veloped, grown, manufactured, extracted, processed, 
cured, and aged. 
‘‘(c) EXCLUSION FROM TARIFFS, ETC.—Any prod-
uct—
‘‘(1) which is manufactured in outer space, and 
‘‘(2) which was—
‘‘(A) launched from, and returned to 
Earth, within the United States, or 
‘‘(B) Manufactured at a facility in outer 
space which is owned by 1 or more United 
States persons, shall be exempt from all Fed-
eral excises, imposts, and duties and any other 
Federal tariffs. 
‘‘(d) PHASEOUT OF BENEFITS.—In the case of a tax-
able year beginning after December 31, 2012, the amount 
excluded under subsection (a) shall be reduced (but not 
below zero) by x/10th’s of the amount excludable without 
regard to this subsection, where ‘x’ is the number of years 
such taxable year is after the last taxable year beginning 
before January 1, 2013. A similar rule shall apply to the 
benefits under subsection (c).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 of such Code 
is amended by striking the last item and inserting the fol-
lowing new items:
‘‘Sec. 140. Space-related income. 
‘‘Sec. 140A. Cross references to other Acts.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 3. CREDIT FOR PURCHASE OF QUALIFIED SPACE COM-
PANY STOCK. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45G. SPACE COMPANY INVESTMENT CREDIT. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
the space company investment credit determined under 
this section for any taxable year is the amount paid in 
the taxable year for the purchase of qualified stock in a 
qualified space company. 
‘‘(b) QUALIFIED SPACE COMPANY.—For purposes of 
this section—
‘‘(1) IN GENERAL.—The term ‘qualified space 
company’ means a domestic C corporation if for the 
3-taxable-year period ending with the taxable year 
immediately preceding the taxable year in which 
qualified stock is purchased—
‘‘(A) the average annual gross receipts of 
such entity does not exceed $100,000,000, and
‘‘(B) more than 70 percent of such gross 
receipts are derived from space-based business. 
‘‘(2) 
SPACE-BASED
BUSINESS.—The 
term 
‘space-based business’ means a business whose gross 
receipts are substantially space-related income, as 
defined in section 140(b). 
‘‘(3) AGGREGATION RULES.—Rules similar to 
the rules of section 1202(d)(3) shall apply. 
‘‘(c) QUALIFIED STOCK.—For purposes of this sec-
tion—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, the term ‘qualified stock’ 
means any stock in a domestic C corporation if—
‘‘(A) as of the date of issuance of such 
stock, such corporation is a qualified space 
company, and 
‘‘(B) except as provided in subsections (f) 
and (h), such stock is acquired by the taxpayer 
at its original issue (directly or through an un-
derwriter)—
‘‘(i) in exchange for money or other 
property (not including stock), or 
‘‘(ii) as compensation for services pro-
vided to such corporation (other than serv-
ices performed as an underwriter of such 
stock). 
‘‘(2) ACTIVE BUSINESS REQUIREMENT.—Stock 
in a corporation shall not be treated as qualified 
stock unless, during substantially all of the tax-
payer’s holding period for such stock—
‘‘(A) such corporation meets active busi-
ness requirements substantially similar to the 
requirements of section 1202(e), determined on 
the basis that the qualified trade or business is 
a space-based business, and 
‘‘(B) such corporation is a C corporation. 
‘‘(3) CERTAIN PURCHASE BY CORPORATION OF 
ITS OWN STOCK.—Rules similar to the rules of sec-
tion 1202(c)(3) shall apply. 
‘‘(e) RECAPTURE.—If, during any taxable year end-
ing with or within the 10-year period beginning on the 
date qualified stock was purchased by the taxpayer, the 
issuer of such stock ceases to a qualified space company, 
the tax under this chapter for such taxable year shall be 
increased by the aggregate decrease in the credits allowed 
under section 38 for all prior taxable years which would 
have resulted solely from reducing to zero any credit deter-
mined under subsection (a) with respect to such stock.
‘‘(f) TERMINATION.—This section shall not apply to 
stock acquired after December 31, 2011.’’. 
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’ 
at the end of paragraph (14), by striking the period at 
the end of paragraph (15) and inserting ‘‘, plus’’, and by 
adding at the end the following new paragraph: 
‘‘(16) space company investment credit deter-
mined under section 45G(a).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 39(d) of such Code is amended by 
adding at the end the following new paragraph: 
‘‘(11) NO CARRYBACK OF SPACE COMPANY IN-
VESTMENT CREDIT BEFORE JANUARY 1, 2004.—No 
portion of the unused business credit for any taxable 
year which is attributable to the space company in-
vestment credit determined under section 45G may 
be carried back to a taxable year beginning before 
January 1, 2004.’’. 
(2) Subsection (c) of section 196 of such Code 
is amended by striking ‘‘and’’ at the end of para-
graph (9), by striking the period at the end of para-
graph (10) and inserting ‘‘, and’’, and by adding at 
the end the following new paragraph:
‘‘(11) the space company investment credit de-
termined under section 45G(a).’’. 
(3) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding at the end the following new 
item:
‘‘Sec. 45G. Space Company Investment Credit.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to costs paid or incurred in taxable 
years beginning after December 31, 2003. 
SEC. 4. CAPITAL GAINS EXCLUSION. 
(a) IN GENERAL.—(1) Part I of subchapter P of the 
Internal Revenue Code of 1986 (relating to treatment of 
capital gains) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 1203. EXCLUSION FOR GAINS FROM SALE OR EX-
CHANGE OF STOCK OF QUALIFIED SPACE 
CORPORATIONS. 
‘‘(a) IN GENERAL.—Gross income shall not include 
gain on the sale or exchange of any stock of a qualified 
space corporation. 
‘‘(b) QUALIFIED SPACE CORPORATION.—For pur-
poses of subsection (a), the term ‘qualified space corpora-
tion’ means, with respect to any taxable year, a domestic 
corporation which is a C corporation if—