,i #aacth ,,congress #ast ,session ,h4 ,r4 #cdbh ,,in ,,the ,,house ,,of ,,representatives ,october #cj1 #bjac,mr4 ,mc,kinley 7for himself and ,mr4 ,enyart7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to allow an increased credit for development and to extend and simplify the credit for increasing research4 #a4 ,credit for increasing development activities 7a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #da the following new section3 #da;,a4 ,credit for increasing development activities 7a7 ,in general ,for purposes of section #ch1 at the election of the taxpayer1 the development credit determined under this section for the taxable year shall be an amount equal to #cj percent of so much of the qualified development expenses for the taxable year as exceeds #ej percent of the average qualified development expenses for the #c taxable years preceding the taxable year for which the credit is being determined4 7b7 ,qualified development expenses ,for purposes of this section-- 7#a7 ,in general ,the term qualified development expenses means the sum of the following amounts which are paid or incurred during the taxable year in carrying on any trade or business of the taxpayer3 7,a7 ,any in-house development expenses4 7,b7 ,any contract development expenses4 7#b7 ,in-house development expenses2 contract development expenses ,the terms in-house development expenses and contract development expenses shall have the respective meaning given such terms in paragraphs 7#b7 and 7#c7 of section #da7;b71 except such paragraphs shall be applied by substituting qualified development for qualified research4 7c7 ,qualified development ,the term qualified development means the systematic application of knowledge or understanding directed toward the production of useful material1 devices1 and systems or methods1 including design1 development1 and improvement of prototypes and new processes to meet specific requirements4 ,for purposes of the preceding sentence the rules of subparagraphs 7,a71 7,b71 and 7,c7 of section #da7;d77#a7 shall apply with respect to any development taken into account under this section4 7d7 ,special rule in case of no qualified development expenses in any of #c preceding years 7#a7 ,taxpayers to which this subparagraph applies ,the credit under this section shall be determined under this subsection if the taxpayer has no qualified development expenses in any one of the #c taxable years preceding the taxable year for which the credit is being determined4 7#b7 ,credit rate ,the credit determined under this subparagraph shall be equal to #ab percent of the qualified development expenses for the taxable year4 7e7 ,election ,an election under this section shall apply to the taxable year for which made and all succeeding taxable years unless revoked with the consent of the ,secretary4 7f7 ,other special rules ,rules similar to the rules of subsections 7d77#d71 7f71 and 7g7 of section #da shall apply for purposes of this section4 7g7 ,termination ,this section shall not apply to taxable years beginning after ,december #ca1 #bjah4 4 7b7 ,coordination with section #da ,subsection 7b7 of section #da of such ,code is amended by adding at the end the following new paragraph3 7#e7 ,coordination with section #da;,a ,in the case of any taxable year for which an election is in effect under section #da;,a1 for purposes of determining the amount of qualified research expenses for such taxable year and the fixed-base percentage with respect to such taxable year1 qualified research expenses shall not include any qualified development expenses 7as defined in subsection 7b7 of such section74 4 7c7 ,coordination with deductions ,section #bhj;,c is amended by adding at the end the following new subsection3 7j7 ,credit for increasing development activities 7#a7 ,in general ,no deduction shall be allowed for that portion of the qualified development expenses 7as defined in section #da;,a7b77 otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section #da;,a7a74 7#b7 ,similar rule where taxpayer capitalizes rather than deducts expenses ,if-- 7,a7 the amount of the credit determined for the taxable year under section #da;,a7a71 exceeds 7,b7 the amount allowable as a deduction for such taxable year for qualified development expenses 7determined without regard to paragraph 7#a771 the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess4 7#c7 ,election of reduced credit 7,a7 ,in general ,in the case of any taxable year for which an election is made under this paragraph-- 7i7 paragraphs 7#a7 and 7#b7 shall not apply1 and 7ii7 the amount of the credit under section #da;,a7a7 shall be the amount determined under subparagraph 7,b74 7,b7 ,amount of reduced credit ,the amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of-- 7i7 the amount of credit determined under section #da;,a7a7 without regard to this paragraph1 over 7ii7 the product of-- 7,i7 the amount described in clause 7i71 and 7,,ii7 the maximum rate of tax under section #aa7;b77#a74 7,c7 ,election ,an election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year 7including extensions71 shall be made on such return1 and shall be made in such manner as the ,secretary may prescribe4 ,such an election1 once made1 shall be irrevocable4 7#d7 ,controlled groups ,paragraph 7#c7 of subsection 7b7 shall apply for purposes of this subsection4 4 7d7 ,part of general business credit ,subsection 7b7 of section #ch of such ,code is amended by striking plus at the end of paragraph 7#ce71 by striking the period at the end of paragraph 7#cf7 and inserting 1 plus1 and by adding at the end the following new paragraph3 7#cg7 the development credit determined under section #da;,a4 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #b4 ,increase in alternative simplified credit for research 7a7 ,in general ,subparagraph 7,a7 of section #da7;c77#e7 of the ,internal ,revenue ,code of #aihf is amended by striking #ad percent 7#ab percent in the case of taxable years ending before ,january #a1 #bjji7 and inserting #bj percent4 7b7 ,special rule in case of no qualified research expenses in any of #c preceding taxable years ,clause 7ii7 of section #da7;c77#e77;,b7 of such ,code is amended by striking #f percent and inserting #h percent4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjac4 #c4 ,extension of credit for increasing research activities 7a7 ,in general ,subparagraph 7,b7 of section #da7;h77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking ,december #ca1 #bjac and inserting ,december #ca1 #bjah4 7b7 ,effective date ,the amendment made by this section shall apply to amounts paid or incurred after ,december #ca1 #bjac4