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S 825

112th CONGRESS
1st Session

S. 825

To amend the Internal Revenue Code of 1986 to permanently extend and modify the research tax credit, and for other purposes.

IN THE SENATE OF THE UNITED STATES

April 14, 2011

Mr. COONS introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to permanently extend and modify the research tax credit, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    (a) Short Title- This Act may be cited as the `Job Creation Through Innovation Act'.

    (b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

SEC. 2. USE OF ONLY SIMPLIFIED RESEARCH CREDIT AFTER 2011; EXPANSION AND PERMANENT EXTENSION.

    (a) Simplified Credit for Qualified Research Expenses- Subsection (a) of section 41 is amended to read as follows:

    `(a) General Rule-

      `(1) CREDIT DETERMINED- For purposes of section 38, the research credit determined under this section for the taxable year shall be an amount equal to 20 percent of so much of the qualified research expenses for the 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 TAXABLE YEARS-

        `(A) TAXPAYERS TO WHICH PARAGRAPH APPLIES- The credit under this section shall be determined under this paragraph if the taxpayer has no qualified research expenses in any one of the 3 taxable years preceding the taxable year for which the credit is being determined.

        `(B) CREDIT RATE- The credit determined under this paragraph shall be equal to 10 percent of the qualified research expenses for the taxable year.'.

    (b) Conforming Amendments-

      (1) TERMINATION OF BASE AMOUNT CALCULATION- Section 41 is amended by striking subsection (c) and redesignating subsection (d) as subsection (c).

      (2) TERMINATION OF BASIC RESEARCH PAYMENT CALCULATION- Section 41 is amended by striking subsection (e) and redesignating subsections (f) and (g) as subsections (d) and (e), respectively.

      (3) SPECIAL RULES-

        (A) Paragraph (1)(A)(ii) of subsection (d) of section 41, as so redesignated, is amended by striking `shares of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums,' and inserting `share of the qualified research expenses'.

        (B) Paragraph (1)(B)(ii) of section 41(d), as so redesignated, is amended by striking `shares of the qualified research expenses, basic research payments, and amounts paid or incurred to energy research consortiums,' and inserting `share of the qualified research expenses'.

        (C) Paragraph (3) of section 41(d), as so redesignated, is amended--

          (i) by striking `, and the gross receipts of the taxpayer' and all that follows in subparagraph (A) and inserting a period,

          (ii) by striking `, and the gross receipts of the taxpayer' and all that follows in subparagraph (B) and inserting a period, and

          (iii) by striking subparagraph (C).

        (D) Paragraph (4) of section 41(d), as so redesignated, is amended by striking `and gross receipts'.

        (E) Subsection (d) of section 41, as so redesignated, is amended by striking paragraph (6).

      (4) PERMANENT EXTENSION-

        (A) Section 41 is amended by striking subsection (h).

        (B) Section 45C(b)(1) is amended by striking subparagraph (D).

      (5) CROSS-REFERENCES-

        (A) Paragraphs (2)(A) and (4) of section 41(b) are each amended by striking `subsection (f)(1)' and inserting `subsection (d)(1)'.

        (B) Paragraph (2) of section 45C(c) is amended by striking `base period research expenses' and inserting `average qualified research expenses'.

        (C) Paragraph (3) of section 45C(d) is amended by striking `section 41(f)' and inserting `section 41(d)'.

        (D) Paragraph (2) of section 45G(e) is amended by striking `section 41(f)' and inserting `section 41(d)'.

        (E) Subsection (g) of section 45O is amended by striking `section 41(f)' and inserting `section 41(d)'.

        (F) Subparagraph (A) of section 54(l)(3) is amended by striking `section 41(g)' and inserting `section 41(e)'.

        (G) Clause (i) of section 170(e)(4)(B) is amended to read as follows:

          `(i) the contribution is to a qualified organization,'.

        (H) Paragraph (4) of section 170(e) is amended by adding at the end the following new subparagraph:

        `(E) QUALIFIED ORGANIZATION- For purposes of this paragraph, the term `qualified organization' means--

          `(i) any educational organization which--

            `(I) is an institution of higher education (within the meaning of section 3304(f)), and

            `(II) is described in subsection (b)(1)(A)(ii), or

          `(ii) 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 research, and

            `(III) is not a private foundation.'.

        (I) Subsection (f) of section 197 is amended by striking `section 41(f)(1)' each place it appears in paragraphs (1)(C) and (9)(C)(i) and inserting `section 41(d)(1)'.

        (J) Section 280C is amended--

          (i) by striking `41(f)' each place it appears in subsection (b)(3) and inserting `41(d)',

          (ii) by striking `or basic research expenses (as defined in section 41(e)(2))' in subsection (c)(1),

          (iii) by striking `section 41(a)(1)' in subsection (c)(2)(A) and inserting `section 41(a)', and

          (iv) by striking `or basic research expenses' in subsection (c)(2)(B).

        (K) Subclause (IV)(c) of section 936(h)(5)(C)(i) is amended by striking `section 41(f)' and inserting `section 41(d)'.

        (L) Subparagraph (D) of section 936(j)(5) is amended by striking `section 41(f)(3)' and inserting `section 41(d)(3)'.

        (M) Clause (i) of section 965(c)(2)(C) is amended by striking `section 41(f)(3)' and inserting `section 41(d)(3)'.

        (N) Clause (i) of section 1400N(l)(7)(B) is amended by striking `section 41(g)' and inserting `section 41(e)'.

    (c) Technical Corrections- Section 409 is amended--

      (1) by inserting `, as in effect before the enactment of the Tax Reform Act of 1984)' after `section 41(c)(1)(B)' in subsection (b)(1)(A),

      (2) by inserting `, as in effect before the enactment of the Tax Reform Act of 1984' after `relating to the employee stock ownership credit' in subsection (b)(4),

      (3) by inserting `(as in effect before the enactment of the Tax Reform Act of 1984)' after `section 41(c)(1)(B)' in subsection (i)(1)(A),

      (4) by inserting `(as in effect before the enactment of the Tax Reform Act of 1984)' after `section 41(c)(1)(B)' in subsection (m),

      (5) by inserting `(as so in effect)' after `section 48(n)(1)' in subsection (m),

      (6) by inserting `(as in effect before the enactment of the Tax Reform Act of 1984)' after `section 48(n)' in subsection (q)(1), and

      (7) by inserting `(as in effect before the enactment of the Tax Reform Act of 1984)' after `section 41' in subsection (q)(3).

    (d) Effective Date-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2011.

      (2) TECHNICAL CORRECTIONS- The amendments made by subsection (c) shall take effect on the date of the enactment of this Act.

SEC. 3. ENHANCED RESEARCH CREDIT FOR DOMESTIC MANUFACTURERS.

    (a) In General- Section 41, as amended by section 3, is amended by redesignating subsection (f) as subsection (g) and by inserting after subsection (e) the following new subsection:

    `(f) Enhanced Credit for Domestic Manufacturers-

      `(1) IN GENERAL- In the case of a qualified domestic manufacturer, this section shall be applied by increasing the 20 percent amount in subsection (a)(1) by the bonus amount.

      `(2) QUALIFIED DOMESTIC MANUFACTURER- For purposes of this subsection--

        `(A) IN GENERAL- The term `qualified domestic manufacturer' means a taxpayer who has domestic production gross receipts which are more than 50 percent of total production gross receipts.

        `(B) DOMESTIC PRODUCTION GROSS RECEIPTS- The term `domestic production gross receipts' has the meaning given to such term under section 199(c)(4).

        `(C) TOTAL PRODUCTION GROSS RECEIPTS- The term `total production gross receipts' means the gross receipts of the taxpayer which are described in section 199(c)(4), determined--

          `(i) without regard to whether property described in subparagraph (A)(i)(I) or (A)(i)(III) thereof was manufactured, produced, grown, or extracted in the United States,

          `(ii) by substituting `any property described in section 168(f)(3)' for `any qualified film' in subparagraph (A)(i)(II) thereof, and

          `(iii) without regard to whether any construction described in subparagraph (A)(ii) thereof or services described in subparagraph (A)(iii) thereof were performed in the United States.

      `(3) BONUS AMOUNT- For purposes of paragraph (1), the bonus amount shall be determined as follows:
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`If the percentage of total production gross receipts which are domestic production gross receipts is: The bonus amount is: 
                                                            More than 50 percent and not more than 60 percent         2 percentage points 
                                                            More than 60 percent and not more than 70 percent         4 percentage points 
                                                            More than 70 percent and not more than 80 percent         6 percentage points 
                                                            More than 80 percent and not more than 90 percent         8 percentage points 
                                                                                         More than 90 percent     10 percentage points.'. 
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    (b) Effective Date- The amendment made by this section shall apply to expenditures paid or incurred in taxable years beginning after December 31, 2011.

SEC. 4. RESEARCH CREDIT MADE REFUNDABLE FOR SMALL BUSINESSES.

    (a) In General- Subsection (a) of section 41 of the Internal Revenue Code of 1986, as amended by section 3, is amended by adding at the end the following new paragraph:

      `(3) PORTION OF CREDIT REFUNDABLE-

        `(A) IN GENERAL- For purposes of subsections (b) and (c) of section 6401, the amount of the credit determined under this section which is attributable to a qualified small business shall be treated as a credit allowed under subpart C of part IV of subchapter A for the taxable year (and not under any other subpart). For purposes of section 6425, any amount treated as so allowed shall be treated as a payment of estimated income tax for the taxable year.

        `(B) QUALIFIED SMALL BUSINESS- For purposes of this paragraph, the term `qualified small business' means, with respect to any taxable year, any person if the annual average number of employees employed by such person during such taxable year is 500 or fewer.'.

    (b) Conforming Amendment- Section 1324(b)(2) of title 31, United States Code, is amended by inserting `41(a)(3),' after `36A,'.

    (c) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2011.

SEC. 5. EXTENSION OF GRANTS FOR SPECIFIED ENERGY PROPERTY IN LIEU OF TAX CREDITS.

    (a) In General- Subsection (a) of section 1603 of division B of the American Recovery and Reinvestment Act of 2009 is amended--

      (1) in paragraph (1), by striking `or 2011' and inserting `2011, or 2012', and

      (2) in paragraph (2)--

        (A) by striking `after 2011' and inserting `after 2012', and

        (B) by striking `or 2011' and inserting `2011, or 2012'.

    (b) Conforming Amendment- Subsection (j) of section 1603 of division B of such Act is amended by striking `2012' and inserting `2013'.

SEC. 6. EXTENSION OF THE ADVANCED ENERGY PROJECT CREDIT.

    (a) In General- Subsection (d) of section 48C is amended by adding at the end the following new paragraph:

      `(6) ADDITIONAL 2011 ALLOCATIONS-

        `(A) IN GENERAL- Not later than 180 days after the date of the enactment of this paragraph, the Secretary, in consultation with the Secretary of Energy, shall establish a program to consider and award certifications for qualified investments eligible for credits under this section to qualifying advanced energy project sponsors with respect to applications received on or after the date of the enactment of this paragraph.

        `(B) LIMITATION- The total amount of credits that may be allocated under the program described in subparagraph (A) shall not exceed the 2011 allocation amount reduced by so much of the 2011 allocation amount as is taken into account as an increase in the limitation described in paragraph (1)(B).

        `(C) APPLICATION OF CERTAIN RULES- Rules similar to the rules of paragraphs (2), (3), (4), and (5) shall apply for purposes of the program described in subparagraph (A), except that--

          `(i) CERTIFICATION- Applicants shall have 2 years from the date that the Secretary establishes such program to submit applications.

          `(ii) SELECTION CRITERIA- For purposes of paragraph (3)(B)(i), the term `domestic job creation (both direct and indirect)' means the creation of direct jobs in the United States producing the property manufactured at the manufacturing facility described under subsection (c)(1)(A)(i), and the creation of indirect jobs in the manufacturing supply chain for such property in the United States.

          `(iii) REVIEW AND REDISTRIBUTION- The Secretary shall conduct a separate review and redistribution under paragraph (5) with respect to such program not later than 4 years after the date of the enactment of this paragraph.

        `(D) 2011 ALLOCATION AMOUNT- For purposes of this subsection, the term `2011 allocation amount' means $5,000,000,000.

        `(E) DIRECT PAYMENTS- In lieu of any qualifying advanced energy project credit which would otherwise be determined under this section with respect to an allocation to a taxpayer under this paragraph, the Secretary shall, upon the election of the taxpayer, make a grant to the taxpayer in the amount of such credit as so determined. Rules similar to the rules of section 50 shall apply with respect to any grant made under this subparagraph.'.

    (b) Portion of 2011 Allocation Allocated Toward Pending Applications Under Original Program- Subparagraph (B) of section 48C(d)(1) is amended by inserting `(increased by so much of the 2011 allocation amount (not in excess of $1,500,000,000) as the Secretary determines necessary to make allocations to qualified investments with respect to which qualifying applications were submitted before the date of the enactment of paragraph (6))' after `$2,300,000,000'.

    (c) Conforming Amendment- Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting `48C(d)(6)(E),' after `36C,'.

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