II 112th CONGRESS 2d Session S. 3307 IN THE SENATE OF THE UNITED STATES June 18, 2012 Mr. Brown of Ohio (for himself and Mr. Casey) 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 make permanent the credit for increasing research activities, to increase such credit for amounts paid or incurred for qualified research occurring in the United States, and to increase the domestic production activities deduction for the manufacture of property substantially all of the research and development of which occurred in the United States, and for other purposes.

1.

Short title

This Act may be cited as the 21st Century Investment Act of 2012.

2.

Research credit made permanent

(a)

In general

Section 41 of the Internal Revenue Code of 1986 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 subsection shall apply to amounts paid or incurred after December 31, 2011.

3.

Increase in simplified research credit

(a)

In general

Subparagraph (A) of section 41(c)(5) of the Internal Revenue Code of 1986 is amended by striking 14 percent (12 percent in the case of taxable years ending before January 1, 2009) and inserting 20 percent. (b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2011.

4.

Increase in research credit for research with United States businesses

(a)

In general

Section 41 of the Internal Revenue Code of 1986, as amended by section 2 of this Act, is amended by redesignating subsection (h) as subsection (i) and by inserting after subsection (g) the following new subsection: (h)

Special rule for research with United States manufacturing business

(1)

In general

If the taxpayer elects the application of this subsection, subsection (a)(1) shall be applied by substituting 25 percent for 20 percent with respect to qualified United States research expenses. (2)

Qualified United States research expenses

For purposes of this subsection, the term qualified United States research expenses means qualified research expenses for qualified research, substantially all of which occurs in the United States. (3)

Separate application of section

In the case of any election of the application of this subsection, this section shall be applied separately with respect to qualified United States research expenses. . (b)

Effective date

The amendments made by this section shall apply to amounts paid or incurred for taxable years beginning after the date of the enactment of this Act.

5.

Increase in domestic production activities deduction for manufactured property researched and developed in United States

(a)

In general

Subsection (d) of section 199 of the Internal Revenue Code of 1986 is amended by redesignating paragraph (10) as paragraph (11) and by inserting after paragraph (9) the following new paragraph: (10)

Special rule for certain manufacturing

(A)

In general

In the case qualified production activities income attributable to the manufacture or production of qualifying production property substantially all of the research and development of which occurred in the United States, subsection (a) shall be applied by substituting 15 percent for 9 percent. (B)

Special rule when taxable income used to determine deduction

In the case of any taxable year for which the taxpayer’s qualified production activities income exceeds the taxpayer’s taxable income (determined without regard to this section), the amount of taxable income to which the 15 percent amount in subparagraph (A) applies under subsection (a)(1) shall be an amount equal to the amount which bears the same ratio to such taxable income (as so determined) as— (i)the amount of qualified production activities income of the taxpayer for the taxable year which is attributable to the manufacture or production of qualifying production property substantially all of the research and development with respect to which occurred in the United States, bears to (ii)all qualified production activities income of the taxpayer for the taxable year. (C)

Termination

This paragraph shall not apply to taxable years beginning after December 31, 2020. . (b)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.