§ 45C. Clinical testing expenses for certain drugs for rare diseases or conditions

§ 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 25 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).

(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, and

(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—

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.

(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.

(2) Special limitations on foreign testing No credit shall be allowed under this section with respect to any clinical testing conducted outside the United States unless—

(A) such testing is conducted outside the United States because there is an insufficient testing population in the United States, and

(B) 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.

(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.

(Added Pub. L. 97–414, § 4(a), Jan. 4, 1983, 96 Stat. 2053, § 44H; renumbered § 28 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(g), title VI, § 612(e)(1), July 18, 1984, 98 Stat. 826, 831, 912; Pub. L. 99–514, title II, §§ 231(d)(3)(A), 232, title VII, § 701(c)(2), title XII, § 1275(c)(4), title XVIII, § 1879(b)(1), (2), Oct. 22, 1986, 100 Stat. 2178, 2180, 2340, 2599, 2905; Pub. L. 100–647, title I, § 1018(q)(1), title IV, § 4008(c)(1), Nov. 10, 1988, 102 Stat. 3585, 3653; Pub. L. 101–239, title VII, § 7110(a)(3), Dec. 19, 1989, 103 Stat. 2323; Pub. L. 101–508, title XI, §§ 11402(b)(2), 11411, Nov. 5, 1990, 104 Stat. 1388–473, 1388–479; Pub. L. 102–227, title I, §§ 102(b), 111(a), Dec. 11, 1991, 105 Stat. 1686, 1688; Pub. L. 103–66, title XIII, § 13111(a)(2), (b), Aug. 10, 1993, 107 Stat. 420; renumbered § 45C and amended Pub. L. 104–188, title I, §§ 1204(e), 1205(a)(1), (b), (d)(1), (2), Aug. 20, 1996, 110 Stat. 1775, 1776; Pub. L. 105–34, title VI, §§ 601(b)(2), 604(a), Aug. 5, 1997, 111 Stat. 862, 863; Pub. L. 105–115, title I, § 125(b)(2)(O), Nov. 21, 1997, 111 Stat. 2326; Pub. L. 105–277, div. J, title I, § 1001(b), Oct. 21, 1998, 112 Stat. 2681–888; Pub. L. 106–170, title V, § 502(a)(2), Dec. 17, 1999, 113 Stat. 1919; Pub. L. 108–311, title III, § 301(a)(2), Oct. 4, 2004, 118 Stat. 1178; Pub. L. 109–432, div. A, title I, § 104(a)(2), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title III, § 301(a)(2), Oct. 3, 2008, 122 Stat. 3865; Pub. L. 111–312, title VII, § 731(b), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 301(a)(2), Jan. 2, 2013, 126 Stat. 2326; Pub. L. 113–295, div. A, title I, § 111(b), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 121(a)(2), Dec. 18, 2015, 129 Stat. 3049; Pub. L. 115–97, title I, § 13401(a), Dec. 22, 2017, 131 Stat. 2133; Pub. L. 115–141, div. U, title IV, § 401(a)(17), (d)(1)(D)(iii), Mar. 23, 2018, 132 Stat. 1185, 1206.)

Editorial Notes

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)(B), 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.

Amendments

2018—Subsec. (b)(2)(A)(ii)(II). Pub. L. 115–141, § 401(a)(17), substituted “, and” for “; and”.

Subsec. (d)(2). Pub. L. 115–141, § 401(d)(1)(D)(iii), struck out subpar. (A) designation and heading, redesignated cls. (i) and (ii) of former subpar. (A) as subpars. (A) and (B), respectively, realigned margins, and struck out former subpar. (B) which related to special limitation for corporations to which former section 936 applied.

2017—Subsec. (a). Pub. L. 115–97 substituted “25 percent” for “50 percent”.

2015—Subsec. (b)(1)(D). Pub. L. 114–113 struck out subpar. (D). Text read as follows: “If section 41 is not in effect for any period, such section shall be deemed to remain in effect for such period for purposes of this paragraph.”

2014—Subsec. (b)(1)(D). Pub. L. 113–295 amended subpar. (D) generally. Prior to amendment, text read as follows: “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, 2013.”

2013—Subsec. (b)(1)(D). Pub. L. 112–240 substituted “December 31, 2013” for “December 31, 2011”.

2010—Subsec. (b)(1)(D). Pub. L. 111–312 substituted “December 31, 2011” for “December 31, 2009”.

2008—Subsec. (b)(1)(D). Pub. L. 110–343 substituted “December 31, 2009” for “December 31, 2007”.

2006—Subsec. (b)(1)(D). Pub. L. 109–432 substituted “2007” for “2005”.

2004—Subsec. (b)(1)(D). Pub. L. 108–311 substituted “December 31, 2005” for “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, § 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, § 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, § 1205(a)(1), renumbered section 28 of this title as this section.

Subsec. (a). Pub. L. 104–188, § 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, § 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, § 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, § 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, § 13111(a)(2), substituted “June 30, 1995” for “June 30, 1992”.

Subsec. (e). Pub. L. 103–66, § 13111(b), substituted “December 31, 1994” for “June 30, 1992”.

1991—Subsec. (b)(1)(D). Pub. L. 102–227, § 102(b), substituted “June 30, 1992” for “December 31, 1991”.

Subsec. (e). Pub. L. 102–227, § 111(a), substituted “June 30, 1992” for “December 31, 1991”.

1990—Subsec. (b)(1)(D). Pub. L. 101–508, § 11402(b)(2), substituted “December 31, 1991” for “December 31, 1990”.

Subsec. (e). Pub. L. 101–508, § 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, § 4008(c)(1), substituted “1989” for “1988”.

Subsec. (b)(2)(A)(ii)(II). Pub. L. 100–647, § 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, § 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, § 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, § 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, § 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, § 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, § 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, § 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, § 231(d)(3)(A)(iii), substituted “section 41(f)” for “section 30(f)”.

Subsec. (e). Pub. L. 99–514, § 232, substituted “1990” for “1987”.

1984—Pub. L. 98–369, § 471(c), renumbered section 44H of this title as this section.

Subsec. (b)(1)(A), (B), (D). Pub. L. 98–369, § 474(g)(1)(A), substituted “section 30” for “section 44F”.