I
107TH CONGRESS
1ST SESSION
H. R. 1137
To amend the Internal Revenue Code of 1986 to establish a permanent
tax incentive for research and development, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 20, 2001
Mrs. WILSON (for herself, Mr. SKEEN, Mr. CROWLEY, Mr. HOLT, Mr. PAUL,
and Ms. HOOLEY of Oregon) introduced the following bill; which was re-
ferred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to establish
a permanent tax incentive for research and development,
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 ‘‘Private Sector Re-
search and Development Investment Act of 2001’’.
SEC. 2. PERMANENT EXTENSION OF RESEARCH CREDIT.
(a) IN GENERAL.—Section 41 of the Internal Rev-
enue Code of 1986 (relating to credit for increasing re-
search activities) is amended by striking subsection (h).
(b) CONFORMING AMENDMENT.—Section 45C(b)(1)
of the Internal Revenue Code of 1986 is amended by strik-
ing subparagraph (D).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred after
the date of the enactment of this Act.
SEC. 3. IMPROVED ALTERNATIVE INCREMENTAL CREDIT.
(a) IN GENERAL.—Section 41 of the Internal Rev-
enue Code of 1986 (relating to credit for increasing re-
search activities), as amended by section 2, is amended
by adding at the end the following new subsection:
‘‘(h) ELECTION
OF ALTERNATIVE INCREMENTAL
CREDIT.—
‘‘(1) IN GENERAL.—At the election of the tax-
payer, the credit under subsection (a)(1) shall be de-
termined under this section by taking into account
the modifications provided by this subsection.
‘‘(2) DETERMINATION OF BASE AMOUNT.—
‘‘(A) IN GENERAL.—In computing the base
amount under subsection (c)—
‘‘(i) notwithstanding subsection (c)(3),
the fixed-base percentage shall be equal to
80 percent of the percentage which the ag-
gregate qualified research expenses of the
taxpayer for the base period is of the ag-
gregate gross receipts of the taxpayer for
the base period, and
‘‘(ii) the minimum base amount under
subsection (c)(2) shall not apply.
‘‘(B) START-UP AND SMALL TAXPAYERS.—
In computing the base amount under subsection
(c), the gross receipts of a taxpayer for any tax-
able year in the base period shall be treated as
at least equal to $1,000,000.
‘‘(C) BASE PERIOD.—For purposes of this
subsection, the base period is the 8-taxable year
period preceding the taxable year (or, if shorter,
the period the taxpayer (and any predecessor)
has been in existence).
‘‘(3) ELECTION.—An election under this sub-
section shall apply to the taxable year for which
made and all succeeding taxable years unless re-
voked with the consent of the Secretary.’’
(b) CONFORMING AMENDMENT.—Section 41(c) of
the Internal Revenue Code of 1986 is amended by striking
paragraph (4) and by redesignating paragraphs (5) and
(6) as paragraphs (4) and (5), respectively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 4. MODIFICATIONS TO CREDIT FOR BASIC RESEARCH.
(a) ELIMINATION
OF
INCREMENTAL
REQUIRE-
MENT.—
(1) IN
GENERAL.—Paragraph (1) of section
41(e) of the Internal Revenue Code of 1986 (relat-
ing to credit allowable with respect to certain pay-
ments to qualified organizations for basic research)
is amended to read as follows:
‘‘(1) IN GENERAL.—The amount of basic re-
search payments taken into account under sub-
section (a)(2) shall be determined in accordance with
this subsection.’’
(2) CONFORMING AMENDMENTS.—
(A) Section 41(a)(2) of such Code is
amended by striking ‘‘determined under sub-
section (e)(1)(A)’’ and inserting ‘‘for the tax-
able year’’.
(B) Section 41(e) of such Code is amended
by striking paragraphs (3), (4), and (5) and by
redesignating paragraphs (6) and (7) as para-
graphs (3) and (4), respectively.
(C) Section 41(e)(4) of such Code, as re-
designated by subparagraph (B), is amended by
striking subparagraph (B) and by redesignating
subparagraphs (C), (D), and (E) as subpara-
graphs (B), (C), and (D), respectively.
(D) Clause (i) of section 170(e)(4)(B) of
such Code is amended by striking ‘‘section
41(e)(6)’’ and inserting ‘‘section 41(e)(3)’’.
(b) BASIC RESEARCH.—
(1) SPECIFIC
COMMERCIAL
OBJECTIVE.—Sec-
tion 41(e)(4) of the Internal Revenue Code of 1986
(relating to definitions and special rules), as redesig-
nated by subsection (a)(2)(B), is amended by adding
at the end the following new subparagraph:
‘‘(E) SPECIFIC COMMERCIAL OBJECTIVE.—
For purposes of subparagraph (A), research
shall not be treated as having a specific com-
mercial objective if the results of such research
are to be published in a timely manner as to be
available to the general public prior to their use
for a commercial purpose.’’
(2) EXCLUSIONS
FROM
BASIC
RESEARCH.—
Clause (ii) of section 41(e)(4)(A) of such Code (re-
lating to definitions and special rules), as redesig-
nated by subsection (a), is amended to read as fol-
lows:
‘‘(ii) basic research in the arts and
humanities.’’
(c) EXPANSION OF CREDIT TO RESEARCH DONE AT
FEDERAL LABORATORIES.—Section 41(e)(3) of the Inter-