTAIN FOL18 LOW-ON INVESTMENTS.—Cash from a sale 

19 of equity interests shall not be taken into 

20 account in determining aggregate gross as21 sets if— 

22 ‘‘(I) the aggregate gross assets of 

23 such entity (determined immediately 

24 after such sale and without regard to 

25 this clause) do not exceed the sum of 


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1 $150,000,000, plus 25 percent of the 

2 aggregate gross assets of such entity 

3 (determined immediately before such 

4 sale and without regard to this 

5 clause), and 

6 ‘‘(II) the aggregate gross assets 

7 of such entity (determined imme8 diately before such sale and without 

9 regard to this clause) do not exceed 

10 $150,000,000. 

11 Sales of equity interests which are part of 

12 the same plan or arrangement, or which 

13 are carried out with the principal purpose 

14 of increasing the amount of cash to which 

15 this clause applies (determined without re16 gard to this sentence), shall be treated as 

17 a single sale for purposes of this clause. 

18 ‘‘(iv) INFLATION ADJUSTMENT.—In 

19 the case of any taxable year beginning 

20 after 2016, the $150,000,000 amount in 

21 subparagraph (E)(iii) and subclauses (I) 

22 and (II) of clause (iii) shall each be in23 creased by an amount equal to— 

24 ‘‘(I) such dollar amount, multi25 plied by 


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1 ‘‘(II) the cost of living adjust2 ment determined under section 1(f)(3) 

3 for the calendar year in which the tax4 able year begins determined by sub5 stituting ‘calendar year 2015’ for ‘cal6 endar year 1992’ in subparagraph (B) 

7 thereof. 

8 Any increase determined under the pre9 ceding sentence shall be rounded to the 

10 nearest $100,000. 

11 ‘‘(G) CAPITAL EXPENDITURES TAKEN INTO

12 ACCOUNT FOR EXPENDITURES TEST.—An ex13 penditure shall not fail to be taken into account 

14 under subparagraph (E)(i) merely because such 

15 expenditure is chargeable to capital account. 

16 ‘‘(H) PASS-THRU ENTITY.—For purposes 

17 of this paragraph, the term ‘pass-thru entity’ 

18 means any partnership, S corporation, or other 

19 entity identified by the Secretary as a pass-thru 

20 entity for purposes of this paragraph. 

21 ‘‘(I) AGGREGATION RULES.— 

22 ‘‘(i) IN GENERAL.—All persons treat23 ed as a single employer under subsection 

24 (a) or (b) of section 52, or subsection (m) 

25 or (o) of section 414, shall be treated as a 


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1 single entity for purposes of subparagraphs 

2 (E) and (F)(iii). 

3 ‘‘(ii) LIMITATION WHERE ENTITY

4 WOULD NOT QUALIFY.—No entity shall be 

5 treated as a high technology research small 

6 business pass-thru entity unless such enti7 ty qualifies as such both with and without 

8 the application of clause (i). 

9 ‘‘(J) ACTIVITIES NOT ENGAGED IN FOR

10 PROFIT AND ECONOMIC SUBSTANCE RULES.— 

11 Section 183 and the economic substance rules 

12 of section 7701(o) shall not apply to disallow 

13 the losses, deductions, and credits of a high 

14 technology research small business pass-thru 

15 entity solely as a result of losses incurred by 

16 such entity.’’. 

17 (b) MATERIAL PARTICIPATION NOT REQUIRED.— 

18 Paragraph (5) of section 469(c) of such Code, as redesig19 nated by subsection (a), is amended by striking ‘‘and (3)’’ 

20 in the heading and text and inserting ‘‘, (3), and (4)’’. 

21 (c) CERTAIN RESEARCH-RELATED DEDUCTIONS AND

22 CREDITS OF HIGH TECHNOLOGY RESEARCH SMALL

23 BUSINESS PASS-THRU ENTITIES ALLOWED FOR PUR24 POSES OF DETERMINING ALTERNATIVE MINIMUM TAX.— 


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1 (1) DEDUCTION FOR RESEARCH AND EXPERI2 MENTAL EXPENDITURES.—Paragraph (2) of section 

3 56(b) of such Code is amended by adding at the end 

4 the following new subparagraph: 

5 ‘‘(E) EXCEPTION FOR HIGH TECHNOLOGY

6 RESEARCH SMALL BUSINESS PASS-THRU ENTI7 TIES.—In the case of a high technology re8 search small business pass-thru entity (as de9 fined in section 469(c)(4)), this paragraph shall 

10 not apply to any amount allowable as a deduc11 tion under section 174(a).’’. 

12 (2) ALLOWANCE OF CERTAIN RESEARCH-RE13 LATED CREDITS.—Subparagraph (B) of section 

14 38(c)(4) of such Code is amended by redesignating 

15 clauses (ii) through (ix) as clauses (iii) through (x), 

16 respectively, and by inserting after clause (i) the fol17 lowing new clause: 

18 ‘‘(ii) the credits determined with re19 spect to an individual taxpayer under sec20 tions 41 and 48D to the extent attrib21 utable to a high technology research small 

22 business pass-thru entity (as defined in 

23 section 469(c)(4)),’’. 

24 (d) EXCEPTION TO LIMITATION ON PASS-THRU OF

25 RESEARCH CREDIT.—Subsection (g) of section 41 of such 


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1 Code is amended by adding at the end the following: 

2 ‘‘Paragraphs (2) and (4) shall not apply with respect to 

3 any high technology research small business pass-thru en4 tity (as defined in section 469(c)(4)).’’ 

5 (e) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to losses and credits arising in tax7 able years beginning on or after December 31, 2015. 

8 SEC. 4. CREDIT ALLOWED AGAINST ALTERNATIVE MIN9 IMUM TAX. 

10 (a) IN GENERAL.—Subparagraph (B) of section 

11 38(c)(4), as amended by this Act, is amended— 

12 (1) by redesignating clauses (iii) through (x) as 

13 clauses (iv) through (xi), respectively, and 

14 (2) by inserting after clause (i) the following 

15 new clause: 

16 ‘‘(ii) for taxable years beginning after 

17 December 31, 2015, the credit determined 

18 under section 41,’’. 

19 (b) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2015. 

22 SEC. 5. TAX-EXEMPT FINANCING OF RESEARCH PARK FA23 CILITIES. 

24 (a) IN GENERAL.—Subsection (a) of section 142 is 

25 amended— 


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1 (1) by striking ‘‘or’’ at the end of paragraph 

2 (14), 

3 (2) by striking the period at the end of para4 graph (15) and inserting ‘‘, or’’, and 

5 (3) by inserting at the end the following new 

6 paragraph: 

7 ‘‘(16) research park facilities.’’. 

8 (b) DEFINITION.—Section 142 is amended by insert9 ing at the end the following new subsection: 

10 ‘‘(n) RESEARCH PARK FACILITIES.—For purposes of 

11 subsection (a)(16), the term ‘research park facility’ means 

12 a facility (including buildings, land, or other structures) 

13 which is used in connection with research and experimen14 tation (as defined in section 168(i)(11)). For purposes of 

15 the preceding sentence, such term includes facilities which 

16 are directly related and ancillary to a research park facil17 ity (determined without regard to this sentence) if— 

18 ‘‘(1) such facilities are located on the same site 

19 as the research park facility, and 

20 ‘‘(2) not more than 25 percent of the net pro21 ceeds of the issue are used to provide such facili22 ties.’’. 


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

2 this section shall apply with respect to bonds issued on 

3 or after the date of the enactment of this Act. 

Æ 


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