Mr. ADAMS, for himself, Mr. Garwood, Mr. Cole, Mr. Heortman, and Mr. Milam, presents;

A Bill

To provide for a permanent extension of tax credits related to research and development.

SECTION 1. SHORT TITLE.

This Act may be cited as the "American Innovation Act of 2004".

SEC. 2. FINDINGS.

The Congress finds as follows:

(1) Research and development performed in the United States results in quality jobs, better and safer products, increased ownership of technology-based intellectual property, and higher productivity in the United States.

(2) The extent to which companies perform and increase research and development activities in the United States is in part dependent on Federal tax policy.

(3) The Congress should make permanent a research and development credit that provides a meaningful incentive to all types of taxpayers.

SEC. 3. PERMANENT EXTENSION OF RESEARCH CREDIT.

(a) IN GENERAL- Section 41 of the Internal Revenue Code of 1986 (relating to credit for increasing research activities) is amended by striking subsection (h).

( CONFORMING AMENDMENT- Paragraph (1) of section 45C( of such Code is amended by striking subparagraph (D).

� EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.

SEC. 4. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL CREDIT .

(a) IN GENERAL- Subparagraph (A) of section 41�(4) of the Internal Revenue Code of 1986 (relating to election of alternative incremental credit ) is amended--

(1) by striking `2.65 percent' and inserting `3 percent',

(2) by striking `3.2 percent' and inserting `4 percent', and

(3) by striking `3.75 percent' and inserting `5 percent'.

( EFFECTIVE DATE- The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 5. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED RESEARCH EXPENSES.

(a) IN GENERAL- Subsection � of section 41 of the Internal Revenue Code of 1986 (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.

`( 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.

`� 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.'.

( COORDINATION WITH ELECTION OF ALTERNATIVE INCREMENTAL CREDIT -

(1) IN GENERAL- Section 41�(4)( of such Code (relating to election) is amended by adding at the end the following: `An election under this paragraph may not be made for any taxable year to which an election under paragraph (5) applies.'.

(2) TRANSITION RULE- In the case of an election under section 41�(4) of the Internal Revenue Code of 1986 which applies to the taxable year which includes the date of the enactment of this Act, 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�(5) of such Code (as added by subsection (a)) for such year.

� EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

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Rep. Dave Anderson
Republican
11th District
New Jersey

Aye