SAFETY Act

To amend the Internal Revenue Code of 1986 to provide an enhanced research credit for the development of smart gun technologies. 1. Short title This Act may be cited as the Start Advancing Firearms Enhancements and Technology Act of 2018 SAFETY Act 2. Enhanced research credit for development of smart gun technologies (a) In general Subpart D of part IV of subchapter A of chapter 1 45T. Research expenses for smart gun technologies (a) General rule For purposes of section 38, in the case of a taxpayer who is a Federal firearms licensee, the smart gun technology credit determined under this section for the taxable year is an amount equal to 30 percent of the excess of— (1) the smart gun technology expenses for the taxable year, over (2) the base amount. (b) Smart gun technology expenses; base amount For purposes of this section— (1) Smart gun technology expenses (A) In general Except as otherwise provided in this paragraph, the term smart gun technology expenses (B) Modifications For purposes of subparagraph (A), section 41(b) shall be applied— (i) by substituting smart gun technology research qualified research (ii) by substituting 100 percent 65 percent (C) Exclusion for amounts funded by grants, etc The term smart gun technology expenses (2) Base amount (A) In general Except as provided in subparagraph (B), the term base amount smart gun technology research qualified research (B) Base amount is zero for 3 years The base amount shall be zero for purposes of determining the amount of credit for taxable years beginning in 2019, 2020, or 2021. (c) Smart gun technology research For purposes of this section— (1) In general The term smart gun technology research (2) Smart gun technology The term smart gun technology (A) to prevent a firearm from being fired by any individual other than an authorized user of the firearm, and (B) to convert the firearm from the inoperable condition to the operable condition in less than 2 seconds after the authorized user makes contact with the firearm, the firearm’s arming device, or an external safe or locking device. (3) Authorized user For purposes of this subsection, the term authorized user (4) Simple mechanical lock For purposes of this subsection, the term simple mechanical lock (d) Federal firearms licensee For purposes of this section, the term Federal firearms licensee chapter 44 (e) Coordination with credit for increasing research expenditures (1) In general Except as provided in paragraph (2), any smart gun technology expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year. (2) Expenses included in determining base period research expenses Smart gun technology expenses for any taxable year shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years. (f) Special rules (1) Certain rules made applicable Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section. (2) Election This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year. (g) Treatment of Credit for Qualified Small Businesses (1) In general Under rules similar to the rules of section 41(h), section 3111(f) shall apply to the payroll tax credit portion of the credit otherwise determined under subsection (a) for the taxable year and such portion shall not be treated (other than for purposes of section 280C) as a credit determined under subsection (a). (2) Federal firearms licensee exception For purposes of this subsection, the payroll tax credit portion of the credit otherwise determined under subsection (a) shall be determined without regard to whether the taxpayer is a Federal firearms licensee. . (b) Denial of double benefit Section 280C of such Code is amended by adding at the end the following new subsection: (i) Credit for smart gun technology expenses (1) In general No deduction shall be allowed for that portion of the smart gun technology expenses (as defined in section 45T(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit allowable for the taxable year under section 45T (determined without regard to section 38(c) thereof). (2) Similar rule where taxpayer capitalizes rather than deducts expenses If— (A) the amount of the credit allowable for the taxable year under section 45T (determined without regard to section 38(c)), exceeds (B) the amount allowable as a deduction for the taxable year for smart gun technology expenses (determined without regard to paragraph (1)), the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess. (3) Controlled groups In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section 41(f)(5)) or a trade or business which is treated as being under common control with other trades or business (within the meaning of section 41(f)(1)(B)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subparagraphs (A) and (B) of section 41(f)(1). . (c) Credit made part of general business credit (1) In general Section 38(b) of such Code is amended by striking plus , plus (33) in the case of a taxpayer who is a Federal firearms licensee (as defined in section 45T(d)), the smart gun technology credit determined under section 45T(a). . (2) Deduction for certain unused business credits Subsection (c) of section 196 of such Code is amended by striking and , and (15) the smart gun technology credit determined under section 45T. . (d) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45S the following new item: Sec. 45T. Research expenses for smart gun technologies. . (e) Effective date The amendments made by this section shall apply to amounts paid or incurred after December 31, 2019, in taxable years beginning after such date. 3. Firearms tax not to apply to cost of smart gun technology (a) In general Section 4181 The price taken into account under the preceding sentence shall not include so much of the price of the firearm as is attributable to any smart gun technology (as defined in section 45T(c)(2)) of such firearm. . (b) Effective date The amendment made by this section shall take effect on January 1, 2020.

Summary: Start Advancing Firearms Enhancements and Technology Act of 2018 or the SAFETY Act This bill increases the rate of the research tax credit from 20% to 30% for research expenses to develop smart gun technologies. The bill also modifies the excise tax on the sale of firearms to exempt the portion of the sale price that is attributable to smart gun technology. "Smart gun technology" is technology (other than a simple mechanical lock) that is designed to (1) prevent a firearm from being fired by any individual other than an authorized user; and (2) convert the firearm from the inoperable condition to the operable condition in less than two seconds after the authorized user makes contact with the firearm, the firearm's arming device, or an external safe or locking device.