I 
113TH CONGRESS 
1ST SESSION H. R. 3428 
To amend the Internal Revenue Code of 1986 to allow an increased credit 
for development and to extend and simplify the credit for increasing research. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 30, 2013 
Mr. MCKINLEY (for himself and Mr. ENYART) 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 allow an 
increased credit for development and to extend and sim-
plify the credit for increasing research. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. CREDIT FOR INCREASING DEVELOPMENT AC-
TIVITIES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 41 the fol-
lowing new section: 
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by substituting ‘qualified development’ for ‘qualified 
research’. 
‘‘(c) QUALIFIED DEVELOPMENT.—The term ‘quali-
fied development’ means the systematic application of 
knowledge or understanding directed toward the produc-
tion of useful material, devices, and systems or methods, 
including design, development, and improvement of proto-
types and new processes to meet specific requirements. 
For purposes of the preceding sentence the rules of sub-
paragraphs (A), (B), and (C) of section 41(d)(1) shall 
apply with respect to any development taken into account 
under this section. 
‘‘(d) SPECIAL RULE IN CASE OF NO QUALIFIED DE-
VELOPMENT
EXPENSES
IN
ANY
OF
3 PRECEDING 
YEARS.— 
‘‘(1) TAXPAYERS
TO
WHICH
THIS
SUBPARA-
GRAPH APPLIES.—The credit under this section shall 
be determined under this subsection if the taxpayer 
has no qualified development expenses in any one of 
the 3 taxable years preceding the taxable year for 
which the credit is being determined. 
‘‘(2) CREDIT
RATE.—The credit determined 
under this subparagraph shall be equal to 12 per-
cent of the qualified development expenses for the 
taxable year. 
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‘‘(e) ELECTION.—An election under this section shall 
apply to the taxable year for which made and all suc-
ceeding taxable years unless revoked with the consent of 
the Secretary. 
‘‘(f) OTHER SPECIAL RULES.—Rules similar to the 
rules of subsections (d)(4), (f), and (g) of section 41 shall 
apply for purposes of this section. 
‘‘(g) TERMINATION.—This section shall not apply to 
taxable years beginning after December 31, 2018.’’. 
(b) COORDINATION WITH SECTION 41.—Subsection 
(b) of section 41 of such Code is amended by adding at 
the end the following new paragraph: 
‘‘(5) COORDINATION
WITH
SECTION
41A.—In 
the case of any taxable year for which an election is 
in effect under section 41A, for purposes of deter-
mining the amount of qualified research expenses for 
such taxable year and the fixed-base percentage with 
respect to such taxable year, qualified research ex-
penses shall not include any qualified development 
expenses (as defined in subsection (b) of such sec-
tion).’’. 
(c) COORDINATION
WITH
DEDUCTIONS.—Section 
280C is amended by adding at the end the following new 
subsection: 
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‘‘(j) CREDIT FOR INCREASING DEVELOPMENT AC-
TIVITIES.— 
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the qualified development 
expenses (as defined in section 41A(b)) otherwise al-
lowable as a deduction for the taxable year which is 
equal to the amount of the credit determined for 
such taxable year under section 41A(a). 
‘‘(2) SIMILAR
RULE
WHERE
TAXPAYER
CAP-
ITALIZES RATHER THAN DEDUCTS EXPENSES.—If— 
‘‘(A) the amount of the credit determined 
for the taxable year under section 41A(a), ex-
ceeds 
‘‘(B) the amount allowable as a deduction 
for such taxable year for qualified development 
expenses (determined without regard to para-
graph (1)), 
the amount chargeable to capital account for the 
taxable year for such expenses shall be reduced by 
the amount of such excess. 
‘‘(3) ELECTION OF REDUCED CREDIT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year for which an election is made 
under this paragraph— 
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‘‘(i) paragraphs (1) and (2) shall not 
apply, and 
‘‘(ii) the amount of the credit under 
section 41A(a) shall be the amount deter-
mined under subparagraph (B). 
‘‘(B) AMOUNT OF REDUCED CREDIT.—The 
amount of credit determined under this sub-
paragraph for any taxable year shall be the 
amount equal to the excess of— 
‘‘(i) the amount of credit determined 
under section 41A(a) without regard to 
this paragraph, over 
‘‘(ii) the product of— 
‘‘(I) the amount described in 
clause (i), and 
‘‘(II) the maximum rate of tax 
under section 11(b)(1). 
‘‘(C) ELECTION.—An election under this 
paragraph for any taxable year shall be made 
not later than the time for filing the return of 
tax for such year (including extensions), shall 
be made on such return, and shall be made in 
such manner as the Secretary may prescribe. 
Such an election, once made, shall be irrev-
ocable. 
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‘‘(4) CONTROLLED GROUPS.—Paragraph (3) of 
subsection (b) shall apply for purposes of this sub-
section.’’. 
(d) PART OF GENERAL BUSINESS CREDIT.—Sub-
section (b) of section 38 of such Code is amended by strik-
ing ‘‘plus’’ at the end of paragraph (35), by striking the 
period at the end of paragraph (36) and inserting ‘‘, plus’’, 
and by adding at the end the following new paragraph: 
‘‘(37) the development credit determined under 
section 41A.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 2. INCREASE IN ALTERNATIVE SIMPLIFIED CREDIT 
FOR RESEARCH. 
(a) IN GENERAL.—Subparagraph (A) of section 
41(c)(5) of the Internal Revenue Code of 1986 is amended 
by striking ‘‘14 percent (12 percent in the case of taxable 
years ending before January 1, 2009)’’ and inserting ‘‘20 
percent’’. 
(b) SPECIAL RULE IN CASE OF NO QUALIFIED RE-
SEARCH EXPENSES IN ANY OF 3 PRECEDING TAXABLE 
YEARS.—Clause (ii) of section 41(c)(5)(B) of such Code 
is amended by striking ‘‘6 percent’’ and inserting ‘‘8 per-
cent’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2013. 
SEC. 3. EXTENSION OF CREDIT FOR INCREASING RE-
SEARCH ACTIVITIES. 
(a) IN GENERAL.—Subparagraph (B) of section 
41(h)(1) of the Internal Revenue Code of 1986 is amended 
by striking ‘‘December 31, 2013’’ and inserting ‘‘Decem-
ber 31, 2018’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to amounts paid or incurred after 
December 31, 2013. 
Æ 
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