Section 1 Short title
This Act may be cited as the “Research and Experimentation Advances Competitiveness at Home Act” or as the “REACH Act”.
Research and Experimentation Advances Competitiveness at Home Act
A BILL
To amend the Internal Revenue Code of 1986 to reform the credit for increasing research activities, and for other purposes.
Sec. 2 Increase of alternative simplified credit
In general— Subparagraph (A) of section 41(c)(5) of the Internal Revenue Code of 1986 is amended by striking “14 percent (12 percent in the case of taxable years ending before January 1, 2009)” and inserting “20 percent”.
Conforming amendment— Clause (ii) of section 41(c)(5)(B) of the Internal Revenue Code of 1986 is amended by striking “6 percent” and inserting “10 percent”.
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 3 Allocation of research expenses among business components
In general— Subparagraph (A) of section 41(d)(2) of the Internal Revenue Code of 1986 is amended by inserting “, and may be applied using a method that relies on reasonable estimation techniques in lieu of contemporaneous accounting to measure employee hours per business component” before the period.
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 4 Inclusion of qualified upper-level employees in research expense calculation
In general— Clause (ii) of section 41(b)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting “, without regard to the employee's position or management level” before the period.
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 5 Repeal of exclusion of adaptive research
In general— Paragraph (4) of section 41(d) of the Internal Revenue Code of 1986 is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), (E), (F), (G), and (H) as subparagraphs (B), (C), (D), (E), (F), and (G), respectively.
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 6 Inclusion of cost reduction research
by striking “or” at the end of clause (ii);
by striking the period at the end of clause (iii) and inserting “, or”; and
by adding at the end the following new clause:
“(iv) reduction of costs associated with—
“(I) a business component of the taxpayer, or
“(II) research relating to a purpose described in clause (i), (ii), or (iii).”
Effective date— The amendments made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 7 Inclusion of obsolescence mitigation
In general— Clause (iv) of section 41(d)(3)(A) of the Internal Revenue Code of 1986, as added by section 5, is amended by inserting “or obsolescence mitigation” after “reduction of costs”.
Effective date— The amendment made by this section shall apply to taxable years beginning after December 31, 2016.
Sec. 8 Election of reduced credit may be made on amended return
In general— Subparagraph (C) of section 280C(c)(3) of the Internal Revenue Code of 1986 is amended to read as follows:
“(C) Election—An election under this paragraph shall made in such manner as the Secretary may prescribe and, once made with respect to a taxable year, shall be irrevocable. Such election may be made on the return of tax for the taxable year to which it applies or on an amended return.”
Effective date— The amendment made by this section shall apply to amended returns which are permitted to be filed under the applicable provisions of the Internal Revenue Code of 1986 after the date of the enactment of this Act.