Biotechnology Future Investment Expansion Act of 2005 - Amends the Internal Revenue Code to permit certain biomedical research corporations to engage in investments and other transactions involving shifts in ownership without incurring limitations on net operating loss carryforwards and certain built-in losses.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4082 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 4082
To permit biomedical research corporations to engage in certain
financings and other transactions without incurring limitations on net
operating loss carryforwards and certain built-in losses, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 19, 2005
Ms. Hart (for herself, Mr. Neal of Massachusetts, Mr. Reynolds, Mr.
English of Pennsylvania, Mr. Hayworth, and Mr. Gerlach) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To permit biomedical research corporations to engage in certain
financings and other transactions without incurring limitations on net
operating loss carryforwards and certain built-in losses, and for other
purposes.
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 ``Biotechnology Future Investment
Expansion Act of 2005''.
SEC. 2. RESTORING THE BENEFIT OF TAX INCENTIVES FOR BIOMEDICAL RESEARCH
AND CLINICAL TRIALS.
(a) In General.--Subsection (l) of section 382 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(9) Certain financing transactions of biomedical research
corporations.--
``(A) General rule.--In the case of a biomedical
research corporation, any owner shift involving a 5-
percent shareholder which occurs as the result of a
qualified investment or qualified transaction during
the testing period shall be treated for purposes of
this section (other than this paragraph) as occurring
before the testing period.
``(B) Biomedical research corporation.--For
purposes of this paragraph, the term `biomedical
research corporation' means, with respect to any
qualified investment, any domestic corporation subject
to tax under this subchapter which is not in bankruptcy
and which, as of the time of the closing on such
investment--
``(i) holds the rights to a drug or
biologic for which an investigational new drug
application is in effect under section 505 of
the Federal Food, Drug, and Cosmetic Act, and
``(ii) certifies that, as of the time of
such closing, the drug or biologic is, or in
the 3 month period before and after such
closing has been, under study pursuant to an
investigational use exemption under section
505(i) of the Federal Food, Drug, and Cosmetic
Act.
``(C) Qualified investment.--For purposes of this
paragraph, the term `qualified investment' means any
acquisition of stock by a shareholder (who after such
acquisition is a less than 50 percent shareholder) in a
biomedical research corporation if such stock is
acquired at its original issue (directly or through an
underwriter) solely in exchange for cash.
``(D) Qualified transaction.--For purposes of this
paragraph, the term `qualified transaction' means any
acquisition of stock in a biomedical research
corporation if such stock is acquired as part of a
merger or acquisition by another biomedical research
corporation that is a loss corporation. If the
acquiring loss corporation is a member of a controlled
group of corporations under section 1563(a), the group
must be a loss group.
``(E) Stock issued in exchange for convertible
debt.--For purposes of this paragraph, stock issued by
a biomedical research corporation in exchange for its
convertible debt (or stock deemed under this section to
be so issued) shall be treated as stock acquired by the
debt holder at its original issue and solely in
exchange for cash if the debt holder previously
acquired the convertible debt at its original issue and
solely in exchange for cash. In the case of an
acquisition of stock in exchange for convertible debt,
the requirements of this paragraph shall be applied
separately as of the time of closing on the investment
in convertible debt, and as of the time of actual
conversion (or deemed conversion under this section) of
the convertible debt for stock.
``(F) Biomedical research corporation must meet 3-
year expenditure and continuity of business tests with
respect to any qualified investment.--
``(i) In general.--This paragraph shall not
apply to a qualified investment or transaction
in a biomedical research corporation unless
such corporation meets the expenditure test for
each year of the measuring period and the
continuity of business test.
``(ii) Measuring period.--For purposes of
this subparagraph, the term `measuring period'
means, with respect to any qualified investment
or transaction, the taxable year of the
biomedical research corporation in which the
closing on the investment occurs, and the 2
preceding taxable years.
``(iii) Expenditure test.--A biomedical
research corporation meets the expenditure test
of this subparagraph for a taxable year if at
least 35 percent of its expenditures for the
taxable year (including, for purposes of this
clause, payments in redemption of its stock)
are expenditures described in section 41(b) or
clinical and preclinical expenditures.
``(iv) Continuity of business test.--A
biomedical research corporation meets the
continuity of business test if, at all times
during the 2-year period following a qualified
investment or transaction, such corporation
continues the business enterprise of such
corporation.
``(G) Effect of corporate redemptions on qualified
investments.--Rules similar to the rules of section
1202(c)(3) shall apply to qualified investments under
this paragraph except that `stock acquired in a
qualified investment' shall be substituted for
`qualified small business stock' each place it appears
therein.
``(H) Effect of other transactions between
biomedical research corporations and investors making
qualified investments.--
``(i) In general.--If, during the 2-year
period beginning 1 year before any qualified
investment, the biomedical research corporation
engages in another transaction with a member of
its qualified investment group and such
biomedical research corporation receives any
consideration other than cash in such
transaction, there shall be a presumption that
stock received in the otherwise qualified
investment transaction was not received solely
in exchange for cash.
``(ii) Qualified investment group.--For
purposes of this subparagraph, the term
`qualified investment group' means, with
respect to any qualified investment, one or
more persons who receive stock issued in
exchange for the qualified investment, and any
person related to such persons within the
meaning of section 267(b) or section 707(b).
``(iii) Regulations.--The Secretary shall
promulgate regulations exempting from this
subparagraph transactions which are customary
in the bioscience research industry and are of
minor value relative to the amount of the
qualified investment.
``(I) Regulations.--The Secretary may issue such
regulations as may be appropriate to achieve the
purposes of this paragraph, to prevent abuse, and to
provide for treatment of biomedical research
corporations under sections 383 and 384 that is
consistent with the purposes of this paragraph.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line