2. To Provide That Certain Activities Performed in Space, the Use of Certain Property in Space and Certain Articles Produced in Space Shall Be Treated as Activities performed, Property Used and Articles Produced Within the United States for Purposes of Any Tax Laws of the United States. (in the House of Representatives April 56 (legislative day, April 22), 1985, Mr. Downey of New York (for Himself and Mr. Nelson of Florida) introduced the Following bill Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Space Tax Investment Equity Act of 1985". TREATMENT OF CERTAIN SPACE ACTIVITIES Sec. 2. For purposes of— (1) the tax credit determined under section 46(a) of the Internal Revenue Code of 1954 and allowed by section 38 of such Code, (2) the tax deduction allowed by section 168(a) of such Code, (3) the tax credit determined under and allowed by section 30 of such Code, and (4) the provisions contained in part 1 of subchapter N of Chapter 1 of such Code (relating to the determination of sources of income), activities performed in space for United States persons on any spacecraft which is predominantly used or operated in space and is controlled from locations within the United States, articles produced in space primarily for sale or use within the United States upon any such spacecraft, and assets used or operated in space upon any such spacecraft (including such spacecraft) shall be treated as activities performed within, articles produced within, and assets used or operated within, the United States. PROPERTY USED IN SPACE Sec. 3. (a) Section 48(a)(2)(B) of the Internal Revenue Code of 1954 (relating to exceptions to the rule with respect to section 38 property used predominantly outside the United States) is amended— (1) by striking "and" at the end of clause (x); (2) by striking the period at the end of clause (xi) and inserting in lieu thereof "; and"; and (3) by adding at the end the following new clause: "(xi) any tangible personal property— "(I) which is predominantly used or operated in space, and "(II) which is either a qualified spacecraft within the meaning of section 861(g)(3) or is used or operated upon such a qualified spacecraft.". (b) The amendments made by this section shall apply with respect to property placed in service after December 31, 1985. APPLICATION ON ACCELERATED COST RECOVERY SYSTEM TO CERTAIN PROPERTY USED PREDOMINANTLY IN SPACE Sec. 4. (a) Section 168(c)(2) of the Internal Revenue Code of 1954 (relating to rules for the type of property which qualifies for the accelerated cost recovery system as recovery property) is amended by adding at the end the following new subparagraph: "(G) Property used in space.—Any tangible property used in space shall be treated as 5-year property of a character subject to the allowance for depreciation.". (b) The amendment made by this section shall apply with respect to property placed in service after December 31, 1985. AVAILABILITY OF TAX CREDIT FOR CERTAIN RESEARCH CONDUCTED IN SPACE Sec. 5. (a) Section 30(f) of the Internal Revenue Code of 1954 (relating to special rules with respect to increased expenses) is amended by adding at the end the following new paragraph: "(6) Qualified research conducted in space.— "(A) Qualified research includes research conducted in space.—For purposes of the definition of the term 'qualified research' contained in subsection (d) and the definition of the term 'basic research' contained in subsection (e)(3), research conducted in space by or for United States persons shall not be treated as research conducted outside the United States.". (b) The amendment made by this subsection shall apply with respect to research expenses paid or incurred after December 31, 1985. TREATMENT OF INCOME Sec. 6. (a) Section 861 of the Internal Revenue Code of 1954 (defining income from sources within the United States) is amended by adding at the end the following new subsection: "(g) Certain Income Derived From Commercial Activity in Space Treated as Income From Sources Within the United States.— "(1) In general.—Amounts includible in gross income of the taxpayer which are attributable to income received by the taxpayer— "(A) from the disposition of an interest in property produced aboard a qualified spacecraft for the taxpayer primarily for sale or use within the United States, "(B) for the use, or the privilege of using, property or an interest in property of the taxpayer aboard a qualified spacecraft, or "(C) as compensation for services performed by the taxpayer aboard a qualified spacecraft, shall be treated as income from sources within the United States in the manner provided in paragraph (2). "(2) Treatment of income described in paragraph (1).—Income described in paragraph (1) shall be treated as income from sources within the United States in the same manner and to the same extent as such income would be so treated if— "(A) in the case of income referred to in paragraph (1)(A), the property described in such paragraph had been produced within the United States, "(B) in the case of income referred to in paragraph (1)(B), the property or interest in property described in such paragraph had been located or used within the United States, or "(C) in the case of income referred to in paragraph (1)(C), the services described in such paragraph had been performed within the United States. "(3) Qualified spacecraft defined.—For purposes of this subsection, the term 'qualified spacecraft' means any craft which— "(A) is predominantly used or operated in space, and "(B) is controlled from locations within the United States. The Secretary shall publish regulations describing the circumstances under which a spacecraft shall be treated as controlled from locations within the United States.". (b) The amendment made by this section shall apply to taxable years beginning after December 31, 1985.