I 
111TH CONGRESS 
1ST SESSION 
H. R. 717 
To amend the Internal Revenue Code of 1986 to provide incentives to improve 
America’s research competitiveness, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 27, 2009 
Ms. EDDIE BERNICE JOHNSON of Texas (for herself and Mr. MCGOVERN) in-
troduced the following bill; which was referred to the Committee on Ways 
and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
incentives to improve America’s research competitiveness, 
and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the‘‘Research and Develop-
ment Tax Credit Act of 2009’’. 
SEC. 2. SIMPLIFICATION OF RESEARCH AND DEVELOP-
MENT CREDIT. 
(a) SIMPLIFIED CREDIT FOR QUALIFIED RESEARCH 
EXPENSES.— 
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(1) IN GENERAL.—Subsection (a) of section 41 
of the Internal Revenue Code of 1986 (relating to 
credit for increasing research activities) is amended 
to read as follows: 
‘‘(a) DETERMINATION OF CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of section 38, 
the research credit determined under this section for 
the taxable year shall be equal to 20 percent of so 
much of the qualified research expenses for such 
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) SPECIAL RULE IN CASE OF NO QUALIFIED 
RESEARCH EXPENSES IN ANY OF 3 PRECEDING TAX-
ABLE YEARS.— 
‘‘(A) TAXPAYERS TO WHICH PARAGRAPH 
APPLIES.—The credit under this section shall 
be determined under this paragraph if the tax-
payer has no qualified research expenses in at 
least 1 of the 3 taxable years preceding the tax-
able year for which the credit is being deter-
mined. 
‘‘(B) CREDIT
RATE.—The credit deter-
mined under this paragraph shall be equal to 
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10 percent of the qualified research expenses 
for the taxable year.’’. 
(2) CONFORMING AMENDMENT.—Section 41 of 
such Code is amended by striking subsection (c). 
(b) UNIFORM REIMBURSEMENT RATES
FOR ALL 
CONTRACT
RESEARCH
EXPENSES
OTHER
THAN 
AMOUNTS PAID FOR BASIC RESEARCH.— 
(1) IN GENERAL.—Section 41(b)(3) of the In-
ternal Revenue Code of 1986 (relating to contract 
research expenses) is amended— 
(A) by striking ‘‘65 percent’’ and inserting 
‘‘80 percent’’, and 
(B) by striking subparagraphs (C) and 
(D). 
(2) 
BASIC
RESEARCH
PAYMENTS.—Section 
41(b) of such Code is amended by redesignating 
paragraph (4) as paragraph (5) and by inserting 
after paragraph (3) the following new paragraph: 
‘‘(4) BASIC RESEARCH PAYMENTS.— 
‘‘(A) IN GENERAL.—In the case of basic 
research payments by the taxpayer, paragraph 
(3)(A) shall be applied by substituting ‘100 per-
cent’ for ‘80 percent’. 
‘‘(B) BASIC
RESEARCH
PAYMENTS
DE-
FINED.—For purposes of this paragraph— 
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‘‘(i) 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 re-
search but only if— 
‘‘(I) such payment is pursuant to 
a written agreement between such cor-
poration and such qualified organiza-
tion, and 
‘‘(II) such basic research is to be 
performed by such qualified organiza-
tion. 
‘‘(ii) EXCEPTION
TO
REQUIREMENT 
THAT RESEARCH BE PERFORMED BY THE 
ORGANIZATION.—In the case of a qualified 
organization described in clause (iii) or (iv) 
of subparagraph (C), subclause (II) of 
clause (i) shall not apply. 
‘‘(C) 
QUALIFIED
ORGANIZATION.—For 
purposes of this paragraph, the term ‘qualified 
organization’ means any of the following orga-
nizations: 
‘‘(i) EDUCATIONAL
INSTITUTIONS.— 
Any educational organization which— 
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‘‘(I) is an institution of higher 
education (within the meaning of sec-
tion 3304(f)), and 
‘‘(II) is described in section 
170(b)(1)(A)(ii). 
‘‘(ii) CERTAIN SCIENTIFIC RESEARCH 
ORGANIZATIONS.—Any 
organization 
not 
described in clause (i) which— 
‘‘(I) 
is 
described 
in 
section 
501(c)(3) and is exempt from tax 
under section 501(a), 
‘‘(II) is organized and operated 
primarily to conduct scientific re-
search, and 
‘‘(III) is not a private founda-
tion. 
‘‘(iii) SCIENTIFIC TAX-EXEMPT ORGA-
NIZATIONS.—Any organization which— 
‘‘(I) 
is 
described 
in 
section 
501(c)(3) (other than a private foun-
dation) or section 501(c)(6), 
‘‘(II) is exempt from tax under 
section 501(a), 
‘‘(III) is organized and operated 
primarily to promote scientific re-
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search by qualified organizations de-
scribed in clause (i) pursuant to writ-
ten research agreements, and 
‘‘(IV) currently expends substan-
tially all of its funds or substantially 
all of the basic research payments re-
ceived by it for grants to, or contracts 
for basic research with, an organiza-
tion described in clause (i). 
‘‘(iv) 
CERTAIN
GRANT
ORGANIZA-
TIONS.—Any organization not described in 
clause (ii) or (iii) which— 
‘‘(I) 
is 
described 
in 
section 
501(c)(3) and is exempt from tax 
under section 501(a) (other than a 
private foundation), 
‘‘(II) is established and main-
tained by an organization established 
before July 10, 1981, which meets the 
requirements of subclause (I), 
‘‘(III) is organized and operated 
exclusively for the purpose of making 
grants to organizations described in 
clause (i) pursuant to written research 
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agreements for purposes of basic re-
search, and 
‘‘(IV) makes an election, rev-
ocable only with the consent of the 
Secretary, to be treated as a private 
foundation for purposes of this title 
(other than section 4940, relating to 
excise tax based on investment in-
come). 
‘‘(D) DEFINITIONS AND SPECIAL RULES.— 
For purposes of this paragraph— 
‘‘(i) BASIC
RESEARCH.—The term 
‘basic research’ means any original inves-
tigation for the advancement of scientific 
knowledge not having a specific commercial 
objective, except that such term shall not 
include— 
‘‘(I) basic research conducted 
outside of the United States, and 
‘‘(II) basic research in the social 
sciences, arts, or humanities. 
‘‘(ii) TRADE OR BUSINESS QUALIFICA-
TION.—For purposes of applying para-
graph (1) to this paragraph, any basic re-
search payments shall be treated as an 
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amount paid in carrying on a trade or 
business of the taxpayer in the taxable 
year in which it is paid (without regard to 
the provisions of paragraph (3)(B)). 
‘‘(iii) CERTAIN
CORPORATIONS
NOT 
ELIGIBLE.—The term ‘corporation’ shall 
not include— 
‘‘(I) an S corporation, 
‘‘(II) a personal holding company 
(as defined in section 542), or 
‘‘(III) a service organization (as 
defined in section 414(m)(3)).’’. 
(3) CONFORMING AMENDMENTS.— 
(A) Section 41 of such Code is amended by 
striking subsection (e). 
(B) Section 41(f) of such Code is amended 
by striking paragraph (6). 
(c) PERMANENT EXTENSION OF CREDIT.— 
(1) IN GENERAL.—Section 41 of the Internal 
Revenue Code of 1986 is amended by striking sub-
section (h). 
(2) CONFORMING AMENDMENT.—Paragraph (1) 
of section 45C(b) of such Code is amended by strik-
ing subparagraph (D). 
(d) CONFORMING AMENDMENTS.— 
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(1) Section 41 of the Internal Revenue Code of 
1986 is amended by redesignating subsections (d), 
(f), and (g) as subsections (c), (d), and (e), respec-
tively. 
(2) Paragraphs (2)(A) and (5) (as redesignated 
by subsection (b)(2)) of section 41(b) of such Code 
are each amended by striking ‘‘subsection (f)(1)’’ 
and inserting ‘‘subsection (d)(1)’’. 
(3) 
Sections 
45C(d)(3), 
45G(e)(2), 
and 
936(h)(5)(C)(i)(IV)(c) of such Code are each 
amended by striking ‘‘section 41(f)’’ and inserting 
‘‘section 41(d)’’. 
(4) Section 54(l)(3)(A) of such Code is amend-
ed by striking ‘‘section 41(g)’’ and inserting ‘‘section 
41(e)’’. 
(5) Section 170(e)(4)(B)(i) of such Code is 
amended by striking ‘‘subparagraph (A) or subpara-
graph (B) of section 41(e)(6)’’ and inserting ‘‘clause 
(i) or (ii) of section 41(b)(4)(C)’’. 
(6) Sections 197(f)(1)(C), 197(f)(9)(C)(i)(II), 
and 280C(b)(3) of such Code are each amended by 
striking ‘‘section 41(f)(1)’’ and inserting ‘‘section 
41(d)(1)’’. 
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(7) Section 280C(b)(3) of such Code is amend-
ed by striking ‘‘section 41(f)(5)’’ and inserting ‘‘sec-
tion 41(d)(5)’’. 
(8) Section 280C(b)(3) of such Code is amend-
ed by striking ‘‘section 41(f)(1)(B)’’ and inserting 
‘‘section 41(d)(1)(B)’’. 
(9) Section 280C(c)(1) of such Code is amend-
ed by striking ‘‘section 41(e)(2)’’ and inserting ‘‘sec-
tion 41(b)(4)(B)’’. 
(10) Section 280C(c)(2)(A) of such Code is 
amended by striking ‘‘section 41(a)(1)’’ and insert-
ing ‘‘section 41(a)’’. 
(11) Sections 936(j)(5)(D) and 965(c)(2)(C)(i) 
of such Code are each amended by striking ‘‘section 
41(f)(3)’’ and inserting ‘‘section 41(d)(3)’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
(f) STUDY OF COMPLIANCE WITH SUBSTANTIATION 
REQUIREMENTS.—The Secretary of the Treasury or his 
delegate shall, not later than 1 year after the date of the 
enactment of this Act, conduct a study of taxpayer compli-
ance with the substantiation requirements for claiming the 
credit allowed under section 41 of the Internal Revenue 
Code of 1986, including a study of— 
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(1) whether taxpayers maintain adequate record 
keeping to determine eligibility for, and correct 
amount of, the credit, 
(2) the impact of failure to comply with such 
requirements on the oversight and enforcement re-
sponsibilities of the Internal Revenue Service, and 
(3) the burdens imposed on other taxpayers by 
failure to comply with such requirements. 
The Secretary shall report the results of such study to 
the Committee on Ways and Means of the House of Rep-
resentatives and the Committee on Finance of the Senate, 
including any recommendations for administrative or leg-
islative actions which could be taken to improve compli-
ance with such requirements. 
SEC. 3. TAX CREDIT FOR INVESTMENTS IN SMALL TECH-
NOLOGY INNOVATION COMPANIES. 
(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 adding at the end the following new 
section: 
‘‘SEC. 45R. RESEARCH INVESTMENT TAX CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.— 
‘‘(1) IN GENERAL.—For purposes of section 38, 
in the case of a taxpayer who holds a qualified eq-
uity investment on a credit allowance date of such 
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investment which occurs during the taxable year, the 
research investment tax credit determined under this 
section for such taxable year is an amount equal to 
the 5 percent of the amount paid to the qualified re-
search entity for such investment at its original 
issue. 
‘‘(2) CREDIT ALLOWANCE DATE.—For purposes 
of paragraph (1), the term ‘credit allowance date’ 
means, with respect to any qualified equity invest-
ment— 
‘‘(A) the date on which such investment is 
initially made, and 
‘‘(B) each of the 4 anniversary dates of 
such date thereafter. 
‘‘(b) QUALIFIED EQUITY INVESTMENT.—For pur-
poses of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified equity 
investment’ means any equity investment in a quali-
fied research entity if— 
‘‘(A) such investment is acquired by the 
taxpayer at its original issue (directly or 
through an underwriter) solely in exchange for 
cash, 
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‘‘(B) substantially all of such cash is used 
by the qualified research entity to make quali-
fied research investments, and 
‘‘(C) such investment is designated for 
purposes of this section by the qualified re-
search entity. 
Such term shall not include any equity investment 
issued by a qualified research entity more than 5 
years after the date that such entity receives an allo-
cation under subsection (e). Any allocation not used 
within such 5-year period may be reallocated by the 
Secretary under subsection (e). 
‘‘(2) LIMITATION.—The maximum amount of 
equity investments issued by a qualified research en-
tity which may be designated under paragraph 
(1)(C) by such entity shall not exceed the portion of 
the limitation amount allocated under subsection (f) 
to such entity. 
‘‘(3) SAFE HARBOR FOR DETERMINING USE OF 
CASH.—The requirement of paragraph (1)(B) shall 
be treated as met if at least 85 percent of the aggre-
gate gross assets of the qualified research entity are 
invested in qualified research investments. 
‘‘(4) 
TREATMENT
OF
SUBSEQUENT
PUR-
CHASERS.—The term ‘qualified research investment’ 
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includes any equity investment which would (but for 
paragraph (1)(A)) be a qualified equity investment 
in the hands of the taxpayer if such investment was 
a qualified equity investment in the hands of a prior 
holder. 
‘‘(5) REDEMPTIONS.—A rule similar to the rule 
of section 1202(c)(3) shall apply for purposes of this 
subsection. 
‘‘(6) EQUITY INVESTMENT.—The term ‘equity 
investment’ means— 
‘‘(A) any stock (other than nonqualified 
preferred stock as defined in section 351(g)(2)) 
in an entity which is a corporation, and 
‘‘(B) any capital interest in an entity 
which is a partnership. 
‘‘(c) QUALIFIED RESEARCH ENTITY.—For purposes 
of this section, the term ‘qualified research entity’ means 
any domestic corporation or partnership if— 
‘‘(1) the primary mission of the entity is serv-
ing, or providing investment capital for, qualifying 
small business innovation companies, 
‘‘(2) the entity maintains accountability to engi-
neers, scientists, and other research-related profes-
sionals through their representation on any gov-
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erning board of the entity or on any advisory board 
to the entity, and 
‘‘(3) the entity is certified by the Secretary for 
purposes of this section as being a qualified research 
entity. 
‘‘(d) QUALIFIED
RESEARCH
INVESTMENTS.—For 
purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘qualified re-
search investment’ means— 
‘‘(A) any capital or equity investment in, 
or loan to, any qualifying small business inno-
vation company, which when added to any other 
such investment in or loan to such company 
taken into account for purposes of this section 
for 
any 
taxable 
year 
does 
not 
exceed 
$10,000,000, and 
‘‘(B) the purchase from another qualified 
research entity of any loan made by such entity 
which is a qualified research investment. 
‘‘(2) QUALIFYING
SMALL
BUSINESS
INNOVA-
TION COMPANY.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘qualifying small business 
innovation company’ means, with respect to any 
taxable year, any corporation (including a non-
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profit corporation) or partnership if for such 
year— 
‘‘(i) the gross receipts of such entity 
do not exceed $10,000,000, 
‘‘(ii) the aggregate gross assets of 
such entity do not exceed $25,000,000, 
and 
‘‘(iii) at least 50 percent of the gross 
expenditures of such entity would qualify 
as research or experimental expenditures 
under section 174. 
All persons treated as a single employer under 
subsection (a) or (b) of section 52 or subsection 
(m) or (o) of section 414 shall be treated as one 
person for purposes of this subparagraph. 
‘‘(B) AGGREGATE
GROSS
ASSETS.—For 
purposes of subparagraph (A)(ii), the term ‘ag-
gregate gross assets’ shall have meaning given 
such term by section 1202(d)(2), except such 
term shall not include intangibles and goodwill. 
‘‘(e) NATIONAL LIMITATION ON AMOUNT OF INVEST-
MENTS DESIGNATED.— 
‘‘(1) IN GENERAL.—There is a research invest-
ment tax credit limitation for each calendar year. 
Such limitation is— 
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‘‘(A) $500,000,000 for 2009, 
‘‘(B) $750,000,000 for 2010 and 2011, 
and 
‘‘(C) $1,000,000,000 for 2012 and 2013. 
‘‘(2) ALLOCATION OF LIMITATION.—The limita-
tion under paragraph (1) shall be allocated by the 
Secretary among qualified research entities selected 
by the Secretary, with not more than $25,000,000 
allocated to any 1 qualified research entity in any 
calendar year. In making allocations under the pre-
ceding sentence, the Secretary shall give priority to 
any entity— 
‘‘(A) with a record of having successfully 
provided capital or technical assistance to quali-
fying small business innovation companies, or 
‘‘(B) which intends to satisfy the require-
ment under subsection (b)(1)(B) by making 
qualified research investments in 1 or more 
companies in which persons unrelated to such 
entity (within the meaning of section 267(b) or 
707(b)(1)) hold the majority equity interest, 
and 
if more than 1 qualified research entity meets sub-
paragraph (A) or (B), the Secretary shall give pri-
ority to the entity with the earliest investment. If in-
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sufficient allocations are available for all qualified 
applicants in any calendar year, the priorities estab-
lished for such applicants without allocations shall 
be carried over to the succeeding calendar year. 
‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 
the research investment tax credit limitation for any 
calendar year exceeds the aggregate amount allo-
cated under paragraph (2) for such year, such limi-
tation for the succeeding calendar year shall be in-
creased by the amount of such excess. No amount 
may be carried under the preceding sentence to any 
calendar year after 2020. 
‘‘(f) RECAPTURE OF CREDIT IN CERTAIN CASES.— 
‘‘(1) IN GENERAL.—If, at any time during the 
7-year period beginning on the date of the original 
issue of a qualified equity investment in a qualified 
research entity, there is a recapture event with re-
spect to such investment, then the tax imposed by 
this chapter for the taxable year in which such event 
occurs shall be increased by the credit recapture 
amount. 
‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur-
poses of paragraph (1), the credit recapture amount 
is an amount equal to the sum of— 
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‘‘(A) the aggregate decrease in the credits 
allowed to the taxpayer under section 38 for all 
prior taxable years which would have resulted if 
no credit had been determined under this sec-
tion with respect to such investment, plus 
‘‘(B) interest at the underpayment rate es-
tablished under section 6621 on the amount de-
termined under subparagraph (A) for each 
prior taxable year for the period beginning on 
the due date for filing the return for the prior 
taxable year involved. 
No deduction shall be allowed under this chapter for 
interest described in subparagraph (B). 
‘‘(3) RECAPTURE
EVENT.—For purposes of 
paragraph (1), there is a recapture event with re-
spect to an equity investment in a qualified research 
entity if— 
‘‘(A) such entity ceases to be a qualified 
research entity, 
‘‘(B) the proceeds of the investment cease 
to be used as required of subsection (b)(1)(B), 
or 
‘‘(C) such investment is redeemed by such 
entity. 
‘‘(4) SPECIAL RULES.— 
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‘‘(A) TAX
BENEFIT
RULE.—The tax for 
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed 
by reason of this section which were used to re-
duce tax liability. In the case of credits not so 
used to reduce tax liability, the carryforwards 
and carrybacks under section 39 shall be appro-
priately adjusted. 
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be 
treated as a tax imposed by this chapter for 
purposes of determining the amount of any 
credit under this chapter or for purposes of sec-
tion 55. 
‘‘(g) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be appropriate to carry out this 
section, including regulations— 
‘‘(1) which prevent the abuse of the purposes of 
this section, 
‘‘(2) which provide rules for determining wheth-
er the requirement of subsection (b)(1)(B) is treated 
as met, 
‘‘(3) which impose appropriate reporting re-
quirements, and 
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‘‘(4) which apply the provisions of this section 
to newly formed entities.’’. 
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) of the Internal Revenue Code of 1986 (relating 
to current year business credit) is amended by striking 
‘‘plus’’ at the end of paragraph (34), by striking the period 
at the end of paragraph (35) and inserting ‘‘, plus’’, and 
by adding at the end the following new paragraph: 
‘‘(36) the credit determined under section 
45R(a).’’. 
(c) CONFORMING AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new item: 
‘‘Sec. 45R. Research investment tax credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to investments made after Decem-
ber 31, 2008. 
SEC. 4. TAX-EXEMPT FINANCING OF RESEARCH PARK FA-
CILITIES. 
(a) IN GENERAL.—Subsection (a) of section 142 is 
amended— 
(1) by striking ‘‘or’’ at the end of paragraph 
(14), 
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘, or’’, and 
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(3) by inserting at the end the following new 
paragraph: 
‘‘(16) research park facility.’’. 
(b) DEFINITION.—Section 142 is amended by insert-
ing at the end the following new subsection: 
‘‘(n) RESEARCH PARK FACILITY.—For purposes of 
subsection (a)(16), the term ‘research park facility’ means 
a facility (including buildings, land, or other structures) 
which is used in connection with research and experimen-
tation (as defined in section 168(i)(11)). For purposes of 
the preceding sentence, such term includes facilities which 
are directly related and ancillary to a research park facil-
ity (determined without regard to this sentence) if— 
‘‘(1) such facilities are located on the same site 
as the research park facility, and 
‘‘(2) not more than 25 percent of the net pro-
ceeds of the issue are used to provide such facili-
ties.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to bonds issued on 
or after the date of the enactment of this Act. 
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SEC. 5. CLARIFICATION OF APPLICATION OF PRIVATE AC-
TIVITY BOND RULES WITH RESPECT TO 
FUNDING OF FEDERAL RESEARCH AGREE-
MENTS. 
Not later than 6 months after the date of the enact-
ment of this Act, the Secretary of the Treasury shall pre-
scribe guidance identifying the circumstances, if any, in 
which the rights of the Federal Government granted under 
chapter 18 of title 35, United States Code (commonly 
known as the Bayh-Dole Act (Pub. Law No. 96–517)) 
constitute private business use under the private activity 
bond rules in section 141 of the Internal Revenue Code 
of 1986. 
Æ 
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