I 
112TH CONGRESS 
2D SESSION 
H. R. 6319 
To amend the Internal Revenue Code of 1986 to provide for startup busi-
nesses to use a portion of the research and development credit to offset 
payroll taxes. 
IN THE HOUSE OF REPRESENTATIVES 
AUGUST 2, 2012 
Mr. GERLACH (for himself and Ms. ZOE LOFGREN of California) 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 provide 
for startup businesses to use a portion of the research 
and development credit to offset payroll taxes. 
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 ‘‘Startup Innovation 
Credit Act of 2012’’. 
SEC. 2. TREATMENT OF RESEARCH CREDIT FOR CERTAIN 
STARTUP COMPANIES. 
(a) IN GENERAL.— 
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(1) IN GENERAL.—Section 41 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new subsection: 
‘‘(i) TREATMENT OF CREDIT TO QUALIFIED SMALL 
BUSINESSES.— 
‘‘(1) IN GENERAL.—At the election of a quali-
fied small business, the payroll tax credit portion of 
the credit determined under subsection (a) shall be 
treated as a credit allowed under section 3111(f) 
(and not under this section). 
‘‘(2) PAYROLL
TAX
CREDIT
PORTION.—For 
purposes of this subsection, the payroll tax credit 
portion of the credit determined under subsection 
(a) for any taxable year is so much of such credit 
as does not exceed $250,000. 
‘‘(3) QUALIFIED SMALL BUSINESS.—For pur-
poses of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
small business’ means, with respect to any tax-
able year— 
‘‘(i) a corporation, partnership, or S 
corporation if— 
‘‘(I) the gross receipts (as deter-
mined under subsection (c)(7)) of 
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such entity for the taxable year is less 
than $5,000,000, and 
‘‘(II) such entity did not have 
gross receipts (as so determined) for 
any period preceding the 5-taxable- 
year period ending with such taxable 
year, and 
‘‘(ii) any person not described in sub-
paragraph (A) if clauses (i) and (ii) of sub-
paragraph (A) applied to such person, de-
termined— 
‘‘(I) by substituting ‘person’ for 
‘entity’ each place it appears), and 
‘‘(II) in the case of an individual, 
by only taking into account the aggre-
gate gross receipts received by such 
individual in carrying on trades or 
businesses of such individual. 
‘‘(B) LIMITATION.—Such term shall not 
include an organization which is exempt from 
taxation under section 501. 
‘‘(4) ELECTION.— 
‘‘(A) IN GENERAL.—In the case of a part-
nership or S corporation, an election under this 
subsection shall be made at the entity level. 
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‘‘(B) REVOCATION.—An election under 
this subsection may not be revoked without the 
consent of the Secretary. 
‘‘(C) LIMITATION.—A taxpayer may not 
make an election under this subsection if such 
taxpayer has made an election under this sub-
section for 5 or more preceding taxable years. 
‘‘(5) AGGREGATION RULES.—For purposes of 
determining the $250,000 limitation under para-
graph (2) and determining gross receipts under 
paragraph (3), all members of the same controlled 
group of corporations (within the meaning of section 
267(f)) and all persons under common control (with-
in the meaning of section 52(b) but determined by 
treating an interest of more than 50 percent as a 
controlling interest) shall be treated as 1 person. 
‘‘(6) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry 
out the purposes of this subsection, including— 
‘‘(A) regulations to prevent the avoidance 
of the purposes of paragraph (3) through the 
use of successor companies or other means, 
‘‘(B) regulations to minimize compliance 
and recordkeeping burdens under this sub-
section for start-up companies, and 
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‘‘(C) regulations for recapturing the ben-
efit of credits determined under section 3111(f) 
in cases where there is a subsequent adjustment 
to the payroll tax credit portion of the credit 
determined under subsection (a), including re-
quiring amended returns in the cases where 
there is such an adjustment.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
280C(c) of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new 
paragraph: 
‘‘(5) TREATMENT OF QUALIFIED SMALL BUSI-
NESS
CREDIT.—For purposes of determining the 
amount of any credit under section 41(a) under this 
subsection, any election under section 41(i) shall be 
disregarded.’’. 
(b) CREDIT ALLOWED AGAINST FICA TAXES.— 
(1) IN GENERAL.—Section 3111 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new subsection: 
‘‘(f) CREDIT
FOR RESEARCH EXPENDITURES
OF 
QUALIFIED SMALL BUSINESSES.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
small business which has made an election under 
section 41(i), there shall be allowed as a credit 
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‘‘(B) OTHER TERMS.—Any term used in 
this subsection which is also used in section 41 
shall have the meaning given such term under 
section 41.’’. 
(2) TRANSFERS
TO
FEDERAL
OLD-AGE
AND 
SURVIVORS
INSURANCE
TRUST
FUND.—There are 
hereby appropriated to the Federal Old-Age and 
Survivors Trust Fund and the Federal Disability In-
surance Trust Fund established under section 201 
of the Social Security Act (42 U.S.C. 401) amounts 
equal to the reduction in revenues to the Treasury 
by reason of the amendments made by paragraph 
(1). Amounts appropriated by the preceding sen-
tence shall be transferred from the general fund at 
such times and in such manner as to replicate to the 
extent possible the transfers which would have oc-
curred to such Trust Fund had such amendments 
not been enacted. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
Æ 
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