‘‘(2) EXCEPTION
FOR
TELECOMMUNICATIONS 
SERVICES, ETC.—Paragraph (1)(A)(ii) shall not 
apply to— 
‘‘(A) any telecommunications service pro-
vided from earth orbit, 
‘‘(B) any service provided by a weather or 
other earth observation satellite, and 
‘‘(C) any other service provided on or be-
fore the date of the enactment of this section of 
transporting property to or from outer space. 
‘‘(3) EXCEPTION FOR WAGES.—Paragraph (1) 
shall not apply to wages (as defined in section 3401) 
received by any employee of an employer. 
‘‘(4) PROPORTIONAL
ALLOCATION
BETWEEN 
SPACE-BASED
AND
EARTH-BASED
ACTIVITIES.—In 
the case of any product or article which is produced 
partly in space, space-related income shall be an 
amount which bears the same ratio to the amount 
of gross income attributable to the sale of such prod-
uct or article as the expenses attributable to pro-
ducing such product or article in space bears to the 
total expenses incurred in producing such product or 
article. 
‘‘(5) PRODUCED.—For purposes of this section, 
the term ‘produced’ includes created, fabricated, de-
veloped, grown, manufactured, extracted, processed, 
cured, and aged. 
‘‘(c) EXCLUSION FROM TARIFFS, ETC.—Any prod-
uct— 
‘‘(1) which is manufactured in outer space, and 
‘‘(2) which was— 
‘‘(A) launched from, and returned to 
Earth, within the United States, or 
‘‘(B) Manufactured at a facility in outer 
space which is owned by 1 or more United 
States persons, shall be exempt from all Fed-
eral excises, imposts, and duties and any other 
Federal tariffs. 
‘‘(d) PHASEOUT OF BENEFITS.—In the case of a tax-
able year beginning after December 31, 2014, the amount 
excluded under subsection (a) shall be reduced (but not 
below zero) by x/10th’s of the amount excludable without 
regard to this subsection, where ‘x’ is the number of years 
such taxable year is after the last taxable year beginning 
before January 1, 2015. A similar rule shall apply to the 
benefits under subsection (c).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 of such Code 
is amended by inserting after the item relating to section 
139A the following new item: 
‘‘Sec. 139B. Space-related income.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 3. CREDIT FOR PURCHASE OF QUALIFIED SPACE COM-
PANY STOCK. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45J. SPACE COMPANY INVESTMENT CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the space company investment credit determined under 
this section for any taxable year is the amount paid in 
the taxable year for the purchase of qualified stock in a 
qualified space company. 
‘‘(b) QUALIFIED SPACE COMPANY.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘qualified space 
company’ means a domestic C corporation if for the 
3-taxable-year period ending with the taxable year 
immediately preceding the taxable year in which 
qualified stock is purchased— 
‘‘(A) the average annual gross receipts of 
such entity does not exceed $100,000,000, and
‘‘(B) more than 70 percent of such gross 
receipts are derived from space-based business. 
‘‘(2) 
SPACE-BASED
BUSINESS.—The 
term 
‘space-based business’ means a business whose gross 
receipts are substantially space-related income, as 
defined in section 139B(b). 
‘‘(3) AGGREGATION RULES.—Rules similar to 
the rules of section 1202(d)(3) shall apply. 
‘‘(c) QUALIFIED STOCK.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘qualified stock’ 
means any stock in a domestic C corporation if— 
‘‘(A) as of the date of issuance of such 
stock, such corporation is a qualified space 
company, and 
‘‘(B) except as provided in subsections (f) 
and (h), such stock is acquired by the taxpayer 
at its original issue (directly or through an un-
derwriter)— 
‘‘(i) in exchange for money or other 
property (not including stock), or 
‘‘(ii) as compensation for services pro-
vided to such corporation (other than serv-
ices performed as an underwriter of such 
stock). 
‘‘(2) ACTIVE BUSINESS REQUIREMENT.—Stock 
in a corporation shall not be treated as qualified 
stock unless, during substantially all of the tax-
payer’s holding period for such stock— 
‘‘(A) such corporation meets active busi-
ness requirements substantially similar to the 
requirements of section 1202(e), determined on 
the basis that the qualified trade or business is 
a space-based business, and 
‘‘(B) such corporation is a C corporation. 
‘‘(3) CERTAIN PURCHASE BY CORPORATION OF 
ITS OWN STOCK.—Rules similar to the rules of sec-
tion 1202(c)(3) shall apply. 
‘‘(e) RECAPTURE.—If, during any taxable year end-
ing with or within the 10-year period beginning on the 
date qualified stock was purchased by the taxpayer, the 
issuer of such stock ceases to a qualified space company, 
the tax under this chapter for such taxable year shall be 
increased by the aggregate decrease in the credits allowed 
under section 38 for all prior taxable years which would 
have resulted solely from reducing to zero any credit deter-
mined under subsection (a) with respect to such stock.