American Research and Competitiveness Act of 2014

To amend the Internal Revenue Code of 1986 to simplify and make permanent the research credit. 1. Short title This Act may be cited as the American Research and Competitiveness Act of 2014 2. Research credit simplified and made permanent (a) In general Subsection (a) of section 41 (a) In general For purposes of section 38, the research credit determined under this section for the taxable year shall be an amount equal to the sum of— (1) 20 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent of the average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined, (2) 20 percent of so much of the basic research payments for the taxable year as exceeds 50 percent of the average basic research payments for the 3 taxable years preceding the taxable year for which the credit is being determined, plus (3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research. . (b) Repeal of termination Section 41 of such Code is amended by striking subsection (h). (c) Conforming amendments (1) Subsection (c) of section 41 of such Code is amended to read as follows: (c) Determination of average research expenses for prior years (1) Special rule in case of no qualified research expenditures in any of 3 preceding taxable years In any case in which the taxpayer has no qualified research expenses in any one of the 3 taxable years preceding the taxable year for which the credit is being determined, the amount determined under subsection (a)(1) for such taxable year shall be equal to 10 percent of the qualified research expenses for the taxable year. (2) Consistent treatment of expenses (A) In general Notwithstanding whether the period for filing a claim for credit or refund has expired for any taxable year taken into account in determining the average qualified research expenses, or average basic research payments, taken into account under subsection (a), the qualified research expenses and basic research payments taken into account in determining such averages shall be determined on a basis consistent with the determination of qualified research expenses and basic research payments, respectively, for the credit year. (B) Prevention of distortions The Secretary may prescribe regulations to prevent distortions in calculating a taxpayer’s qualified research expenses or basic research payments caused by a change in accounting methods used by such taxpayer between the current year and a year taken into account in determining the average qualified research expenses or average basic research payments taken into account under subsection (a). . (2) Section 41(e) of such Code is amended— (A) by striking all that precedes paragraph (6) and inserting the following: (e) Basic research payments For purposes of this section— (1) In general The term basic research payment (A) such payment is pursuant to a written agreement between such corporation and such qualified organization, and (B) such basic research is to be performed by such qualified organization. (2) Exception to requirement that research be performed by the organization In the case of a qualified organization described in subparagraph (C) or (D) of paragraph (3), subparagraph (B) of paragraph (1) shall not apply. , (B) by redesignating paragraphs (6) and (7) as paragraphs (3) and (4), respectively, and (C) in paragraph (4) as so redesignated, by striking subparagraphs (B) and (C) and by redesignating subparagraphs (D) and (E) as subparagraphs (B) and (C), respectively. (3) Section 41(f)(3) of such Code is amended— (A) (i) by striking , and the gross receipts determined under clause (iii) (ii) by striking clause (iii) of subparagraph (A) and redesignating clauses (iv), (v), and (vi), thereof, as clauses (iii), (iv), and (v), respectively, (iii) by striking and (iv) and (iii) (iv) by striking subclause (IV) of subparagraph (A)(iv) (as so redesignated), by striking , and and (v) by striking (A)(vi) (A)(v) (vi) by striking (A)(iv)(II) (A)(iii)(II) (B) by striking , and the gross receipts of the predecessor, (C) by striking , and the gross receipts of, (D) by striking , or gross receipts of, (E) by striking subparagraph (C). (d) Effective date (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2013. (2) Subsection (b) The amendment made by subsection (b) shall apply to amounts paid or incurred after December 31, 2013. 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

Summary: American Research and Competitiveness Act of 2014 - Amends the Internal Revenue Code to establish a permanent research tax credit that allows for: (1) 20% of the qualified or basic research expenses that exceed 50% of the average qualified or basic research expenses for the 3 preceding taxable years, and (2) 20% of amounts paid to an energy research consortium for energy research. Reduces such credit rate to 10% if a taxpayer has no qualified research expenses in any one of the 3 preceding taxable years. Prohibits the entry of the budgetary effects of this Act on any PAYGO scorecard.