Tax credit for medical research related to developing qualified infectious disease products

(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:

45O.

Credit for medical research related to developing qualified infectious disease products

(a)

General rule

For purposes of section 38, the infectious disease research credit determined under this section for the taxable year is an amount equal to 50 percent of the qualified infectious disease research expenses for the taxable year. (b)

Qualified infectious disease research expenses

For purposes of this section— (1)

Qualified infectious disease research expenses

Except as otherwise provided in this subsection, the term qualified infectious disease research expenses means the amounts which are paid or incurred by the taxpayer during the taxable year with respect to any research and development of any qualified infectious disease product which would be described in subsection (b) of section 41 if such subsection were applied with the modifications set forth in paragraph (2). (2)

Modifications; increased incentive for contract research payments

For purposes of paragraph (1), subsection (b) of section 41 shall be applied— (A)by substituting qualified infectious disease research for qualified research each place it appears in paragraphs (2) and (3) of such subsection, and (B)by substituting 100 percent for 65 percent in paragraph (3)(A) of such subsection. (3)

Exclusion for amounts funded by grants, etc

The term qualified infectious disease 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). (4)

Qualified infectious disease research

The term qualified infectious disease research means qualified research (as defined in section 41(d)) which relates to the development of a qualified infectious disease product, except that qualified infectious disease research shall include expenses related to re-formulating existing qualified infectious disease products. (5)

Qualified infectious disease product

(A)

In general

The term qualified infectious disease product means any antibiotic drug, antiviral, diagnostic test, biological product, or vaccine that is developed for the purpose of treating, detecting, preventing, or identifying a qualifying pathogen. (B)

Qualifying antibiotic drug and antiviral formulations

To qualify as a qualified infectious disease product under subparagraph (A), any antibiotic drug or antiviral shall be in a formulation for which the Secretary of Health and Human Services, after consulting with infectious diseases clinicians and appropriate professional associations, has determined there is a significant medical need. (6)

Other definitions

(A)

Antibiotic drug

The term antibiotic drug has the meaning given to that term in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321). (B)

Antiviral

The term antiviral means a drug or biological product intended for human use that impedes the reproduction of a virus. (C)

Biological product

The term biological product has the meaning given to that term in section 351 of the Public Health Service Act (42 U.S.C. 262). (D)

Device

The term device has the meaning given to that term in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321). (E)

Diagnostic test

The term diagnostic test means a device or product used to detect the presence, concentration, or characteristics of an infectious human disease. (F)

Drug

The term drug has the meaning given to that term in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321). (G)

Qualifying pathogen

The term qualifying pathogen means— (i)methicillin-resistant staphylococcus aureus, (ii)life-threatening gram negative bacteria, such as Escherichia coli (E. coli), Acinetobacter, Klebsiella species, and Pseudomonas aeruginosa, (iii)extensively drug resistant tuberculosis (XDR–TB), or (iv)any other infectious pathogen identified for purposes of this section by the Secretary of Health and Human Services, in concurrence with infectious disease clinicians and appropriate professional associations, as a significant threat to public health because of drug resistance or other factors (or likely to become such a threat). (H)

Vaccine

The term vaccine means a vaccine intended for human use. (c)

Coordination with credit for increasing research expenditures

(1)

In general

Except as provided in paragraph (2), any qualified infectious disease 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 infectious disease 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)

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)

Coordination with credit for clinical testing expenses for certain drugs for rare diseases

Any qualified infectious disease 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 45C for such taxable year. (3)

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. (e)

Termination

This section shall not apply to taxable years beginning after December 31, 2012.

(b)

Inclusion in general business credit

Section 38(b) of the Internal Revenue Code of 1986 is amended by striking plus at the end of paragraph (30), by striking the period at the end of paragraph (31) and inserting , plus, and by adding at the end the following new paragraph:

(32)the infectious disease research credit determined under section 45O.

(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:

(f)

Credit for qualified infectious disease research expenses

(1)

In general

No deduction shall be allowed for that portion of the qualified infectious disease research expenses (as defined in section 45O(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 45O(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 (12), by striking the period at the end of paragraph (13) and inserting , and, and by adding at the end the following new paragraph:

(14)the infectious disease research credit determined under section 45O(a) (other than such credit determined under the rules of section 280C(e)(2)).

(e)

Technical 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. 45O. Credit for medical research related to developing qualified infectious disease products.

(f)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2007.