S.Amdt. 1618

1. Adds SEC. ____. EMERGING AND FOUNDATIONAL NATIONAL SECURITY TECHNOLOGIES wherever appropriate

   Adds a section

   Inserted: SEC. ____. EMERGING AND FOUNDATIONAL NATIONAL SECURITY TECHNOLOGIES.

   Inserted: (a) In General.--

   Inserted: (1) In general.--Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 48C the following new section:

   Inserted: "SEC. 48D. CREDIT FOR NATIONAL SECURITY TECHNOLOGY.

   Inserted: "(a) General Rule.--For purposes of section 46, the national security technology credit for any taxable year is an amount equal to the applicable percentage of the basis of qualified property placed in service by the taxpayer during such taxable year.

   Inserted: "(b) Applicable Percentage.--For purposes of this section, the applicable percentage with respect to any taxable year is--

   Inserted: "(1) 30 percent in the case of qualified property placed in service before January 1, 2028,

   Inserted: "(2) 20 percent in the case of qualified property placed in service after December 31, 2027, and before January 1, 2029,

   Inserted: "(3) 10 percent in the case of qualified property placed in service after December 31, 2028, and before January 1, 2031, and

   Inserted: "(4) zero in the case of qualified property placed in service after December 31, 2030.

   Inserted: "(c) Qualified Property.--For purposes of this section--

   Inserted: "(1) In general.--The term 'qualified property' means property--

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   Inserted: "(A) which is used in the United States,

   Inserted: "(B) substantially all of the use of which is to design or manufacture qualified national security technology,

   Inserted: "(C) which is described in section 1221(a)(2), and

   Inserted: "(D) the original use of which commences with the taxpayer.

   Inserted: "(2) Qualified national security technology.--The term 'qualified national security technology' means technology which, as of the first year a credit under this section is claimed by the taxpayer for the technology--

   Inserted: "(A) is described in section 721(a)(6)(A) of the Defense Production Act of 1950 (50 U.S.C. 4565(a)(6)(A)), or

   Inserted: "(B) is included on the list promulgated by the White House Office of Science and Technology Policy under subsection (e).

   Inserted: "(d) Denial of Double Benefit.--A credit shall not be allowed under this section for any expense for which a credit is allowed under any other provision of this title.

   Inserted: "(e) Emerging and Foundational National Security Technologies.--Not later than 6 months after the date of the enactment of this section, the Secretary, in consultation with the Director of the White House Office of Science and Technology Policy, the Secretary of Defense, the Director of National Intelligence, and the Secretary of Energy, shall develop, promulgate, and update annually a list of emerging and foundational technologies which are critical to national security and the development and manufacture of which by United States companies should be encouraged. Such list shall be published annually and made publicly available, including on the Internet.".

   Inserted: (b) Conforming Amendments.--

   Inserted: (1) Section 46 of the Internal Revenue Code of 1986 is amended--

   Inserted: (A) by striking "and" at the end of paragraph (5),

   Inserted: (B) by striking the period at the end of paragraph (6) and inserting ", and", and

   Inserted: (C) by adding at the end the following new paragraph:

   Inserted: "(7) the national security technology credit.".

   Inserted: (2) Section 49(a)(1)(C) of such Code is amended--

   Inserted: (A) by striking "and" at the end of clause (iv),

   Inserted: (B) by striking the period at the end of clause (v) and inserting ", and", and

   Inserted: (C) by adding at the end the following new clause:

   Inserted: "(vi) the basis of any qualified property taken into account under section 48D(c).".

   Inserted: (3) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item:

   Inserted: "Sec. 48D. Credit for national security technology.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to property placed in service after the first publication of the list required under section 48D(e) of the Internal Revenue Code of 1986, as added by this Act.

   Inserted: SEC. ____. EXCLUSION FOR GAIN FROM INVESTMENTS IN NATIONAL SECURITY TECHNOLOGY.

   Inserted: (a) In General.--Part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

   Inserted: "SEC. 1202A. EXCLUSION FOR GAIN FROM QUALIFIED NATIONAL SECURITY TECHNOLOGY STOCK.

   Inserted: "(a) Exclusion.--In the case of a taxpayer other than a corporation, gross income shall not include any gain from the sale or exchange of qualified national security technology stock held for more than 5 years.

   Inserted: "(b) Qualified National Security Technology Stock.--For purposes of this section--

   Inserted: "(1) In general.--Except as otherwise provided in this section, the term 'qualified national security technology stock' means any stock in a C corporation which is originally issued after the date of the enactment of the United States Innovation and Competition Act if--

   Inserted: "(A) as of the date of issuance, such corporation is a qualified corporation, and

   Inserted: "(B) except as provided in subsections (e) and (g), such stock is acquired by the taxpayer at its original issue (directly or through an underwriter)--

   Inserted: "(i) in exchange for money or other property (not including stock), or

   Inserted: "(ii) as compensation for services provided to such corporation (other than services performed as an underwriter of such stock).

   Inserted: "(2) Active business requirement; etc.--Stock in a corporation shall not be treated as qualified national security technology stock unless, during substantially all of the taxpayer's holding period for such stock, such corporation meets the active business requirements of subsection (d) and such corporation is a C corporation.

   Inserted: "(3) Certain purchases by corporation of its own stock.--

   Inserted: "(A) Redemptions from taxpayer or related person.--Stock acquired by the taxpayer shall not be treated as qualified national security technology stock if, at any time during the 4-year period beginning on the date 2 years before the issuance of such stock, the corporation issuing such stock purchased (directly or indirectly) any of its stock from the taxpayer or from a person related (within the meaning of section 267(b) or 707(b)) to the taxpayer.

   Inserted: "(B) Significant redemptions.--Stock issued by a corporation shall not be treated as qualified national security technology stock if, during the 2-year period beginning on the date 1 year before the issuance of such stock, such corporation made 1 or more purchases of its stock with an aggregate value (as of the time of the respective purchases) exceeding 5 percent of the aggregate value of all of its stock as of the beginning of such 2-year period.

   Inserted: "(C) Treatment of certain transactions.--If any transaction is treated under section 304(a) as a distribution in redemption of the stock of any corporation, for purposes of subparagraphs (A) and (B), such corporation shall be treated as purchasing an amount of its stock equal to the amount treated as such a distribution under section 304(a).

   Inserted: "(c) Qualified Corporation.--For purposes of this section--

   Inserted: "(1) In general.--The term 'qualified corporation' means any domestic corporation which is a C corporation if substantially all of the activities of such corporation are to design or manufacture qualified national security technology (as defined in section 48D(c)(2)).

   Inserted: "(2) Aggregation rules.--

   Inserted: "(A) In general.--All corporations which are members of the same parent-subsidiary controlled group shall be treated as 1 corporation for purposes of this subsection.

   Inserted: "(B) Parent-subsidiary controlled group.--For purposes of subparagraph (A), the term 'parent-subsidiary controlled group' means any controlled group of corporations as defined in section 1563(a)(1), except that--

   Inserted: "(i) 'more than 50 percent' shall be substituted for 'at least 80 percent' each place it appears in section 1563(a)(1), and

   Inserted: "(ii) section 1563(a)(4) shall not apply.

   Inserted: "(d) Active Business Requirement.--

   Inserted: "(1) In general.--For purposes of subsection (b)(2), the requirements of this subsection are met by a corporation for any period if during such period--

   Inserted: "(A) at least 80 percent (by value) of the assets of such corporation are used by such corporation in the active conduct of 1 or more qualified trades or businesses involving the design or manufacture of qualified national security technology (as defined in section 48D(c)(2)), and

   Inserted: "(B) such corporation is an eligible corporation.

   Inserted: "(2) Special rule for certain activities.--For purposes of paragraph (1), if, in connection with any future qualified trade or business, a corporation is engaged in--

   Inserted: "(A) start-up activities described in section 195(c)(1)(A),

   Inserted: "(B) activities resulting in the payment or incurring of expenditures which may be treated as research and experimental expenditures under section 174, or

   Inserted: "(C) activities with respect to in-house research expenses described in section 41(b)(4), assets used in such activities shall be treated as used in the active conduct of a qualified trade or business. Any determination under this paragraph shall be made without regard to whether a corporation has any gross income from such activities at the time of the determination.

   Inserted: "(3) Qualified trade or business.--For purposes of this subsection, the term 'qualified trade or business' means any trade or business other than any banking, insurance, financing, leasing, investing, or similar business.

   Inserted: "(4) Eligible corporation.--For purposes of this subsection, the term 'eligible corporation' means any domestic corporation.

   Inserted: "(5) Stock in other corporations.--

   Inserted: "(A) Look-thru in case of subsidiaries.--For purposes of this subsection, stock and debt in any subsidiary corporation shall be disregarded and the parent corporation shall be deemed to own its ratable share of the subsidiary's assets, and to conduct its ratable share of the subsidiary's activities.

   Inserted: "(B) Portfolio stock or securities.--A corporation shall be treated as failing to meet the requirements of paragraph (1) for any period during which more than 10 percent of the value of its assets (in excess of liabilities) consists of stock or securities in other corporations which are not subsidiaries of such corporation (other than assets described in paragraph (6)).

   Inserted: "(C) Subsidiary.--For purposes of this paragraph, a corporation shall be considered a subsidiary if the parent owns more than 50 percent of the combined voting power of all classes of stock entitled to vote, or more than 50 percent in value of all outstanding stock, of such corporation.

   Inserted: "(6) Working capital.--For purposes of paragraph (1)(A), any assets which--

   Inserted: "(A) are held as a part of the reasonably required working capital needs of a qualified trade or business of the corporation, or

   Inserted: "(B) are held for investment and are reasonably expected to be used within 2 years to finance research and experimentation in a qualified trade or business or increases in working capital needs of a qualified trade or business, shall be treated as used in the active conduct of a qualified trade or business. For periods after the corporation has been in existence for at least 2 years, in no event may more than 50 percent of the assets of the corporation qualify as used in the active conduct of a qualified trade or business by reason of this paragraph.

   Inserted: "(7) Maximum real estate holdings.--A corporation shall not be treated as meeting the requirements of paragraph (1) for any period during which more than 10 percent of the total value of its assets consists of real property which is not used in the active conduct of a qualified trade or business. For purposes of the preceding sentence, the ownership of, dealing in, or renting of real property shall not be treated as the active conduct of a qualified trade or business.

   Inserted: "(8) Computer software royalties.--For purposes of paragraph (1), rights to computer software which produces active business computer software royalties (within the meaning of section 543(d)(1)) shall be treated as an asset used in the active conduct of a trade or business.

   Inserted: "(e) Certain Rules Made Applicable.--Rules similar to the rules of subsections (f), (g), (h), (i), and (j) of section 1202 shall apply for purposes of this section.

   Inserted: "(f) Regulations.--The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations to prevent the avoidance of the purposes of this section.".

   Inserted: (b) Clerical Amendment.--The table of sections for part I of subchapter P of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

   Inserted: "Sec. 1202A. Exclusion for gain from qualified national security technology stock.".

   Inserted: (c) Effective Date.--The amendments made by this section shall apply to stock acquired after the date of the enactment of this Act.

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As printed