Internal Revenue Code:Sec. 41. Credit for increasing research activities
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart D - Business Related Credits
Statute
Sec. 41. Credit for increasing research activities
(a) General rule
For purposes of section 38, the research credit determined under
this section for the taxable year shall be an amount equal to the
sum of -
(1) 20 percent of the excess (if any) of -
(A) the qualified research expenses for the taxable year,
over
(B) the base amount,
(2) 20 percent of the basic research payments determined under
subsection (e)(1)(A), and
(3) 20 percent of the amounts paid or incurred by the
taxpayer in carrying on any trade or business of the
taxpayer during the taxable year (including as
contributions) to an energy research consortium.
(b) Qualified research expenses
For purposes of this section -
(1) Qualified research expenses
The term ''qualified research expenses'' means the sum of the
following amounts which are paid or incurred by the taxpayer
during the taxable year in carrying on any trade or business of
the taxpayer -
(A) in-house research expenses, and
(B) contract research expenses.
(2) In-house research expenses
(A) In general
The term ''in-house research expenses'' means -
(i) any wages paid or incurred to an employee for qualified
services performed by such employee,
(ii) any amount paid or incurred for supplies used in the
conduct of qualified research, and
(iii) under regulations prescribed by the Secretary, any
amount paid or incurred to another person for the right to
use computers in the conduct of qualified research.
Clause (iii) shall not apply to any amount to the extent that
the taxpayer (or any person with whom the taxpayer must
aggregate expenditures under subsection (f)(1)) receives or
accrues any amount from any other person for the right to use
substantially identical personal property.
(B) Qualified services
The term ''qualified services'' means services consisting of
-
(i) engaging in qualified research, or
(ii) engaging in the direct supervision or direct support
of research activities which constitute qualified research.
If substantially all of the services performed by an individual
for the taxpayer during the taxable year consists of services
meeting the requirements of clause (i) or (ii), the term
''qualified services'' means all of the services performed by
such individual for the taxpayer during the taxable year.
(C) Supplies
The term ''supplies'' means any tangible property other than
-
(i) land or improvements to land, and
(ii) property of a character subject to the allowance for
depreciation.
(D) Wages
(i) In general
The term ''wages'' has the meaning given such term by
section 3401(a).
(ii) Self-employed individuals and owner-employees
In the case of an employee (within the meaning of section
401(c)(1)), the term ''wages'' includes the earned income (as
defined in section 401(c)(2)) of such employee.
(iii) Exclusion for wages to which work opportunity credit
applies
The term ''wages'' shall not include any amount taken into
account in determining the work opportunity credit under
section 51(a).
(3) Contract research expenses
(A) In general
The term ''contract research expenses'' means 65 percent of
any amount paid or incurred by the taxpayer to any person
(other than an employee of the taxpayer) for qualified
research.
(B) Prepaid amounts
If any contract research expenses paid or incurred during any
taxable year are attributable to qualified research to be
conducted after the close of such taxable year, such amount
shall be treated as paid or incurred during the period during
which the qualified research is conducted.
(C) Amounts paid to certain research consortia
(i) In general
Subparagraph (A) shall be applied by substituting ''75
percent'' for ''65 percent'' with respect to amounts paid or
incurred by the taxpayer to a qualified research consortium
for qualified research on behalf of the taxpayer and 1 or
more unrelated taxpayers. For purposes of the preceding
sentence, all persons treated as a single employer under
subsection (a) or (b) of section 52 shall be treated as
related taxpayers.
(ii) Qualified research consortium
The term ''qualified research consortium'' means any
organization which -
(I) is described in section 501(c)(3) or 501(c)(6) 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.
(D) AMOUNTS PAID TO ELIGIBLE SMALL BUSINESSES,
UNIVERSITIES, AND FEDERAL LABORATORIES-
(i) IN GENERAL- In the case of amounts paid by the
taxpayer to--
(I) an eligible small business,
(II) an institution of higher education (as defined in
section 3304(f)), or
(III) an organization which is a Federal laboratory,
for qualified research which is energy research,
subparagraph (A) shall be applied by substituting
`100 percent' for `65 percent'.
(ii) ELIGIBLE SMALL BUSINESS- For purposes of this
subparagraph, the term `eligible small business'
means a small business with respect to which the
taxpayer does not own (within the meaning of section
318) 50 percent or more of--
(I) in the case of a corporation, the outstanding
stock of the corporation (either by vote or value),
and
(II) in the case of a small business which is not a
corporation, the capital and profits interests of
the small business.
(iii) SMALL BUSINESS- For purposes of this subparagraph--
(I) IN GENERAL- The term `small business' means, with
respect to any calendar year, any person if the annual
average number of employees employed by such person
during either of the 2 preceding calendar years was
500 or fewer. For purposes of the preceding sentence,
a preceding calendar year may be taken into account
only if the person was in existence throughout the
year.
(II) STARTUPS, CONTROLLED GROUPS, AND PREDECESSORS-
Rules similar to the rules of subparagraphs (B) and
(D) of section 220(c)(4) shall apply for purposes of
this clause.
(iv) FEDERAL LABORATORY- For purposes of this subparagraph,
the term `Federal laboratory' has the meaning given
such term by section 4(6) of the Stevenson-Wydler
Technology Innovation Act of 1980 (15 U.S.C. 3703(6)),
as in effect on the date of the enactment of the Energy
Tax Incentives Act of 2005.'.
(4) Trade or business requirement disregarded for in-house
research expenses of certain startup ventures
In the case of in-house research expenses, a taxpayer shall be
treated as meeting the trade or business requirement of paragraph
(1) if, at the time such in-house research expenses are paid or
incurred, the principal purpose of the taxpayer in making such
expenditures is to use the results of the research in the active
conduct of a future trade or business -
(A) of the taxpayer, or
(B) of 1 or more other persons who with the taxpayer are
treated as a single taxpayer under subsection (f)(1).
(c) Base amount
(1) In general
The term ''base amount'' means the product of -
(A) the fixed-base percentage, and
(B) the average annual gross receipts of the taxpayer for the
4 taxable years preceding the taxable year for which the credit
is being determined (hereinafter in this subsection referred to
as the ''credit year'').
(2) Minimum base amount
In no event shall the base amount be less than 50 percent of
the qualified research expenses for the credit year.
(3) Fixed-base percentage
(A) In general
Except as otherwise provided in this paragraph, the
fixed-base percentage is the percentage which the aggregate
qualified research expenses of the taxpayer for taxable years
beginning after December 31, 1983, and before January 1, 1989,
is of the aggregate gross receipts of the taxpayer for such
taxable years.
(B) Start-up companies
(i) Taxpayers to which subparagraph applies
The fixed-base percentage shall be determined under this
subparagraph if -
(I) the first taxable year in which a taxpayer had both
gross receipts and qualified research expenses begins after
December 31, 1983, or
(II) there are fewer than 3 taxable years beginning after
December 31, 1983, and before January 1, 1989, in which the
taxpayer had both gross receipts and qualified research
expenses.
(ii) Fixed-base percentage
In a case to which this subparagraph applies, the
fixed-base percentage is -
(I) 3 percent for each of the taxpayer's 1st 5 taxable
years beginning after December 31, 1993, for which the
taxpayer has qualified research expenses,
(II) in the case of the taxpayer's 6th such taxable year,
1/6 of the percentage which the aggregate qualified
research expenses of the taxpayer for the 4th and 5th such
taxable years is of the aggregate gross receipts of the
taxpayer for such years,
(III) in the case of the taxpayer's 7th such taxable
year, 1/3 of the percentage which the aggregate qualified
research expenses of the taxpayer for the 5th and 6th such
taxable years is of the aggregate gross receipts of the
taxpayer for such years,
(IV) in the case of the taxpayer's 8th such taxable year,
1/2 of the percentage which the aggregate qualified
research expenses of the taxpayer for the 5th, 6th, and 7th
such taxable years is of the aggregate gross receipts of
the taxpayer for such years,
(V) in the case of the taxpayer's 9th such taxable year,
2/3 of the percentage which the aggregate qualified
research expenses of the taxpayer for the 5th, 6th, 7th,
and 8th such taxable years is of the aggregate gross
receipts of the taxpayer for such years,
(VI) in the case of the taxpayer's 10th such taxable
year, 5/6 of the percentage which the aggregate qualified
research expenses of the taxpayer for the 5th, 6th, 7th,
8th, and 9th such taxable years is of the aggregate gross
receipts of the taxpayer for such years, and
(VII) for taxable years thereafter, the percentage which
the aggregate qualified research expenses for any 5 taxable
years selected by the taxpayer from among the 5th through
the 10th such taxable years is of the aggregate gross
receipts of the taxpayer for such selected years.
(iii) Treatment of de minimis amounts of gross receipts and
qualified research expenses
The Secretary may prescribe regulations providing that de
minimis amounts of gross receipts and qualified research
expenses shall be disregarded under clauses (i) and (ii).
(C) Maximum fixed-base percentage
In no event shall the fixed-base percentage exceed 16
percent.
(D) Rounding
The percentages determined under subparagraphs (A) and
(B)(ii) shall be rounded to the nearest 1/100th of 1 percent.
(4) Election of alternative incremental credit
(A) In general
At the election of the taxpayer, the credit determined under
subsection (a)(1) shall be equal to the sum of -
(i) 3 percent of so much of the qualified research
expenses for the taxable year as exceeds 1 percent of the
average described in subsection (c)(1)(B) but does not exceed
1.5 percent of such average,
(ii) 4 percent of so much of such expenses as exceeds 1.5
percent of such average but does not exceed 2 percent of such
average, and
(iii) 5 percent of so much of such expenses as exceeds 2
percent of such average.
(B) 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.
(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 one 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) <<NOTE: Applicability.>> 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.
(6) Consistent treatment of expenses required
(A) In general
Notwithstanding whether the period for filing a claim for
credit or refund has expired for any taxable year taken into
account in determining the fixed-base percentage, the qualified
research expenses taken into account in computing such
percentage shall be determined on a basis consistent with the
determination of qualified research expenses for the credit
year.
(B) Prevention of distortions
The Secretary may prescribe regulations to prevent
distortions in calculating a taxpayer's qualified research
expenses or gross receipts caused by a change in accounting
methods used by such taxpayer between the current year and a
year taken into account in computing such taxpayer's fixed-base
percentage.
(7) Gross receipts
For purposes of this subsection, gross receipts for any taxable
year shall be reduced by returns and allowances made during the
taxable year. In the case of a foreign corporation, there shall
be taken into account only gross receipts which are effectively
connected with the conduct of a trade or business within the
United States, the Commonwealth of Puerto Rico, or any possession
of the United States.
(d) Qualified research defined
For purposes of this section -
(1) In general
The term ''qualified research'' means research -
(A) with respect to which expenditures may be treated as
expenses under section 174,
(B) which is undertaken for the purpose of discovering
information -
(i) which is technological in nature, and
(ii) the application of which is intended to be useful in
the development of a new or improved business component of
the taxpayer, and
(C) substantially all of the activities of which constitute
elements of a process of experimentation for a purpose
described in paragraph (3).
Such term does not include any activity described in paragraph
(4).
(2) Tests to be applied separately to each business component
For purposes of this subsection -
(A) In general
Paragraph (1) shall be applied separately with respect to
each business component of the taxpayer.
(B) Business component defined
The term ''business component'' means any product, process,
computer software, technique, formula, or invention which is to
be -
(i) held for sale, lease, or license, or
(ii) used by the taxpayer in a trade or business of the
taxpayer.
(C) Special rule for production processes
Any plant process, machinery, or technique for commercial
production of a business component shall be treated as a
separate business component (and not as part of the business
component being produced).
(3) Purposes for which research may qualify for credit
For purposes of paragraph (1)(C) -
(A) In general
Research shall be treated as conducted for a purpose
described in this paragraph if it relates to -
(i) a new or improved function,
(ii) performance, or
(iii) reliability or quality.
(B) Certain purposes not qualified
Research shall in no event be treated as conducted for a
purpose described in this paragraph if it relates to style,
taste, cosmetic, or seasonal design factors.
(4) Activities for which credit not allowed
The term ''qualified research'' shall not include any of the
following:
(A) Research after commercial production
Any research conducted after the beginning of commercial
production of the business component.
(B) Adaptation of existing business components
Any research related to the adaptation of an existing
business component to a particular customer's requirement or
need.
(C) Duplication of existing business component
Any research related to the reproduction of an existing
business component (in whole or in part) from a physical
examination of the business component itself or from plans,
blueprints, detailed specifications, or publicly available
information with respect to such business component.
(D) Surveys, studies, etc.
Any -
(i) efficiency survey,
(ii) activity relating to management function or technique,
(iii) market research, testing, or development (including
advertising or promotions),
(iv) routine data collection, or
(v) routine or ordinary testing or inspection for quality
control.
(E) Computer software
Except to the extent provided in regulations, any research
with respect to computer software which is developed by (or for
the benefit of) the taxpayer primarily for internal use by the
taxpayer, other than for use in -
(i) an activity which constitutes qualified research
(determined with regard to this subparagraph), or
(ii) a production process with respect to which the
requirements of paragraph (1) are met.
(F) Foreign research
Any research conducted outside the United States, the
Commonwealth of Puerto Rico, or any possession of the United
States.
(G) Social sciences, etc.
Any research in the social sciences, arts, or humanities.
(H) Funded research
Any research to the extent funded by any grant, contract, or
otherwise by another person (or governmental entity).
(e) Credit allowable with respect to certain payments to qualified
organizations for basic research
For purposes of this section -
(1) In general
In the case of any taxpayer who makes basic research payments
for any taxable year -
(A) the amount of basic research payments taken into account
under subsection (a)(2) shall be equal to the excess of -
(i) such basic research payments, over
(ii) the qualified organization base period amount, and
(B) that portion of such basic research payments which does
not exceed the qualified organization base period amount shall
be treated as contract research expenses for purposes of
subsection (a)(1).
(2) Basic research payments defined
For purposes of this subsection -
(A) In general
The term ''basic research payment'' means, with respect to
any taxable year, any amount paid in cash during such taxable
year by a corporation to any qualified organization for basic
research but only if -
(i) such payment is pursuant to a written agreement between
such corporation and such qualified organization, and
(ii) such basic research is to be performed by such
qualified organization.
(B) Exception to requirement that research be performed by the
organization
In the case of a qualified organization described in
subparagraph (C) or (D) of paragraph (6), clause (ii) of
subparagraph (A) shall not apply.
(3) Qualified organization base period amount
For purposes of this subsection, the term ''qualified
organization base period amount'' means an amount equal to the
sum of -
(A) the minimum basic research amount, plus
(B) the maintenance-of-effort amount.
(4) Minimum basic research amount
For purposes of this subsection -
(A) In general
The term ''minimum basic research amount'' means an amount
equal to the greater of -
(i) 1 percent of the average of the sum of amounts paid or
incurred during the base period for -
(I) any in-house research expenses, and
(II) any contract research expenses, or
(ii) the amounts treated as contract research expenses
during the base period by reason of this subsection (as in
effect during the base period).
(B) Floor amount
Except in the case of a taxpayer which was in existence
during a taxable year (other than a short taxable year) in the
base period, the minimum basic research amount for any base
period shall not be less than 50 percent of the basic research
payments for the taxable year for which a determination is
being made under this subsection.
(5) Maintenance-of-effort amount
For purposes of this subsection -
(A) In general
The term ''maintenance-of-effort amount'' means, with respect
to any taxable year, an amount equal to the excess (if any) of
-
(i) an amount equal to -
(I) the average of the nondesignated university
contributions paid by the taxpayer during the base period,
multiplied by
(II) the cost-of-living adjustment for the calendar year
in which such taxable year begins, over
(ii) the amount of nondesignated university contributions
paid by the taxpayer during such taxable year.
(B) Nondesignated university contributions
For purposes of this paragraph, the term ''nondesignated
university contribution'' means any amount paid by a taxpayer
to any qualified organization described in paragraph (6)(A) -
(i) for which a deduction was allowable under section 170,
and
(ii) which was not taken into account -
(I) in computing the amount of the credit under this
section (as in effect during the base period) during any
taxable year in the base period, or
(II) as a basic research payment for purposes of this
section.
(C) Cost-of-living adjustment defined
(i) In general
The cost-of-living adjustment for any calendar year is the
cost-of-living adjustment for such calendar year determined
under section 1(f)(3), by substituting ''calendar year 1987''
for ''calendar year 1992'' in subparagraph (B) thereof.
(ii) Special rule where base period ends in a calendar year
other than 1983 or 1984
If the base period of any taxpayer does not end in 1983 or
1984, section 1(f)(3)(B) shall, for purposes of this
paragraph, be applied by substituting the calendar year in
which such base period ends for 1992. Such substitution shall
be in lieu of the substitution under clause (i).
(6) Qualified organization
For purposes of this subsection, the term ''qualified
organization'' means any of the following organizations:
(A) Educational institutions
Any educational organization which -
(i) is an institution of higher education (within the
meaning of section 3304(f)), and
(ii) is described in section 170(b)(1)(A)(ii).
(B) Certain scientific research organizations
Any organization not described in subparagraph (A) 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.
(C) Scientific tax-exempt organizations
Any organization which -
(i) is described in -
(I) section 501(c)(3) (other than a private foundation),
or
(II) section 501(c)(6),
(ii) is exempt from tax under section 501(a),
(iii) is organized and operated primarily to promote
scientific research by qualified organizations described in
subparagraph (A) pursuant to written research agreements, and
(iv) currently expends -
(I) substantially all of its funds, or
(II) substantially all of the basic research payments
received by it,
for grants to, or contracts for basic research with, an
organization described in subparagraph (A).
(D) Certain grant organizations
Any organization not described in subparagraph (B) or (C)
which -
(i) is described in section 501(c)(3) and is exempt from
tax under section 501(a) (other than a private foundation),
(ii) is established and maintained by an organization
established before July 10, 1981, which meets the
requirements of clause (i),
(iii) is organized and operated exclusively for the purpose
of making grants to organizations described in subparagraph
(A) pursuant to written research agreements for purposes of
basic research, and
(iv) makes an election, revocable only with the consent of
the Secretary, to be treated as a private foundation for
purposes of this title (other than section 4940, relating to
excise tax based on investment income).
(7) Definitions and special rules
For purposes of this subsection -
(A) Basic research
The term ''basic research'' means any original investigation
for the advancement of scientific knowledge not having a
specific commercial objective, except that such term shall not
include -
(i) basic research conducted outside of the United States,
and
(ii) basic research in the social sciences, arts, or
humanities.
(B) Base period
The term ''base period'' means the 3-taxable-year period
ending with the taxable year immediately preceding the 1st
taxable year of the taxpayer beginning after December 31, 1983.
(C) Exclusion from incremental credit calculation
For purposes of determining the amount of credit allowable
under subsection (a)(1) for any taxable year, the amount of the
basic research payments taken into account under subsection
(a)(2) -
(i) shall not be treated as qualified research expenses
under subsection (a)(1)(A), and
(ii) shall not be included in the computation of base
amount under subsection (a)(1)(B).
(D) Trade or business qualification
For purposes of applying subsection (b)(1) to this
subsection, any basic research payments shall be treated as an
amount paid in carrying on a trade or business of the taxpayer
in the taxable year in which it is paid (without regard to the
provisions of subsection (b)(3)(B)).
(E) Certain corporations not eligible
The term ''corporation'' shall not include -
(i) an S corporation,
(ii) a personal holding company (as defined in section
542), or
(iii) a service organization (as defined in section
414(m)(3)).
(f) Special rules
(1) Paragraph (6) of section 41(f) (relating to special
rules) is amended by adding at the end the following:
For purposes of this section -
(1) Aggregation of expenditures
(A) Controlled group of corporations
In determining the amount of the credit under this section -
(i) all members of the same controlled group of
corporations shall be treated as a single taxpayer, and
(ii) the credit (if any) allowable by this section to each
such member shall be its proportionate shares of the
qualified research expenses and basic research payments
giving rise to the credit.
(B) Common control
Under regulations prescribed by the Secretary, in determining
the amount of the credit under this section -
(i) all trades or businesses (whether or not incorporated)
which are under common control shall be treated as a single
taxpayer, and
(ii) the credit (if any) allowable by this section to each
such person shall be its proportionate shares of the
qualified research expenses and basic research payments
giving rise to the credit.
The regulations prescribed under this subparagraph shall be
based on principles similar to the principles which apply in
the case of subparagraph (A).
(2) Allocations
(A) Pass-thru in the case of estates and trusts
Under regulations prescribed by the Secretary, rules similar
to the rules of subsection (d) of section 52 shall apply.
(B) Allocation in the case of partnerships
In the case of partnerships, the credit shall be allocated
among partners under regulations prescribed by the Secretary.
(3) Adjustments for certain acquisitions, etc.
Under regulations prescribed by the Secretary -
(A) Acquisitions
If, after December 31, 1983, a taxpayer acquires the major
portion of a trade or business of another person (hereinafter
in this paragraph referred to as the ''predecessor'') or the
major portion of a separate unit of a trade or business of a
predecessor, then, for purposes of applying this section for
any taxable year ending after such acquisition, the amount of
qualified research expenses paid or incurred by the taxpayer
during periods before such acquisition shall be increased by so
much of such expenses paid or incurred by the predecessor with
respect to the acquired trade or business as is attributable to
the portion of such trade or business or separate unit acquired
by the taxpayer, and the gross receipts of the taxpayer for
such periods shall be increased by so much of the gross
receipts of such predecessor with respect to the acquired trade
or business as is attributable to such portion.
(B) Dispositions
If, after December 31, 1983 -
(i) a taxpayer disposes of the major portion of any trade
or business or the major portion of a separate unit of a
trade or business in a transaction to which subparagraph (A)
applies, and
(ii) the taxpayer furnished the acquiring person such
information as is necessary for the application of
subparagraph (A),
then, for purposes of applying this section for any taxable
year ending after such disposition, the amount of qualified
research expenses paid or incurred by the taxpayer during
periods before such disposition shall be decreased by so much
of such expenses as is attributable to the portion of such
trade or business or separate unit disposed of by the taxpayer,
and the gross receipts of the taxpayer for such periods shall
be decreased by so much of the gross receipts as is
attributable to such portion.
(C) Certain reimbursements taken into account in determining
fixed-base percentage
If during any of the 3 taxable years following the taxable
year in which a disposition to which subparagraph (B) applies
occurs, the disposing taxpayer (or a person with whom the
taxpayer is required to aggregate expenditures under paragraph
(1)) reimburses the acquiring person (or a person required to
so aggregate expenditures with such person) for research on
behalf of the taxpayer, then the amount of qualified research
expenses of the taxpayer for the taxable years taken into
account in computing the fixed-base percentage shall be
increased by the lesser of -
(i) the amount of the decrease under subparagraph (B) which
is allocable to taxable years so taken into account, or
(ii) the product of the number of taxable years so taken
into account, multiplied by the amount of the reimbursement
described in this subparagraph.
(4) Short taxable years
In the case of any short taxable year, qualified research
expenses and gross receipts shall be annualized in such
circumstances and under such methods as the Secretary may
prescribe by regulation.
(5) Controlled group of corporations
The term ''controlled group of corporations'' has the same
meaning given to such term by section 1563(a), except that -
(A) ''more than 50 percent'' shall be substituted for ''at
least 80 percent'' each place it appears in section 1563(a)(1),
and
(B) the determination shall be made without regard to
subsections (a)(4) and (e)(3)(C) of section 1563.
(6) ENERGY RESEARCH CONSORTIUM-
(A) IN GENERAL- The term `energy research consortium'
means any organization--
(i) which is--
(I) described in section 501(c)(3) and is exempt
from tax under section 501(a) and is organized
and operated primarily to conduct energy research,
or
(II) organized and operated primarily to conduct
energy research in the public interest (within
the meaning of section 501(c)(3)),
(ii) which is not a private foundation,
(iii) to which at least 5 unrelated persons paid or
incurred during the calendar year in which the taxable
year of the organization begins amounts (including as
contributions) to such organization for energy
research, and
(iv) to which no single person paid or incurred (including
as contributions) during such calendar year an amount
equal to more than 50 percent of the total amounts
received by such organization during such calendar year
for energy research.
(B) TREATMENT OF PERSONS- All persons treated as a single
employer under subsection (a) or (b) of section 52 shall
be treated as related persons for purposes of
subparagraph (A)(iii) and as a single person for
purposes of subparagraph (A)(iv).
(C) Foreign research.--For purposes of subsection
(a)(3), amounts paid or incurred for any energy research
conducted outside the United States, the Commonwealth of
Puerto Rico, or any possession of the United States
shall not be taken into account.
(D) Denial of double benefit.--Any amount taken
into account under subsection (a)(3) shall not be taken
into account under paragraph (1) or (2) of subsection
(a).
(g) Special rule for pass-thru of credit
In the case of an individual who -
(1) owns an interest in an unincorporated trade or business,
(2) is a partner in a partnership,
(3) is a beneficiary of an estate or trust, or
(4) 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. If the amount
determined under subsection (a) for any taxable year exceeds the
limitation of the preceding sentence, such amount may be carried to
other taxable years under the rules of section 39; except that the
limitation of the preceding sentence shall be taken into account in
lieu of the limitation of section 38(c) in applying section 39.
(h) Termination
(1) In general
This section shall not apply to any amount paid or incurred -
(A) after June 30, 1995, and before July 1, 1996, or
(B) after December 31, 2007.
(2) Computation of base amount
In the case of any taxable year with respect to which this
section applies to a number of days which is less than the total
number of days in such taxable year, the base amount with respect
to such taxable year shall be the amount which bears the same
ratio to the base amount for such year (determined without regard
to this paragraph) as the number of days in such taxable year to
which this section applies bears to the total number of days in
such taxable year.
Sources
(Added Pub. L. 97-34, title II, Sec. 221(a), Aug. 13, 1981, 95
Stat. 241, Sec. 44F; amended Pub. L. 97-354, Sec. 5(a)(3), Oct. 19,
1982, 96 Stat. 1692; Pub. L. 97-448, title I, Sec. 102(b)(2), Jan.
12, 1983, 96 Stat. 2372; renumbered Sec. 30 and amended Pub. L.
98-369, div. A, title IV, Sec. 471(c), 474(i)(1), title VI, Sec.
612(e)(1), July 18, 1984, 98 Stat. 826, 831, 912; renumbered Sec.
41 and amended Pub. L. 99-514, title II, Sec. 231(a)(1), (b), (c),
(d)(2), (3)(C)(ii), (e), title XVIII, Sec. 1847(b)(1), Oct. 22,
1986, 100 Stat. 2173, 2175, 2178-2180, 2856; Pub. L. 100-647, title
I, Sec. 1002(h)(1), title IV, Sec. 4007(a), 4008(b)(1), Nov. 10,
1988, 102 Stat. 3370, 3652; Pub. L. 101-239, title VII, Sec.
7110(a)(1), (b), (b)((c)), 7814(e)(2)(C), Dec. 19, 1989, 103 Stat.
2322, 2323, 2325, 2414; Pub. L. 101-508, title XI, Sec.
11101(d)(1)(C), 11402(a), Nov. 5, 1990, 104 Stat. 1388-405,
1388-473; Pub. L. 102-227, title I, Sec. 102(a), Dec. 11, 1991, 105
Stat. 1686; Pub. L. 103-66, title XIII, Sec. 13111(a)(1), 13112(a),
(b), 13201(b)(3)(C), Aug. 10, 1993, 107 Stat. 420, 421, 459; Pub.
L. 104-188, title I, Sec. 1201(e)(1), (4), 1204(a)-(d), Aug. 20,
1996, 110 Stat. 1772-1774; Pub. L. 105-34, title VI, Sec. 601(a),
(b)(1), Aug. 5, 1997, 111 Stat. 861; Pub. L. 105-277, div. J,
title I, Sec. 1001(a), Oct. 21, 1998, 112 Stat. 2681-888; Pub. L.
106-170, title V, Sec. 502(a)(1), (b)(1), (c)(1), Dec. 17, 1999,
113 Stat. 1919.)
Miscellaneous
PRIOR PROVISIONS
A prior section 41, added Pub. L. 97-34, title III, Sec. 331(a),
Aug. 13, 1981, 95 Stat. 289, Sec. 44G; amended Pub. L. 97-448,
title I, Sec. 103(g)(1), Jan. 12, 1983, 96 Stat. 2379; renumbered
Sec. 41 and amended Pub. L. 98-369, div. A, title I, Sec. 14,
title IV, Sec. 471(c), 474(l), 491(e)(2), (3), July 18, 1984, 98
Stat. 505, 826, 833, 852, 853, related to employee stock ownership
credit, prior to repeal by Pub. L. 99-514, title XI, Sec. 1171(a),
Oct. 22, 1986, 100 Stat. 2513, applicable to compensation paid or
accrued after Dec. 31, 1986, in taxable years ending after such
date, except as otherwise provided, see section 1171(c) of Pub. L.
99-514, set out as an Effective Date of 1986 Amendment note under
section 38 of this title. For transition rules relating to such
repeal, see section 1177 of Pub. L. 99-514, set out as a Transition
Rules note under section 38 of this title.
Another prior section 41 was renumbered section 24 of this title.
AMENDMENTS
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 123. <<NOTE: 26 USC 41 note.>> SPECIAL RULE FOR ELECTIONS UNDER
EXPIRED PROVISIONS.
(a) <<NOTE: Deadline.>> Research Credit Elections.--In the case of
any taxable year ending after December 31, 2005, and before the date of
the enactment of this Act, any election under section 41(c)(4) or
section 280C(c)(3)(C) of the Internal Revenue Code of 1986 shall be
treated as having been timely made for such taxable year if such
election is made not later than the later of April 15, 2007, or such
time as the Secretary of the Treasury, or his designee, may specify.
Such election shall be made in the manner prescribed by such Secretary
or designee.
(b) Other Elections.--Except as otherwise provided by such Secretary
or designee, a rule similar to the rule of subsection (a) shall apply
with respect to elections under any other expired provision of the
Internal Revenue Code of 1986 the applicability of which is extended by
reason of the amendments made by this title.
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 104. EXTENSION AND MODIFICATION OF RESEARCH CREDIT.
(a) Extension.--
(1) In general.--Section 41(h)(1)(B) is amended by striking
``2005'' and inserting ``2007''.
(2) Conforming amendment.--Section 45C(b)(1)(D) is amended
by striking ``2005'' and inserting ``2007''.
(b) Increase in Rates of Alternative Incremental Credit.--
(1) In general.--Subparagraph (A) of section 41(c)(4)
(relating to election of alternative incremental credit) is
amended--
(A) by striking ``2.65 percent'' and inserting ``3
percent'',
(B) by striking ``3.2 percent'' and inserting ``4
percent'', and
(C) by striking ``3.75 percent'' and inserting ``5
percent''.
(3) <<NOTE: 26 USC 41 note.>> Transition rule.--
(A) In general.--In the case of a specified
transitional taxable year for which an election under
section 41(c)(4) of the Internal Revenue Code of 1986
applies, the credit determined under section 41(a)(1) of
such Code shall be equal to the sum of--
(i) the applicable 2006 percentage multiplied
by the amount determined under section 41(c)(4)(A)
of such Code (as in effect for taxable years
ending on December 31, 2006), plus
(ii) the applicable 2007 percentage multiplied
by the amount determined under section 41(c)(4)(A)
of such Code (as in effect for taxable years
ending on January 1, 2007).
(B) Definitions.--For purposes of subparagraph (A)--
(i) Specified transitional taxable year.--The
term ``specified transitional taxable year'' means
any taxable year which ends after December 31,
2006, and which includes such date.
(ii) Applicable 2006 percentage.--The term
``applicable 2006 percentage'' means the number of
days in the specified transitional taxable year
before January 1, 2007, divided by the number of
days in such taxable year.
(iii) Applicable 2007 percentage.--The term
``applicable 2007 percentage'' means the number of
days in the specified transitional taxable year
after December 31, 2006, divided by the number of
days in such taxable year.
(c) Alternative Simplified Credit for Qualified Research Expenses.--
(1) In general.--Subsection (c) of section 41 <<NOTE: 26 USC
41.>> (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 one 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) <<NOTE: Applicability.>> 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.''.
(2) <<NOTE: 26 USC 41 note.>> Transition rule for deemed
revocation of election of alternative incremental credit.--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 January 1, 2007, 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 this subsection) for such year.
(4) <<NOTE: 26 USC 41 note.>> Transition rule for
noncalendar taxable years.--
(A) In general.--In the case of a specified
transitional taxable year for which an election under
section 41(c)(5) of the Internal Revenue Code of 1986
(as added by this subsection) applies, the credit
determined under section 41(a)(1) of such Code shall be
equal to the sum of--
(i) the applicable 2006 percentage multiplied
by the amount determined under section 41(a)(1) of
such Code (as in effect for taxable years ending
on December 31, 2006), plus
(ii) the applicable 2007 percentage multiplied
by the amount determined under section 41(c)(5) of
such Code (as in effect for taxable years ending
on January 1, 2007).
(B) Definitions and special rules.--For purposes of
subparagraph (A)--
(i) Definitions.--Terms used in this paragraph
which are also used in subsection (b)(3) shall
have the respective meanings given such terms in
such subsection.
(ii) Dual elections permitted.--Elections
under paragraphs (4) and (5) of section 41(c) of
such Code may both apply for the specified
transitional taxable year.
(iii) Deferral of deemed election
revocation.--Any election under section 41(c)(4)
of the Internal Revenue Code of 1986 treated as
revoked under paragraph (2) shall be treated as
revoked for the taxable year after the specified
transitional taxable year.
2005 - P.L. 109-135
(l) Amendments Related to Section 1351.--
(1) Paragraph (6) of section 41(f) (relating to special
rules) is amended by adding at the end the following:
``(C) Foreign research.--For purposes of subsection
(a)(3), amounts paid or incurred for any energy research
conducted outside the United States, the Commonwealth of
Puerto Rico, or any possession of the United States
shall not be taken into account.
``(D) Denial of double benefit.--Any amount taken
into account under subsection (a)(3) shall not be taken
into account under paragraph (1) or (2) of subsection
(a).''.
(2) Clause (ii) of section 41(b)(3)(C) is amended by
striking ``(other than an energy research consortium)''.
2005 - Energy Policy Act of 2005, Sec.1351(b),
amended Sec.41(b)(3) by adding a new subparagraph (D).
The amendments made by this section shall apply to
amounts paid or incurred after the date of the enactment
of this Act, in taxable years ending after such date.
2005 - Energy Policy Act of 2005, Sec.1351(a)(2),
amended Sec.41(f) by adding a new paragraph (6).
The amendments made by this section shall apply to
amounts paid or incurred after the date of the enactment
of this Act, in taxable years ending after such date.
2005 - Energy Policy Act of 2005, Sec.1351(a)(1),
amended Sec. 41(a) by adding a new paragraph (3). The
amendments made by this section shall apply to amounts
paid or incurred after the date of the enactment of this
Act, in taxable years ending after such date
2004 - Subsec.301(a),Pub.L.108-311, amended Sec.41(h)(1)(B)
to insert December 31, 2005 and strike June 30, 2004. Effective
Date.--The amendments made by this section shall apply to amounts
paid or incurred after June 30, 2004.
1999 - Subsec. (c)(4)(A)(i). Pub. L. 106-170, Sec. 502(b)(1)(A),
substituted ''2.65 percent'' for ''1.65 percent''.
Subsec. (c)(4)(A)(ii). Pub. L. 106-170, Sec. 502(b)(1)(B),
substituted ''3.2 percent'' for ''2.2 percent''.
Subsec. (c)(4)(A)(iii). Pub. L. 106-170, Sec. 502(b)(1)(C),
substituted ''3.75 percent'' for ''2.75 percent''.
Subsecs. (c)(6), (d)(4)(F). Pub. L. 106-170, Sec. 502(c)(1),
inserted '', the Commonwealth of Puerto Rico, or any possession of
the United States'' before period at end.
Subsec. (h)(1). Pub. L. 106-170, Sec. 502(a)(1)(B), struck out
concluding provisions which read as follows: ''Notwithstanding the
preceding sentence, in the case of a taxpayer making an election
under subsection (c)(4) for its first taxable year beginning after
June 30, 1996, and before July 1, 1997, this section shall apply to
amounts paid or incurred during the 36-month period beginning with
the first month of such year. The 36 months referred to in the
preceding sentence shall be reduced by the number of full months
after June 1996 (and before the first month of such first taxable
year) during which the taxpayer paid or incurred any amount which
is taken into account in determining the credit under this
section.''
Subsec. (h)(1)(B). Pub. L. 106-170, Sec. 502(a)(1)(A),
substituted ''June 30, 2004'' for ''June 30, 1999''.
1998 - Subsec. (h)(1). Pub. L. 105-277 substituted ''June 30,
1999'' for ''June 30, 1998'' in subpar. (B) and substituted
''36-month'' for ''24-month'' and ''36 months'' for ''24 months''
in concluding provisions.
1997 - Subsec. (c)(4)(B). Pub. L. 105-34, Sec. 601(b)(1), amended
heading and text of subpar. (B) generally. Prior to amendment,
text read as follows: ''An election under this paragraph may be
made only for the first taxable year of the taxpayer beginning
after June 30, 1996. Such an election shall apply to the taxable
year for which made and all succeeding taxable years unless revoked
with the consent of the Secretary.''
Subsec. (h)(1). Pub. L. 105-34, Sec. 601(a), substituted ''June
30, 1998'' for ''May 31, 1997'' in subpar. (B) and ''during the
24-month period beginning with the first month of such year. The
24 months referred to in the preceding sentence shall be reduced by
the number of full months after June 1996 (and before the first
month of such first taxable year) during which the taxpayer paid or
incurred any amount which is taken into account in determining the
credit under this section.'' for ''during the first 11 months of
such taxable year.'' in concluding provisions.
1996 - Subsec. (b)(2)(D)(iii). Pub. L. 104-188, Sec. 1201(e)(1),
(4), substituted ''work opportunity credit'' for ''targeted jobs
credit'' in heading and text.
Subsec. (b)(3)(C). Pub. L. 104-188, Sec. 1204(d), added subpar.
(C).
Subsec. (c)(3)(B)(i). Pub. L. 104-188, Sec. 1204(b), reenacted
heading without change and amended text generally. Prior to
amendment, text read as follows: ''The fixed-base percentage shall
be determined under this subparagraph if there are fewer than 3
taxable years beginning after December 31, 1983, and before January
1, 1989, in which the taxpayer had both gross receipts and
qualified research expenses.''
Subsec. (c)(4) to (6). Pub. L. 104-188, Sec. 1204(c), added par.
(4) and redesignated former pars. (4) and (5) as (5) and (6),
respectively.
Subsec. (h). Pub. L. 104-188, Sec. 1204(a), reenacted heading
without change and amended text generally. Prior to amendment,
text read as follows:
''(1) In general. - This section shall not apply to any amount
paid or incurred after June 30, 1995.
''(2) Computation of base amount. - In the case of any taxable
year which begins before July 1, 1995, and ends after June 30,
1995, the base amount with respect to such taxable year shall be
the amount which bears the same ratio to the base amount for such
year (determined without regard to this paragraph) as the number of
days in such taxable year before July 1, 1995, bears to the total
number of days in such taxable year.''
1993 - Subsec. (c)(3)(B)(ii). Pub. L. 103-66, Sec. 13112(a),
amended heading and text of cl. (ii) generally. Prior to
amendment, text read as follows: ''In a case to which this
subparagraph applies, the fixed-base percentage is 3 percent.''
Subsec. (c)(3)(B)(iii). Pub. L. 103-66, Sec. 13112(b)(1),
substituted ''clauses (i) and (ii)'' for ''clause (i)''.
Subsec. (c)(3)(D). Pub. L. 103-66, Sec. 13112(b)(2), substituted
''subparagraphs (A) and (B)(ii)'' for ''subparagraph (A)''.
Subsec. (e)(5)(C). Pub. L. 103-66, Sec. 13201(b)(3)(C),
substituted ''1992'' for ''1989'' in cls. (i) and (ii).
Subsec. (h). Pub. L. 103-66, Sec. 13111(a)(1), substituted ''June
30, 1995'' for ''June 30, 1992'' in pars. (1) and (2) and ''July 1,
1995'' for ''July 1, 1992'' in two places in par. (2).
1991 - Subsec. (h). Pub. L. 102-227 substituted ''June 30, 1992''
for ''December 31, 1991'' in pars. (1) and (2), and ''July 1,
1992'' for ''January 1, 1992'' in two places in par. (2).
1990 - Subsec. (e)(5)(C)(i). Pub. L. 101-508, Sec.
11101(d)(1)(C)(i), inserted before period at end '', by
substituting 'calendar year 1987' for 'calendar year 1989' in
subparagraph (B) thereof''.
Subsec. (e)(5)(C)(ii). Pub. L. 101-508, Sec. 11101(d)(1)(C)(ii),
(iii), substituted ''1989'' for ''1987'' and inserted at end ''Such
substitution shall be in lieu of the substitution under clause
(i).''
Subsec. (h). Pub. L. 101-508, Sec. 11402(a), substituted
''December 31, 1991'' for ''December 31, 1990'' wherever appearing
and ''January 1, 1992'' for ''January 1, 1991'' wherever appearing.
1989 - Subsec. (a)(1)(B). Pub. L. 101-239, Sec. 7110(b)(2)(A),
amended subpar. (B) generally. Prior to amendment, subpar. (B)
read as follows: ''the base period research expenses, and''.
Subsec. (b)(4). Pub. L. 101-239, Sec. 7110(b)((c)), added par.
(4).
Subsec. (c). Pub. L. 101-239, Sec. 7110(b)(1), substituted ''Base
amount'' for ''Base period research expenses'' in heading and
amended text generally, substituting pars. (1) to (5) for former
pars. (1) to (3) which defined ''base period research expenses''
and ''base period'' and prescribed minimum base period research
expenses.
Subsec. (e)(7)(C)(ii). Pub. L. 101-239, Sec. 7110(b)(2)(B),
substituted ''base amount'' for ''base period research expenses''.
Subsec. (f)(1). Pub. L. 101-239, Sec. 7110(b)(2)(C), substituted
''proportionate shares of the qualified research expenses and basic
research payments'' for ''proportionate share of the increase in
qualified research expenses'' in subpars. (A)(ii) and (B)(ii).
Subsec. (f)(3)(A). Pub. L. 101-239, Sec. 7110(b)(2)(D),
substituted ''December 31, 1983'' for ''June 30, 1980'' and
inserted before period at end '', and the gross receipts of the
taxpayer for such periods shall be increased by so much of the
gross receipts of such predecessor with respect to the acquired
trade or business as is attributable to such portion''.
Subsec. (f)(3)(B). Pub. L. 101-239, Sec. 7110(b)(2)(E),
substituted ''December 31, 1983'' for ''June 30, 1980'' in
introductory provisions and inserted before period at end '', and
the gross receipts of the taxpayer for such periods shall be
decreased by so much of the gross receipts as is attributable to
such portion''.
Subsec. (f)(3)(C). Pub. L. 101-239, Sec. 7110(b)(2)(F),
substituted ''Certain reimbursements taken into account in
determining fixed-base percentage'' for ''Increase in base period''
in heading, ''for the taxable years taken into account in computing
the fixed-base percentage shall be increased by the lesser of'' for
''for the base period for such taxable year shall be increased by
the lesser of'' in introductory provisions, and new cls. (i) and
(ii) for former cls. (i) and (ii) which read as follows:
''(i) the amount of the decrease under subparagraph (B) which is
allocable to such base period, or
''(ii) the product of the number of years in the base period,
multiplied by the amount of the reimbursement described in this
subparagraph.''
Subsec. (f)(4). Pub. L. 101-239, Sec. 7110(b)(2)(G), inserted
''and gross receipts'' after ''qualified research expenses''.
Subsec. (h). Pub. L. 101-239, Sec. 7814(e)(2)(C), redesignated
subsec. (i) as (h) and struck out former subsec. (h) which related
to election, time for election, and manner of election by taxpayer
to have research credit not apply for a taxable year.
Subsec. (h)(1). Pub. L. 101-239, Sec. 7110(a)(1)(A), substituted
''December 31, 1990'' for ''December 31, 1989''.
Subsec. (h)(2). Pub. L. 101-239, Sec. 7110(a)(1), substituted
''January 1, 1991'' for ''January 1, 1990'' in two places and
substituted ''December 31, 1990'' for ''December 31, 1989''.
Pub. L. 101-239, Sec. 7110(b)(2)(H), substituted ''base amount''
for ''base period expenses'' in heading and ''the base amount with
respect to such taxable year shall be the amount which bears the
same ratio to the base amount for such year (determined without
regard to this paragraph)'' for ''any amount for any base period
with respect to such taxable year shall be the amount which bears
the same ratio to such amount for such base period'' in text.
Subsec. (i). Pub. L. 101-239, Sec. 7814(e)(2)(C), redesignated
subsec. (i) as (h).
1988 - Subsec. (g). Pub. L. 100-647, Sec. 1002(h)(1), inserted at
end ''If the amount determined under subsection (a) for any taxable
year exceeds the limitation of the preceding sentence, such amount
may be carried to other taxable years under the rules of section
39; except that the limitation of the preceding sentence shall be
taken into account in lieu of the limitation of section 38(c) in
applying section 39.''
Subsec. (h). Pub. L. 100-647, Sec. 4008(b)(1), added subsec. (h).
Former subsec. (h) redesignated (i).
Subsec. (i). Pub. L. 100-647, Sec. 4008(b)(1), redesignated
former subsec. (h) as (i).
Pub. L. 100-647, Sec. 4007(a), substituted ''1989'' and ''1990''
for ''1988'' and ''1989'', respectively, wherever appearing in
subsec. (h), prior to redesignation as subsec. (i) by Pub. L.
100-647, Sec. 4008(b)(1).
1986 - Pub. L. 99-514, Sec. 231(d)(2), renumbered section 30 of
this title as this section.
Subsec. (a). Pub. L. 99-514, Sec. 231(c)(1), amended subsec. (a)
generally. Prior to amendment, subsec. (a) read as follows:
''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 excess (if any) of -
''(1) the qualified research expenses for the taxable year,
over
''(2) the base period research expenses.''
Subsec. (b)(2)(A)(iii). Pub. L. 99-514, Sec. 231(e), amended cl.
(iii) generally. Prior to amendment, cl. (iii) read as follows:
''any amount paid or incurred to another person for the right to
use personal property in the conduct of qualified research.''
Subsec. (b)(2)(D)(iii). Pub. L. 99-514, Sec. 1847(b)(1),
substituted ''targeted jobs credit'' for ''new jobs or WIN credit''
in heading.
Subsec. (d). Pub. L. 99-514, Sec. 231(b), inserted ''defined'' in
heading and amended text generally. Prior to amendment, text read
as follows: ''For purposes of this section the term 'qualified
research' has the same meaning as the term research or experimental
has under section 174, except that such term shall not include -
''(1) qualified research conducted outside the United States,
''(2) qualified research in the social sciences or humanities,
and
''(3) qualified research to the extent funded by any grant,
contract, or otherwise by another person (or any governmental
entity).''
Subsec. (e). Pub. L. 99-514, Sec. 231(c)(2), amended subsec. (e)
generally, substituting ''Credit allowable with respect to certain
payments to qualified organizations for basic research'' for
''Credit available with respect to certain basic research by
colleges, universities, and certain research organizations'' in
heading, and restating and expanding provisions of former pars. (1)
to (4) into new pars. (1) to (7).
Subsec. (g). Pub. L. 99-514, Sec. 231(d)(3)(C)(ii), amended
subsec. (g) generally, substituting provisions relating to special
rule for pass-thru of credit for provisions relating to limitation
on amount of credit for research based on amount of tax liability.
Subsec. (h). Pub. L. 99-514, Sec. 231(a)(1), added subsec. (h).
1984 - Pub. L. 98-369, Sec. 471(c), renumbered section 44F of
this title as this section.
Subsec. (b)(2)(D)(iii). Pub. L. 98-369, Sec. 474(i)(1)(A),
substituted ''in determining the targeted jobs credit under section
51(a)'' for ''in computing the credit under section 40 or 44B''.
Subsec. (g)(1)(A). Pub. L. 98-369, Sec. 612(e)(1), substituted
''section 26(b)'' for ''section 25(b)''.
Pub. L. 98-369, Sec. 474(i)(1)(B), amended subpar. (A) generally,
substituting ''shall not exceed the taxpayer's tax liability for
the taxable year (as defined in section 25(b)), reduced by the sum
of the credits allowable under subpart A and sections 27, 28, and
29'' for ''shall not exceed the amount of the tax imposed by this
chapter reduced by the sum of the credits allowable under a section
of this part having a lower number or letter designation than this
section, other than the credits allowable by sections 31, 39, and
43. For purposes of the preceding sentence, the term 'tax imposed
by this chapter' shall not include any tax treated as not imposed
by this chapter under the last sentence of section 53(a)''.
1983 - Subsec. (b)(2)(A). Pub. L. 97-448 inserted provision that
cl. (iii) would not apply to any amount to the extent that the
taxpayer (or any person with whom the taxpayer must aggregate
expenditures under subsection (f)(1)) received or accrued any
amount from any other person for the right to use substantially
identical personal property.
1982 - Subsec. (f)(2)(A). Pub. L. 97-354, Sec. 5(a)(3)(A),
substituted ''Pass-thru in the case of estates and trusts'' for
''Pass-through in the case of subchapter S corporations, etc.'' in
subpar. heading, and substituted provisions relating to the
applicability of rules similar to rules of subsec. (d) of section
52 for provisions relating to the applicability of rules similar to
rules of subsecs. (d) and (e) of section 52.
Subsec. (g)(1)(B)(iv). Pub. L. 97-354, Sec. 5(a)(3)(B),
substituted ''an S corporation'' for ''an electing small business
corporation (within the meaning of section 1371(b))''.
EFFECTIVE DATE OF 2006 AMENDMENT
2006 - Tax Relief and Health Care Act of 2006 (P.L. 109-432)
SEC. 104. EXTENSION AND MODIFICATION OF RESEARCH CREDIT.
(a)(3) <<NOTE: 26 USC 41 note.>> Effective date.--Except as
provided in paragraph (3), the amendments made by this
subsection shall apply to taxable years ending after December
31, 2006.
(b)(2) <<NOTE: 26 USC 41 note.>> Effective date.--Except as
provided in paragraph (3), the amendments made by this
subsection shall apply to taxable years ending after December
31, 2006.
(c)(3) <<NOTE: 26 USC 41 note.>> Effective date.--Except as
provided in paragraph (4), the amendments made by this
subsection shall apply to taxable years ending after December
31, 2006.
EFFECTIVE DATE OF 1999 AMENDMENT
Pub. L. 106-170, title V, Sec. 502(a)(3), Dec. 17, 1999, 113
Stat. 1919, provided that: ''The amendments made by this subsection
(amending this section and section 45C of this title) shall apply
to amounts paid or incurred after June 30, 1999.''
Pub. L. 106-170, title V, Sec. 502(b)(2), Dec. 17, 1999, 113
Stat. 1919, provided that: ''The amendments made by this subsection
(amending this section) shall apply to taxable years beginning
after June 30, 1999.''
Pub. L. 106-170, title V, Sec. 502(c)(3), Dec. 17, 1999, 113
Stat. 1920, provided that: ''The amendments made by this subsection
(amending this section and section 280C of this title) shall apply
to amounts paid or incurred after June 30, 1999.''
EFFECTIVE DATE OF 1998 AMENDMENT
Pub. L. 105-277, div. J, title I, Sec. 1001(c), Oct. 21, 1998,
112 Stat. 2681-888, provided that: ''The amendments made by this
section (amending this section and section 45C of this title) shall
apply to amounts paid or incurred after June 30, 1998.''
EFFECTIVE DATE OF 1997 AMENDMENT
Section 601(c) of Pub. L. 105-34 provided that: ''The amendments
made by this section (amending this section and section 45C of this
title) shall apply to amounts paid or incurred after May 31,
1997.''
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1201(e)(1), (4) of Pub. L. 104-188
applicable to individuals who begin work for the employer after
Sept. 30, 1996, see section 1201(g) of Pub. L. 104-188, set out as
a note under section 38 of this title.
Section 1204(f) of Pub. L. 104-188 provided that:
''(1) In general. - Except as provided in paragraph (2), the
amendments made by this section (amending this section and section
28 (now 45C) of this title) shall apply to taxable years ending
after June 30, 1996.
''(2) Subsections (c) and (d). - The amendments made by
subsections (c) and (d) (amending this section) shall apply to
taxable years beginning after June 30, 1996.
''(3) Estimated tax. - The amendments made by this section shall
not be taken into account under section 6654 or 6655 of the
Internal Revenue Code of 1986 (relating to failure to pay estimated
tax) in determining the amount of any installment required to be
paid for a taxable year beginning in 1997.''
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by section 13111(a)(1) of Pub. L. 103-66 applicable to
taxable years ending after June 30, 1992, see section 13111(c) of
Pub. L. 103-66, set out as a note under section 45C of this title.
Section 13112(c) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section) shall apply
to taxable years beginning after December 31, 1993.''
Amendment by section 13201(b)(3)(C) of Pub. L. 103-66 applicable
to taxable years beginning after Dec. 31, 1992, see section
13201(c) of Pub. L. 103-66, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1991 AMENDMENT
Amendment by Pub. L. 102-227 applicable to taxable years ending
after Dec. 31, 1991, see section 102(c) of Pub. L. 102-227, set out
as a note under section 45C of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by section 11101(d)(1)(C) of Pub. L. 101-508 applicable
to taxable years beginning after Dec. 31, 1990, see section
11101(e) of Pub. L. 101-508, set out as a note under section 1 of
this title.
Amendment by section 11402(a) of Pub. L. 101-508 applicable to
taxable years beginning after Dec. 31, 1989, see section 11402(c)
of Pub. L. 101-508, set out as a note under section 45C of this
title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7110(e) of Pub. L. 101-239 provided that: ''The
amendments made by this section (amending this section and sections
28, 174, 196, and 280C of this title) (other than subsection (a)
(amending this section and section 28 of this title)) shall apply
to taxable years beginning after December 31, 1989.''
Amendment by section 7814(e)(2)(C) of Pub. L. 101-239 effective,
except as otherwise provided, as if included in the provision of
the Technical and Miscellaneous Revenue Act of 1988, Pub. L.
100-647, to which such amendment relates, see section 7817 of Pub.
L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1002(h)(1) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 4008(d) of Pub. L. 100-647 provided that: ''The
amendments made by this section (amending this section and sections
28, 196, 280C, and 6501 of this title) shall apply to taxable years
beginning after December 31, 1988.''
EFFECTIVE DATE OF 1986 AMENDMENT
Section 231(g) of Pub. L. 99-514 provided that:
''(1) In general. - Except as provided in this subsection (2),
the amendments made by this section (amending this section and
sections 28, 38, 39, 108, 170, 280C, 381, 936, 6411, and 6511 of
this title, renumbering former section 30 of this title as this
section, and enacting and amending provisions set out as notes
under this section) shall apply to taxable years beginning after
December 31, 1985.
''(2) Subsection (a). - The amendments made by subsection (a)
(amending this section and provisions set out as a note under this
section) shall apply to taxable years ending after December 31,
1985.
''(3) Basic research. - Section 41(a)(2) of the Internal Revenue
Code of 1986 (as added by this section), and the amendments made by
subsection (c)(2) (amending this section), shall apply to taxable
years beginning after December 31, 1986.''
Amendment by section 1847(b)(1) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(i)(1) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 612(e)(1) of Pub. L. 98-369 applicable to
interest paid or accrued after Dec. 31, 1984, on indebtedness
incurred after Dec. 31, 1984, see section 612(g) of Pub. L. 98-369,
set out as an Effective Date note under section 25 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Section 102(h)(2) of Pub. L. 97-448 provided that the amendment
made by that section is effective only with respect to amounts paid
or incurred after March 31, 1982.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-354 applicable to taxable years beginning
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as
an Effective Date note under section 1361 of this title.
EFFECTIVE DATE
Section 221(d) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, title II, Sec. 231(a)(2), Oct. 22, 1986, 100 Stat. 2095,
2173, provided that:
''(1) In general. - The amendments made by this section (enacting
this section of amending sections 55, 381, 383, 6096, 6411, and
6511 of this title) shall apply to amounts paid or incurred after
June 30, 1981.
''(2) Transitional rule. -
''(A) In general. - If, with respect to the first taxable year
to which the amendments made by this section apply and which ends
in 1981 or 1982, the taxpayer may only take into account
qualified research expenses paid or incurred during a portion of
such taxable year, the amount of the qualified research expenses
taken into account for the base period of such taxable year shall
be the amount which bears the same ratio to the total qualified
research expenses for such base period as the number of months in
such portion of such taxable year bears to the total number of
months in such taxable year.
''(B) Definitions. - For purposes of the preceding sentence,
the terms 'qualified research expenses' and 'base period' have
the meanings given to such terms by section 44F (now 41) of the
Internal Revenue Code of 1986 (formerly I.R.C. 1954) (as added by
this section).''
SPECIAL RULE FOR CREDIT ATTRIBUTABLE TO SUSPENSION PERIODS
Pub. L. 106-170, title V, Sec. 502(d), Dec. 17, 1999, 113 Stat.
1920, provided that:
''(1) In general. - For purposes of the Internal Revenue Code of
1986, the credit determined under section 41 of such Code which is
otherwise allowable under such Code -
''(A) shall not be taken into account prior to October 1, 2000,
to the extent such credit is attributable to the first suspension
period; and
''(B) shall not be taken into account prior to October 1, 2001,
to the extent such credit is attributable to the second
suspension period.
On or after the earliest date that an amount of credit may be taken
into account, such amount may be taken into account through the
filing of an amended return, an application for expedited refund,
an adjustment of estimated taxes, or other means allowed by such
Code.
''(2) Suspension periods. - For purposes of this subsection -
''(A) the first suspension period is the period beginning on
July 1, 1999, and ending on September 30, 2000; and
''(B) the second suspension period is the period beginning on
October 1, 2000, and ending on September 30, 2001.
''(3) Expedited refunds. -
''(A) In general. - If there is an overpayment of tax with
respect to a taxable year by reason of paragraph (1), the
taxpayer may file an application for a tentative refund of such
overpayment. Such application shall be in such manner and form,
and contain such information, as the Secretary may prescribe.
''(B) Deadline for applications. - Subparagraph (A) shall apply
only to an application filed before the date which is 1 year
after the close of the suspension period to which the application
relates.
''(C) Allowance of adjustments. - Not later than 90 days after
the date on which an application is filed under this paragraph,
the Secretary shall -
''(i) review the application;
''(ii) determine the amount of the overpayment; and
''(iii) apply, credit, or refund such overpayment,
in a manner similar to the manner provided in section 6411(b) of
such Code.
''(D) Consolidated returns. - The provisions of section 6411(c)
of such Code shall apply to an adjustment under this paragraph in
such manner as the Secretary may provide.
''(4) Credit attributable to suspension period. -
''(A) In general. - For purposes of this subsection, in the
case of a taxable year which includes a portion of the suspension
period, the amount of credit determined under section 41 of such
Code for such taxable year which is attributable to such period
is the amount which bears the same ratio to the amount of credit
determined under such section 41 for such taxable year as the
number of months in the suspension period which are during such
taxable year bears to the number of months in such taxable year.
''(B) Waiver of estimated tax penalties. - No addition to tax
shall be made under section 6654 or 6655 of such Code for any
period before July 1, 1999, with respect to any underpayment of
tax imposed by such Code to the extent such underpayment was
created or increased by reason of subparagraph (A).
''(5) Secretary. - For purposes of this subsection, the term
'Secretary' means the Secretary of the Treasury (or such
Secretary's delegate).''
SPECIAL RULES FOR TAXABLE YEARS BEGINNING BEFORE OCT. 1, 1990, AND
ENDING AFTER SEPT. 30, 1990
Section 7110(a)(2) of Pub. L. 101-239, which set forth the method
of determining the amount treated as qualified research expenses
for taxable years beginning before Oct. 1, 1990, and ending after
Sept. 30, 1990, was repealed by Pub. L. 101-508, title XI, Sec.
11402(b)(1), Nov. 5, 1990, 104 Stat. 1388-473.
(Section 1702(d)(1) of Pub. L. 104-188 provided that:
''Notwithstanding section 11402(c) of the Revenue Reconciliation
Act of 1990 (Pub. L. 101-508, set out as a note under section 45C
of this title), the amendment made by section 11402(b)(1) of such
Act (repealing section 7110(a)(2) of Pub. L. 101-239, formerly set
out as a note above) shall apply to taxable years ending after
December 31, 1989.'')
STUDY AND REPORT ON CREDIT PROVIDED BY THIS SECTION
Section 4007(b) of Pub. L. 100-647 directed Comptroller General
of United States to conduct a study of credit provided by 26 U.S.C.
41 and submit a report of the study not later than Dec. 31, 1989,
to Committee on Ways and Means of House of Representatives and
Committee on Finance of Senate.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
NEW SECTION 41 TREATED AS CONTINUATION OF OLD SECTION 44F
Section 474(i)(2) of Pub. L. 98-369 provided that: ''For purposes
of determining -
''(A) whether any excess credit under old section 44F (now 41)
for a taxable year beginning before January 1, 1984, is allowable
as a carryover under new section 30 (now 41), and
''(B) the period during which new section 30 (now 41) is in
effect,
new section 30 (now 41) shall be treated as a continuation of old
section 44F (and shall apply only to the extent old section 44F
would have applied).''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 30A, 38, 45C, 144, 170,
196, 197, 280C, 409, 936, 1202 of this title.
