[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3505 Introduced in House (IH)]
106th CONGRESS
1st Session
H. R. 3505
To amend the Internal Revenue Code of 1986 to provide for a medical
research tax credit.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
November 18, 1999
Mr. Watkins 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 for a medical
research tax credit.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. CREDIT FOR MEDICAL RESEARCH.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by inserting after section 41 the following new
section:
``SEC. 41A. CREDIT FOR MEDICAL RESEARCH EXPENSES.
``(a) General Rule.--For purposes of section 38, the medical
research credit determined under this section for the taxable year
shall be 30 percent of the excess (if any) of--
``(1) the qualified medical research expenses for the
taxable year, over
``(2) the medical research base period amount.
In determining the amount of credit, the special rules set forth in
section 41(f) shall apply.
``(b) Qualified Medical Research Activities.--
``(1) Definitions.--The term `qualified medical research
activities' means research, including human clinical testing
and animal testing, in or reasonably expected to lead to, the
development of any medical product for the prevention, cure, or
alleviation of human disease, sickness, or injury which occurs
before--
``(A) the date on which an application with respect
to such product is approved under section 505(b) or
505A of the Federal Food, Drug, and Cosmetic Act,
``(B) the date on which a license for such product
is approved under section 351 of the Public Health
Service Act, or
``(C) the date (or latter of the dates)
classification of a device intended for human use is
made under section 513 of the Federal Food, Drug, and
Cosmetic Act or approval of a device intended for human
use is granted under section 515 of such Act.
The term `qualified medical research activities' includes preclinical
and clinical testing occurring after the dates specified above in this
subsection if the purpose of such testing is to develop new functional
uses (including pediatric studies as described in section 355A(g) of
the Federal Food, Drug, and Cosmetic Act), characteristics,
indications, combinations, dosages, or delivery forms to an existing
product.
``(2) Exclusions.--The term `qualified medical research
activities' shall not include--
``(A) any amount to the extent funded by any grant,
contract, or otherwise by another person, entity,
government, or instrumentality of a government,
``(B) any such activities conducted outside the
United States and its possessions,
``(C) except as otherwise permitted by paragraph
(1) of this subsection, any research conducted after
commercial production of the product,
``(D) market research, testing, or development
(including advertising or promotion), or
``(E) routine or ordinary testing or inspection for
quality control.
``(c) Other Definitions.--For purposes of this section--
``(1) Qualified medical research expenses.--The term
`qualified medical research expenses' means amounts paid or
incurred by the taxpayer for qualified medical research
activities which are qualified research expenses within the
meaning of section 41(b); except that paragraph (3)(A) of
section 41(b) shall be applied for purposes of this section by
substituting `100 percent' for `65 percent' with respect to
amounts paid to a qualified academic institution and by
substituting `85 percent' for `65 percent' with respect to
amounts paid to a qualified nonprofit medical institution.
``(2) Product.--The term `product' means any drug,
biologic, medical or diagnostic test, or medical device.
``(3) Qualified academic institution.--The term `qualified
academic institution' means any of the following institutions:
``(A) Educational institution.--An institution
described in section 170(b)(1)(A) (ii) or (iii) which
is owned or affiliated with an institution of higher
education as described in section 3304(f).
``(B) Cancer research institution.--A cancer
research institution which is designated as a cancer
center by the National Cancer Institute, is, or is
owned by, an organization described in section
501(c)(3), is exempt from taxation under section
501(a), and is not a private foundation, or
``(C) Nonprofit independent research
institutions.--A not-for-profit, independent research
institute organized and operated exclusively for
scientific or educational purposes and exempt from
taxation under section 501(c)(3).
``(4) Qualified nonprofit medical institution.--The term
`nonprofit qualified medical institution' means any not-for-
profit organization which is described in section 501(c)(3), is
exempt from taxation under section 501(a) by reason of its
operation of a hospital or medical or health activity, and is
not a private foundation and which is not a qualified academic
institution.
``(5) Medical research base period amount.--The term
`medical research base period amount' means the average of the
taxpayer's qualified medical research expenses for the most
recent consecutive 5 taxable years of the taxpayer which ended
6 months before the beginning of the taxable year for which
such base period amount is determined.
``(A) If the taxpayer has not paid or incurred
expenses for qualified medical research activities for
any year during the base period set forth above, the
base period amount shall be the average of the
taxpayer's expenses for qualified medical research
activities for the years during such period in which
the taxpayer did pay or incur expenses for qualified
medical research activities.
``(B) For each of the first 2 taxable years in
which the taxpayer pays or incurs qualified medical
research expenses, the medical research base period
amount shall be 60 percent of the taxpayer's qualified
medical research expenses for the taxable year for
which such base period amount is determined.
``(d) Coordination With Credit for Increasing Research Expenditures
and With Credit for Clinical Testing Expenses for Certain Drugs for
Rare Diseases.--
``(1) No credit is allowable under this section for any
taxable year for which the taxpayer is allowed the credit under
section 41.
``(2) Any expenses for qualified medical research 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 45C for such
taxable year.''
(b) General Business Credit.--Section 38(b) of such Code (relating
to current business year credit) is amended by striking ``plus'' at the
end of paragraph (11), by striking the period at the end of paragraph
(12), and inserting ``, plus'', and by adding at the end the following:
``(13) the medical research expenses credit determined
under section 41A(a).''
(c) Deduction for Unused Portion of Credit.--Section 196(c) of such
Code (defining qualified business credits) is amended by striking
``and'' at the end of paragraph (7), by striking the period at the end
of paragraph (8) and inserting ``, and'', and by adding at the end the
following:
``(9) the medical research expenses credit determined under
section 41A(a).''
(d) Limitation on Deductions for Expenses for Which Credit Is
Allowable.--Section 280C of such Code (relating to certain expenses for
which credits are allowable) is amended by adding at the end the
following new subsection:
``(d) Credit for Increasing Research Activities.--
``(1) In general.--No deduction shall be allowed for that
portion of the qualified medical research expenses (as defined
in section 41A(c)(1)) 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 41A(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 41A(a), exceeds, and
``(B) the amount allowable as a deduction for such
taxable year for qualified medical 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 41A(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 41A(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 no 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.''
(e) Conforming 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 41 the following:
``Sec. 41A. Credit for medical research
expenses''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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