Research tax credit

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

30E.

Simplified small business research credit

(a)

In general

In the case of an eligible small business, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 20 percent of the qualified research expenses of the taxpayer for the taxable year. (b)

Qualified research expenditures

For purposes of this section, the term qualified research expenses has the meaning given such term by section 41(b), except that in lieu of applying paragraph (2)(C) thereof (defining supplies) the term supplies means any tangible property other than land. (c)

Eligible small business

For purposes of this section— (1)

In general

The term eligible small business means with respect to any taxable year beginning in a calendar year, any employer if such employer employed an average of 500 or fewer employees on business days during the preceding calendar year. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the employer was in existence throughout such year. (2)

Employers not in existence in preceding year

In the case of an employer which was not in existence throughout the preceding calendar year, the determination under paragraph (1) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year. (d)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year shall not exceed the excess of— (1)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (2)the sum of the credits allowable under this subpart (other than this section and sections 23, 25D, 30, 30B, and 30D) and section 27 for the taxable year. (e)

Portion of credit refundable

(1)

In general

The aggregate credits allowed to a taxpayer under subpart C shall be increased by an amount equal to 25 percent of the excess (if any) of— (A)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (B)the amount of the credit allowable under subsection (a) (determined without regard to this subsection and section 26(a) or subsection (d), as the case may be).

The amount of the credit allowed under this subsection shall not be treated as a credit allowed under this subpart and shall reduce the amount of credit otherwise allowable under subsection (a) without regard to section 26(a)(2) or subsection (d), as the case may be.

(2)

Application of subsection

This subsection shall apply only with respect to the first 5 taxable years of an eligible small business (including the taxable years of any predecessor in interest). (f)

Special rules

For purposes of this section— (1)

Controlled groups

All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single person. (2)

Denial of double benefit

(A)

Coordination with other provisions

Any amount taken into account under subsection (a) shall not be taken into account in determining any deduction or other credit allowed under this chapter. (B)

Reduction in basis

For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed and attributable to such property. (3)

Special rule for pass-thru of credit

In the case of an individual who— (A)owns an interest in an unincorporated trade or business, (B)is a partner in a partnership, (C)is a beneficiary of an estate or trust, or (D)is a shareholder in an S corporation,

the amount determined under subsection (a) for any taxable year shall not exceed an amount (separately computed with respect to such person’s interest in such trade or business or entity) equal to the amount of tax attributable to that portion of a person’s taxable income which is allocable or apportionable to the person’s interest in such trade or business or entity.

(g)

Termination

Subsection (a) shall not apply to taxable years beginning after December 31, 2015.

(b)

Conforming amendments

(1)Section 24(b)(3)(B) of such Code is amended by striking and 30D and inserting 30D, and 30E. (2)Section 25(e)(1)(C)(ii) of such Code is amended by inserting 30E, after 30D,. (3)Section 25A(i)(5)(B) of such Code is amended by striking and 30D and inserting 30D, and 30E. (4)Section 25B(g)(2) of such Code is amended by striking and 30D and inserting 30D, and 30E. (5)Section 26(a)(1) of such Code is amended by striking and 30D and inserting 30D, and 30E. (6)Section 904(i) of such Code is amended by striking and 30D and inserting 30D, and 30E. (7)Section 1400C(d)(2) of such Code is amended by inserting , and 30E after 30D. (c)

Clerical amendment

The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 30E. Simplified small business research credit.

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2009.