[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 4994 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 4994
To amend the Internal Revenue Code of 1986 to provide for credits
against tax for domestic manufacturing of critical medical supplies and
drugs.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 15, 2026
Mrs. Blackburn introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for credits
against tax for domestic manufacturing of critical medical supplies and
drugs.
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 ``Our Nation's Supply chain for
Healthcare has Over Reliance Elsewhere Act'' or the ``ONSHORE
Manufacturing Act''.
SEC. 2. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.
(a) In General.--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 section:
``SEC. 45BB. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.
``(a) In General.--For purposes of section 38, the domestic medical
and drug manufacturing credit determined under this section for any
taxable year is an amount equal to 10.5 percent of the lesser of--
``(1) the qualified medical and drug manufacturing income
of the taxpayer for the taxable year, or
``(2) taxable income of the taxpayer for the taxable year.
``(b) Credit Limited to Wages Paid.--
``(1) In general.--The amount of the credit allowable under
subsection (a) for any taxable year shall not exceed 50 percent
of the W-2 wages of the taxpayer for the taxable year.
``(2) W-2 wages.--For purposes of this section--
``(A) In general.--The term `W-2 wages' means, with
respect to any person for any taxable year of such
person, the sum of the amounts described in paragraphs
(3) and (8) of section 6051(a) paid by such person with
respect to employment of employees by such person
during the calendar year ending during such taxable
year.
``(B) Limitation to wages attributable to domestic
production.--Such term shall not include any amount
which is not properly allocable to domestic medical and
drug manufacturing gross receipts for purposes of
subsection (c)(1).
``(C) Return requirement.--Such term shall not
include any amount which is not properly included in a
return filed with the Social Security Administration on
or before the 60th day after the due date (including
extensions) for such return.
``(3) Acquisitions, dispositions, and short taxable
years.--The Secretary shall provide for the application of this
subsection in cases of a short taxable year or where the
taxpayer acquires, or disposes of, the major portion of a trade
or business or the major portion of a separate unit of a trade
or business during the taxable year.
``(c) Qualified Medical and Drug Manufacturing Income.--For
purposes of this section--
``(1) In general.--The term `qualified medical and drug
manufacturing income' for any taxable year means an amount
equal to the excess (if any) of--
``(A) the taxpayer's domestic medical and drug
manufacturing gross receipts for the taxable year, over
``(B) the sum of--
``(i) the cost of goods sold that are
allocable to such receipts, and
``(ii) other expenses, losses, or
deductions which are properly allocable to such
receipts.
``(2) Allocation method.--The Secretary shall prescribe
rules for the proper allocation of items described in paragraph
(1)(B) for purposes of determining qualified medical and drug
manufacturing income. Such rules shall provide for the proper
allocation of items whether or not such items are directly
allocable to domestic medical and drug manufacturing gross
receipts.
``(3) Special rules for determining costs.--
``(A) In general.--For purposes of determining
costs under clause (i) of paragraph (1)(B), any item or
service brought into the United States shall be treated
as acquired by purchase, and its cost shall be treated
as not less than its value immediately after it entered
the United States.
``(B) Exports for further manufacture.--In the case
of any property described in subparagraph (A) that had
been exported by the taxpayer for further manufacture,
the increase in cost or adjusted basis under
subparagraph (A) shall not exceed the difference
between the value of the property when exported and the
value of the property when brought back into the United
States after the further manufacture.
``(4) Domestic medical and drug manufacturing gross
receipts.--
``(A) In general.--The term `domestic medical and
drug manufacturing gross receipts' means the gross
receipts of the taxpayer which are derived from any
sale, exchange, or other disposition of a specified
medical product.
``(B) Specified medical product.--The term
`specified medical product' means any of the following
which is manufactured or produced by the taxpayer in
whole or in significant part within the United States:
``(i) Any drug (as defined in section
201(g) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(g))), including any
biological product (as defined in section
351(i) of the Public Health Service Act (42
U.S.C. 262(i))), which is included in--
``(I) the list of essential
medicines, medical countermeasures, and
critical inputs maintained by the
Commissioner of Food and Drugs pursuant
to Executive Order 13944 (85 Fed. Reg.
49929 (August 14, 2020)),
``(II) the list of defense-specific
essential medicines, medical
countermeasures, and critical inputs
maintained by the Secretary of Defense
pursuant to Executive Order 13944 (85
Fed. Reg. 49929 (August 14, 2020)),
``(III) the Department of Defense
Joint Deployment Formulary, or
``(IV) a list prepared by the
Defense Logistics Agency of drugs
required for military readiness.
``(ii) Any device (as defined in section
201(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(h))) which is included in--
``(I) the list of critical medical
devices maintained by the Secretary of
Health and Human Services pursuant to
Executive Order 14001 (86 Fed. Reg.
7219 (January 26, 2021)), or
``(II) the Department of Defense
Joint Deployment Formulary.
``(iii) Any active pharmaceutical
ingredient (as defined in section 207.1 of
title 21, Code of Federal Regulations (or
successor regulations)) which is used in the
manufacture of a drug or device described in
clause (i) or (ii), respectively.
``(iv) Any covered countermeasure (as
defined in section 319F-3(i)(1) of the Public
Health Service Act (42 U.S.C. 247d-6d(i)(1)))
which is included in a list described in
subclause (I), (II), or (III) of clause (i) or
subclause (I) or (II) of clause (ii).
``(C) Partnerships owned by expanded affiliated
groups.--For purposes of this paragraph, if all of the
interests in the capital and profits of a partnership
are owned by members of a single expanded affiliated
group at all times during the taxable year of such
partnership, the partnership and all members of such
group shall be treated as a single taxpayer during such
period.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Application of section to pass-thru entities.--
``(A) Partnerships and s corporations.--In the case
of a partnership or S corporation--
``(i) this section shall be applied at the
partner or shareholder level,
``(ii) each partner or shareholder shall
take into account such person's allocable share
of each item described in subparagraph (A) or
(B) of subsection (c)(1) (determined without
regard to whether the items described in such
subparagraph (A) exceed the items described in
such subparagraph (B)), and
``(iii) each partner or shareholder shall
be treated for purposes of subsection (b) as
having W-2 wages for the taxable year in an
amount equal to such person's allocable share
of the W-2 wages of the partnership or S
corporation for the taxable year (as determined
under regulations prescribed by the Secretary).
``(B) Trusts and estates.--In the case of a trust
or estate--
``(i) the items referred to in subparagraph
(A)(ii) (as determined therein) and the W-2
wages of the trust or estate for the taxable
year, shall be apportioned between the
beneficiaries and the fiduciary (and among the
beneficiaries) under regulations prescribed by
the Secretary, and
``(ii) for purposes of paragraph (2),
adjusted gross income of the trust or estate
shall be determined as provided in section
67(e) with the adjustments described in such
paragraph.
``(C) Regulations.--The Secretary may prescribe
rules requiring or restricting the allocation of items
and wages under this paragraph and may prescribe such
reporting requirements as the Secretary determines
appropriate.
``(2) Application to individuals.--In the case of an
individual, subsection (a)(2) shall be applied by substituting
`adjusted gross income' for `taxable income'. For purposes of
the preceding sentence, adjusted gross income shall be
determined after application of sections 86, 135, 137, 219,
221, 222, and 469.
``(3) Special rule for affiliated groups.--
``(A) In general.--All members of an expanded
affiliated group shall be treated as a single
corporation for purposes of this section.
``(B) Expanded affiliated group.--For purposes of
this section, the term `expanded affiliated group'
means an affiliated group as defined in section
1504(a), determined--
``(i) by substituting `more than 50
percent' for `at least 80 percent' each place
it appears, and
``(ii) without regard to paragraphs (2) and
(4) of section 1504(b).
``(C) Allocation of credit.--Except as provided in
regulations, the credit under subsection (a) shall be
allocated among the members of the expanded affiliated
group in proportion to each member's respective amount
(if any) of qualified medical and drug manufacturing
income.
``(4) Trade or business requirement.--This section shall be
applied by only taking into account items which are
attributable to the actual conduct of a trade or business.
``(5) Coordination with minimum tax.--For purposes of
determining alternative minimum taxable income under section
55, qualified medical and drug manufacturing income shall be
determined without regard to any adjustments under sections 56
through 59.
``(6) Unrelated business taxable income.--For purposes of
determining the tax imposed by section 511, subsection
(a)(1)(B) shall be applied by substituting `unrelated business
taxable income' for `taxable income'.
``(7) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the purposes of this
section, including regulations which prevent more than 1
taxpayer from being allowed a credit under this section with
respect to any activity described in subsection (c)(4)(A).''.
(b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of
such Code is amended by striking ``plus'' at the end of subclause (I),
by redesignating subclause (II) as subclause (III), and by inserting
after subclause (I) the following new subclause:
``(II) the credit allowed under
section 38 for the taxable year which
is properly allocable to the domestic
medical and drug manufacturing credit
determined under section 45BB(a),
plus''.
(c) Part of General Business Credit.--Section 38(b) of such Code is
amended by striking ``plus'' at the end of paragraph (40), by striking
the period at the end of paragraph (41) and inserting ``, plus'', and
by adding at the end the following new paragraph:
``(42) the domestic medical and drug manufacturing credit
determined under section 45BB(a).''.
(d) Credit Allowed Against Alternative Minimum Tax.--Section
38(c)(4)(B) of such Code is amended by redesignating clauses (x)
through (xii) as clauses (xi) through (xiii), respectively, and by
inserting after clause (ix) the following new clause:
``(x) the credit determined under section
45BB,''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45BB. Domestic medical and drug manufacturing credit.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2026.
SEC. 3. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.
(a) In General.--Subpart E 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 section:
``SEC. 48F. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.
``(a) In General.--For purposes of section 46, the qualifying
advanced medical manufacturing equipment credit determined under this
section for any taxable year is the applicable percentage of the basis
of any qualifying advanced medical manufacturing equipment placed in
service during such taxable year.
``(b) Applicable Percentage.--For purposes of this section, the
term `applicable percentage' means--
``(1) 30 percent in the case of qualifying advanced medical
manufacturing equipment which is placed in service before
January 1, 2031,
``(2) 20 percent in the case of qualifying advanced medical
manufacturing equipment which is placed in service during
calendar year 2031,
``(3) 10 percent in the case of qualifying advanced medical
manufacturing equipment which is placed in service during
calendar year 2032, and
``(4) 0 percent in the case of qualifying advanced medical
manufacturing equipment which is placed in service after
December 31, 2032.
``(c) Qualifying Advanced Medical Manufacturing Equipment.--For
purposes of this section, the term `qualifying advanced medical
manufacturing equipment' means property--
``(1) which is machinery or equipment that is designed and
used to manufacture a specified medical product (as defined in
section 45BB(c)(4)(B)),
``(2) which has been identified by the Secretary (after
consultation with the Secretary of Health and Human Services)
as machinery or equipment that--
``(A) incorporates novel technology or uses an
established technique or technology in a new or
innovative way, or
``(B) that can improve medical product quality,
address shortages of medicines, and speed time-to-
market,
``(3) which is placed in service in the United States by
the taxpayer, and
``(4) with respect to which depreciation is allowable.
``(d) Certain Qualified Progress Expenditures Rules Made
Applicable.--Rules similar to the rules of subsections (c)(4) and (d)
of section 46 (as in effect on the day before the enactment of the
Revenue Reconciliation Act of 1990) shall apply for purposes of this
section.
``(e) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary to carry out the purposes of this
section, including regulations which prevent abuse or fraud.''.
(b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of
such Code, as amended by the preceding provisions of this Act, is
amended by striking ``plus'' at the end of subclause (II), by
redesignating subclause (III) as subclause (IV), and by inserting after
subclause (II) the following new subclause:
``(III) the credit allowed under
section 46 for the taxable year which
is properly allocable to the qualifying
advanced medical manufacturing
equipment credit determined under
section 48F(a), plus''.
(c) Part of Investment Credit.--Section 46 of such Code is amended
by striking ``and'' at the end of paragraph (6), by striking the period
at the end of paragraph (7) and inserting ``, and'', and by adding at
the end the following new paragraph:
``(8) the qualifying advanced medical manufacturing
equipment credit.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 48F. Qualifying advanced medical manufacturing equipment
credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this section under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the date of the enactment of the Revenue
Reconciliation Act of 1990).
SEC. 4. MEDICAL MANUFACTURING EPA COMPLIANCE CREDIT.
(a) In General.--Subpart E of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986, as amended by the preceding
provisions of this Act, is amended by adding at the end the following
new section:
``SEC. 48G. MEDICAL MANUFACTURING EPA COMPLIANCE CREDIT.
``(a) In General.--For purposes of section 46, the medical
manufacturing EPA compliance credit determined under this section for
any taxable year is the applicable percentage of the basis of any
qualifying medical manufacturing EPA compliance property placed in
service during such taxable year.
``(b) Applicable Percentage.--For purposes of this section, the
term `applicable percentage' means--
``(1) 30 percent in the case of qualifying medical
manufacturing EPA compliance property which is placed in
service before January 1, 2031,
``(2) 20 percent in the case of qualifying medical
manufacturing EPA compliance property which is placed in
service during calendar year 2031,
``(3) 10 percent in the case of qualifying medical
manufacturing EPA compliance property which is placed in
service during calendar year 2032, and
``(4) 0 percent in the case of qualifying medical
manufacturing EPA compliance property which is placed in
service after December 31, 2032.
``(c) Qualifying Medical Manufacturing EPA Compliance Property.--
For purposes of this section, the term `qualifying medical
manufacturing EPA compliance equipment' means property--
``(1) which is used by the taxpayer in the trade or
business of manufacturing a specified medical product (as
defined in section 45BB(c)(4)(B)),
``(2) which is used to meet emissions limits under the
Clean Air Act or wastewater standards under the Clean Water
Act,
``(3) which is placed in service in the United States by
the taxpayer,
``(4) with respect to which depreciation is allowable, and
``(5) which is not qualifying advanced medical
manufacturing equipment (as defined in section 48F).
``(d) Certain Qualified Progress Expenditures Rules Made
Applicable.--Rules similar to the rules of subsections (c)(4) and (d)
of section 46 (as in effect on the day before the enactment of the
Revenue Reconciliation Act of 1990) shall apply for purposes of this
section.
``(e) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary to carry out the purposes of this
section, including regulations which prevent abuse or fraud.''.
(b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of
such Code, as amended by the preceding provisions of this Act, is
further amended by striking ``plus'' at the end of subclause (III), by
redesignating subclause (IV) as subclause (V), and by inserting after
subclause (III) the following new subclause:
``(IV) the credit allowed under
section 46 for the taxable year which
is properly allocable to the medical
manufacturing EPA compliance credit
determined under section 48G(a),
plus''.
(c) Part of Investment Credit.--Section 46 of such Code, as amended
by the preceding provisions of this Act, 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 medical manufacturing EPA compliance credit.''.
(d) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code, as amended by the
preceding provisions of this Act, is amended by adding at the end the
following new item:
``Sec. 48G. Medical manufacturing EPA compliance credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to periods after the date of the enactment of this section under
rules similar to the rules of section 48(m) of the Internal Revenue
Code of 1986 (as in effect on the date of the enactment of the Revenue
Reconciliation Act of 1990).
SEC. 5. REPORTS TO CONGRESS REGARDING SUPPLY CHAIN RESILIENCY.
(a) Internal Revenue Service.--The Commissioner of Internal Revenue
shall submit to Congress an annual report (beginning with calendar year
2027) regarding the utilization of the credits allowed under sections
45BB, 48F, and 48G of the Internal Revenue Code of 1986 (as added by
this Act).
(b) Department of Veterans Affairs.--The Secretary of Veterans
Affairs shall submit to Congress an annual report (beginning with
calendar year 2027) regarding the impact of the credits allowed under
sections 45BB, 48F, and 48G of the Internal Revenue Code of 1986 (as
added by this Act) on compliance with procurement of domestically
manufactured drugs, biologics, active pharmaceutical ingredients,
countermeasures and devices under the Buy American Act of 1933 (41
U.S.C. 8301 et seq.).
(c) Department of Defense.--The Secretary of Defense shall submit
to Congress an annual report (beginning with calendar year 2027)
regarding the impact of the credits allowed under sections 45BB, 48F,
and 48G of the Internal Revenue Code of 1986 (as added by this Act) on
compliance with procurement of domestically manufactured drugs,
biologics, active pharmaceutical ingredients, countermeasures and
devices under the Buy American Act of 1933 (41 U.S.C. 8301 et seq.).
(d) Food and Drug Administration.--The Commissioner of Food and
Drugs shall submit to Congress an annual report (beginning with
calendar year 2027) regarding the impact of the credits allowed under
sections 45BB, 48F, and 48G of the Internal Revenue Code of 1986 (as
added by this Act) on drug and device shortages.
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