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103D CONGRESS

1ST SESSION H. R. 241

To amend the Internal Revenue Code of 1986 to encourage investments

in new manufacturing and other productive equipment by allowing an

investment tax credit to taxpayers who increase the amount of such

investments.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. LEVIN (for himself and Mr. MATSUI) 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

investments in new manufacturing and other productive

equipment by 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. INVESTMENT CREDIT FOR NEW MANUFACTUR4 ING AND OTHER PRODUCTION EQUIPMENT.

5 (a) ALLOWANCE OF CREDIT.—Section 46 of the In6 ternal Revenue Code of 1986 (relating to amount of in7 vestment credit) is amended by striking ‘‘and’’ at the end

8 of paragraph (2), by striking the period at the end of para-
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1 graph (3) and inserting ‘‘, and’’, and by adding at the

2 end thereof the following new paragraph:

3 ‘‘(4) the manufacturing and other productive

4 equipment credit.’’

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

6 is amended by adding at the end thereof the following new

7 subsection:

8 ‘‘(c) MANUFACTURING AND OTHER PRODUCTIVE

9 EQUIPMENT CREDIT.—

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

11 the manufacturing and other productive equipment

12 credit for any taxable year is an amount equal to 10

13 percent of the excess (if any) of—

14 ‘‘(A) the aggregate bases of qualified man15 ufacturing and other productive equipment

16 properties placed in service during such taxable

17 year, over

18 ‘‘(B) the base amount.

19 ‘‘(2) QUALIFIED MANUFACTURING AND PRO20 DUCTIVE EQUIPMENT PROPERTY.—For purposes of

21 this subsection—

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

23 manufacturing and productive equipment prop24 erty’ means any property—
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1 ‘‘(i) which is used as an integral part

2 of manufacturing, production, or extraction

3 or of furnishing transportation, commu4 nications, electrical energy, gas, water, or

5 sewage disposal services,

6 ‘‘(ii) which is tangible property to

7 which section 168 applies,

8 ‘‘(iii) which is section 1245 property

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

10 ‘‘(iv)(I) the construction, reconstruc11 tion, or erection of which is completed by

12 the taxpayer, or

13 ‘‘(II) which is acquired by the tax14 payer if the original use of such property

15 commences with the taxpayer.

16 ‘‘(B) SPECIAL RULE FOR COMPUTER SOFT17 WARE.—In the case of any computer software

18 which is used to control or monitor a manufac19 turing or production process and with respect

20 to which depreciation (or amortization in lieu of

21 depreciation) is allowable, such software shall

22 be treated as qualified manufacturing and pro23 ductive equipment property.

24 ‘‘(3) BASE AMOUNT.—For purposes of para25 graph (1)(B)—
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1 ‘‘(A) IN GENERAL.—The term ‘base

2 amount’ means the product of—

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

4 ‘‘(ii) the average annual gross receipts

5 of the taxpayer for the four taxable years

6 preceding the taxable year for which the

7 credit is being determined (hereafter in

8 this subsection referred to as the ‘credit

9 year’).

10 ‘‘(B) MINIMUM BASE AMOUNT.—In no

11 event shall the base amount be less than 50

12 percent of the amount determined under para13 graph (1)(A).

14 ‘‘(C) FIXED-BASE PERCENTAGE.—

15 ‘‘(i) IN GENERAL.—The fixed-base

16 percentage is the percentage which the ag17 gregate amounts described in paragraph

18 (1)(A) for taxable years beginning after

19 December 31, 1986, and before January 1,

20 1992, is of the aggregate gross receipts of

21 the taxpayer for such taxable years.

22 ‘‘(ii) ROUNDING.—The percentages

23 determined under clause (i) shall be round24 ed to the nearest 1/100 of 1 percent.
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1 ‘‘(D) OTHER RULES.—Rules similar to the

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

3 shall apply for purposes of this paragraph.

4 ‘‘(4) COORDINATION WITH OTHER CREDITS.—

5 This subsection shall not apply to any property to

6 which the energy credit or rehabilitation credit

7 would apply unless the taxpayer elects to waive the

8 application of such credits to such property.

9 ‘‘(5) CERTAIN PROGRESS EXPENDITURE RULES

10 MADE APPLICABLE.—Rules similar to rules of sub11 section (c)(4) and (d) of section 46 (as in effect on

12 the day before the date of the enactment of the Rev13 enue Reconciliation Act of 1990) shall apply for pur14 poses of this subsection.’’

15 (b) MANUFACTURING AND OTHER PRODUCTIVE

16 EQUIPMENT CREDIT ALLOWABLE AGAINST ENTIRE REG17 ULAR TAX AND ALTERNATIVE MINIMUM TAX.—

18 (1) Subsection (c) of section 38 of such Code

19 (relating to limitation based on amount of tax) is

20 amended by adding at the end thereof the following

21 new paragraph:

22 ‘‘(3) SPECIAL RULES FOR MANUFACTURING

23 AND OTHER PRODUCTIVE EQUIPMENT CREDIT.—
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1 ‘‘(A) IN GENERAL.—In the case of a C

2 corporation, this section and section 39 shall be

3 applied separately—

4 ‘‘(i) first with respect to so much of

5 the credit allowed by subsection (a) as is

6 not attributable to the productive equip7 ment credit, and

8 ‘‘(ii) then with respect to the produc9 tive equipment credit.

10 ‘‘(B) RULES FOR APPLICATION OF PRO11 DUCTIVE EQUIPMENT CREDIT.—

12 ‘‘(i) IN GENERAL.—In the case of the

13 productive equipment credit, in lieu of ap14 plying the preceding paragraphs of this

15 subsection, the amount of such credit al16 lowed under subsection (a) for any taxable

17 year shall not exceed the net chapter 1 tax

18 for such year.

19 ‘‘(ii) NET CHAPTER 1 TAX.—For pur20 poses of clause (i), the term ‘net chapter 1

21 tax’ means the sum of the regular tax li22 ability for the taxable year and the tax im23 posed by section 55 for the taxable year,

24 reduced by the sum of the credits allowable

25 under this part for the taxable year (other
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1 than under section 34 and other than the

2 productive equipment credit).

3 ‘‘(C) PRODUCTIVE EQUIPMENT CREDIT.—

4 For purposes of this paragraph, the term ‘pro5 ductive equipment credit’ means the credit al6 lowable under subsection (a) by reason of sec7 tion 48(c).’’

8 (2) Paragraph (2) of section 55(c) of such Code

9 is amended to read as follows:

10 ‘‘(2) CROSS REFERENCES.—

‘‘(A) For provisions providing that certain credits

are not allowable against the tax imposed by this

section, see sections 26(a), 28(d)(2), 29(b)(5), and

38(c).

‘‘(B) For provision allowing manufacturing and

other productive equipment credit against the tax

imposed by this section, see section 38(c)(3).’’

11 (d) TECHNICAL AMENDMENTS.—

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

13 Code is amended by inserting ‘‘or qualified manufac14 turing and productive equipment property’’ after

15 ‘‘energy property’’.

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

17 such Code is amended by inserting ‘‘or 48(c)(5)’’ be18 fore the period at the end thereof.

19 (3) Paragraph (5) of section 50(a) of such Code

20 is amended by adding at the end thereof the follow21 ing new subparagraph:
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1 ‘‘(D) SPECIAL RULES FOR CERTAIN PROP2 ERTY.—In the case of any qualified manufac3 turing and productive equipment property

4 which is 3-year property (within the meaning of

5 section 168(e))—

6 ‘‘(i) the percentage set forth in clause

7 (ii) of the table contained in paragraph

8 (1)(B) shall be 66 percent,

9 ‘‘(ii) the percentage set forth in clause

10 (iii) of such table shall be 33 percent, and

11 ‘‘(iii) clauses (iv) and (v) of such table

12 shall not apply.’’

13 (4)(A) The section heading for section 48 of

14 such Code is amended to read as follows:

15 ‘‘SEC. 48. OTHER CREDITS.’’

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

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

18 amended by striking the item relating to section 48

19 and inserting the following:

‘‘Sec. 48. Other credits.’’

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

21 this section shall apply to—

22 (1) property acquired by the taxpayer after

23 March 31, 1993, and

24 (2) property the construction, reconstruction, or

25 erection of which is completed by the taxpayer after
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1 March 31, 1993, but only to the extent of the basis

2 thereof attributable to construction, reconstruction,

3 or erection after such date.

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