[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 627 Introduced in Senate (IS)]







109th CONGRESS
  1st Session
                                 S. 627

 To amend the Internal Revenue Code of 1986 to permanently extend the 
 research credit, to increase the rates of the alternative incremental 
 credit, and to provide an alternative simplified credit for qualified 
                           research expenses.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 15, 2005

 Mr. Hatch (for himself, Mr. Baucus, Mr. Grassley, Mr. Kyl, Mr. Smith, 
 Mr. Schumer, and Mr. Kerry) 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 the 
 research credit, to increase the rates of the alternative incremental 
 credit, and to provide an alternative simplified credit for qualified 
                           research expenses.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investment in America Act of 2005''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Research and development performed in the United States 
        results in quality jobs, better and safer products, increased 
        ownership of technology-based intellectual property, and higher 
        productivity in the United States.
            (2) The extent to which companies perform and increase 
        research and development activities in the United States is in 
        part dependent on Federal tax policy.
            (3) Congress should make permanent a research and 
        development credit that provides a meaningful incentive to all 
        types of taxpayers.

SEC. 3. PERMANENT EXTENSION OF RESEARCH CREDIT.

    (a) In General.--Section 41 of the Internal Revenue Code of 1986 
(relating to credit for increasing research activities) is amended by 
striking subsection (h).
    (b) Conforming Amendment.--Paragraph (1) of section 45C(b) of such 
Code is amended by striking 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. 4. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL CREDIT.

    (a) In General.--Subparagraph (A) of section 41(c)(4) of the 
Internal Revenue Code of 1986 (relating to election of alternative 
incremental credit) is amended--
            (1) by striking ``2.65 percent'' and inserting ``3 
        percent'',
            (2) by striking ``3.2 percent'' and inserting ``4 
        percent'', and
            (3) by striking ``3.75 percent'' and inserting ``5 
        percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after the date of the enactment of this Act.

SEC. 5. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED RESEARCH EXPENSES.

    (a) In General.--Subsection (c) of section 41 of the Internal 
Revenue Code of 1986 (relating to base amount) is amended by 
redesignating paragraphs (5) and (6) as paragraphs (6) and (7), 
respectively, and by inserting after paragraph (4) the following new 
paragraph:
            ``(5) Election of alternative simplified credit.--
                    ``(A) In general.--At the election of the taxpayer, 
                the credit determined under subsection (a)(1) shall be 
                equal to 12 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.
                    ``(B) Special rule in case of no qualified research 
                expenses in any of 3 preceding taxable years.--
                            ``(i) Taxpayers to which subparagraph 
                        applies.--The credit under this paragraph shall 
                        be determined under this subparagraph if the 
                        taxpayer has no qualified research expenses in 
                        any 1 of the 3 taxable years preceding the 
                        taxable year for which the credit is being 
                        determined.
                            ``(ii) Credit rate.--The credit determined 
                        under this subparagraph shall be equal to 6 
                        percent of the qualified research expenses for 
                        the taxable year.
                    ``(C) Election.--An election under this paragraph 
                shall apply to the taxable year for which made and all 
                succeeding taxable years unless revoked with the 
                consent of the Secretary. An election under this 
                paragraph may not be made for any taxable year to which 
                an election under paragraph (4) applies.''.
    (b) Coordination With Election of Alternative Incremental Credit.--
            (1) In general.--Section 41(c)(4)(B) of the Internal 
        Revenue Code of 1986 (relating to election) is amended by 
        adding at the end the following: ``An election under this 
        paragraph may not be made for any taxable year to which an 
        election under paragraph (5) applies.''.
            (2) Transition rule.--In the case of an election under 
        section 41(c)(4) of the Internal Revenue Code of 1986 which 
        applies to the taxable year which includes the date of the 
        enactment of this Act, such election shall be treated as 
        revoked with the consent of the Secretary of the Treasury if 
        the taxpayer makes an election under section 41(c)(5) of such 
        Code (as added by subsection (a)) for such year.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.
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