Internal Revenue Code:Sec. 45C. Clinical testing expenses for certain drugs for rare diseases or conditions
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter A - Determination of Tax Liability
PART IV - CREDITS AGAINST TAX
Subpart D - Business Related Credits
Statute
Sec. 45C. Clinical testing expenses for certain drugs for rare
diseases or conditions
(a) General rule
For purposes of section 38, the credit determined under this
section for the taxable year is an amount equal to 50 percent of
the qualified clinical testing expenses for the taxable year.
(b) Qualified clinical testing expenses
For purposes of this section -
(1) Qualified clinical testing expenses
(A) In general
Except as otherwise provided in this paragraph, the term
''qualified clinical testing 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 ''clinical testing'' 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 ''qualified clinical testing 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).
(D) Special rule
For purposes of this paragraph, section 41 shall be deemed to
remain in effect for periods after June 30, 1995, and before
July 1, 1996, and periods after December 31, 2007.
(2) Clinical testing
(A) In general
The term ''clinical testing'' means any human clinical
testing -
(i) which is carried out under an exemption for a drug
being tested for a rare disease or condition under section
505(i) of the Federal Food, Drug, and Cosmetic Act (or
regulations issued under such section),
(ii) which occurs -
(I) after the date such drug is designated under section
526 of such Act, and
(II) before the date on which an application with respect
to such drug is approved under section 505(b) of such Act
or, if the drug is a biological product, before the date on
which a license for such drug is issued under section 351
of the Public Health Service Act; (FOOTNOTE 1) and
(FOOTNOTE 1) So in original. The semicolon probably should be a
comma.
(iii) which is conducted by or on behalf of the taxpayer to
whom the designation under such section 526 applies.
(B) Testing must be related to use for rare disease or
condition
Human clinical testing shall be taken into account under
subparagraph (A) only to the extent such testing is related to
the use of a drug for the rare disease or condition for which
it was designated under section 526 of the Federal Food, Drug,
and Cosmetic Act.
(c) Coordination with credit for increasing research expenditures
(1) In general
Except as provided in paragraph (2), any qualified clinical
testing 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 clinical testing 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) Definition and special rules
(1) Rare disease or condition
For purposes of this section, the term ''rare disease or
condition'' means any disease or condition which -
(A) affects less than 200,000 persons in the United States,
or
(B) affects more than 200,000 persons in the United States
but for which there is no reasonable expectation that the cost
of developing and making available in the United States a drug
for such disease or condition will be recovered from sales in
the United States of such drug.
Determinations under the preceding sentence with respect to any
drug shall be made on the basis of the facts and circumstances as
of the date such drug is designated under section 526 of the
Federal Food, Drug, and Cosmetic Act.
(2) Special limitations on foreign testing
(A) In general
No credit shall be allowed under this section with respect to
any clinical testing conducted outside the United States unless
-
(i) such testing is conducted outside the United States
because there is an insufficient testing population in the
United States, and
(ii) such testing is conducted by a United States person or
by any other person who is not related to the taxpayer to
whom the designation under section 526 of the Federal Food,
Drug, and Cosmetic Act applies.
(B) Special limitation for corporations to which section 936
applies
No credit shall be allowed under this section with respect to
any clinical testing conducted by a corporation to which an
election under section 936 applies.
(3) 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.
(4) Election
This section shall apply to any taxpayer for any taxable year
only if such taxpayer elects (at such time and in such manner as
the Secretary may by regulations prescribe) to have this section
apply for such taxable year.
Sources
(Added Pub. L. 97-414, Sec. 4(a), Jan. 4, 1983, 96 Stat. 2053, Sec.
44H; renumbered Sec. 28 and amended Pub. L. 98-369, div. A, title
IV, Sec. 471(c), 474(g), title VI, Sec. 612(e)(1), July 18, 1984,
98 Stat. 826, 831, 912; Pub. L. 99-514, title II, Sec.
231(d)(3)(A), 232, title VII, Sec. 701(c)(2), title XII, Sec.
1275(c)(4), title XVIII, Sec. 1879(b)(1), (2), Oct. 22, 1986, 100
Stat. 2178, 2180, 2340, 2599, 2905; Pub. L. 100-647, title I, Sec.
1018(q)(1), title IV, Sec. 4008(c)(1), Nov. 10, 1988, 102 Stat.
3585, 3653; Pub. L. 101-239, title VII, Sec. 7110(a)(3), Dec. 19,
1989, 103 Stat. 2323; Pub. L. 101-508, title XI, Sec. 11402(b)(2),
11411, Nov. 5, 1990, 104 Stat. 1388-473, 1388-479; Pub. L. 102-227,
title I, Sec. 102(b), 111(a), Dec. 11, 1991, 105 Stat. 1686, 1688;
Pub. L. 103-66, title XIII, Sec. 13111(a)(2), (b), Aug. 10, 1993,
107 Stat. 420; renumbered Sec. 45C and amended Pub. L. 104-188,
title I, Sec. 1204(e), 1205(a)(1), (b), (d)(1), (2), Aug. 20, 1996,
110 Stat. 1775, 1776; Pub. L. 105-34, title VI, Sec. 601(b)(2),
604(a), Aug. 5, 1997, 111 Stat. 862, 863; Pub. L. 105-115, title I,
Sec. 125(b)(2)(O), Nov. 21, 1997, 111 Stat. 2326; Pub. L. 105-277,
div. J, title I, Sec. 1001(b), Oct. 21, 1998, 112 Stat. 2681-888;
Pub. L. 106-170, title V, Sec. 502(a)(2), Dec. 17, 1999, 113 Stat.
1919.)
References in Text
REFERENCES IN TEXT
Sections 505(b), (i) and 526 of the Federal Food, Drug, and
Cosmetic Act, referred to in subsecs. (b)(2)(A) and (d)(1),
(2)(A)(ii), are classified to sections 355(b), (i) and 360bb,
respectively, of Title 21, Food and Drugs.
Section 351 of the Public Health Service Act, referred to in
subsec. (b)(2)(A)(ii)(II), is classified to section 262 of Title
42, The Public Health and Welfare.
Miscellaneous
AMENDMENTS
2004 - Subsec.301(a)(2), PL118-311, amended Sec.45C(b)(1)(D)
by inserting December 31, 2005 and striking June 30, 2004.
1999 - Subsec. (b)(1)(D). Pub. L. 106-170 substituted ''June 30,
2004'' for ''June 30, 1999''.
1998 - Subsec. (b)(1)(D). Pub. L. 105-277 substituted ''June 30,
1999'' for ''June 30, 1998''.
1997 - Subsec. (b)(1)(D). Pub. L. 105-34, Sec. 601(b)(2),
substituted ''June 30, 1998'' for ''May 31, 1997''.
Subsec. (b)(2)(A)(ii)(II). Pub. L. 105-115 struck out ''or 507''
after ''505(b)''.
Subsec. (e). Pub. L. 105-34, Sec. 604(a), struck out subsec. (e)
which read as follows:
''(e) Termination. - This section shall not apply to any amount
paid or incurred -
''(1) after December 31, 1994, and before July 1, 1996, or
''(2) after May 31, 1997.''
1996 - Pub. L. 104-188, Sec. 1205(a)(1), renumbered section 28 of
this title as this section.
Subsec. (a). Pub. L. 104-188, Sec. 1205(d)(1), substituted ''For
purposes of section 38, the credit determined under this section
for the taxable year is'' for ''There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year''.
Subsec. (b)(1)(D). Pub. L. 104-188, Sec. 1204(e), inserted '',
and before July 1, 1996, and periods after May 31, 1997'' after
''June 30, 1995''.
Subsec. (d)(2) to (5). Pub. L. 104-188, Sec. 1205(d)(2),
redesignated pars. (3) to (5) as (2) to (4), respectively, and
struck out former par. (2) which read as follows: ''Limitation
based on amount of tax. - The credit allowed by this section for
any taxable year shall not exceed the excess (if any) of -
''(A) the regular tax (reduced by the sum of the credits
allowable under subpart A and section 27), over
''(B) the tentative minimum tax for the taxable year.''
Subsec. (e). Pub. L. 104-188, Sec. 1205(b), amended subsec. (e)
generally. Prior to amendment, subsec. (e) read as follows:
''Termination. - This section shall not apply to any amount paid or
incurred after December 31, 1994.''
1993 - Subsec. (b)(1)(D). Pub. L. 103-66, Sec. 13111(a)(2),
substituted ''June 30, 1995'' for ''June 30, 1992''.
Subsec. (e). Pub. L. 103-66, Sec. 13111(b), substituted
''December 31, 1994'' for ''June 30, 1992''.
1991 - Subsec. (b)(1)(D). Pub. L. 102-227, Sec. 102(b),
substituted ''June 30, 1992'' for ''December 31, 1991''.
Subsec. (e). Pub. L. 102-227, Sec. 111(a), substituted ''June 30,
1992'' for ''December 31, 1991''.
1990 - Subsec. (b)(1)(D). Pub. L. 101-508, Sec. 11402(b)(2),
substituted ''December 31, 1991'' for ''December 31, 1990''.
Subsec. (e). Pub. L. 101-508, Sec. 11411, substituted ''December
31, 1991'' for ''December 31, 1990''.
1989 - Subsec. (b)(1)(D). Pub. L. 101-239 substituted ''1990''
for ''1989''.
1988 - Subsec. (b)(1)(D). Pub. L. 100-647, Sec. 4008(c)(1),
substituted ''1989'' for ''1988''.
Subsec. (b)(2)(A)(ii)(II). Pub. L. 100-647, Sec. 1018(q)(1),
amended subcl. (II) generally. Prior to amendment, subcl. (II)
read as follows: ''before the date on which an application with
respect to such drug is approved under section 505(b) of such Act
or, if the drug is a biological product, before the date on which a
license for such drug is issued under section 351 of the Public
Health Services Act, and''.
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 231(d)(3)(A)(i),
(iv), substituted ''41'' for ''30'' in subpars. (A), (B), and (D),
and substituted ''1988'' for ''1985'' in subpar. (D).
Subsec. (b)(2)(A)(ii)(I). Pub. L. 99-514, Sec. 1879(b)(1)(A),
substituted ''the date such drug'' for ''the date of such drug''.
Subsec. (b)(2)(A)(ii)(II). Pub. L. 99-514, Sec. 1879(b)(1)(B),
inserted ''or, if the drug is a biological product, before the date
on which a license for such drug is issued under section 351 of the
Public Health Services Act''.
Subsec. (c). Pub. L. 99-514, Sec. 231(d)(3)(A)(i), (ii),
substituted ''41'' for ''30'' in pars. (1) and (2) and ''41(b)''
for ''30(b)'' in par. (2).
Subsec. (d)(1). Pub. L. 99-514, Sec. 1879(b)(2), amended par. (1)
generally. Prior to amendment, par. (1) read as follows: ''For
purposes of this section, the term 'rare disease or condition'
means any disease or condition which occurs so infrequently in the
United States that there is no reasonable expectation that the cost
of developing and making available in the United States a drug for
such disease or condition will be recovered from sales in the
United States of such drug. Determinations under the preceding
sentence with respect to any drug shall be made on the basis of the
facts and circumstances as of the date such drug is designated
under section 526 of the Federal Food, Drug, and Cosmetic Act.''
Subsec. (d)(2). Pub. L. 99-514, Sec. 701(c)(2), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: ''The
credit allowed by this section for any taxable year shall not
exceed the taxpayer's tax liability for the taxable year (as
defined in section 26(b)), reduced by the sum of the credits
allowable under subpart A and section 27.''
Subsec. (d)(3)(B). Pub. L. 99-514, Sec. 1275(c)(4), struck out
''934(b) or'' before ''936'' in heading and amended text
generally. Prior to amendment, text read as follows: ''No credit
shall be allowed under this section with respect to any clinical
testing conducted by a corporation to which section 934(b) applies
or to which an election under section 936 applies.''
Subsec. (d)(4). Pub. L. 99-514, Sec. 231(d)(3)(A)(iii),
substituted ''section 41(f)'' for ''section 30(f)''.
Subsec. (e). Pub. L. 99-514, Sec. 232, substituted ''1990'' for
''1987''.
1984 - Pub. L. 98-369, Sec. 471(c), renumbered section 44H of
this title as this section.
Subsec. (b)(1)(A), (B), (D). Pub. L. 98-369, Sec. 474(g)(1)(A),
substituted ''section 30'' for ''section 44F''.
Subsec. (c)(1). Pub. L. 98-369, Sec. 474(g)(1)(A), substituted
''section 30'' for ''section 44F''.
Subsec. (c)(2). Pub. L. 98-369, Sec. 474(g)(1)(A), (B),
substituted ''section 30'' for ''section 44F'' and ''section
30(b)'' for ''section 44F(b)''.
Subsec. (d)(2). Pub. L. 98-369, Sec. 612(e)(1), substituted
''section 26(b)'' for ''section 25(b)''.
Pub. L. 98-369, Sec. 474(g)(2), amended par. (2) generally,
substituting ''shall not exceed the taxpayer's tax liability for
the taxable year (as defined in section 25(b), reduced by the sum
of the credits allowable under subpart A and section 27'' for
''shall not exceed the amount of the tax imposed by this chapter
for the taxable year reduced by the sum of the credits allowable
under a section of this subpart having a lower number or letter
designation than this section, other than the credits allowable by
sections 31, 39, and 43. For purposes of the preceding sentence,
the term 'tax imposed by this chapter' shall not include any tax
treated as not imposed by this chapter under the last sentence of
section 53(a)''.
Subsec. (d)(4). Pub. L. 98-369, Sec. 474(g)(1)(C), substituted
''section 30(f)'' for ''section 44F(f)''.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106-170 applicable to amounts paid or
incurred after June 30, 1999, see section 502(a)(3) of Pub. L.
106-170, set out as a note under section 41 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-277 applicable to amounts paid or
incurred after June 30, 1998, see section 1001(c) of Pub. L.
105-277, set out as a note under section 41 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 601(b)(2) of Pub. L. 105-34 applicable to
amounts paid or incurred after May 31, 1997, see section 601(c) of
Pub. L. 105-34, set out as a note under section 41 of this title.
Section 604(b) of Pub. L. 105-34 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
amounts paid or incurred after May 31, 1997.''
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1204(e) of Pub. L. 104-188 applicable to
taxable years ending after June 30, 1996, and not to be taken into
account under section 6654 or 6655 of this title in determining
amount of any installment required to be paid for a taxable year
beginning in 1997, see section 1204(f) of Pub. L. 104-188, set out
as a note under section 41 of this title.
Amendment by section 1205(a)(1), (b), (d)(1), (2) of Pub. L.
104-188 applicable to amounts paid or incurred in taxable years
ending after June 30, 1996, see section 1205(e) of Pub. L. 104-188,
set out as a note under section 29 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13111(c) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section and section
41 of this title) shall apply to taxable years ending after June
30, 1992.''
EFFECTIVE DATE OF 1991 AMENDMENT
Section 102(c) of Pub. L. 102-227 provided that: ''The amendments
made by this section (amending this section and section 41 of this
title) shall apply to taxable years ending after December 31,
1991.''
Section 111(b) of Pub. L. 102-227 provided that: ''The amendment
made by this section (amending this section) shall apply to taxable
years ending after December 31, 1991.''
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11402(c) of Pub. L. 101-508 provided that: ''The
amendments made by this section (amending this section and section
41 of this title and repealing provisions set out as a note under
section 41 of this title) shall apply to taxable years beginning
after December 31, 1989.''
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1018(q)(1) of Pub. L. 100-647 effective,
except as otherwise provided, as if included in the provision of
the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Amendment by section 4008(c)(1) of Pub. L. 100-647 applicable to
taxable years beginning after Dec. 31, 1988, see section 4008(d) of
Pub. L. 100-647, set out as a note under section 41 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 231(d)(3)(A) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1985, see section 231(g) of
Pub. L. 99-514, set out as a note under section 41 of this title.
Amendment by section 701(c)(2) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 701(f) of Pub. L.
99-514, set out as an Effective Date note under section 55 of this
title.
Amendment by section 1275(c)(4) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1277 of Pub. L. 99-514,
set out as a note under section 931 of this title.
Section 1879(b)(3) of Pub. L. 99-514 provided that: ''The
amendments made by this subsection (amending this section) shall
apply to amounts paid or incurred after December 31, 1982, in
taxable years ending after such date.''
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(g) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Amendment by section 612(e)(1) of Pub. L. 98-369, applicable to
interest paid or accrued after December 31, 1984, on indebtedness
incurred after December 31, 1984, see section 612(g) of Pub. L.
98-369, set out as an Effective Date note under section 25 of this
title.
EFFECTIVE DATE
Section 4(d) of Pub. L. 97-414 provided that: ''The amendments
made by this section (enacting this section and amending sections
280C and 6096 of this title) shall apply to amounts paid or
incurred after December 31, 1982, in taxable years ending after
such date.''
APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99-514 IN
RELATION TO TREATY OBLIGATIONS OF UNITED STATES
For applicability of amendment by section 701(c)(2) of Pub. L.
99-514 notwithstanding any treaty obligation of the United States
in effect on Oct. 22, 1986, with provision that for such purposes
any amendment by title I of Pub. L. 100-647 be treated as if it had
been included in the provision of Pub. L. 99-514 to which such
amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100-647,
set out as a note under section 861 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 38, 39, 280C of this
title.
