H.R. 942 - Start Advancing Firearms Enhancements and Technology Act of 2018 (SAFETY Act)

116TH CONGRESS
1ST SESSION

H.R. 942

To amend the Internal Revenue Code of 1986
to provide an enhanced research credit for the development
of smart gun technologies.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 31, 2019

Mr. HIMES (for himself, Ms. KUSTER of New Hampshire,
Ms. HILL of California, Ms. CLARKE of New York, Mr. DEUTCH,
Mr. PERLMUTTER, Mr. SOTO, and Mrs. MURPHY) introduced
the following bill; which was referred
to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide an enhanced research credit for the development of smart gun technologies.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "Start Advancing Firearms Enhancements and Technology Act of 2018" or the "SAFETY Act".

SEC. 2. ENHANCED RESEARCH CREDIT FOR DEVELOPMENT OF SMART GUN TECHNOLOGIES.

(a) IN GENERAL. — Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 45S the following new section:

"SEC. 45T. RESEARCH EXPENSES FOR SMART GUN TECHNOLOGIES.

"(a) GENERAL RULE. — For purposes of section 38, in the case of a taxpayer who is a Federal firearms licensee, the smart gun technology credit determined under this section for the taxable year is an amount equal to 30 percent of the excess of — 

"(1) the smart gun technology expenses for the taxable year, over

"(2) the base amount.

"(b) SMART GUN TECHNOLOGY EXPENSES; BASE AMOUNT. — For purposes of this section — 

"(1) SMART GUN TECHNOLOGY EXPENSES. — 

"(A) IN GENERAL. — Except as otherwise provided in this paragraph, the term 'smart gun technology expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year which would be described in section 41(b) if such section were applied with the modifications set forth in subparagraph (B).

"(B) MODIFICATIONS. — For purposes of subparagraph (A), section 41(b) shall be applied —

"(i) by substituting 'smart gun technology research' for 'qualified research' each place it appears in paragraphs (2) and (3) of such subsection, and

"(ii) by substituting '100 percent' for '65 percent' in paragraph (3)(A) of such subsection.

"(C) EXCLUSION FOR AMOUNTS FUNDED BY GRANTS, ETC. — The term 'smart gun technology expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).

"(2) BASE AMOUNT. — 

"(A) IN GENERAL. — Except as provided in subparagraph (B), the term 'base amount' means the amount which would be the base amount in section 41(c) if such section were applied by substituting 'smart gun technology research' for 'qualified research' each place it appears.

"(B) BASE AMOUNT IS ZERO FOR 3 YEARS. — The base amount shall be zero for purposes of determining the amount of credit for taxable years beginning in 2019, 2020, or 2021.

"(c) SMART GUN TECHNOLOGY RESEARCH . — For purposes of this section — 

"(1) IN GENERAL. — The term 'smart gun technology research' means qualified research (as defined in section 41(d)) for the purpose of developing smart gun technologies for firearms.

"(2) SMART GUN TECHNOLOGY. — The term 'smart gun technology' means any technology (other than a simple mechanical lock) which is designed —

"(A) to prevent a firearm from being fired by any individual other than an authorized user of the firearm, and

"(B) to convert the firearm from the inoperable condition to the operable condition in less than 2 seconds after the authorized user makes contact with the firearm, the firearm's arming device, or an external safe or locking device.

"(3) AUTHORIZED USER. — For purposes of this subsection, the term 'authorized user' means, with respect to a firearm, the owner of the firearm and any individual lawfully authorized by such owner to operate the firearm.

"(4) SIMPLE MECHANICAL LOCK. — For purposes of this subsection, the term 'simple mechanical lock' means a lock that uses a key or a conventional combination lock. Such term does not include an advanced lock that incorporates electronics or biometric sensors, or a lock with other features to enable faster opening from any orientation with low visibility.

"(d) FEDERAL FIREARMS LICENSEE. — For purposes of this section, the term 'Federal firearms licensee' means any person holding a license under chapter 44 of title 18, United States Code, other than a licensed collector.

"(e) COORDINATION WITH CREDIT FOR INCREASING RESEARCH EXPENDITURES. — 

"(1) IN GENERAL. — Except as provided in paragraph (2), any smart gun technology expenses for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year.

"(2) EXPENSES INCLUDED IN DETERMINING BASE PERIOD RESEARCH EXPENSES. — Smart gun technology expenses for any taxable year shall be taken into account in determining base period research expenses for purposes of applying section 41 to subsequent taxable years.

"(f) SPECIAL RULES. — 

"(1) CERTAIN RULES MADE APPLICABLE. — Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.

"(2) ELECTION. — This section shall apply to any taxpayer for any taxable year only if such taxpayer elects (at such time and in such manner as the Secretary may by regulations prescribe) to have this section apply for such taxable year.

"(g) TREATMENT OF CREDIT FOR QUALIFIED SMALL BUSINESSES. — 

"(1) IN GENERAL. — Under rules similar to the rules of section 41(h), section 3111(f) shall apply to the payroll tax credit portion of the credit otherwise determined under subsection (a) for the taxable year and such portion shall not be treated (other than for purposes of section 280C) as a credit determined under subsection (a).

"(2) FEDERAL FIREARMS LICENSEE EXCEPTION. — For purposes of this subsection, the payroll tax credit portion of the credit otherwise determined under subsection (a) shall be determined without regard to whether the taxpayer is a Federal firearms licensee.".

(b) DENIAL OF DOUBLE BENEFIT. — Section 280C of such Code is amended by adding at the end the following new subsection:

"(i) CREDIT FOR SMART GUN TECHNOLOGY EXPENSES. — 

"(1) IN GENERAL. — No deduction shall be allowed for that portion of the smart gun technology expenses (as defined in section 45T(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 45T (determined without regard to section 38(c) thereof).

"(2) SIMILAR RULE WHERE TAXPAYER CAPITALIZES RATHER THAN DEDUCTS EXPENSES. — If — 

"(A) the amount of the credit allowable for the taxable year under section 45T (determined without regard to section 38(c)), exceeds

"(B) the amount allowable as a deduction for the taxable year for smart gun technology 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 MADE PART OF GENERAL BUSINESS CREDIT. — 

(1) IN GENERAL. — Section 38(b) of such Code is amended by striking "plus" at the end of paragraph (31), by striking the period at the end of paragraph (32) and inserting ", plus", and by adding at the end thereof the following new paragraph:

"(33) in the case of a taxpayer who is a Federal firearms licensee (as defined in section 45T(d)), the smart gun technology credit determined under section 45T(a).".

(2) DEDUCTION FOR CERTAIN UNUSED BUSINESS CREDITS. — Subsection (c) of section 196 of such Code is amended by striking "and" at the end of paragraph (13), by striking the period at the end of paragraph (14) and inserting ", and", and by adding after paragraph (8) the following new paragraph:

"(15) the smart gun technology credit determined under section 45T.".

(d) CLERICAL AMENDMENT. — The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45S the following new item:

"Sec. 45T. Research expenses for smart gun technologies.".

(e) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts paid or incurred after December 31, 2019, in taxable years beginning after such date.

SEC. 3. FIREARMS TAX NOT TO APPLY TO COST OF SMART GUN TECHNOLOGY.

(a) IN GENERAL. — Section 4181 of the Internal Revenue Code of 1986 is amended by adding at the end the following new sentence:

"The price taken into account under the preceding sentence shall not include so much of the price of the firearm as is attributable to any smart gun technology (as defined in section 45T(c)(2)) of such firearm.".

(b) EFFECTIVE DATE. — The amendment made by this section shall take effect on January 1, 2020.