SECTION 1. 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:

``SEC. 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.
Amends the Internal Revenue Code to allow a general business tax credit for 50% of expenses paid for research and development of any qualified infectious disease product. Defines "qualified infectious disease product" as any antibiotic drug, antiviral, diagnostic test, biological product, or vaccine developed to treat, detect, prevent, or identify certain pathogens. Terminates such credit after 2012.
To amend the Internal Revenue Code of 1986 to provide a tax credit for medical research related to developing qualified infectious disease products.