,i  #aac? ,,congress  #a/ ,session  ,h4 
,r4 #cdbh  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,octob] #cj1 #bjac,mr4
 ,mc,kinley 7= himself & ,mr4 ,eny>t7   
introduc$ ! foll[+ bill2 :i* 0 ref]r$ to
 ! ,committee on ,ways & ,means  ,a     
,,bill  ,to am5d ! ,int]nal ,rev5ue     
,code ( #aihf to all[ an increas$ cr$it 
= developm5t & to ext5d & simplify !    
cr$it = increas+ rese>*4  #a4 ,cr$it =  
increas+ developm5t activities  7a7 ,9  
g5]al ,subp>t ,d ( "p ,,iv ( sub*apt] ,a
 ( *apt] #a ( ! ,int]nal ,rev5ue ,code (
 #aihf is am5d$ by ins]t+ aft] section  
#da ! foll[+ new section3  #da;,a4      
,cr$it = increas+ developm5t activities 
7a7 ,9 g5]al ,= purposes ( section #ch1 
at ! election ( ! taxpay]1 ! developm5t 
cr$it det]m9$ "u ?is section = ! taxable
 ye> %all be an am\nt equal to #cj p]c5t
 ( s mu* ( ! qualifi$ developm5t exp5ses
 = ! taxable ye> z exce$s #ej p]c5t ( ! 
av]age qualifi$ developm5t exp5ses = !  
#c taxable ye>s prec$+ ! taxable ye> =  
:i* ! cr$it is be+ det]m9$4  7b7        

,qualifi$ developm5t exp5ses ,= purposes
 ( ?is section-- 7#a7 ,9 g5]al ,! t]m   
qualifi$ developm5t exp5ses means ! sum 
( ! foll[+ am\nts :i* are paid or       
incurr$ dur+ ! taxable ye> 9 c>ry+ on   
any trade or bus9ess ( ! taxpay]3 7,a7  
,any 9-h\se developm5t exp5ses4  7,b7   
,any contract developm5t exp5ses4  7#b7 
,9-h\se developm5t exp5ses2 contract    
developm5t exp5ses ,! t]ms 9-h\se       
developm5t exp5ses & contract developm5t
 exp5ses %all h ! respective mean+ giv5 
su* t]ms 9 p>agraphs 7#b7 & 7#c7 (      
section #da7;b71 except su* p>agraphs   
%all be appli$ by sub/itut+ qualifi$    
developm5t = qualifi$ rese>*4  7c7      
,qualifi$ developm5t ,! t]m qualifi$    
developm5t means ! sy/ematic application
 ( k or und]/&+ direct$ t[>d !          
production ( useful mat]ial1 devices1 & 
sy/ems or me?ods1 includ+ design1       
developm5t1 & improvem5t ( prototypes & 
new processes to meet specific          
requirem5ts4 ,= purposes ( ! prec$+     
s5t5ce ! rules ( subp>agraphs 7,a71     

7,b71 & 7,c7 ( section #da7;d77#a7 %all 
apply ) respect to any developm5t tak5  
into acc\nt "u ?is section4  7d7        
,special rule 9 case ( no qualifi$      
developm5t exp5ses 9 any ( #c prec$+    
ye>s  7#a7 ,taxpay]s to :i* ?is         
subp>agraph applies ,! cr$it "u ?is     
section %all be det]m9$ "u ?is          
subsection if ! taxpay] has no qualifi$ 
developm5t exp5ses 9 any "o ( ! #c      
taxable ye>s prec$+ ! taxable ye> = :i* 
! cr$it is be+ det]m9$4  7#b7 ,cr$it    
rate ,! cr$it det]m9$ "u ?is subp>agraph
 %all be equal to #ab p]c5t ( ! qualifi$
 developm5t exp5ses = ! taxable ye>4    
7e7 ,election ,an election "u ?is       
section %all apply to ! taxable ye> =   
:i* made & all succe$+ taxable ye>s     
unless revok$ ) ! cons5t ( ! ,secret>y4 
7f7 ,o!r special rules ,rules simil> to 
! rules ( subsections 7d77#d71 7f71 &   
7g7 ( section #da %all apply = purposes 
( ?is section4  7g7 ,t]m9ation ,?is     
section %all n apply to taxable ye>s    
beg9n+ aft] ,decemb] #ca1 #bjah4  4  7b7

 ,coord9ation ) section #da ,subsection 
7b7 ( section #da ( su* ,code is am5d$  
by add+ at ! end ! foll[+ new p>agraph3 
7#e7 ,coord9ation ) section #da;,a ,9 ! 
case ( any taxable ye> = :i* an election
 is 9 effect "u section #da;,a1 =       
purposes ( det]m9+ ! am\nt ( qualifi$   
rese>* exp5ses = su* taxable ye> & !    
fix$-base p]c5tage ) respect to su*     
taxable ye>1 qualifi$ rese>* exp5ses    
%all n include any qualifi$ developm5t  
exp5ses 7z def9$ 9 subsection 7b7 ( su* 
section74  4  7c7 ,coord9ation )        
d$uctions ,section #bhj;,c is am5d$ by  
add+ at ! end ! foll[+ new subsection3  
7j7 ,cr$it = increas+ developm5t        
activities  7#a7 ,9 g5]al ,no d$uction  
%all be all[$ = t portion ( ! qualifi$  
developm5t exp5ses 7z def9$ 9 section   
#da;,a7b77 o!rwise all[able z a d$uction
 = ! taxable ye> :i* is equal to ! am\nt
 ( ! cr$it det]m9$ = su* taxable ye> "u 
section #da;,a7a74  7#b7 ,simil> rule   
:]e taxpay] capitalizes r ?an d$ucts    
exp5ses ,if-- 7,a7 ! am\nt ( ! cr$it    

det]m9$ = ! taxable ye> "u section      
#da;,a7a71 exce$s  7,b7 ! am\nt all[able
 z a d$uction = su* taxable ye> =       
qualifi$ developm5t exp5ses 7det]m9$ )\t
 reg>d to p>agraph 7#a771  ! am\nt      
*>geable to capital acc\nt = ! taxable  
ye> = su* exp5ses %all be r$uc$ by !    
am\nt ( su* excess4  7#c7 ,election (   
r$uc$ cr$it  7,a7 ,9 g5]al ,9 ! case (  
any taxable ye> = :i* an election is    
made "u ?is p>agraph-- 7i7 p>agraphs    
7#a7 & 7#b7 %all n apply1 &  7ii7 !     
am\nt ( ! cr$it "u section #da;,a7a7    
%all be ! am\nt det]m9$ "u subp>agraph  
7,b74  7,b7 ,am\nt ( r$uc$ cr$it ,!     
am\nt ( cr$it det]m9$ "u ?is subp>agraph
 = any taxable ye> %all be ! am\nt equal
 to ! excess (-- 7i7 ! am\nt ( cr$it    
det]m9$ "u section #da;,a7a7 )\t reg>d  
to ?is p>agraph1 ov]  7ii7 ! product (--
 7,i7 ! am\nt describ$ 9 clause 7i71 &  
7,,ii7 ! maximum rate ( tax "u section  
#aa7;b77#a74  7,c7 ,election ,an        
election "u ?is p>agraph = any taxable  
ye> %all be made n lat] ?an ! "t = fil+ 

! return ( tax = su* ye> 7includ+       
ext5sions71 %all be made on su* return1 
& %all be made 9 su* mann] z ! ,secret>y
 may prescribe4 ,su* an election1 once  
made1 %all be irrevocable4  7#d7        
,controll$ gr\ps ,p>agraph 7#c7 (       
subsection 7b7 %all apply = purposes (  
?is subsection4  4  7d7 ,"p ( g5]al     
bus9ess cr$it ,subsection 7b7 ( section 
#ch ( su* ,code is am5d$ by /rik+ plus  
at ! end ( p>agraph 7#ce71 by /rik+ !   
p]iod at ! end ( p>agraph 7#cf7 & ins]t+
 1 plus1 & by add+ at ! end ! foll[+ new
 p>agraph3  7#cg7 ! developm5t cr$it    
det]m9$ "u section #da;,a4  4  7e7      
,effective date ,! am5dm5ts made by ?is 
section %all apply to taxable ye>s      
beg9n+ aft] ,decemb] #ca1 #bjac4  #b4   
,increase 9 alt]native simplifi$ cr$it =
 rese>*  7a7 ,9 g5]al ,subp>agraph 7,a7 
( section #da7;c77#e7 ( ! ,int]nal      
,rev5ue ,code ( #aihf is am5d$ by /rik+ 
#ad p]c5t 7#ab p]c5t 9 ! case ( taxable 
ye>s end+ be=e ,janu>y #a1 #bjji7 &     
ins]t+ #bj p]c5t4  7b7 ,special rule 9  

case ( no qualifi$ rese>* exp5ses 9 any 
( #c prec$+ taxable ye>s ,clause 7ii7 ( 
section #da7;c77#e77;,b7 ( su* ,code is 
am5d$ by /rik+ #f p]c5t & ins]t+ #h     
p]c5t4  7c7 ,effective date ,! am5dm5ts 
made by ?is section %all apply to       
taxable ye>s beg9n+ aft] ,decemb] #ca1  
#bjac4  #c4 ,ext5sion ( cr$it = increas+
 rese>* activities  7a7 ,9 g5]al        
,subp>agraph 7,b7 ( section #da7;h77#a7 
( ! ,int]nal ,rev5ue ,code ( #aihf is   
am5d$ by /rik+ ,decemb] #ca1 #bjac &    
ins]t+ ,decemb] #ca1 #bjah4  7b7        
,effective date ,! am5dm5t made by ?is  
section %all apply to am\nts paid or    
incurr$ aft] ,decemb] #ca1 #bjac4