The Medical Innovation Tax Credit (MITC)
Current Status as of March 1, 2000
Language encouraging companies to fund more clinical trials at medical
schools and affiliated teaching hospitals has been included in
House-passed legislation, H.R. 2990, which would regulate the managed care
industry and improve access to health care coverage. Specifically,
companies would be encouraged to fund more clinical trials at medical
schools and teaching hospitals through the creation of an incremental 40
percent tax credit. Companies would receive this tax credit only if they
conducted clinical research activities at eligible academic institutions
(see below). Because the Senate passed version of the managed care bill
did not include medical innovation tax credit (MITC) provisions, the
differences between the two bills will be reconciled between the House and
Senate during conference. The conferees are currently meeting, hoping to
work out a compromise by spring.
Similar MITC language was included in (Senate and House passed
conference) tax legislation H.R. 2488 that was vetoed by President Clinton
September 23, 1999.
Summary
The 40 percent tax credit is based on H.R. 1039 and S. 1010, the
"Medical Innovation Tax Credit of 1999"(MITC), introduced by Reps. Sam
Johnson (R-Texas) and Sander Levin (D-Mich.) and Senators Jim Jeffords
(R-Vt.) and John "Jay" Rockefeller (D-W.Va.). These bills establish an
incremental 20 percent tax credit for companies that conduct clinical
testing research activities at qualified institutions. Companies would be
eligible for the Medical Innovation Tax Credit if they make payments for
clinical trials to the following eligible academic institutions: medical
schools, teaching hospitals owned by, or affiliated with, an institution
of higher education; a foundation owned by, or affiliated with an
institution of higher education or teaching hospital; and a charitable
research hospital designated as a cancer center a by the National Cancer
Institute of the National Institutes of Health. No tax credit is allowed
for clinical testing research activity conducted outside the United
States.
The MITC is targeted, incremental and free-standing. Compared to the
Research and Experimentation (R&E) Tax Credit more commonly known as
the R&D Tax Credit, the MITC is much more narrow in scope. While
companies can use the R&E Credit for a broad array of research
activities, the MITC may be used only for human clinical trials conducted
at the previously identified eligible entities. Companies can claim only
one tax credit for an expense: the MITC, the R&E Tax Credit, or the
Orphan Drug Credit.
The cost of the MITC is modest. The Joint Committee on Taxation has
estimated the cost at $2 million over 5 years (2000-2004), assuming a
permanent R&E credit.
Congressional Activity
In the 106th Congress, Reps. Sam Johnson (R-Texas) and Sander Levin
(D-Mich.) and Sens. Jim Jeffords (R-Vt.) and John J. Rockefeller (D-W.Va.)
introduced H.R. 1039 and S. 1010, MITC legislation, on March 9, 1999, and
June 11, 1999, respectively.
On August 5, 1999, the Senate and House passed conference tax
legislation, H.R. 2488, which included an incremental 40 percent tax
credit for companies that conduct clinical testing research activities at
eligible institutions. The conference tax bill was vetoed by President
Clinton on September 23, 1999.
Neither the original House nor Senate version of the tax legislation
contained the medical innovation tax credit. Sen. Jeffords (R-Vt.)
convinced Senate Finance Committee Chair William Roth (R-Del.) to include
a variation of S. 1010 in Roth's Manager's Amendment to the Senate tax
bill.
On October 10, 1999, the House passed H.R. 2990, which would regulate
the managed care industry and provide greater choice and access to health
insurance coverage. The bill includes MITC provisions similar to those in
the vetoed tax legislation. Because the Senate version of the managed care
legislation, S. 1344, does not include any MITC provisions, differences
between the two versions will have to be resolved. House and Senate
conferees were appointed in November 1999, but have not yet met.
AAMC Action
The AAMC strongly supports the Medical Innovation Tax Credit and
encourages its members to contact their legislative representatives in
support of the MITC provisions included in H.R. 2990. AAMC members are
also encouraged to continue to seek legislative cosponsors for the
original MITC legislation, H.R. 1039 and S. 1010. The AAMC has been
working with members of the Senate Finance Committee and the House Ways
and Means Committee to include the MITC in any tax relief or health care
related legislative vehicle.
The MITC offers an opportunity to "level the playing field" for medical
schools and teaching hospitals by providing a tax incentive for companies
to fund more clinical trials at medical schools and affiliated teaching
hospitals, at a time when these institutions, as a group, continue to lose
market share in the conduct of clinical trials.
Contacts
Richard M. Knapp, Ph.D.,
Executive Vice President, 202-828-0410, or Lynne L. Davis, Office of Governmental
Relations, 202-828-0526. | 
