Page:United States Statutes at Large Volume 100 Part 3.djvu/367

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2175

"(E) COMPUTER SOFTWARE.—Except to the extent provided in regulations, any research with respect to computer software which is developed by (or for the benefit of) the taxpayer primarily for internal use by the taxpayer, other than for use in— "(i) an activity which constitutes qualified research (determined with regard to this subparagraph), or "(ii) a production process with respect to which the requirements of paragraph (1) are met. "(F) FOREIGN RESEARCH.—Any research conducted outside the United States. "(G) SOCIAL SCIENCES, ETC.—Any research in the social sciences, arts, or humanities. "(H) FUNDED RESEARCH.—Any research to the extent

funded by any grant, contract, or otherwise by another person (or governmental entity)." (c) REDUCTION IN CREDIT; CREDIT FOR BASIC RESEARCH PAYMENTS TO QUALIFIED ORGANIZATIONS.—

(1) IN GENERAL.—Subsection (a) of section 30 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 the sum of— "(1) 20 percent of the excess (if any) of— "(A) the qualified research expenses for the taxable year, over "(B) the base period research expenses, and "(2) 20 percent of the basic research payments determined under subsection (e)(l)(A)." (2) DEFINITIONS AND SPECIAL RULES RELATING TO PAYMENTS FOR

BASIC RESEARCH.—Subsection (e) of section 30 (relating to credit available with respect to certain basic research by colleges, universities, and certain research organizations) is amended to read as follows: "(e) CREDIT ALLOWABLE WITH RESPECT TO CERTAIN PAYMENTS TO QUALIFIED ORGANIZATIONS FOR BASIC RESEARCH.—For purposes of

this section— "(1) IN GENERAL.—In the case of any taxpayer who makes basic research payments for any taxable year— "(A) the amount of basic research payments taken into account under subsection (a)(2) shall be equal to the excess of"(i) such basic research payments, over "(ii) the qualified organization base period amount, and "(B) that portion of such basic research payments which does not exceed the qualified organization base period amount shall be treated as contract research expenses for purposes of subsection (a)(D. "(2) BASIC RESEARCH PAYMENTS DEFINED.—For purposes of this subsection— "(A) IN GENERAL.—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—

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