PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2173
business of farming, determined on the basis that such credit was used first. (3) FARMING.—The term "farming" has the meaning given such term by section 2032A(e)(4) and (5) of such Code.
Subtitle C—General Business Credit Reduction SEC. 221. REDUCTION IN TAX LIABILITY WHICH MAY BE OFFSET BY BUSINESS CREDIT FROM 85 PERCENT TO 75 PERCENT.
(a) IN GENERAL.—Subparagraph (B) of section 38(c)(1) (relating to limitation based on amount of tax) is amended by striking out "85 percent" and inserting in lieu thereof "75 percent". (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1985.
Subtitle D—Research and Development Provisions SEC. 231. AMENDMENTS RELATING TO CREDIT FOR INCREASING RESEARCH ACTIVITIES. (a) 3-YEAR EXTENSION OF THE RESEARCH CREDIT.—
(1) IN GENERAL.—Section 30 (relating to credit for increasing research activities) is amended by adding at the end thereof the following new subsection: "(h) TERMINATION.—
"(1) IN GENERAL.—This section shall not apply to any amount paid or incurred after December 31, 1988. "(2) COMPUTATION OF BASE PERIOD EXPENSES.—In the case of any taxable year which begins before January 1, 1989, and ends after December 31, 1988, any amount for any base period with respect to such taxable year shall be the amount which bears the same ratio to such amount for such base period as the number of days in such taxable year before January 1, 1989, bears to the total number of days in such taxable year." (2) CONFORMING AMENDMENT.—Subsection (d) of section 221 of
the Economic Recovery Tax Act of 1981 is amended— (A) by striking out ", and before January 1, 1986" in paragraph (1), and (B) by striking out the last sentence of paragraph (2)(A). (b) DEFINITION OF QUALIFIED RESEARCH; CERTAIN RESEARCH NOT ELIGIBLE FOR CREDIT.—Subsection (d) of section 30 (defining qualified
research) is amended to read as follows: "(d) QUALIFIED RESEARCH DEFINED.—For purposes of this section— "(1) IN GENERAL.—The term 'qualified research' means research— "(A) with respect to which expenditures may be treated as expenses under section 174, "(B) which is undertaken for the purpose of discovering information— "(i) which is technological in nature, and "(ii) the application of which is intended to be useful in the development of a new or improved business component of the taxpayer, and
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