II 
113TH CONGRESS 
2D SESSION 
H. R. 4438 
IN THE SENATE OF THE UNITED STATES 
MAY 12, 2014 
Received 
AN ACT 
To amend the Internal Revenue Code of 1986 to simplify 
and make permanent the research credit. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘American Research 
and Competitiveness Act of 2014’’. 
SEC. 2. RESEARCH CREDIT SIMPLIFIED AND MADE PERMA-
NENT. 
(a) IN GENERAL.—Subsection (a) of section 41 of the 
Internal Revenue Code of 1986 is amended to read as fol-
lows: 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
research credit determined under this section for the tax-
able year shall be an amount equal to the sum of— 
‘‘(1) 20 percent of so much of the qualified re-
search 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 re-
search 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 in-
curred by the taxpayer in carrying on any trade or 
business of the taxpayer during the taxable year (in-
cluding as contributions) to an energy research con-
sortium for energy research.’’. 
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(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 EX-
PENSES 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 deter-
mined 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
EX-
PENSES.— 
‘‘(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 re-
search payments, taken into account under sub-
section (a), the qualified research expenses and 
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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’ means, with respect to any taxable year, 
any amount paid in cash during such taxable year 
by a corporation to any qualified organization for 
basic research but only if— 
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‘‘(A) such payment is pursuant to a writ-
ten agreement between such corporation and 
such qualified organization, and 
‘‘(B) such basic research is to be per-
formed by such qualified organization. 
‘‘(2) EXCEPTION TO REQUIREMENT THAT RE-
SEARCH BE PERFORMED BY THE ORGANIZATION.— 
In the case of a qualified organization described in 
subparagraph (C) or (D) of paragraph (3), subpara-
graph (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 re-
ceipts’’ in subparagraph (A)(i) and all that fol-
lows through ‘‘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), respec-
tively, 
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