I
104TH CONGRESS
2D SESSION
H. R. 2984
To amend the Internal Revenue Code of 1986 to extend the research credit,
to allow an alternative incremental research credit, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 28, 1996
Mr. FOX of Pennsylvania (for himself, Mr. BEREUTER, Mr. DORNAN, and Mr.
ZIMMER) introduced the following bill; which was referred to the Commit-
tee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to extend
the research credit, to allow an alternative incremental
research credit, 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. EXTENSION AND MODIFICATION OF RESEARCH
CREDIT.
(a) EXTENSION.—Subsection (h) of section 41 of the
Internal Revenue Code of 1986 (relating to credit for re-
search activities) is amended—
(1) by striking ‘‘June 30, 1995’’ each place it
appears and inserting ‘‘December 31, 1997’’, and
(2) by striking ‘‘July 1, 1995’’ each place it ap-
pears and inserting ‘‘January 1, 1998’’.
(b) BASE AMOUNT FOR START-UP COMPANIES.—
Clause (i) of section 41(c)(3)(B) of such Code (relating
to start-up companies) is amended to read as follows:
‘‘(i) TAXPAYERS TO WHICH SUBPARA-
GRAPH APPLIES.—The fixed-base percent-
age shall be determined under this sub-
paragraph if—
‘‘(I) the first taxable year in
which a taxpayer had both gross re-
ceipts and qualified research expenses
begins after December 31, 1983, or
‘‘(II) there are fewer than 3 tax-
able years beginning after December
31, 1983, and before January 1,
1989, in which the taxpayer had both
gross receipts and qualified research
expenses.’’.
(c) ELECTION
OF
ALTERNATIVE
INCREMENTAL
CREDIT.—Subsection (c) of section 41 of such Code is
amended by redesignating paragraphs (4) and (5) as para-
graphs (5) and (6), respectively, and by inserting after
paragraph (3) the following new paragraph:
‘‘(4) ELECTION
OF
ALTERNATIVE
INCREMEN-
TAL CREDIT.—
‘‘(A) IN GENERAL.—At the election of the
taxpayer, the credit determined under sub-
section (a)(1) shall be equal to the sum of—
‘‘(i) 1.65 percent of so much of the
qualified research expenses for the taxable
year as exceeds 1 percent of the average
described in subsection (c)(1)(B) but does
not exceed 1.5 percent of such average,
‘‘(ii) 2.2 percent of so much of such
expenses as exceeds 1.5 percent of such av-
erage but does not exceed 2 percent of
such average, and
‘‘(iii) 2.75 percent of so much of such
expenses as exceeds 2 percent of such aver-
age.
‘‘(B) ELECTION.—An election under this
paragraph may be made only for the first tax-
able year of the taxpayer beginning after June
30, 1995. Such an election shall apply to the
taxable year for which made and all succeeding
taxable years unless revoked with the consent of
the Secretary.’’
(d) INCREASED CREDIT FOR CONTRACT RESEARCH
EXPENSES WITH RESPECT TO CERTAIN RESEARCH CON-
SORTIA.—Paragraph (3) of section 41(b) of such Code is
amended by adding at the end the following new subpara-
graph:
‘‘(C) AMOUNTS
PAID
TO
CERTAIN
RE-
SEARCH CONSORTIA.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall be applied by substituting ‘80 per-
cent’ for ‘65 percent’ with respect to
amounts paid or incurred by the taxpayer
to a qualified research consortium for
qualified research.
‘‘(ii) QUALIFIED RESEARCH CONSOR-
TIUM.—The term ‘qualified research con-
sortium’ means any organization described
in subsection (e)(6)(B) if—
‘‘(I) at least 15 unrelated tax-
payers paid (during the calendar year
in which the taxable year of the tax-
payer begins) amounts to such organi-
zation for qualified research,
‘‘(II) no 3 persons paid during
such calendar year more than 50 per-
cent of the total amounts paid during
such calendar year for qualified re-
search, and
‘‘(III) 
no 
person 
contributed
more than 20 percent of such total
amounts.
For purposes of subclause (I), all persons
treated as a single employer under sub-
section (a) or (b) of section 52 shall be
treated as related taxpayers.’’
(e) CONFORMING AMENDMENT.—Subparagraph (D)
of section 28(b)(1) of such Code is amended by striking
‘‘June 30, 1995’’ and inserting ‘‘December 31, 1997’’.
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years ending after June 30,
1995.
(2) SUBSECTIONS (c) AND (d).—The amend-
ments made by subsections (c) and (d) shall apply
to taxable years beginning after June 30, 1995.
Æ