(a) Rule for employment credits No deduction shall be allowed for that portion of the wages or salaries paid or incurred for the taxable year which is equal to the sum of the credits determined for the taxable year under sections
45A (a),
51 (a), and
1396(a), 1400P(b), and 1400R. In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section
52 (a)) or a trade or business which is treated as being under common control with other trades or businesses (within the meaning of section
52 (b)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subsections (a) and (b) of section 52.
(b) Credit for qualified clinical testing expenses for certain drugs
(1) In general No deduction shall be allowed for that portion of the qualified clinical testing expenses (as defined in section
45C (b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit allowable for the taxable year under section
45C (determined without regard to section
38 (c)).
(2) Similar rule where taxpayer capitalizes rather than deducts expenses If
(A) the amount of the credit allowable for the taxable year under section
45C (determined without regard to section
38 (c)), exceeds
(B) the amount allowable as a deduction for the taxable year for qualified clinical testing expenses (determined without regard to paragraph (1)),
the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.
(3) Controlled groups In the case of a corporation which is a member of a controlled group of corporations (within the meaning of section
41 (f)(5)) or a trade or business which is treated as being under common control with other trades or business (within the meaning of section
41 (f)(1)(B)), this subsection shall be applied under rules prescribed by the Secretary similar to the rules applicable under subparagraphs (A) and (B) of section
41 (f)(1).
(c) Credit for increasing research activities
(1) In general No deduction shall be allowed for that portion of the qualified research expenses (as defined in section
41 (b)) or basic research expenses (as defined in section
41 (e)(2)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section
41 (a).
(2) Similar rule where taxpayer capitalizes rather than deducts expenses If
(A) the amount of the credit determined for the taxable year under section
41 (a)(1), exceeds
(B) the amount allowable as a deduction for such taxable year for qualified research expenses or basic research expenses (determined without regard to paragraph (1)),
the amount chargeable to capital account for the taxable year for such expenses shall be reduced by the amount of such excess.
(3) Election of reduced credit
(A) In general In the case of any taxable year for which an election is made under this paragraph
(i) paragraphs (1) and (2) shall not apply, and
(ii) the amount of the credit under section
41 (a) shall be the amount determined under subparagraph (B).
(B) Amount of reduced credit The amount of credit determined under this subparagraph for any taxable year shall be the amount equal to the excess of
(i) the amount of credit determined under section
41 (a) without regard to this paragraph, over
(ii) the product of
(I) the amount described in clause (i), and
(II) the maximum rate of tax under section
11 (b)(1).
(C) Election
An election under this paragraph for any taxable year shall be made not later than the time for filing the return of tax for such year (including extensions), shall be made on such return, and shall be made in such manner as the Secretary may prescribe. Such an election, once made, shall be irrevocable.
(4) Controlled groups
Paragraph (3) of subsection (b) shall apply for purposes of this subsection.