S 1718 IS

To amend the Internal Revenue Code of 1986 to provide a credit for medical research related to developing vaccines against widespread diseases.

October 12, 1999

Mr. KERRY (for himself and Mr. DURBIN) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide a credit for medical research related to developing vaccines against widespread diseases.

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 `Lifesaving Vaccine Technology Act of 1999'.

SEC. 2. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING VACCINES AGAINST WIDESPREAD DISEASES.

(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 adding at the end the following new section:

`SEC. 45D. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING VACCINES AGAINST WIDESPREAD DISEASES.

`(a) GENERAL RULE- For purposes of section 38, the vaccine research credit determined under this section for the taxable year is an amount equal to 30 percent of the qualified vaccine research expenses for the taxable year.

`(b) QUALIFIED VACCINE RESEARCH EXPENSES- For purposes of this section--

`(1) QUALIFIED VACCINE RESEARCH EXPENSES-

`(A) IN GENERAL- Except as otherwise provided in this paragraph, the term `qualified vaccine research expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year which would be described in subsection (b) of section 41 if such subsection were applied with the modifications set forth in subparagraph (B).

`(B) MODIFICATIONS- For purposes of subparagraph (A), subsection (b) of section 41 shall be applied--

`(i) by substituting `vaccine research' for `qualified research' each place it appears in paragraphs (2) and (3) of such subsection, and

`(ii) by substituting `75 percent' for `65 percent' in paragraph (3)(A) of such subsection.

`(C) EXCLUSION FOR AMOUNTS FUNDED BY GRANTS, ETC- The term `qualified vaccine 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) VACCINE RESEARCH- The term `vaccine research' means research to develop vaccines and microbicides for--

`(A) malaria,

`(B) tuberculosis, or

`(C) HIV.

`(c) COORDINATION WITH CREDIT FOR INCREASING RESEARCH EXPENDITURES-

`(1) IN GENERAL- Except as provided in paragraph (2), any qualified vaccine 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 41 for such taxable year.

`(2) EXPENSES INCLUDED IN DETERMINING BASE PERIOD RESEARCH EXPENSES- Any qualified vaccine 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) SPECIAL RULES-

`(1) LIMITATIONS ON FOREIGN TESTING- No credit shall be allowed under this section with respect to any vaccine research (other than human clinical testing) conducted outside the United States by any entity which is not registered with the Secretary.

`(2) 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.

`(3) ELECTION- This section (other than subsection (e)) shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year.

`(e) SHAREHOLDER EQUITY INVESTMENT CREDIT IN LIEU OF RESEARCH CREDIT-

`(1) IN GENERAL- For purposes of section 38, the vaccine research credit determined under this section for the taxable year shall include an amount equal to 20 percent of the amount paid by the taxpayer to acquire qualified research stock in a corporation if--

`(A) the amount received by the corporation for such stock is used within 18 months after the amount is received to pay qualified vaccine research expenses of the corporation for which a credit would (but for subparagraph (B) and subsection (d)(3)) be determined under this section, and

`(B) the corporation waives its right to the credit determined under this section for the qualified vaccine research expenses which are paid with such amount.

`(2) QUALIFIED RESEARCH STOCK- For purposes of paragraph (1), the term `qualified research stock' means any stock in a C corporation--

`(A) which is originally issued after the date of the enactment of the Lifesaving Vaccine Technology Act of 1999,

`(B) which is acquired by the taxpayer at its original issue (directly or through an underwriter) in exchange for money or other property (not including stock), and

`(C) as of the date of issuance, such corporation meets the gross assets tests of subparagraphs (A) and (B) of section 1202(d)(1).'

(b) INCLUSION IN GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business 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 new paragraph:

`(13) the vaccine research credit determined under section 45D.'.

(2) TRANSITION RULE- Section 39(d) of such Code (relating to transitional rules) is amended by adding at the end the following new paragraph:

`(9) NO CARRYBACK OF SECTION 45D CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the vaccine research credit determined under section 45D may be carried back to a taxable year ending before the date of the enactment of section 45D.'.

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of the Internal Revenue Code of 1986 (relating to certain expenses for which credits are allowable) is amended by adding at the end the following new subsection:

`(d) CREDIT FOR QUALIFIED VACCINE RESEARCH EXPENSES-

`(1) IN GENERAL- No deduction shall be allowed for that portion of the qualified vaccine research expenses (as defined in section 45D(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 45D(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) of the Internal Revenue Code of 1986 (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 new paragraph:

`(9) the vaccine research credit determined under section 45D(a) (other than such credit determined under the rules of section 280C(d)(2)).'.

(e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

`Sec. 45D. Credit for medical research related to developing vaccines against widespread diseases.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

(g) DISTRIBUTION OF VACCINES DEVELOPED USING CREDIT- It is the sense of Congress that if a tax credit is allowed under section 45D of the Internal Revenue Code of 1986 to any corporation or shareholder of a corporation by reason of vaccine research expenses incurred by the corporation in the development of a vaccine, such corporation should certify to the Secretary of the Treasury that, within 1 year after that vaccine is first licensed, such corporation will establish a good faith plan to maximize international access to high quality and affordable vaccines.

(h) STUDY- The Secretary of the Treasury, in consultation with the Institute of Medicine, shall conduct a study of the effectiveness of the credit under section 45D of the Internal Revenue Code of 1986 in stimulating vaccine research. Not later than the date which is 4 years after the date of the enactment of this Act, the Secretary shall submit to the Congress the results of such study together with any recommendations the Secretary may have to improve the effectiveness of such credit in stimulating vaccine research.

SEC. 3. SENSE OF CONGRESS.

(a) ACCELERATION OF INTRODUCTION OF PRIORITY VACCINES- It is the sense of Congress that the President and Federal agencies (including the Department of State, the Department of Health and Human Services, and the Department of the Treasury) should work together in vigorous support of the creation and funding of a multi-lateral, international effort, such as a vaccine purchase fund, to accelerate the introduction of vaccines to which the tax credit under section 45D of the Internal Revenue Code of 1986 applies and of other priority vaccines into the poorest countries in the world.

(b) FLEXIBLE PRICING- It is the sense of Congress that flexible or differential pricing for vaccines, providing lowered prices for the poorest countries, is one of several valid strategies to accelerate the introduction of vaccines in developing countries.

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