U.S. Healthcare Technologies Competitiveness Act of 2006 - Amends the Internal Revenue Code to provide tax incentives for investment in biomedical research corporations and related entities, by: (1) exempting investors in biomedical research corporations from limitations on net operating losses acquired through stock sales and mergers involving such corporations; (2) permitting a complete offset against the alternative minimum tax for the net operating losses of biomedical research corporations; (3) making permanent and increasing the rates for the tax credit for increasing research activities; (4) allowing tax credits for countermeasures equity investments and research expenses, qualified medical innovation expenses, equity investments in incubational companies, and investment in qualified biotechnology zone bonds; (5) accelerating eligibility for the tax credit for orphan drug expenses; (6) allowing expensing of biotechnology science park property and medical research equipment; (7) allowing deferral of the tax on gain from the sale of stock in a biomedical research corporation; (8) increasing the tax deductibility of capital losses on the sale of stock in biomedical research corporations; and (9) modifying passive loss deduction rules and S corporation shareholder requirements for biomedical research corporations.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5115 Introduced in House (IH)]
109th CONGRESS
2d Session
H. R. 5115
To amend the Internal Revenue Code of 1986 to modernize the tax
treatment of biomedical research corporations.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 6, 2006
Ms. Hart (for herself, Mr. English of Pennsylvania, and Mr. Weller)
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 modernize the tax
treatment of biomedical research corporations.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) Short Title.--This Act may be cited as the ``U.S. Healthcare
Technologies Competitiveness Act of 2006''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title.
TITLE I--PROVISIONS RELATING TO CORPORATE TAX INCENTIVES
Sec. 101. Modify change of ownership rules.
Sec. 102. Net operating losses under alternative minimum tax.
Sec. 103. Research credit expansion.
Sec. 104. Medical innovation tax credit.
Sec. 105. Orphan drug credit expansion.
Sec. 106. Countermeasures and pandemic flu research incentives.
Sec. 107. Countermeasures equity tax credit.
Sec. 108. Biotechnology science parks.
Sec. 109. Expensing for qualified medical research equipment.
TITLE II--PROVISIONS RELATING TO INVESTOR TAX INCENTIVES
Sec. 201. Capital gains rollover.
Sec. 202. Treatment of ordinary losses.
Sec. 203. Equity credit for incubational firms.
Sec. 204. Modification of passive loss rules.
Sec. 205. Modification of subchapter S rules.
Sec. 206. Treatment of bonds for biomedical research facilities as
exempt facility bonds.
Sec. 207. Incentives for biotechnology zones.
TITLE I--PROVISIONS RELATING TO CORPORATE TAX INCENTIVES
SEC. 101. MODIFY CHANGE OF OWNERSHIP RULES.
(a) In General.--Subsection (l) of section 382 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, or
holds the rights to a device for which an
investigational device exemption is approved
under section 520(g) of such Act, and
``(ii) certifies that, as of the time of
such closing, the drug, biologic, or device is,
or in the 6 month period beginning 3 months
before such closing has been, under study
pursuant to an investigational use exemption
under section 505(i) or section 520(g) 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 expenses.
``(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 may
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. 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 December 31, 2006.
SEC. 102. NET OPERATING LOSSES UNDER ALTERNATIVE MINIMUM TAX.
(a) In General.--Section 56(d)(1) (defining alternative tax net
operating loss deduction) is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of subparagraph (B)
and inserting ``, and'', and by adding at the end the following new
subparagraph:
``(C) in the case of biomedical research
corporations (as defined in section 382(l)(9)(B)), the
amount of such deduction shall not exceed the
alternative minimum taxable income determined without
regard to such deduction.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2006.
SEC. 103. RESEARCH CREDIT EXPANSION.
(a) Permanent Extension of Research Credit.--
(1) In general.--Section 41 (relating to credit for
increasing research activities) is amended by striking
subsection (h).
(2) Conforming amendment.--Paragraph (1) of section 45C(b)
is amended by striking subparagraph (D).
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
(b) Increase in Rates of Alternative Incremental Credit.--
Subparagraph (a) of section 41(c)(4) (relating to election of
alternative incremental credit) is amended--
(1) in clause (i) by striking ``2.65 percent'' and
inserting ``3 percent'',
(2) in clause (ii) by striking ``3.2 percent'' and
inserting ``4 percent'', and
(3) in clause (iii) by striking ``3.75 percent'' and
inserting ``5 percent''.
(c) Alternative Simplified Credit for Qualified Research
Expenses.--
(1) In general.--Subsection (c) of section 41 (relating to
base amount) is amended by redesignating paragraphs (5) and (6)
as paragraphs (6) and (7), respectively, and by inserting after
paragraph (4) the following new paragraph:
``(5) Election of alternative simplified credit.--
``(A) In general.--At the election of the taxpayer,
the credit determined under subsection (a)(1) shall be
equal to 12 percent of so much of the qualified
research expenses for the taxable year as exceeds 50
percent of the average qualified research expenses for
the 3 taxable years preceding the taxable year for
which the credit is being determined.
``(B) Special rule in case of no qualified research
expenses in any of 3 preceding taxable years.--
``(i) Taxpayers to which subparagraph
applies.--The credit under this paragraph shall
be determined under this subparagraph if the
taxpayer does not have qualified research
expenses in any 1 of the 3 taxable years
preceding the taxable year for which the credit
is being determined.
``(ii) Credit rate.--The credit determined
under this subparagraph shall be equal to 6
percent of the qualified research expenses for
the taxable year.
``(C) Election.--An election under this paragraph
shall apply to the taxable year for which made and all
succeeding taxable years unless revoked with the
consent of the Secretary. An election under this
paragraph may not be made for any taxable year to which
an election under paragraph (4) applies.''.
(2) Coordination with election of alternative incremental
credit.--Section 41(c)(4)(B) (relating to election) is amended
by adding at the end the following: ``An election under this
paragraph may not be made for any taxable year to which an
election under paragraph (5) applies.''.
(d) Contract Research Expenses.--Subparagraph (D) of section
41(b)(3) (relating to contract research expenses) is amended--
(1) in the heading by inserting ``biomedical research
corporations,'' after ``eligible small businesses,'', and
(2) in clause (i) by redesignating subclauses (II) and
(III) as subclauses (III) and (IV) respectively, and by
inserting after subclause (I) the following new subclause:
``(II) a biomedical research
corporation (as defined in section
382(l)(9)(B)),''.
(e) Basic Research Expenses of Qualifying Biomedical Research
Corporation.--Section 41(e)(3) is amended is amended to read as
follows:
``(3) Qualified organization base period amount.--For
purposes of this subsection--
``(A) In general.--The term `qualified organization
base period amount' means an amount equal to the sum
of--
``(i) the minimum basic research amount,
plus
``(ii) the maintenance-of-effort amount.
``(B) Biomedical research corporation.--In the case
of a biomedical research corporation, the qualified
organization base period amount is zero.''.
(f) Effective Date.-- The amendments made by this section shall
apply to taxable years beginning after December, 31, 2006.
SEC. 104. MEDICAL INNOVATION TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by inserting after
section 41 the following new section:
``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.
``(a) General Rule.-- For purposes of section 38, the medical
innovation credit determined under this section for the taxable year
shall be an amount equal to 40 percent of the excess (if any) of--
``(1) the qualified medical innovation expenses for the
taxable year, over
``(2) the medical innovation base period amount.
``(b) Qualified Medical Innovation Expenses.--For purposes of this
section--
``(1) In general.--The term `qualified medical innovation
expenses' means the amounts paid or incurred by the taxpayer
during the taxable year directly or indirectly to any qualified
academic institution for clinical testing research activities.
``(2) Clinical testing research activities.--
``(A) In general.--The term `clinical testing
research activities' means human clinical testing
conducted at any qualified academic institution in the
development of any product, which occurs before--
``(i) the date on which an application with
respect to such product is approved under
section 505(b), 506, or 507 of the Federal
Food, Drug, and Cosmetic Act,
``(ii) the date on which a license for such
product is issued under section 351 of the
Public Health Service Act, or
``(iii) the date on which classification or
approval of such product which is a device
intended for human use is given under section
513, 514, or 515 of the Federal Food, Drug, and
Cosmetic Act.
``(B) Product.--The term `product' means any drug,
biologic, or medical device.
``(3) Qualified academic institution.--The term `qualified
academic institution' means any of the following institutions:
``(A) Educational institution.--An organization
described in section 170(b)(1)(A)(iii) which is owned
or affiliated with an institution of higher education
as described in section 3304(f).
``(B) Teaching hospital.--A teaching hospital
which--
``(i) is publicly supported or owned by an
organization described in section 501(c)(3),
and
``(ii) is affiliated with an organization
meeting the requirements of subparagraph (A).
``(C) Foundation.--A medical research organization
described in section 501(c)(3) (other than a private
foundation) which is affiliated with, or owned by--
``(i) an organization meeting the
requirements of subparagraph (A), or
``(ii) a teaching hospital meeting the
requirements of subparagraph (B).
``(D) Charitable research hospital.--A hospital
that is designated as a cancer center by the National
Cancer Institute.
``(4) Exclusion for amounts funded by grants, etc.--The
term `qualified medical innovation 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).
``(c) Medical Innovation Base Period Amount.--For purposes of this
section, the term `medical innovation base period amount' means the
average annual qualified medical innovation expenses paid by the
taxpayer during the 3-taxable year period ending with the taxable year
immediately preceding the first taxable year of the taxpayer beginning
after December 31, 2006.
``(d) Special Rules.--
``(1) Limitation on foreign testing.--No credit shall be
allowed under this section with respect to any clinical testing
research activities conducted outside the United States.
``(2) Certain rules made applicable.--Rules similar to the
rules of subsections (f) and (g) of section 41 shall apply for
purposes of this section.
``(3) Election.--This section shall apply to any taxpayer
for any taxable year only if such taxpayer elects to have this
section apply for such taxable year.
``(4) Coordination with credit for increasing research
expenditures and with credit for clinical testing expenses for
certain drugs for rare diseases.--Any qualified medical
innovation expense 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
or 45C for such taxable year.''.
(b) Credit to Be Part of General Business Credit.--
(1) In general.--Section 38(b) (relating to current year
business credits) is amended by striking ``and'' at the end of
paragraph (29), by striking the period at the end of paragraph
(30) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(31) the medical innovation credit determined under
section 41A(a).''.
(2) Transition rule.--Section 39(d) is amended by adding at
the end the following new paragraph:
``(9) No carryback of section 41a credit before
enactment.--No portion of the unused business credit for any
taxable year which is attributable to the medical innovation
credit determined under section 41A may be carried back to a
taxable year beginning before January 1, 2007.''.
(c) Denial of Double Benefit.--Section 280C is amended by adding at
the end the following new subsection:
``(e) Medical Innovation Credit.--
``(1) In general.--No deduction shall be allowed for that
portion of the qualified medical innovation expenses (as
defined in section 41A(b)) 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) Certain rules to apply.--Rules similar to the rules
of paragraphs (2), (3), and (4) of subsection (c) shall apply
for purposes of this subsection.''.
(d) Deduction for Unused Portion of Credit.--Section 196(c)
(defining qualified business credits) is amended by striking ``and'' at
the end of paragraph (12), by striking the period at the end of
paragraph (13) and inserting ``, and'', and by inserting after
paragraph (13) the following new paragraph:
``(14) the medical innovation credit determined under
section 41A(a).''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding after the
item relating to section 41 the following new item:
``Sec. 41A. Credit for medical innovation expenses.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 105. ORPHAN DRUG CREDIT EXPANSION.
(a) In General.--Subclause (I) of section 45C(b)(2)(A)(ii) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(I) after the date that the application is filed
for designation under such section 526 of such Act,
and''.
(b) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2006.
SEC. 106. COUNTERMEASURES AND PANDEMIC FLU RESEARCH INCENTIVES.
(a) Election of Federal Tax Incentive Regime.--
(1) In general.--A biomedical research corporation (as
defined in section 382(l)(9)(B) of the Internal Revenue Code of
1986) may elect to apply the tax incentive described in
subparagraph (A), (B), or (C) for a taxable year, but such
biomedical research corporation may not elect to apply more
than one such tax incentive for such taxable year.
(A) Research and development limited partnerships
to fund countermeasure research.--
(i) In general.--A biomedical research
corporation that elects the tax incentive
described in this subparagraph may establish a
limited partnership organized primarily for
research related to covered countermeasures,
but only if such corporation is a qualified
small business as determined under section
1202(d) of the Internal Revenue Code of 1986,
by substituting ``$750,000,000'' for
``$50,000,000'' each place it appears. For
purposes of this subparagraph, section 469 of
such Code shall not apply with respect to a
limited partnership established under this
subparagraph.
(ii) Covered countermeasure.--The term
``covered countermeasure'' has the meaning
given such term in division C of the Department
of Defense, Emergency Supplemental
Appropriations to Address Hurricanes in the
Gulf of Mexico, and Pandemic Influenza Act,
2006.
(B) Capital gains exclusion for investors to fund
countermeasure research.--A biomedical research
corporation that elects the tax incentive described in
this subparagraph may issue a class of stock for
research related to covered countermeasures (as defined
in subparagraph (A)(ii)) under section 1202 of the
Internal Revenue Code of 1986 with the following
modifications:
(i) Increased exclusion for noncorporate
taxpayers.--Subsection (a) of section 1202 of
such Code shall be applied by substituting
``100 percent'' for ``50 percent''.
(ii) Application to corporate taxpayers.--
Subsection (a) of section 1202 of such Code
shall be applied without regard to the phrase
``other than a corporation''.
(iii) Reduction in holding period.--
Subsection (a) of section 1202 of such Code
shall be applied by substituting ``3 years''
for ``5 years''.
(iv) Nonapplication of per-issuer
limitation.--Section 1202 of such Code shall be
applied without regard to subsection (b)
(relating to per-issuer limitations on
taxpayer's eligible gain).
(v) Stock of larger businesses eligible for
exclusion.--Paragraph (1) of section 1202(d) of
such Code (defining qualified small business)
shall be applied by substituting
``$750,000,000'' for ``$50,000,000'' each place
it appears.
(vi) Modification of working capital
limitation.--Section 1202(e)(6) of such Code
shall be applied--
(I) in subparagraph (B), by
substituting ``5 years'' for ``2
years'', and
(II) without regard to the last
sentence.
(vii) Nonapplication of minimum tax
preference.--Section 57(a) of such Code
(relating to general rule for items of tax
preference) shall be applied without regard to
paragraph (7).
(C) Tax credit to fund countermeasure research.--A
biomedical research corporation that elects the tax
incentive described in this subparagraph may elect to
apply the tax credit described in subsection (b).
(2) Reporting.--Each biomedical research corporation shall
submit to the Secretary of the Treasury such information
regarding its election of a tax incentive under this section as
the Secretary determines necessary.
(b) Tax Credit to Fund Countermeasure Research.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended by
adding at the end the following new section:
``SEC. 45N. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING
COUNTERMEASURES.
``(a) General Rule.--For purposes of section 38, in the case of a
biomedical research corporation that makes an election, pursuant to
section 106(a) of the U.S. Healthcare Technologies Competitiveness Act
of 2006, to have this section apply, the countermeasures research
credit determined under this section for the taxable year is an amount
equal to 35 percent of the eligible countermeasures research expenses
for the taxable year.
``(b) Eligible Countermeasures Research Expenses.--For purposes of
this section--
``(1) Eligible countermeasures research expenses.--
``(A) In general.--Except as otherwise provided in
this paragraph, the term `eligible countermeasures
research expenses' means amounts paid or incurred by
the taxpayer during the taxable year for research,
including preclinical research and animal model
development, which would be described in subsection (b)
of section 41 if such subsection were applied with the
modifications set forth in subparagraph (B) of this
paragraph and that the Secretary of Health and Human
Services determines has significant potential to lead
to the development of a covered countermeasure.
``(B) Modifications; increased incentive for
contract research payments.-- For purposes of
subparagraph (A), subsection (b) of section 41 shall be
applied--
``(i) by substituting `eligible
countermeasures 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 `eligible countermeasures research
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) Covered countermeasure.--The term `covered
countermeasure' has the meaning given such term in division C
of the Department of Defense, Emergency Supplemental
Appropriations to Address Hurricanes in the Gulf of Mexico, and
Pandemic Influenza Act, 2006.
``(c) Coordination With Credit for Increasing Research
Expenditures.--
``(1) In general.--Except as provided in paragraph (2), any
eligible countermeasures research expenses for a taxable year
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.--Any eligible countermeasures research expenses for
any taxable year which are qualified research expenses (within
the meaning of section 41(b)) shall be taken into account in
determining base period research expenses for purposes of
applying section 41 to subsequent taxable years.
``(d) Coordination With Credit for Clinical Testing Expenses for
Certain Drugs for Rare Diseases.--Any eligible countermeasures research
expense for a taxable year shall not be taken into account for purposes
of determining the credit allowable under section 45C for such taxable
year.
``(e) 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) Inclusion in general business credit.--Section 38(b)
(as amended by this Act) is further amended by striking ``and''
at the end of paragraph (30), by striking the period at the end
of paragraph (31) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(32) the countermeasures research credit determined under
section 45N.''.
(3) Denial of double benefit.--Section 280C (as amended by
this Act) is further amended by adding at the end the following
new subsection:
``(f) Credit for Eligible Countermeasures Research Expenses.--
``(1) In general.--No deduction shall be allowed for that
portion of the eligible countermeasures research expenses (as
defined in section 45N(b)) 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 45N(a).
``(2) Certain rules to apply.--Rules similar to the rules
of paragraphs (2), (3), and (4) of subsection (c) shall apply
for purposes of this subsection.''.
(4) Deduction for unused portion of credit.--Section 196(c)
(as amended by this Act) is further 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 at the
end the following new paragraph:
``(15) the countermeasures research credit determined under
section 45N(a).''.
(5) Technical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
``Sec. 45N. Credit for medical research related to developing
countermeasures.''.
SEC. 107. COUNTERMEASURES EQUITY TAX CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(as amended by this Act) is further amended by adding at the end the
following new section:
``SEC. 45O. COUNTERMEASURES EQUITY TAX CREDIT.
``(a) Allowance of Credit.--
``(1) General rule.--For purposes of section 38, in the
case of a taxpayer who holds a qualified countermeasures equity
investment on a credit allowance date of such investment which
occurs during the taxable year, the countermeasures equity tax
credit determined under this section for such taxable year is
an amount equal to the applicable percentage of the amount paid
to the qualified countermeasures company solely in exchange for
its stock at original issue.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is 40 percent.
``(3) Credit allowance date.--For purposes of paragraph
(1), the term `credit allowance date' means, with respect to
any qualified countermeasures equity investment--
``(A) the date on which such investment is
initially made, and
``(B) each of the 3 subsequent anniversary dates of
such date.
``(b) Qualified Countermeasures Equity Investment.--For purposes of
this section--
``(1) In general.--The term `qualified countermeasures
equity investment' means any equity investment in a qualified
countermeasures company if--
``(A) such investment is acquired by the taxpayer
at its original issue (directly or through an
underwriter) solely in exchange for cash,
``(B) not less than \1/2\ of such cash is used by
the qualified countermeasures company with respect to
research on covered countermeasures, and
``(C) such investment is designated for purposes of
this section by the qualified countermeasures company.
Such term shall not include any equity investment issued by a
qualified countermeasures company more than 5 years after the
date that such company receives an allocation under subsection
(d). Any allocation not used within such 5-year period may be
reallocated by the Secretary under subsection (d).
``(2) Limitation.--The maximum amount of equity investments
issued by a qualified countermeasures company which may be
designated under paragraph (1)(C) by such company shall not
exceed the portion of the limitation amount allocated under
subsection (d) to such company.
``(3) Treatment of subsequent purchasers.--The term
`qualified equity investment' includes any equity investment
which would (but for paragraph (1)(A)) be a qualified equity
investment in the hands of the taxpayer if such investment was
a qualified equity investment in the hands of a prior holder.
``(4) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this subsection.
``(5) Equity investment.--The term `equity investment'
means any stock (other than nonqualified preferred stock as
defined in section 351(g)(2)) in an entity which is a
corporation.
``(c) Qualified Countermeasures Company.--For purposes of this
section--
``(1) In general.--The term `qualified countermeasures
company' means any domestic biomedical research corporation (as
defined in section 328(l)(9)(B)) that the Secretary of Health
and Human Services determines has significant potential to lead
to the development of a covered countermeasure.
``(2) Covered countermeasure.--The term `covered
countermeasure' has the meaning given such term in division C
of the Department of Defense, Emergency Supplemental
Appropriations to Address Hurricanes in the Gulf of Mexico, and
Pandemic Influenza Act, 2006.
``(d) National Limitation on Amount of Investments Designated.--
``(1) In general.--There is a qualified countermeasures
equity tax credit limitation of $150,000,000 for each taxable
year.
``(2) Allocation of limitation.--The limitation under
paragraph (1) shall be allocated by the Secretary among
qualified countermeasures companies selected by the Secretary.
In making allocations under the preceding sentence, the
Secretary shall give priority to the extent to which it is
reasonably anticipated that a qualified countermeasures company
would have insufficient taxable income and tax liability to
utilize research tax credits and other tax incentives provided
by section 106 of the U.S. Healthcare Technologies
Competitiveness Act of 2006.
``(3) Carryover of unused limitation.--If the qualified
countermeasures equity tax credit limitation for any taxable
year exceeds the aggregate amount allocated under paragraph (2)
for such year, such limitation for the succeeding taxable year
shall be increased by the amount of such excess.
``(e) Denial of Double Benefit.--With respect to a qualified
countermeasures equity investment in a qualified countermeasures
company, the countermeasures equity tax credit described in subsection
(a) shall not apply in the case of a taxable year in which such
qualified countermeasures company elects to apply a tax incentive
described in section 106 of the U.S. Healthcare Technologies
Competitiveness Act of 2006.
``(f) Recapture of Credit in Certain Cases.--
``(1) In general.--If, at any time during the 4-year period
beginning on the date of the original issue of a qualified
countermeasures equity investment in a qualified
countermeasures company, there is a recapture event with
respect to such investment, then the tax imposed by this
chapter for the taxable year in which such event occurs shall
be increased by the credit recapture amount.
``(2) Credit recapture amount.--For purposes of paragraph
(1), the credit recapture amount is an amount equal to the sum
of--
``(A) the aggregate decrease in the credits allowed
to the taxpayer under section 38 for all prior taxable
years which would have resulted if no credit had been
determined under this section with respect to such
investment, plus
``(B) interest at the underpayment rate established
under section 6621 on the amount determined under
subparagraph (A) for each prior taxable year for the
period beginning on the due date for filing the return
for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest
described in subparagraph (B).
``(3) Recapture event.--For purposes of paragraph (1),
there is a recapture event with respect to a qualified
countermeasures equity investment in a qualified
countermeasures company if--
``(A) such company ceases to be a qualified
countermeasures company, or
``(B) such investment is redeemed by such company.
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable
year shall be increased under paragraph (1) only with
respect to credits allowed by reason of this section
which were used to reduce tax liability. In the case of
credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be
appropriately adjusted.
``(B) No credits against tax.--Any increase in tax
under this subsection shall not be treated as a tax
imposed by this chapter for purposes of determining the
amount of any credit under this chapter or for purposes
of section 55.
``(g) Basis Reduction.--The basis of any qualified countermeasures
equity investment shall be reduced by the amount of any credit
determined under this section with respect to such investment. This
subsection shall not apply for purposes of sections 1202, 1400B, and
1400F.
``(h) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out this section, including regulations
which--
``(1) prevent the abuse of the purposes of this section,
``(2) impose appropriate reporting requirements, and
``(3) apply the provisions of this section to newly formed
entities.''.
(b) Credit to Be Part of General Business Credit.--Section 38(b)
(as amended by this Act) is further amended by striking ``and'' at the
end of paragraph (31), by striking the period at the end of paragraph
(32) and inserting ``, and'', and by adding at the end the following:
``(33) the countermeasures equity investment credit
determined under section 45O(a).''.
(c) Deduction for Unused Portion of Credit.--Section 196(c) (as
amended by this Act) is further amended by striking ``and'' at the end
of paragraph (14), by striking the period at the end of paragraph (15)
and inserting ``, and'', and by adding at the end the following new
paragraph:
``(16) the countermeasures equity investment credit
determined under section 45O(a),''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 (as amended by this Act) is
further amended by adding after the item relating to section 45N the
following:
``Sec. 45O. Countermeasures equity tax credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 108. BIOTECHNOLOGY SCIENCE PARKS.
(a) Expensing.--
(1) In general.--Section 179(d) (relating to definitions
and special rules) is amended by adding at the end the
following new paragraph:
``(11) Application of section to property placed in service
in biotechnology science parks.--
``(A) In general.--In the case of any section 179
property placed in service in any biotechnology science
park, this section shall be applied without regard to
paragraphs (1) and (2) of subsection (b).
``(B) Biotechnology science park.--
``(i) In general.--The term `biotechnology
science park' means a group of interrelated
companies and institutions, including
suppliers, service providers, institutions of
higher education, start-up incubators, and
trade associations, that--
``(I) cooperates and competes in
the field of biomedical research and
medical devices,
``(II) is located in the United
States,
``(III) promotes real estate
development, technology transfer, and
partnerships between such companies and
institutions, and
``(IV) is not a business or
industrial park.
``(ii) Business or industrial park.--The
term `business or industrial park' means a for-
profit real estate venture of businesses or
industries which do not necessarily reinforce
each other through supply chain or technology
transfer mechanisms.''.
(2) Effective date.--The amendment made by this subsection
shall apply with respect to property placed in service after
the date of the enactment of this Act.
(b) Tax Credit for Research Activities.--
(1) In general.--Section 41(a) (relating to credit for
increasing research activities) is amended by striking ``and''
at the end of paragraph (2), by striking the period at the end
of paragraph (3) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(4) 20 percent of the qualified research expenses paid or
incurred by the taxpayer in carrying on any trade or business
located in a biotechnology science park during the taxable
year.''.
(2) Biotechnology science park.--Section 41(f) (relating to
special rules) is amended by adding at the end the following
new paragraph:
``(7) Biotechnology science park.--
``(A) In general.--The term `biotechnology science
park' means a group of interrelated companies and
institutions, including suppliers, service providers,
institutions of higher education, start-up incubators,
and trade associations, that--
``(i) cooperates and competes in the field
of biomedical research and medical devices,
``(ii) is located in the United States,
``(iii) promotes real estate development,
technology transfer, and partnerships between
such companies and institutions, and
``(iv) is not a business or industrial
park.
``(B) Business or industrial park.--The term
`business or industrial park' means a for-profit real
estate venture of businesses or industries which do not
necessarily reinforce each other through supply chain
or technology transfer mechanisms.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31, 2006.
(c) Private Business Use of a Bond-Financed Facility.--
(1) In general.--Subparagraph (A) of section 141(b)(6)
(defining private business use) is amended by inserting ``or
use in the performance of research using, in whole or in part,
funds of the United States or any agency or instrumentality
thereof'' before ``shall not be taken into account''.
(2) Effective date.--
(A) In general.--The amendment made by this
subsection shall apply to any use on or after the date
of the enactment of this Act.
(B) No inference.--Nothing in the amendment made by
this subsection shall be construed to create any
inference with respect to the use of tax-exempt bond
financed facilities before the effective date of such
amendment.
SEC. 109. EXPENSING FOR QUALIFIED MEDICAL RESEARCH EQUIPMENT.
(a) In General.--Part VI of subchapter B of chapter 1 (relating to
itemized deductions for individuals and corporations) is amended by
inserting after section 179D the following new section:
``SEC. 179E. ELECTION TO EXPENSE CERTAIN MEDICAL RESEARCH EQUIPMENT.
``(a) Treatment as Expenses.-- A biomedical research corporation
(as defined in section 382(l)(9)(B)) may elect to treat the cost of any
qualified medical research property as an expense which is not
chargeable to capital account. Any cost so treated shall be allowed as
a deduction for the taxable year in which the qualified property is
placed in service.
``(b) Election.--
``(1) In general.--An election under this section for any
taxable year shall be made on the taxpayer's return of the tax
imposed by this chapter for the taxable year. Such election
shall be made in such manner as the Secretary may by
regulations prescribe.
``(2) Election irrevocable.--Any election made under this
section may not be revoked except with the consent of the
Secretary.
``(c) Qualified Medical Research Property.-- The term `qualified
medical research property' means any property--
``(1) the original use of which commences with the
taxpayer,
``(2) that is placed in service by the taxpayer after the
date of the enactment of this section,
``(3) that is customary in the bioscience research
industry, and
``(4) that is required for the taxpayer's advanced
biomedical research.''.
(b) Conforming Amendments.--
(1) Section 1245(a) is amended by inserting ``179E,'' after
``179D,'' both places it appears in paragraphs (2)(C) and
(3)(C).
(2) Section 263(a)(1) is amended by striking ``or'' at the
end of subparagraph (J), by striking the period at the end of
subparagraph (K) and inserting ``, or'', and by inserting after
subparagraph (K) the following new subparagraph:
``(L) expenditures for which a deduction is allowed
under section 179E.''.
(3) Section 312(k)(3)(B) is amended by striking ``or 179D''
each place it appears in the heading and text and inserting
``179D, or 179E''.
(4) The table of sections for part VI of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 179D the following new item:
``Sec. 179E. Election to expense certain medical research equipment.''.
(c) Effective Date.--The amendments made by this section shall
apply to properties placed in service after the date of the enactment
of this Act.
TITLE II--PROVISIONS RELATING TO INVESTOR TAX INCENTIVES
SEC. 201. CAPITAL GAINS ROLLOVER.
(a) In General.--
(1) Section 1045(a) is amended by inserting ``or biomedical
research corporation stock'' after ``qualified small business
stock'' each place it appears herein.
(2) Section 1045(b) is amended by redesignating paragraphs
(2), (3), (4), and (5) as paragraphs (3), (4), (5), and (6),
respectively, and by inserting after paragraph (1) the
following new paragraph:
``(2) Biomedical research corporation.--The term
`biomedical research corporation' has the meaning given to such
term in section 382(l)(9)(B).''.
(b) Conforming Amendments.--
(1) The heading for section 1045 is amended by inserting
``or biomedical research'' after ``small business'' each time
it appears.
(2) The item relating to section 1045 in the table of
sections for part III of subchapter O of chapter 1 is amended
by inserting ``or biomedical research'' after ``small
business'' each time it appears.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 202. TREATMENT OF ORDINARY LOSSES.
(a) In General.--
(1) Section 1244(a) and (d) are amended by inserting ``or
biomedical research corporation stock'' after ``1244 stock.''
(2) Section 1244 is amended by redesignating subsection (d)
as subsection (e) and by inserting after subsection (c) the
following new subsection:
``(d) Biomedical Research Corporation Stock Defined.--For purposes
of this section--
``(1) In general.--The term `biomedical research
corporation stock' means stock in a domestic corporation if--
``(A) at the time such stock is issued, such
corporation was a biomedical research corporation, and
``(B) such stock was issued by such corporation for
money or other property (other than stock or
securities).
``(2) Biomedical research corporation.--
``(A) In general.-- The term `biomedical research
corporation' means a corporation that--
``(i) is subject to tax under this
subchapter at the time such stock is issued,
``(ii) is not in bankruptcy,
``(iii) 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 or
holds the rights to a device for which an
investigational device exemption is approved
under section 520(g) of such Act,
``(iv) certifies that, as of the time of
such stock issuance, the drug, biologic, or
device is, or in the 6-month period beginning 3
months before such closing has been, under
study pursuant to an active investigational new
drug or device application approved by the
Commissioner of the Food and Drug
Administration,
``(v) has aggregate gross assets before and
after the issuance that do not exceed
$50,000,000, and
``(vi) agrees to submit such reports to the
Secretary and to shareholders as the Secretary
may require to carry out the purposes of this
section.''.
(b) Conforming Amendments.--
(1) The heading for section 1244 is amended by inserting
``or biomedical research'' before ``stock''.
(2) The item relating to section 1244 in the table of
sections for part IV of subchapter P of chapter 1 is amended by
inserting ``or biomedical research'' before ``stock.''
(c) Effective Date.--The amendments made by this section shall
apply to stock issued after December 31, 2006.
SEC. 203. EQUITY CREDIT FOR INCUBATIONAL FIRMS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(as amended by this Act) is amended by inserting after section 45O the
following new section:
``SEC. 45P. INCUBATIONAL EQUITY TAX CREDIT.
``(a) Allowance of Credit.--
``(1) General rule.--For purposes of section 38, in the
case of a taxpayer who makes a qualified incubational equity
investment during the taxable year, the incubational equity tax
credit determined under this section for such taxable year is
an amount equal to the applicable percentage of the amount paid
to the qualified incubational company solely in exchange for
its stock at original issue.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is 40 percent.
``(b) Qualified Incubational Equity Investment.--For purposes of
this section--
``(1) In general.--The term `qualified incubational equity
investment' means any equity investment in a qualified
incubational company if--
``(A) such investment is acquired by the taxpayer
at its original issue (directly or through an
underwriter) solely in exchange for cash,
``(B) not less than \1/2\ of such cash is used by
the qualified incubational company with respect to
qualifying research under section 41, and
``(C) such investment is designated for purposes of
this section by the qualified incubational company.
Such term shall not include any equity investment issued by a
qualified incubational company more than 5 years after the date
that such company receives an allocation under subsection (d).
Any allocation not used within such 5-year period may be
reallocated by the Secretary under subsection (d).
``(2) Limitation.--The maximum amount of equity investments
issued by a qualified incubational company which may be
designated under paragraph (1)(C) by such company shall not
exceed the portion of the limitation amount allocated under
subsection (f) to such company.
``(3) Treatment of subsequent purchasers.--The term
`qualified equity investment' includes any equity investment
which would (but for paragraph (1)(A)) be a qualified equity
investment in the hands of the taxpayer if such investment was
a qualified equity investment in the hands of a prior holder.
``(4) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this subsection.
``(5) Equity investment.--The term `equity investment'
means any stock (other than nonqualified preferred stock as
defined in section 351(g)(2)) in an entity which is a
corporation.
``(c) Qualified Incubational Company.--For purposes of this section
the term `qualified incubational company' means any domestic biomedical
research corporation (as defined in section 382(l)(9)(B)) subject to
tax under subchapter C of this chapter, that has 25 employees or less
and gross assets of less than $25,000,000.
``(d) National Limitation on Amount of Investments Designated.--
``(1) In general.--There is an incubational equity tax
credit limitation of $500,000,000 for each taxable year.
``(2) Allocation of limitation.--The limitation under
paragraph (1) shall be allocated by the Secretary among
qualified incubational companies selected by the Secretary. In
making allocations under the preceding sentence, the Secretary
shall give priority to the extent to which it is reasonably
anticipated that a qualified incubational company would have
insufficient taxable income and tax liability to utilize the
section 41 research tax credit.
``(3) Carryover of unused limitation.--If the qualified
incubational equity tax credit limitation for any taxable year
exceeds the aggregate amount allocated under paragraph (2) for
such year, such limitation for the succeeding taxable year
shall be increased by the amount of such excess.
``(e) Recapture of Credit in Certain Cases.--
``(1) In general.--If, at any time during the 4-year period
beginning on the date of the original issue of a qualified
incubational equity investment in a qualified incubational
company, there is a recapture event with respect to such
investment, then the tax imposed by this chapter for the
taxable year in which such event occurs shall be increased by
the credit recapture amount.
``(2) Credit recapture amount.--For purposes of paragraph
(1), the credit recapture amount is an amount equal to the sum
of--
``(A) the aggregate decrease in the credits allowed
to the taxpayer under section 38 for all prior taxable
years which would have resulted if no credit had been
determined under this section with respect to such
investment; plus
``(B) interest at the underpayment rate established
under section 6621 on the amount determined under
subparagraph (A) for each prior taxable year for the
period beginning on the due date for filing the return
for the prior taxable year involved.
No deduction shall be allowed under this chapter for interest
described in subparagraph (B).
``(3) Recapture event.--For purposes of paragraph (1),
there is a recapture event with respect to a qualified
countermeasures equity investment in a qualified
countermeasures company if--
``(A) such company ceases to be a qualified
biomedical research corporation (as defined in section
382(l)(9)(B)), or
``(B) such investment is redeemed by such company.
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable
year shall be increased under paragraph (1) only with
respect to credits allowed by reason of this section
which were used to reduce tax liability. In the case of
credits not so used to reduce tax liability, the
carryforwards and carrybacks under section 39 shall be
appropriately adjusted.
``(B) No credits against tax.--Any increase in tax
under this subsection shall not be treated as a tax
imposed by this chapter for purposes of determining the
amount of any credit under this chapter or for purposes
of section 55.
``(f) Basis Reduction.--The basis of any qualified incubational
equity investment shall be reduced by the amount of any credit
determined under this section with respect to such investment. This
subsection shall not apply for purposes of sections 1202, 1400B, and
1400F.
``(g) Regulations.--The secretary shall prescribe such regulations
as may be appropriate to carry out this section, including regulations
which--
``(1) prevent the abuse of the purposes of this section,
``(2) impose appropriate reporting requirements, and
``(3) apply the provisions of this section to newly formed
entities.''.
(b) Credit to Be Part of General Business Credit.--Section 38(b)
(as amended by this Act) is further amended by striking ``and'' at the
end of paragraph (32), by striking the period at the end of paragraph
(33) and inserting ``, and'', and by adding at the end the following:
``(34) the incubational equity tax credit determined under
section 45N(a).''.
(c) Deduction for Unused Portion of Credit.--Section 196(c) of such
Code (defining qualified business credits), as amended by this section,
is amended by striking ``and'' at the end of paragraph (15), by
striking the period at the end of paragraph (16) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(17) the incubational equity tax credit determined under
section 45P(a).''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 (as amended by this Act) is
further amended by adding after the item relating to section 45O the
following new item:
``Sec. 45P. Incubational equity tax credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2006.
SEC. 204. MODIFICATION OF PASSIVE LOSS RULES.
(a) In General.--Section 469(i) is amended--
(1) by inserting ``or biomedical research corporation
activities'' after ``real estate activities'' each place it
appears in paragraphs (1) and (4), and
(2) by inserting ``or biomedical or device research
corporation activity'' after ``real estate activity'' in
paragraph (6)(A).
(b) Biomedical Research Corporation Defined.--Section 469(i) is
amended by inserting the following new paragraph:
``(7) Biomedical research corporation.--The term
`biomedical research corporation' has the meaning given such
term in section 382(l)(9)(B).''.
(c) Effective Date.--The amendments made by this section shall
apply to losses incurred after December 31, 2006.
SEC. 205. MODIFICATION OF SUBCHAPTER S RULES.
(a) In General.--Section 1361(b)(1) is amended by inserting the
following flush sentence: ``In the case of a biomedical research
corporation (as defined in section 382(l)(9)(B)), subparagraph (A)
shall be applied by substituting `150' for `100'.''
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2006.
SEC. 206. TREATMENT OF BONDS FOR BIOMEDICAL RESEARCH FACILITIES AS
EXEMPT FACILITY BONDS.
(a) Treatment as Exempt Facility Bonds.--Subsection (a) of section
142 (relating to exempt facility bond) is amended by striking ``or'' at
the end of paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``, or'', and by adding at the end the
following new paragraph:
``(16) biomedical research facilities.''.
(b) Biomedical Research Facilities.--Section 142 is amended by
adding at the end the following new subsection:
``(n) Biomedical Research Facility.--For purposes of this section--
``(1) In general.-- The term `biomedical research facility'
means a facility owned by a private, for-profit entity
primarily utilized for biomedical research.
``(2) Biomedical research described.-- The term `biomedical
research' refers to research into a drug or biologic (or
related medical device) conducted pursuant to an
investigational use exemption under section 505(i) of the
Federal Food, Drug, and Cosmetic Act.
``(3) Limitation on aggregate face amount of tax-exempt
financing.--
``(A) In general.--An issue shall not be treated as
an issue described in subsection (a)(16) unless--
``(i) the Secretary has allocated an amount
to such issue under this paragraph, and
``(ii) the aggregate face amount of bonds
issued pursuant to such issue does not exceed
such amount.
``(B) Allocation.-- The Secretary may allocate
amounts to issues under this paragraph in such manner
as the Secretary determines appropriate, except that
the aggregate amount so allocated shall not exceed
$15,000,000,000.
``(C) Refunding bonds.-- Subparagraph (A) shall not
apply with respect to any bond the proceeds of which
are used exclusively to refund a bond issued pursuant
to subsection (a)(16) (or a bond which is a part of a
series of refundings of a bond so issued) if the amount
of the refunding bond does not exceed the outstanding
amount of the refunded bond.''.
(c) Exemption From General State Volume Caps.--Paragraph (3) of
section 146(g) (relating to exception for certain bonds) is amended by
striking ``or (15)'' and inserting ``(15), or (16)''.
(d) Effective Date.--The amendments made by this section shall
apply to bonds issued after December 31, 2006.
SEC. 207. INCENTIVES FOR BIOTECHNOLOGY ZONES.
(a) In General.--Subchapter U of chapter 1 (relating to designation
and treatment of empowerment zones, enterprise communities, and rural
development investment areas) is amended by redesignating part V as
part VI, by redesignating section 1397F as section 1397G, and by
inserting after part IV the following new part:
``PART V--INCENTIVES FOR BIOTECHNOLOGY ZONES
``Sec. 1397F. Credit to holders of qualified biotechnology zone bonds.
``SEC. 1397F. CREDIT TO HOLDERS OF QUALIFIED BIOTECHNOLOGY ZONE BONDS.
``(a) Allowance of Credit.--In the case of an eligible taxpayer who
holds a qualified biotechnology zone bond on the credit allowance date
of such bond which occurs during the taxable year, there shall be
allowed as a credit against the tax imposed by this chapter for such
taxable year the amount determined under subsection (b).
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this subsection with respect to any qualified
biotechnology zone bond is the amount equal to the product of--
``(A) the credit rate determined by the Secretary
under paragraph (2) for the month in which such bond
was issued, multiplied by
``(B) the face amount of the bond held by the
taxpayer on the credit allowance date.
``(2) Determination.--During each calendar month, the
Secretary shall determine a credit rate which shall apply to
bonds issued during the following calendar month. The credit
rate for any month is the percentage which the Secretary
estimates will permit the issuance of qualified biotechnology
zone bonds without discount and without interest cost to the
issuer.
``(c) Limitation Based on Amount of Tax.--The credit allowed under
subsection (a) for any taxable year shall not exceed the excess of--
``(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(2) the sum of the credits allowable under part IV of
subchapter A (other than subpart C thereof, relating to
refundable credits).
``(d) Qualified Biotechnology Zone Bond.--For purposes of this
section--
``(1) In general.--The term `qualified biotechnology zone
bond' means any bond issued as part of an issue if--
``(A) 95 percent or more of the proceeds of such
issue are to be used for a qualified purpose with
respect to a qualified biotechnology zone entity
selected by an eligible State business development
agency,
``(B) the bond is issued by a State or local
Government within the jurisdiction of which such
biotechnology zone is located,
``(C) the issuer--
``(i) designates such bond for purposes of
this section, and
``(ii) certifies that it has the written
approval of the eligible State business
development agency for such bond issuance, and
``(D) the term of each bond which is part of such
issue does not exceed the maximum term permitted under
paragraph (2).
``(2) Term requirement.--During each calendar month, the
Secretary shall determine the maximum term permitted under this
paragraph for bonds issued during the following calendar month.
Such maximum term shall be the term which the Secretary
estimates will result in the present value of the obligation to
repay the principal on the bond being equal to 50 percent of
the face amount of the bond. Such present value shall be
determined using as a discount rate the average annual interest
rate of tax-exempt obligations having a term of 10 years or
more which are issued during the month. If the term as so
determined is not a multiple of a whole year, such term shall
be rounded to the next highest whole year.
``(3) Qualified biotechnology zone entity.--
``(A) In general.--The term `qualified
biotechnology zone entity' means any for-profit private
entity in the business of biomedical research (or a
medical device manufacturer) if--
``(i) such entity is not in bankruptcy,
``(ii) such entity 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
(or manufactures a related medical device), or
holds the rights to a device for which an
investigational device exemption is approved
under section 520(g) of such Act, and
``(iii) such entity certifies that, as of
the time of such closing, the drug, biologic,
or device is, or in the 6-month period
beginning 3 months before such closing has
been, under study pursuant to an
investigational use exemption under section
505(i) or section 520(g) of the Federal Food,
Drug, and Cosmetic Act.
``(B) Eligible state development agency.--The term
`eligible State development agency' means any State
agency with a purpose of developing a State's
biotechnology businesses.
``(4) Qualified purpose.--The term `qualified purpose'
means, with respect to any qualified biotechnology zone,
constructing or developing facilities utilized in the
biomedical research field.
``(5) Eligible taxpayer.--The term `eligible taxpayer'
means--
``(A) a bank (within the meaning of section 581),
``(B) an insurance company to which subchapter L
applies, or
``(C) a corporation actively engaged in the
business of lending money.
``(e) Limitation on Amount of Bonds Designated.--
``(1) National limitation.--There is a national
biotechnology zone bond limitation of $500,000,000 for each
calendar year.
``(2) Allocation of limitation.--The national biotechnology
zone bond limitation for a calendar year shall be allocated by
the Secretary among qualified companies selected by the
Secretary. In making allocations under the preceding sentence,
the Secretary shall give priority to the extent to which it is
reasonably anticipated that a qualified company would have
insufficient taxable income and tax liability to utilize
research tax credits and other similar credits.
``(3) Designation subject to limitation amount.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (d)(1)
with respect to any qualified biotechnology zone shall not
exceed the limitation amount allocated to such academy under
paragraph (2) for such calendar year.
``(4) Carryover of unused limitation.--If, for any calendar
year the limitation amount for any State, exceeds the amount of
bonds issued during such year which are designated under
subsection (d)(1) with respect to qualified biotechnology zone
facilities within such State, the limitation amount for such
State for the following calendar year shall be increased by the
amount of such excess.
``(f) Other Definitions.--For purposes of this section--
``(1) Credit allowance date.--The term `credit allowance
date' means, with respect to any issue, the last day of the 1-
year period beginning on the date of issuance of such issue and
the last day of each successive 1-year period thereafter.
``(2) Bond.--The term `bond' includes any obligation.
``(3) State.--The term `State' includes the District of
Columbia and any possession of the United States.
``(g) Credit Included in Gross Income.--Gross income includes the
amount of the credit allowed to the taxpayer under this section.''.
(b) Conforming Amendments.--
(1) The table of parts for subchapter U of chapter 1 is
amended by striking the last item and inserting the following:
``Part V. Incentives for biotechnology zones.
``Part VI. Regulations.''.
(2) The table of sections for part V, as so redesignated,
is amended to read as follows:
``Sec. 1397G. Regulations.''.
(c) Effective Date.--The amendments made by this section shall
apply to obligations issued after December 31, 2006.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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