Page:United States Statutes at Large Volume 103 Part 3.djvu/257

 PUBLIC LAW 101-239—DEC. 19, 1989 103 STAT. 2325 inserting "for the taxable years taken into account in computing the fixed-base percentage shall be increased by the lesser of— "(i) the amount of the decresise under subparagraph (B) which is allocable to taxable years so taken into account, or "(ii) the product of the number of taxable years so taken into account, multiplied by the amount of the reimbursement described in this subparagraph." (ii) The heading for such subparagraph (C) is amended to read as follows: "(C) CERTAIN REIMBURSEMENTS TAKEN INTO ACCOUNT IN DETERMINING FIXED-BASE PERCENTAGE. —". (G) Paragraph (4) of section 41(f) is amended by inserting "and gross receipts" after "qualified research expenses'. (H) Paragraph (2) of section 41(h), as redesignated by subtitle H, is amended— (i) by striking "BASE PERIOD EXPENSES" in the heading and inserting "BASE AMOUNT", and (ii) by striking "any amount for any base period" and all that follows through "such base period" and insert- ing "the base amount with respect to such taxable year shall be the amount which bears the same ratio to the base gunount for such year (determined without regard to this paragraph)". (b) TRADE OR BUSINESS REQUIREMENT DISREGARDED FOR IN-HOUSE RESEARCH EXPENSES OF CERTAIN STARTUP VENTURES.—Subsection (b) of section 41 (defining qualified research expenses) is amended by adding at the end thereof the following new paragraph: "(4) TRADE OR BUSINESS REQUIREMENT DISREGARDED FOR IN- HOUSE RESEARCH EXPENSES OF CERTAIN STARTUP VENTURES. —In the case of in-house research expenses, a taxpayer shall be treated as meeting the trade or business requirement of para- graph (1) if, at the time such in-house research expenses are paid or incurred, the principal purpose of the taxpayer in making such expenditures is to use the results of the research in the active conduct of a future trade or business— "(A) of the taxpayer, or "(B) of 1 or more other persons who with the taxpayer are treated as a single taxpayer under subsection (f)(D." (c) FULL DISALLOWANCE OF DEDUCTION FOR QUALIFIED RESEARCH EXPENSES.— (1) Subsection (c) of section 280C, as amended by subtitle H, is further amended by striking "50 percent of each place it appears. (2) Paragraph (2) of section 196(d) is amended by inserting before the period "for a taxable year beginning before January 1, 1990". (d) ONLY REASONABLE RESEARCH EXPENDITURES ELIGIBLE FOR SEC- TION 174.— Section 174 is amended by redesignating subsection (e) as subsection (0 and by inserting after subsection (d) the following new subsection: " (e) ONLY REASONABLE RESEARCH EXPENDITURES ELIGIBLE. —T h is section shall apply to a research or experimental expenditure only to the extent that the amount thereof is reasonable under the circumstances."

�