California Legislature—2013–14 Regular Session

Assembly Bill No. 1564

Introduced by Assembly Member V. Manuel Pérez

January 29, 2014

An act to add Article 4.5 (commencing with Section 12097) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, and to amend Sections 17052.12 and 23609 of, and to add Section 19535 to, the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 1564, as introduced, V. Manuel Pérez. Income taxes: research and development credit: credit sale and purchase.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a credit for a percentage of specified research expenses.

This bill would increase that percentage by 3% each taxable year for 5 taxable years and then return to the current rate. This bill would limit the credit to a 10-year carryover period. This bill would create a Research and Development Tax Credit Trade Program, which the Governor’s Office of Business and Economic Development (GO-Biz) would administer to authorize taxpayers to purchases and sell the credits. This bill would appropriate a portion of the money made from the sale of the credits to GO-Biz and the Franchise Tax Board for the costs incurred by the agencies in administering the program. This bill would impose specified auditing requirements on the Franchise Tax Board related to this credit, as specified.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares the following:

(a) California’s greatest economic asset is its diverse economy
that supports key industry clusters that rely upon innovation to
compete globally.

(b) California is uniquely situated to benefit from increasing
research and development tax credits because of California’s world
renowned academic institutions, industry clusters, and diverse
population that attracts worldwide talent.

(c) Recent studies conducted by the Public Policy Institute of
California ranked California fourth in the nation in entrepreneurial
energy and second in the nation in innovation capacity. However,
California was ranked as having only the 43rd most favorable
corporate tax structure. This low raking artificially reduces the
capacity of research and development that could occur in the state
because companies are more likely to expand to other states or
counties where they will be taxed at a lower level.

(d) Creating an environment rich in research and development
spawns the growth of manufacturing. In the last 10 years, California
has declined from the sixth largest economy in the world to the
ninth, which is behind Brazil. During that time, manufacturing
declined in California from 1.865 million jobs to 1.257 million
jobs.

(e) California needs to invest in the innovation economy by
eliminating the roadblocks in state law and regulations and by
developing a tax system that rewards capital expenditures in order
to ensure that the private sector will invest financial capital and
intellectual capital in California.

(f) California needs to support the creation of new manufacturing
jobs created by the private sector in the innovation economy with
a highly skilled workforce.

SEC. 2.  

It is the intent of the Legislature to do the following:

(a) Incrementally increase the research and development tax
credits under the Personal Income Tax Law and the Corporation
Tax Law up to 15 percent for a five-year period.

(b) Reduce California’s research and development tax credits
by creating a 10-year carryover maximum, focusing the credits on
startup businesses.

(c) Create new and clearly defined auditing procedures for the
Franchise Tax Board relating to this credit to allow taxpayers
claiming a research and development tax credit to defend their
research and development activities.

SEC. 3.  

Article 4.5 (commencing with Section 12097) is added
to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government
Code, to read:

 

Article 4.5.  The Research and Development Tax Credit Trade
Program

 

12097.  

The Governor’s Office of Business and Economic
Development (GO-Biz) shall develop and administer a program
to allow the sale or purchase of research and development tax
credits allowed under Sections 17052.12 and 23609 of the Revenue
and Taxation Code. GO-Biz shall create an Internet Web site
through which approved taxpayers may, by January 1, 2017, make
such sale or purchase.

(a) The Franchise Tax Board shall notify GO-Biz quarterly of
all taxpayers that claim a credit under Sections 17052.12 and 23609
of the Revenue and Taxation Code, and the amount of credit
claimed.

(b) A taxpayer may request approval by GO-Biz to sell or
purchase a credit.

(c) GO-Biz shall approve a taxpayer before that taxpayer may
sell or purchase the credits.

(1) GO-Biz shall approve a taxpayer to sell its credits if that
taxpayer has all of the following:

(A) A facility in which research and development occurs in the
state.

(B) Less than fifty million dollars ($50,000,000) in earnings
before income tax, depreciation, and amortization.

(C) Unused research and development tax credits from a
previous taxable year.

(2) GO-Biz shall approve a taxpayer to purchase a research and
development tax credit if all of the following requirements are
met:

(A) The taxpayer has had qualified research expenses, as defined
in Sections 17052.12 and 23609 of the Revenue and Taxation Code
and Section 41 of the Internal Revenue Code, within the past five
years.

(B) The taxpayer conducts a trade or business in the state.

(d) If a taxpayer is approved, GO-Biz shall create an online
account for the taxpayer to allow the taxpayer to log into the
Internet Web site to sell or purchase the credits.

(e) A taxpayer shall not be approved to sell or purchase more
than five million dollars ($5,000,000) in unused research and
development tax credits per taxable year.

(f) If the taxpayer does not reinvest the money received from
the sale of the credit into the taxpayer’s trade or business or if the
purchased credits reduce the taxpayer’s tax liability by more than
50 percent, any remaining unapplied credit shall be canceled and
any previously applied credit that was not reinvested or that
exceeds 50 percent of the taxpayer’s tax liability shall be
recaptured, and the taxpayer shall be liable for any increase in tax
attributable to the recapture of any credit previously allowed under
this section.

(g) The price of the credit shall be based on the open-market
demand.

(h) GO-Biz shall notify the Franchise Tax Board of each sale
or purchase of a credit, the identity of the taxpayer selling the
credit, the identity of the taxpayer that purchased the credit, and
the amount of the credit sold quarterly. The Franchise Tax Board
shall review this information to ensure that a credit is not being
used multiple times.

12097.1.  

(a) There is hereby established in the State Treasury
the Research and Development Tax Credit Trade Fund.

(b) (1) Until GO-Biz has been fully reimbursed for its costs of
developing, creating, and starting the Research and Development
Tax Credit Trade Program, 15 percent of each credit sold or
purchased on the Internet Web site established by GO-Biz shall
be deposited into the Research and Development Tax Credit Trade
Fund for the purpose of funding this program pursuant to Section
12097, and appropriated as follows:

(A) Thirteen percent of each credit to GO-Biz for the
administrative and start-up costs of implementing this program.

(B) Two percent of each credit to the Franchise Tax Board for
the administrative costs of implementing this program.

(2) The remaining 85 percent of each credit may be used as a
credit against the “net tax” or “tax,” as applicable of the taxpayer
that purchased the credit.

(c) (1) Once GO-Biz has been fully reimbursed for its costs of
developing, creating, and starting this program, 5 percent of each
credit sold through the Internet Web site established by GO-Biz
shall be deposited into the Research and Development Tax Credit
Trade Fund for the purpose of funding the Research and
Development Tax Credit Trade Program pursuant to Section 12097,
and appropriated as follows:

(A) Three percent of each credit to GO-Biz for the administrative
costs of implementing this program.

(B) Two percent of each credit to the Franchise Tax Board for
the administrative costs of implementing this program.

(2) The remaining 95 percent of each credit may be used as a
credit against the “net tax” or “tax,” as applicable of the taxpayer
that purchased the credit.

SEC. 4.  

Section 17052.12 of the Revenue and Taxation Code
is amended to read:

17052.12.  

For each taxable year beginning on or after January
1, 1987, there shall be allowed as a credit against the “net tax” (as
defined by Section 17039) for the taxable year an amount
determined in accordance with Section 41 of the Internal Revenue
Code, except as follows:

(a) For each taxable year beginning before January 1, 1997, the
reference to “20 percent” in Section 41(a)(1) of the Internal
Revenue Code is modified to read “8 percent.”

(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “11 percent.”

(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, the reference to “20 percent” in Section
41(a)(1) of the Internal Revenue Code is modified to read “12
percent.”

(3) For each taxable year beginning on or after January 1, 2000,
begin insert and before January 1, 2014, end insert the reference to “20 percent” in
Section 41(a)(1) of the Internal Revenue Code is modified to read
“15 percent.”

begin insert

(4) For each taxable year beginning on or after January 1,
2014, and before January 1, 2015, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “18 percent.”

end insert begin insert

(5) For each taxable year beginning on or after January 1,
2015, and before January 1, 2016, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “21 percent.”

end insert begin insert

(6) For each taxable year beginning on or after January 1,
2016, and before January 1, 2017, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “24 percent.”

end insert begin insert

(7) For each taxable year beginning on or after January 1,
2017, and before January 1, 2018, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “27 percent.”

end insert begin insert

(8) For each taxable year beginning on or after January 1,
2018, and before January 1, 2019, the reference to “20 percent”
in Section 41(a)(1) of the Internal Revenue Code is modified to
read “30 percent.”

end insert begin insert

(9) For each taxable year beginning on or after January 1,
2019, the reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “15 percent.”

end insert

(c) Section 41(a)(2) of the Internal Revenue Code shall not
apply.

(d) “Qualified research” shall include only research conducted
in California.

(e) In the case where the credit allowed under this section
exceeds the “net tax,” the excess may be carried over to reduce
the “net tax” in the following year, and succeeding begin insert nine end insert years if
necessary, until the credit has been exhausted.

(f) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of
“qualified research expense” any amount paid or incurred for
tangible personal property that is eligible for the exemption from
sales or use tax provided by Section 6378.

(2) For each taxable year beginning on or after January 1, 1998,
the reference to “Section 501(a)” in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read “this part or Part 11 (commencing with Section
23001).”

(g) (1) For each taxable year beginning on or after January 1,
2000:

(A) The reference to “3 percent” in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read “one and forty-nine
hundredths of one percent.”

(B) The reference to “4 percent” in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read “one and
ninety-eight hundredths of one percent.”

(C) The reference to “5 percent” in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read “two and forty-eight
hundredths of one percent.”

(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code
may be made for any taxable year of the taxpayer beginning on or
after January 1, 1998. That election shall apply to the taxable year
for which made and all succeeding taxable years unless revoked
with the consent of the Franchise Tax Board.

(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer’s trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.

(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of alternative simplified credit, shall not apply.

(h) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.

(i) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:

(1) The last sentence shall not apply.

(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of
Section 41(g) of the Internal Revenue Code, that amount may be
carried over to other taxable years under the rules of subdivision
(e); except that the limitation of Section 41(g) of the Internal
Revenue Code shall be taken into account in each subsequent
taxable year.

(j) Section 41(a)(3) of the Internal Revenue Code shall not apply.

(k) Section 41(b)(3)(D) of the Internal Revenue Code, relating
to amounts paid to eligible small businesses, universities, and
federal laboratories, shall not apply.

(l) Section 41(f)(6), relating to energy research consortium,
shall not apply.

begin insert

(m) A taxpayer may sell a credit allowed under this section
pursuant to Article 4.5 (commencing with Section 12097) of
Chapter 1.6 of Part, of Division 3 of Title 2 of the Government
Code.

end insert

SEC. 5.  

Section 19535 is added to the Revenue and Taxation
Code, to read:

19535.  

(a) The Franchise Tax Board shall perform the
following audit procedures if a taxpayer filed for a credit under
Section 17052.12 or 23609 and was not allowed that credit:

(1) Use a risk-based approach to conduct an audit. The
risk-based approach shall focus on identifying areas of a taxpayer’s
business or trade in which there may be subjectivity in determining
whether an employee of the taxpayer is performing qualified
research or nonqualified research, and what percentage of that
employee’s time is devoted to performing qualified research.

(2) Require a general explanation of the taxpayer’s trade or
business, the role of research and development in the trade or
business, the development of new and improved products,
processes, and software from the taxpayer.

(3) Determine whether the Internal Revenue Services has
conducted an examination of the credit allowed under Section 41
of the Internal Revenue Code and request a copy of the audit report.
If the Internal Revenue Services has conducted an examination,
the Franchise Tax Board shall rely upon the findings of the
examination, subject to verifying that the research activities and
costs were incurred in state.

(4) Conduct a physical tour of the taxpayer’s facilities and
interview employees of the taxpayer that are performing qualified
research. A physical tour should be conducted prior to arriving at
a determination that a taxpayer’s activities do not qualify as
qualified research, as defined in Sections 17052.12 and 23609.
The tour shall include the area in which research is performed and
follow a product or process through its life cycle beginning with
development and ending in production.

(5) Identify the types of employees dedicated to research,
production, or administrative duties, or a mixture of any of those
activities.

(b) The Franchise Tax Board may perform the following audit
procedures if a taxpayer filed for a credit under Section 17052.12
or 23609 and was not allowed that credit and the auditor deems it
necessary:

(1) Ask the taxpayer to provide examples of research projects
from the examination years and to describe projects that are
currently under development.

(2) Ask the taxpayer to explain each step of the development
process, where mixed-services are performed, and distinguish
between production or administration functions and research.

(c) If the Franchise Tax Board determines a particular expense
to not be a qualified research expenditure, a taxpayer shall be
allowed an opportunity to provide additional supporting records.
If an adjustment in whether an expense is considered a qualified
research expense is necessary based on the taxpayers additional
supporting records, the Franchise Tax Board shall explain and
document the discrepancy. An adjustment based upon mere
criticism of a taxpayer’s workpapers, study, methods, or vague
disallowance for law of substantiation, without actual information
or evidence that contradict a taxpayer’s documents or other
evidence shall not be upheld. A lack of substantiation shall be a
valid reason for disallowing a credit when the taxpayer only
submits vague testimony.

SEC. 6.  

Section 23609 of the Revenue and Taxation Code is
amended to read:

23609.  

For each taxable year beginning on or after January 1,
1987, there shall be allowed as a credit against the “tax” (as defined
by Section 23036) an amount determined in accordance with
Section 41 of the Internal Revenue Code, except as follows:

(a) For each taxable year beginning before January 1, 1997,
both of the following modifications shall apply:

(1) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “8 percent.”

(2) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “12 percent.”

(b) (1) For each taxable year beginning on or after January 1,
1997, and before January 1, 1999, both of the following
modifications shall apply:

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “11 percent.”

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “24 percent.”

(2) For each taxable year beginning on or after January 1, 1999,
and before January 1, 2000, both of the following shall apply:

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “12 percent.”

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “24 percent.”

(3) For each taxable year beginning on or after January 1, 2000,
begin insert and before January 1, 2014, end insert both of the following shall apply:

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “15 percent.”

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “24 percent.”

begin insert

(4) For each taxable year beginning on or after January 1,
2014, and before January 1, 2015, both of the following shall
apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “18 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “27 percent.”

end insert begin insert

(5) For each taxable year beginning on or after January 1,
2015, and before January 1, 2016, both of the following shall
apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “21 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “30 percent.”

end insert begin insert

(6) For each taxable year beginning on or after January 1,
2016, and before January 1, 2017, both of the following shall
apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “24 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “33 percent.”

end insert begin insert

(7) For each taxable year beginning on or after January 1,
2017, and before January 1, 2018, both of the following shall
apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “27 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “36 percent.”

end insert begin insert

(8) For each taxable year beginning on or after January 1,
2018, and before January 1, 2019, both of the following shall
apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “30 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “39 percent.”

end insert begin insert

(9) For each taxable year beginning on or after January 1,
2019, both of the following shall apply:

end insert begin insert

(A) The reference to “20 percent” in Section 41(a)(1) of the
Internal Revenue Code is modified to read “15 percent.”

end insert begin insert

(B) The reference to “20 percent” in Section 41(a)(2) of the
Internal Revenue Code is modified to read “24 percent.”

end insert

(c) (1) With respect to any expense paid or incurred after the
operative date of Section 6378, Section 41(b)(1) of the Internal
Revenue Code is modified to exclude from the definition of
“qualified research expense” any amount paid or incurred for
tangible personal property that is eligible for the exemption from
sales or use tax provided by Section 6378.

(2) “Qualified research” and “basic research” shall include only
research conducted in California.

(d) The provisions of Section 41(e)(7)(A) of the Internal
Revenue Code, shall be modified so that “basic research,” for
purposes of this section, includes any basic or applied research
including scientific inquiry or original investigation for the
advancement of scientific or engineering knowledge or the
improved effectiveness of commercial products, except that the
term does not include any of the following:

(1) Basic research conducted outside California.

(2) Basic research in the social sciences, arts, or humanities.

(3) Basic research for the purpose of improving a commercial
product if the improvements relate to style, taste, cosmetic, or
seasonal design factors.

(4) Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality of any deposit
of ore or other mineral (including oil and gas).

(e) (1) In the case of a taxpayer engaged in any
biopharmaceutical research activities that are described in codes
2833 to 2836, inclusive, or any research activities that are described
in codes 3826, 3829, or 3841 to 3845, inclusive, of the Standard
Industrial Classification (SIC) Manual published by the United
States Office of Management and Budget, 1987 edition, or any
other biotechnology research and development activities, the
provisions of Section 41(e)(6) of the Internal Revenue Code shall
be modified to include both of the following:

(A) A qualified organization as described in Section
170(b)(1)(A)(iii) of the Internal Revenue Code and owned by an
institution of higher education as described in Section 3304(f) of
the Internal Revenue Code.

(B) A charitable research hospital owned by an organization
that is described in Section 501(c)(3) of the Internal Revenue Code,
is exempt from taxation under Section 501(a) of the Internal
Revenue Code, is not a private foundation, is designated a
“specialized laboratory cancer center,” and has received Clinical
Cancer Research Center status from the National Cancer Institute.

(2) For purposes of this subdivision:

(A) “Biopharmaceutical research activities” means those
activities that use organisms or materials derived from organisms,
and their cellular, subcellular, or molecular components, in order
to provide pharmaceutical products for human or animal
therapeutics and diagnostics. Biopharmaceutical activities make
use of living organisms to make commercial products, as opposed
to pharmaceutical activities that make use of chemical compounds
to produce commercial products.

(B) “Other biotechnology research and development activities”
means research and development activities consisting of the
application of recombinant DNA technology to produce
commercial products, as well as research and development
activities regarding pharmaceutical delivery systems designed to
provide a measure of control over the rate, duration, and site of
pharmaceutical delivery.

(f) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and succeeding begin insert nine end insert years if necessary, until
the credit has been exhausted.

(g) For each taxable year beginning on or after January 1, 1998,
the reference to “Section 501(a)” in Section 41(b)(3)(C) of the
Internal Revenue Code, relating to contract research expenses, is
modified to read “this part or Part 10 (commencing with Section
17001).”

(h) (1) For each taxable year beginning on or after January 1,
2000:

(A) The reference to “3 percent” in Section 41(c)(4)(A)(i) of
the Internal Revenue Code is modified to read “one and forty-nine
hundredths of one percent.”

(B) The reference to “4 percent” in Section 41(c)(4)(A)(ii) of
the Internal Revenue Code is modified to read “one and
ninety-eight hundredths of one percent.”

(C) The reference to “5 percent” in Section 41(c)(4)(A)(iii) of
the Internal Revenue Code is modified to read “two and forty-eight
hundredths of one percent.”

(2) Section 41(c)(4)(B) shall not apply and in lieu thereof an
election under Section 41(c)(4)(A) of the Internal Revenue Code
may be made for any taxable year of the taxpayer beginning on or
after January 1, 1998. That election shall apply to the taxable year
for which made and all succeeding taxable years unless revoked
with the consent of the Franchise Tax Board.

(3) Section 41(c)(7) of the Internal Revenue Code, relating to
gross receipts, is modified to take into account only those gross
receipts from the sale of property held primarily for sale to
customers in the ordinary course of the taxpayer’s trade or business
that is delivered or shipped to a purchaser within this state,
regardless of f.o.b. point or any other condition of the sale.

(4) Section 41(c)(5) of the Internal Revenue Code, relating to
election of the alternative simplified credit, shall not apply.

(i) Section 41(h) of the Internal Revenue Code, relating to
termination, shall not apply.

(j) Section 41(g) of the Internal Revenue Code, relating to
special rule for passthrough of credit, is modified by each of the
following:

(1) The last sentence shall not apply.

(2) If the amount determined under Section 41(a) of the Internal
Revenue Code for any taxable year exceeds the limitation of
Section 41(g) of the Internal Revenue Code, that amount may be
carried over to other taxable years under the rules of subdivision
(f), except that the limitation of Section 41(g) of the Internal
Revenue Code shall be taken into account in each subsequent
taxable year.

(k) Section 41(a)(3) of the Internal Revenue Code shall not
apply.

(l) Section 41(b)(3)(D) of the Internal Revenue Code, relating
to amounts paid to eligible small businesses, universities, and
federal laboratories, shall not apply.

(m) Section 41(f)(6) of the Internal Revenue Code, relating to
energy research consortium, shall not apply.

begin insert

(n) A taxpayer may sell a credit allowed under this section
pursuant to Article 4.5 (commencing with Section 12097) of
Chapter 1.6 of Part, of Division 3 of Title 2 of the Government
Code.

end insert