Page:United States Statutes at Large Volume 95.djvu/268

 95 STAT. 242

PUBLIC LAW 97-34—AUG. 13, 1981 "(ii) SELF-EMPLOYED INDIVIDUALS AND OWNER-EMPLOY-

26 USC 401.

EES.—In the case of an employee (within the meaning of section 401(c)(1)), the term 'wages' includes the earned income (as defined in section 401(c)(2)) of such employee, "(iii) EXCLUSION FOR WAGES TO WHICH NEW JOBS OR WIN CREDIT APPLIES.—The term 'wages' shall not include any amount taken into account in computing the credit under section 40 or 44B. "(8) CONTRACT RESEARCH EXPENSES.—

"(A) IN GENERAL.—The term 'contract research expenses' means 65 percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified research. "(B)

PREPAID

AMOUNTS.—If

any

contract

research

expenses paid or incurred during any taxable year are attributable to qualified research to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the qualified research is conducted. "(c) BASE PERIOD RESEARCH EXPENSES.—For purposes of this section— "(1) IN GENERAL.—The term 'base period research expenses' means the average of the qualified research expenses for each year in the base period. "(2) BASE PERIOD.—

"(A) IN GENERAL.—For purposes of this subsection, the term 'base period' means the 3 taxable years immediately preceding the taxable year for which the determination is being made (hereinafter in this subsection referred to as the 'determination year'). "(B) TRANSITIONAL RULES.—Subparagraph (A) shall be applied— "(i) by substituting 'first taxable year' for '3 taxable years' in the case of the first determination year ending after June 30, 1981, and "(ii) by substituting '2' for '3' in the case of the second determination year ending after June 30, 1981. "(3) MINIMUM BASE PERIOD RESEARCH EXPENSES.—In no event shall the base period research expenses be less than 50 percent of the qualified research expenses for the determination year. "(d) QuAUFiED RESEARCH.—For purposes of this section the term 'qualified research' has the same meaning as the term research or experimental has under section 174, except that such term shall not include— "(1) qualified research conducted outside the United States, "(2) qualified research in the social sciences or humanities, and "(3) qualified research to the extent funded by any grant, contract, or otherwise by another person (or any governmental entity). "(e) CREDIT AVAILABLE WITH RESPECT TO CERTAIN BASIC RESEARCH BY COLLEGES, UNIVERSITIES, AND CERTAIN RESEARCH ORGANIZATIONS.—

Post, p. 248.

"(1) IN GENERAL.—65 percent of any amount paid or incurred by a corporation (as such term is defined in section 170(e)(4)(D)) to any qualified organization for basic research to be performed by such organization shall be treated as contract research expenses. The preceding sentence shall apply only if the amount is paid or

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