S.Amdt. 3121

SA 3121. Mr. CARPER submitted an amendment intended to be proposed to
amendment SA 3060 proposed by Mr. Wyden to the bill H.R. 3474, to amend
the Internal Revenue Code of 1986 to allow employers to exempt
employees with health coverage under TRICARE or the Veterans
Administration from being taken into account for purposes of the
employer mandate under the Patient Protection and Affordable Care Act;
which was ordered to lie on the table; as follows:

Beginning on page 10, strike line 11 and all that follows
through page 18, line 17, and insert the following:

SEC. 111. PERMANENT EXTENSION AND MODIFICATION OF RESEARCH
CREDIT.

(a) Simplified Credit for Qualified Research Expenses.--
Subsection (a) of section 41 is amended to read as follows:
``(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 25 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 Rules and Termination of Base Amount
Calculation.--
(1) In general.--Subsection (c) of section 41 is amended to
read as follows:
``(c) Special Rule in Case of No Qualified Research
Expenses in Any of 3 Preceding Taxable Years.--
``(1) Taxpayers to which subsection applies.--The credit
under this section shall be determined under this subsection,
and not under subsection (a), if, in any one of the 3 taxable
years preceding the taxable year for which the credit is
being determined, the taxpayer has no qualified research
expenses.
``(2) Credit rate.--The credit determined under this
subsection shall be equal to 10 percent of the qualified
research expenses for the taxable year.''.
(2) Consistent treatment of expenses.--Subsection (b) of
section 41 is amended by adding at the end the following new
paragraph:
``(5) 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 in the 3-taxable-year period taken into account
under subsection (a), the qualified research expenses taken
into account for such year 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 caused by a change in
accounting methods used by such taxpayer between the credit
year and a year in such 3-taxable-year period.''.
(c) Inclusion of Qualified Research Expenses of an Acquired
Person.--
(1) Partial inclusion of pre-acquisition qualified research
expenses.--Subparagraph (A) of section 41(f)(3) is amended to
read as follows:
``(A) Acquisitions.--
``(i) In general.--If a person 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 the amount of qualified research expenses
paid or incurred by the acquiring person during the 3 taxable
years preceding the taxable year in which the credit under
this section is determined shall be increased by--

``(I) for purposes of applying this section for the taxable
year in which such acquisition is made, the amount determined
under clause (ii), and
``(II) for purposes of applying this section for any
taxable year after the taxable year in which such acquisition
is made, so much of the qualified research expenses paid or
incurred by the predecessor with respect to the acquired
trade or business during the portion of the measurement
period that is part of the 3-taxable-year period preceding
the taxable year for which the credit is determined as is
attributable to the portion of such trade or business or
separate unit acquired by such person.

``(ii) Amount determined.--The amount determined under this
clause is the amount equal to the product of--

``(I) so much of the qualified research expenses paid or
incurred by the predecessor with respect to the acquired
trade or business during the 3 taxable years before the
taxable year in which the acquisition is made as is
attributable to the portion of such trade or business or
separate unit acquired by the acquiring person, and
``(II) the number of months in the period beginning on the
date of the acquisition and ending on the last day of the
taxable year in which the acquisition is made,

divided by 12.
``(iii) Special rules for coordinating taxable years.--In
the case of an acquiring person and a predecessor whose
taxable years do not begin on the same date--

``(I) each reference to a taxable year in clauses (i) and
(ii) shall refer to the appropriate taxable year of the
acquiring person,
``(II) the qualified research expenses paid or incurred by
the predecessor during each taxable year of the predecessor
any portion of which is part of the measurement period shall
be allocated equally among the months of such taxable year,
and
``(III) the amount of such qualified research expenses
taken into account under clauses (i) and (ii) with respect to
a taxable year of the acquiring person shall be equal to the
total of the expenses attributable under subclause (II) to
the months occurring during such taxable year.

``(iv) Measurement period.--For purposes of this
subparagraph, the term `measurement period' means the taxable
year of the acquiring person in which the acquisition is made
and the 3 taxable years of the acquiring person preceding
such taxable year.''.
(2) Expenses of a predecessor.--Subparagraph (B) of section
41(f)(3) is amended to read as follows:
``(B) Dispositions.--If the predecessor furnished to 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 predecessor during the 3 taxable years
preceding such taxable year shall be reduced--

[[Page S3091]]

``(i) in the case of the taxable year in which such
disposition is made, by an amount equal to the product of--

``(I) the amount of qualified research expenses paid or
incurred during such 3 taxable years with respect to the
acquired business, and
``(II) the number of days in the period beginning on the
date of acquisition (as determined for purposes of
subparagraph (A)(ii)(II)) and ending on the last day of the
taxable year of the predecessor in which the disposition is
made,

divided by the number of days in the taxable year of the
predecessor, and
``(ii) in the case of any taxable year ending after the
taxable year in which such disposition is made, the amount
described in clause (i)(I).''.
(d) Aggregation of Expenditures.--Paragraph (1) of section
41(f), as amended by the American Taxpayer Relief Act of
2012, is amended--
(1) by striking ``of the qualified research expenses, basic
research payments, and amounts paid or incurred to energy
research consortiums,'' in subparagraph (A)(ii) and inserting
``qualified research expenses'', and
(2) by striking ``of the qualified research expenses, basic
research payments, and amounts paid or incurred to energy
research consortiums,'' in subparagraph (B)(ii) and inserting
``qualified research expenses''.
(e) Split 100 Percent Credit for Contract Research
Expenses.--Subparagraph (A) of section 41(b)(3) is amended to
read as follows:
``(A) In general.--
``(i) Taxpayers paying for contracted research.--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.
``(ii) Taxpayers performing contracted research.--In the
case of a taxpayer (other than an entity described in
subparagraph (C) or (D) or paragraph (5)(C)) who receives
amounts from any person (other than an employer of the
taxpayer) for qualified research on behalf of such person,
the term `contract research expenses' means so much of the
qualified research expenses paid or incurred by the taxpayer
as does not exceed 35 percent of the amounts so received from
such person.
``(iii) Special rules.--For purposes of clause (ii)--

``(I) Trade or business.--The qualified research expenses
of the taxpayer shall be determined as if the trade or
business of the taxpayer were the conduct of qualified
research on behalf of other persons.
``(II) Research not treated as funded research.--
Subparagraph (H) of subsection (d)(4) shall not apply.
``(III) Qualified research.--The qualified research
expenses of a taxpayer shall be determined as if the
conditions of subparagraph (B) of subsection (d)(1) are
satisfied if the business component described in subparagraph
(B)(ii) thereof is a business component of either of the
taxpayers described in clauses (i) and (ii).

``(iv) Denial of double benefit.--The amount of any in-
house research expenses taken into account under this section
with respect to a taxpayer described in clause (ii) shall be
reduced by the amount of the contract research expenses taken
into account under such clause with respect to such taxpayer
for the taxable year.''.
(f) Inclusion of Basic Research Payments.--Subsection (b)
of section 41 is amended by redesignating paragraph (5), as
added by this section, as paragraph (6), and by inserting
after paragraph (4) the following new paragraph:
``(5) Basic research payments.--
``(A) In general.--In the case of basic research payments
made by the taxpayer, paragraph (3)(A) shall be applied by
substituting `100 percent' for `65 percent'.
``(B) Basic research payments.--For purposes of this
paragraph, 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 made pursuant to a written agreement
between such corporation and such qualified organization, and
``(ii) except in the case of a payment to a qualified
organization described in clause (iii) or (iv) of
subparagraph (C), such basic research is to be performed by
such qualified organization.
``(C) Qualified organization.--For purposes of this
paragraph, the term `qualified organization' means any of the
following organizations:
``(i) 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).

``(ii) Certain scientific research organizations.--Any
organization not described in clause (i) 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.

``(iii) Scientific tax-exempt organizations.--Any
organization which--

``(I) is described in section 501(c)(3) (other than a
private foundation) or 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
clause (i) pursuant to written research agreements, and
``(IV) currently expends substantially all of its funds or
substantially all of the basic research payments received by
it for grants to, or contracts for basic research with, an
organization described in clause (i).

``(iv) Certain grant organizations.--Any organization not
described in clause (ii) or (iii) 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 subclause (I),
``(III) is organized and operated exclusively for the
purpose of making grants to organizations described in clause
(i) 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).

``(D) Definitions and special rules.--For purposes of this
paragraph--
``(i) 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.

``(ii) Trade or business qualification.--For purposes of
applying paragraph (1) to this paragraph, 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
paragraph (3)(B)).
``(iii) 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)).''.

(g) Permanent Extension.--
(1) Section 41 is amended by striking subsection (h).
(2) Paragraph (1) of section 45C(b) is amended by striking
subparagraph (D).
(h) Conforming Amendments.--
(1) Termination of basic research payment calculation.--
Section 41 is amended--
(A) by striking subsection (e),
(B) by redesignating subsection (g) as subsection (e), and
(C) by relocating subsection (e), as so redesignated,
immediately after subsection (d).
(2) Special rules.--
(A) Paragraph (4) of section 41(f) is amended by striking
``and gross receipts''.
(B) Subsection (f) of section 41 is amended by striking
paragraph (6).
(3) Cross-references.--
(A) Subparagraph (B) of section 45C(b)(1) is amended--
(i) by striking ``paragraph (3)(A)'' in clause (ii) and
inserting ``paragraph (3)(A)(i)'',
(ii) by striking the period at the end of clause (ii) and
inserting ``, and'',
(iii) by striking ``and'' at the end of clause (i), and
(iv) by adding at the end the following new clause:
``(iii) by disregarding clauses (ii), (iii), and (iv) of
paragraph (3)(A) of such subsection.''.
(B) Paragraph (2) of section 45C(c) is amended by striking
``base period research expenses'' and inserting ``average
qualified research expenses''.
(C) Subparagraph (A) of section 54(l)(3) is amended by
striking ``section 41(g)'' and inserting ``section 41(e)''.
(D) Clause (i) of section 170(e)(4)(B) is amended by
striking ``subparagraph (A) or subparagraph (B) of section
41(e)(6)'' and inserting ``clause (i) or clause (ii) of
section 41(b)(5)(C)''.
(E) Section 280C is amended--
(i) by striking ``or basic research expenses (as defined in
section 41(e)(2))'' in subsection (c)(1),
(ii) by striking ``section 41(a)(1)'' in subsection
(c)(2)(A) and inserting ``section 41(a)'', and
(iii) by striking ``or basic research expenses'' in
subsection (c)(2)(B).
(F) Clause (i) of section 1400N(l)(7)(B) is amended by
striking ``section 41(g)'' and inserting ``section 41(e)''.
(i) Treatment of Research Credit for Certain Startup
Companies.--
(1) In general.--Section 41, as amended by subsections (g)
and (h), is amended by adding at the end the following new
subsection:
``(g) Treatment of Credit for Qualified Small Businesses.--
``(1) In general.--At the election of a qualified small
business for any taxable year, section 3111(f) shall apply to
the payroll tax credit portion of the credit otherwise
determined under subsection (a) for the taxable year and such
portion shall not be treated (other than for purposes of
section 280C) as a credit determined under subsection (a).
``(2) Payroll tax credit portion.--For purposes of this
subsection, the payroll tax credit portion of the credit
determined under subsection (a) with respect to any qualified
small business for any taxable year is the least of--

[[Page S3092]]

``(A) the amount specified in the election made under this
subsection,
``(B) the credit determined under subsection (a) for the
taxable year (determined before the application of this
subsection), or
``(C) in the case of a qualified small business other than
a partnership or S corporation, the amount of the business
credit carryforward under section 39 carried from the taxable
year (determined before the application of this subsection to
the taxable year).
``(3) Qualified small business.--For purposes of this
subsection--
``(A) In general.--The term `qualified small business'
means, with respect to any taxable year--
``(i) a corporation or partnership, if--

``(I) the gross receipts (as determined under the rules of
section 448(c)(3), without regard to subparagraph (A)
thereof) of such entity for the taxable year is less than
$5,000,000, and
``(II) such entity did not have gross receipts (as so
determined) for any taxable year preceding the 5-taxable-year
period ending with such taxable year, and

``(ii) any person (other than a corporation or partnership)
who meets the requirements of subclauses (I) and (II) of
clause (i), determined--

``(I) by substituting `person' for `entity' each place it
appears, and
``(II) by only taking into account the aggregate gross
receipts received by such person in carrying on all trades or
businesses of such person.

``(B) Limitation.--Such term shall not include an
organization which is exempt from taxation under section 501.
``(4) Election.--
``(A) In general.--Any election under this subsection for
any taxable year--
``(i) shall specify the amount of the credit to which such
election applies,
``(ii) shall be made on or before the due date (including
extensions) of--

``(I) in the case of a qualified small business which is a
partnership, the return required to be filed under section
6031,
``(II) in the case of a qualified small business which is
an S corporation, the return required to be filed under
section 6037, and
``(III) in the case of any other qualified small business,
the return of tax for the taxable year, and

``(iii) may be revoked only with the consent of the
Secretary.
``(B) Limitations.--
``(i) Amount.--The amount specified in any election made
under this subsection shall not exceed $250,000.
``(ii) Number of taxable years.--A person may not make an
election under this subsection if such person (or any other
person treated as a single taxpayer with such person under
paragraph (5)(A)) has made an election under this subsection
for 5 or more preceding taxable years.
``(C) Special rule for partnerships and s corporations.--In
the case of a qualified small business which is a partnership
or S corporation, the election made under this subsection
shall be made at the entity level.
``(5) Aggregation rules.--
``(A) In general.--Except as provided in subparagraph (B),
all persons or entities treated as a single taxpayer under
subsection (f)(1) shall be treated as a single taxpayer for
purposes of this subsection.
``(B) Special rules.--For purposes of this subsection and
section 3111(f)--
``(i) each of the persons treated as a single taxpayer
under subparagraph (A) may separately make the election under
paragraph (1) for any taxable year, and
``(ii) the $250,000 amount under paragraph (4)(B)(i) shall
be allocated among all persons treated as a single taxpayer
under subparagraph (A) in the same manner as under
subparagraph (A)(ii) or (B)(ii) of subsection (f)(1),
whichever is applicable.
``(6) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including--
``(A) regulations to prevent the avoidance of the purposes
of the limitations and aggregation rules under this
subsection through the use of successor companies or other
means,
``(B) regulations to minimize compliance and record-keeping
burdens under this subsection, and
``(C) regulations for recapturing the benefit of credits
determined under section 3111(f) in cases where there is a
subsequent adjustment to the payroll tax credit portion of
the credit determined under subsection (a), including
requiring amended income tax returns in the cases where there
is such an adjustment.''.
(2) Credit allowed against fica taxes.--Section 3111 is
amended by adding at the end the following new subsection:
``(f) Credit for Research Expenditures of Qualified Small
Businesses.--
``(1) In general.--In the case of a taxpayer who has made
an election under section 41(g) for a taxable year, there
shall be allowed as a credit against the tax imposed by
subsection (a) for the first calendar quarter which begins
after the date on which the taxpayer files the return
specified in section 41(g)(4)(A)(ii) an amount equal to the
payroll tax credit portion determined under section 41(g)(2).
``(2) Limitation.--The credit allowed by paragraph (1)
shall not exceed the tax imposed by subsection (a) for any
calendar quarter on the wages paid with respect to the
employment of all individuals in the employ of the employer.
``(3) Carryover of unused credit.--If the amount of the
credit under paragraph (1) exceeds the limitation of
paragraph (2) for any calendar quarter, such excess shall be
carried to the succeeding calendar quarter and allowed as a
credit under paragraph (1) for such quarter.
``(4) Deduction allowed for credited amounts.--The credit
allowed under paragraph (1) shall not be taken into account
for purposes of determining the amount of any deduction
allowed under chapter 1 for taxes imposed under subsection
(a).''.
(j) Credit Allowed Against Alternative Minimum Tax.--
Subparagraph (B) of section 38(c)(4) is amended--
(1) by redesignating clauses (ii), (iii), (iv), (v), (vi),
(vii), (viii), and (ix) as clauses (iii), (iv), (v), (vi),
(vii), (viii), (ix), and (x), respectively, and
(2) by inserting after clause (i) the following new clause:
``(ii) the credit determined under section 41 with respect
to an eligible small business (as defined in paragraph
(5)(C), after application of rules similar to the rules of
paragraph (5)(D)),''.
(k) Technical Corrections.--Section 409 is amended--
(1) by inserting ``, as in effect before the enactment of
the Tax Reform Act of 1984)'' after ``section 41(c)(1)(B)''
in subsection (b)(1)(A),
(2) by inserting ``, as in effect before the enactment of
the Tax Reform Act of 1984'' after ``relating to the employee
stock ownership credit'' in subsection (b)(4),
(3) by inserting ``(as in effect before the enactment of
the Tax Reform Act of 1984)'' after ``section 41(c)(1)(B)''
in subsection (i)(1)(A),
(4) by inserting ``(as in effect before the enactment of
the Tax Reform Act of 1984)'' after ``section 41(c)(1)(B)''
in subsection (m), and
(5) by inserting ``(as so in effect)'' after ``section
48(n)(1)'' in subsection (m).
(l) Effective Date.--
(1) In general.--Except as provided in paragraphs (2), (3),
(4), and (5), the amendments made by this section shall apply
to taxable years beginning after December 31, 2014.
(2) Permanent extension.--The amendments made by subsection
(g) shall apply to amounts paid or incurred after December
31, 2013.
(3) Treatment of research credit for certain startup
companies.--The amendments made by subsection (i) shall apply
to credits determined for taxable years beginning after
December 31, 2013.
(4) Credit allowed against alternative minimum tax.--The
amendments made by subsection (j) shall apply to credits
determined for taxable years beginning after December 31,
2013, and to carrybacks of such credits.
(5) Technical corrections.--The amendments made by
subsection (k) shall take effect on the date of the enactment
of this Act.
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