PUBLIC LAW 100-647—NOV. 10, 1988
102 STAT. 3653
"(2) TIME FOR MAKING ELECTION.—An election under paragraph (1) for any taxable year may be made (or revoked) at any time before the expiration of the 3-year period beginning on the last day prescribed by law for filing the return for such taxable year (determined without regard to extensions). "(3) MANNER OF MAKING ELECTION.—An election under paragraph (1) (or revocation thereof) shall be made in such manner as the Secretary may by regulations prescribe." (2) DEDUCTION FOR UNUSED RESEARCH CREDIT.—
(A) Subsection (c) of section 196 of the 1986 Code is amended by striking out "and" at the end of paragraph (2), by striking out the period at the end of paragraph (3) and inserting in lieu thereof ", and", and by adding at the end thereof the following new paragraph: "(4) the research credit determined under section 41(a) for taxable years beginning after December 31, 1988." (B) Subsection (d) of section 196 of the 1986 Code is amended to read as follows: "(d) SPECIAL RULE FOR INVESTMENT TAX CREDIT AND RESEARCH
CREDIT.—Subsection (a) shall be applied by substituting an amount equal to 50 percent of for an amount equal to in the case of— "(1) the investment credit determined under section 46(a) (other than a credit to which section 48(q)(3) applies), and "(2) the research credit determined under section 41(a)." (c) TECHNICAL AMENDMENTS.—
(1) Paragraph (1) of section 28(b) of the 1986 Code is amended by striking out "1988" and inserting in lieu thereof "1989". (2) Subsection (n) of section 6501 of the 1986 Code is amended by striking out "or 51(j)" and inserting in lieu thereof ", 41(h), or 51(j)". (d) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1988. SEC. 4009. ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES.
(a) GENERAL RULE.—For purposes of sections 861(b), 862(b), and 863(b) of the 1986 Code, qualified research and experimental expenditures shall be allocated and apportioned as follows: (1) Any qualified research and experimental expenditures expended solely to meet legal requirements imposed by a political entity with respect to the improvement or marketing of specific products or processes for purposes not reasonably expected to generate gross income (beyond de minimis amounts) outside the jurisdiction of the political entity shall be allocated only to gross income from sources within such jurisdiction. (2) In the case of any qualified research and experimental expenditures (not allocated under paragraph (1)) to the extent— (A) that such expenditures are attributable to activities conducted in the United States, 64 percent of such expenditures shall be allocated and apportioned to income from sources within the United States and deducted from such income in determining the amount of taxable income from sources within the United States, and (B) that such expenditures are attributable to activities conducted outside the United States, 64 percent of such expenditures shall be allocated and apportioned to income from sources outside the United States and deducted from
26 USC 41 note. 26 USC 861 note.
�
