Credit for investments in high technology and biotechnology business concerns developing innovative technologies

(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 after section 30D the following new section:

30E.

Investments in high technology and biotechnology business concerns developing innovative technologies

(a)

Allowance of credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 25 percent of the qualified equity investments made by the taxpayer during the taxable year. (b)

Limitations

(1)

National limitation

(A)

In general

There is a national innovative technology investment credit limitation of $500,000,000. (B)

Allocation of limitation and issuance of certificate

Under regulations, the Administrator of the Small Business Administration shall make allocations of the national innovative technology investment credit limitation among qualified equity investments and shall issue an innovative technology investment credit certificate for each such allocation. (C)

Per business investment limitation

The amount of the national innovative technology investment credit limitation allocated to a qualified technology small business concern shall not exceed 50 percent of the total amount awarded to such concern under the Small Business Innovation Research (SBIR) program under section 9 of the Small Business Act. (D)

Certificate required for credit eligibility

The amount allowed as a credit under subsection (a) with respect to any qualified equity investment shall not exceed the amount of the national innovative technology investment credit limitation allocated to such investment and shown on the innovative technology investment credit certificate pursuant to subparagraph (E)(ii). (E)

Innovative technology investment credit certificate

For purposes of this subsection, an innovative technology investment credit certificate is a certificate which— (i)certifies the amount of the qualified equity investment, (ii)relates such investment to an award under the Small Business Innovation Research (SBIR) program under section 9 of the Small Business Act which qualifies for purposes of this section, and (iii)contains such other information as the Administrator, in consultation with the Secretary, determines to be necessary or appropriate to carry out this section.

The amount of any award under the Small Business Innovation Research program, once related under subparagraph (B) with a qualified equity investment, may not thereafter be available for purposes of this section.

(2)

Limitation based on percentage ownership

The amount of the credit under subsection (a) allowed to the taxpayer with respect to a qualified equity investment in a qualified technology small business concern shall be zero if, after such investment, the taxpayer owns (within the meaning of section 318) 50 percent or more of— (A)in the case that such concern is a corporation, the outstanding stock of the corporation (either by vote or value), and (B)in the case that such concern is not a corporation, the capital and profits interests of such concern. (c)

Qualified equity investment

For purposes of this section— (1)

In general

The term qualified equity investment means any equity investment in a qualified technology small business concern made during the investment period if such investment is acquired by the taxpayer at its original issue (directly or through an underwriter) solely in exchange for cash. (2)

Equity investment

The term equity investment means— (A)any stock (other than nonqualified preferred stock, as defined in section 351(g)(2)) in an entity which is a corporation, and (B)any capital or profits interest in an entity which is not a corporation. (3)

Qualified technology small business concern

The term qualified technology small business concern means, with respect to any taxable year, any small business concern (as defined in section 3 of the Small Business Act) if such concern— (A)is engaged in a high technology or biotechnology trade or business, and (B)employs an average of fewer than 500 employees on business days during such year. (4)

Investment period

The term investment period means the period— (A)beginning on the date the qualified technology small business concern first receives funds pursuant to a funding agreement under the Small Business Innovation Research (SBIR) program under section 9 of the Small Business Act, and (B)ending on the last day of the 18-month period beginning on the date on which such funding agreement ceases to be in effect. (d)

Application with other credits

(1)

Business credit treated as part of general business credit

Except as provided in paragraph (2), the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)). (2)

Personal credit

(A)

In general

In the case of an individual who elects the application of this paragraph, for purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year. (B)

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 subpart A for any taxable year (determined after application of paragraph (1)) by reason of subparagraph (A) shall not exceed the excess of— (i)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (ii)the sum of the credits allowable under subpart A (other than this section) and section 27 for the taxable year. (C)

Carryforward of unused credit

If the credit allowable under subsection (a) by reason of subparagraph (A) exceeds the limitation imposed by section 26(a)(1) or subparagraph (B), whichever is applicable, for such taxable year, reduced by the sum of the credits allowable under subpart A (other than this section) for such taxable year, such excess shall be carried to each of the succeeding 20 taxable years to the extent that such unused credit may not be taken into account under subsection (a) by reason of subparagraph (A) for a prior taxable year because of such limitation. (e)

Special rules

(1)

Related parties

For purposes of this section— (A)

In general

All related persons shall be treated as 1 person. (B)

Related persons

A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b). (2)

Basis

For purposes of this subtitle, the basis of any investment with respect to which a credit is allowable under this section shall be reduced by the amount of such credit so allowed. (3)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any qualified equity investment which is held by the taxpayer less than 3 years, except that no benefit shall be recaptured in the case of— (A)transfer of such investment by reason of the death of the taxpayer, (B)transfer between spouses, or (C)transfer incident to the divorce (as defined in section 1041) of such taxpayer. (f)

Regulations

The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations— (1)which prevent the abuse of the purposes of this section, and (2)which impose appropriate reporting requirements.

(b)

Credit made part of general business credit

Subsection (b) of section 38 of such Code (relating to current year business credit) is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)the portion of the qualified equity investment credit to which section 30E(d)(1) applies.

(c)

Conforming amendments

(1)Section 1016(a) of such Code is amended by striking and at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting , and, and by inserting after paragraph (37) the following new paragraph:

(38)to the extent provided in section 30E(d)(2).

(2)Section 24(b)(3)(B) of such Code is amended by striking and 30D and inserting 30D, and 30E. (3)Section 25(e)(1)(C)(ii) of such Code is amended by inserting 30E, after 30D,. (4)Section 25A(i)(5)(B) of such Code is amended by striking and 30D and inserting , 30D, and 30E. (5)Section 25A(i)(5) of such Code is amended by inserting 30E, after 30D,. (6)Section 25B(g)(2) of such Code is amended by striking and 30D and inserting 30D, and 30E. (7)Section 26(a)(1) of such Code is amended by striking and 30D and inserting 30D, and 30E. (8)Section 30(c)(2)(B)(ii) of such Code is amended by striking and 30D and inserting , 30D, and 30E. (9)Section 30B(g)(2)(B)(ii) of such Code is amended by striking and 30D and inserting 30D, and 30E. (10)Section 30D(d)(2)(B)(ii) of such Code is amended by striking and 25D and inserting , 25D, and 30E. (11)Section 904(i) of such Code is amended by striking and 30D and inserting 30D, and 30E. (12)Section 1400C(d)(2) of such Code is amended by striking and 30D and inserting 30D, and 30E. (d)

Clerical amendment

The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 30D the following new item:

Sec. 30E. Investments in high technology and biotechnology business concerns developing innovative technologies.

(e)

Effective date

The amendments made by this section shall apply to investments made after December 31, 2009, in taxable years ending after such date.