I 

116TH CONGRESS 

2D SESSION H. R. 7767 

To amend the Internal Revenue Code of 1986 to provide for credits against 

tax for domestic medical and drug manufacturing and advanced medical 

manufacturing equipment. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 23, 2020 

Mr. WENSTRUP (for himself and Mr. ARRINGTON) introduced the following 

bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

for credits against tax for domestic medical and drug 

manufacturing and advanced medical manufacturing 

equipment. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. DOMESTIC MEDICAL AND DRUG MANUFAC4 TURING CREDIT. 

5 (a) IN GENERAL.—Subpart D of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 is amended by adding at the end the following new 

8 section: 


pamtmann on DSKBC07HB2PROD with BILLS
2 

•HR 7767 IH

1 ‘‘SEC. 45U. DOMESTIC MEDICAL AND DRUG MANUFAC2 TURING CREDIT. 

3 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

4 domestic medical and drug manufacturing credit deter5 mined under this section for any taxable year is an amount 

6 equal to 10.5 percent of the lesser of— 

7 ‘‘(1) the qualified medical and drug manufac8 turing income of the taxpayer for the taxable year, 

9 or 

10 ‘‘(2) taxable income of the taxpayer for the tax11 able year. 

12 ‘‘(b) CREDIT LIMITED TO WAGES PAID.— 

13 ‘‘(1) IN GENERAL.—The amount of the credit 

14 allowable under subsection (a) for any taxable year 

15 shall not exceed 50 percent of the W–2 wages of the 

16 taxpayer for the taxable year. 

17 ‘‘(2) W–2 WAGES.—For purposes of this sec18 tion— 

19 ‘‘(A) IN GENERAL.—The term ‘W–2 

20 wages’ means, with respect to any person for 

21 any taxable year of such person, the sum of the 

22 amounts described in paragraphs (3) and (8) of 

23 section 6051(a) paid by such person with re24 spect to employment of employees by such per25 son during the calendar year ending during 

26 such taxable year. 


pamtmann on DSKBC07HB2PROD with BILLS
3 

•HR 7767 IH

1 ‘‘(B) LIMITATION TO WAGES ATTRIB2 UTABLE TO DOMESTIC PRODUCTION.—Such 

3 term shall not include any amount which is not 

4 properly allocable to domestic medical and drug 

5 manufacturing gross receipts for purposes of 

6 subsection (c)(1). 

7 ‘‘(C) RETURN REQUIREMENT.—Such term 

8 shall not include any amount which is not prop9 erly included in a return filed with the Social 

10 Security Administration on or before the 60th 

11 day after the due date (including extensions) 

12 for such return. 

13 ‘‘(3) ACQUISITIONS, DISPOSITIONS, AND SHORT

14 TAXABLE YEARS.—The Secretary shall provide for 

15 the application of this subsection in cases of a short 

16 taxable year or where the taxpayer acquires, or dis17 poses of, the major portion of a trade or business or 

18 the major portion of a separate unit of a trade or 

19 business during the taxable year. 

20 ‘‘(c) QUALIFIED MEDICAL AND DRUG MANUFAC21 TURING INCOME.—For purposes of this section— 

22 ‘‘(1) IN GENERAL.—The term ‘qualified medical 

23 and drug manufacturing income’ for any taxable 

24 year means an amount equal to the excess (if any) 

25 of— 


pamtmann on DSKBC07HB2PROD with BILLS
4 

•HR 7767 IH

1 ‘‘(A) the taxpayer’s domestic medical and 

2 drug manufacturing gross receipts for the tax3 able year, over 

4 ‘‘(B) the sum of— 

5 ‘‘(i) the cost of goods sold that are al6 locable to such receipts, and 

7 ‘‘(ii) other expenses, losses, or deduc8 tions which are properly allocable to such 

9 receipts. 

10 ‘‘(2) ALLOCATION METHOD.—The Secretary 

11 shall prescribe rules for the proper allocation of 

12 items described in paragraph (1)(B) for purposes of 

13 determining qualified medical and drug manufac14 turing income. Such rules shall provide for the prop15 er allocation of items whether or not such items are 

16 directly allocable to domestic medical and drug man17 ufacturing gross receipts. 

18 ‘‘(3) SPECIAL RULES FOR DETERMINING

19 COSTS.— 

20 ‘‘(A) IN GENERAL.—For purposes of deter21 mining costs under clause (i) of paragraph 

22 (1)(B), any item or service brought into the 

23 United States shall be treated as acquired by 

24 purchase, and its cost shall be treated as not 


pamtmann on DSKBC07HB2PROD with BILLS
5 

•HR 7767 IH

1 less than its value immediately after it entered 

2 the United States. 

3 ‘‘(B) EXPORTS FOR FURTHER MANUFAC4 TURE.—In the case of any property described 

5 in subparagraph (A) that had been exported by 

6 the taxpayer for further manufacture, the in7 crease in cost or adjusted basis under subpara8 graph (A) shall not exceed the difference be9 tween the value of the property when exported 

10 and the value of the property when brought 

11 back into the United States after the further 

12 manufacture. 

13 ‘‘(4) DOMESTIC MEDICAL AND DRUG MANUFAC14 TURING GROSS RECEIPTS.— 

15 ‘‘(A) IN GENERAL.—The term ‘domestic 

16 medical and drug manufacturing gross receipts’ 

17 means the gross receipts of the taxpayer which 

18 are derived from any sale, exchange, or other 

19 disposition of— 

20 ‘‘(i) any active pharmaceutical ingre21 dient, or 

22 ‘‘(ii) any qualified countermeasure, 

23 which was manufactured or produced by the 

24 taxpayer in whole or in significant part within 

25 the United States. 


pamtmann on DSKBC07HB2PROD with BILLS
6 

•HR 7767 IH

1 ‘‘(B) ACTIVE PHARMACEUTICAL INGRE2 DIENT.—The term ‘active pharmaceutical ingre3 dient’ means any substance or mixture of sub4 stances intended to be used in the manufacture 

5 of a drug product and (when so used) becomes 

6 an active ingredient in the drug product. 

7 ‘‘(C) QUALIFIED COUNTERMEASURE.—The 

8 term ‘qualified countermeasure’ has the mean9 ing given such term in section 319F–1(a)(2) of 

10 the Public Health Service Act (42 U.S.C. 

11 247d–6a(a)(2)).’’ 

12 ‘‘(D) PARTNERSHIPS OWNED BY EX13 PANDED AFFILIATED GROUPS.—For purposes 

14 of this paragraph, if all of the interests in the 

15 capital and profits of a partnership are owned 

16 by members of a single expanded affiliated 

17 group at all times during the taxable year of 

18 such partnership, the partnership and all mem19 bers of such group shall be treated as a single 

20 taxpayer during such period. 

21 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur22 poses of this section— 

23 ‘‘(1) APPLICATION OF SECTION TO PASS-THRU

24 ENTITIES.— 


pamtmann on DSKBC07HB2PROD with BILLS
7 

•HR 7767 IH

1 ‘‘(A) PARTNERSHIPS AND S CORPORA2 TIONS.—In the case of a partnership or S cor3 poration— 

4 ‘‘(i) this section shall be applied at the 

5 partner or shareholder level, 

6 ‘‘(ii) each partner or shareholder shall 

7 take into account such person’s allocable 

8 share of each item described in subpara9 graph (A) or (B) of subsection (c)(1) (de10 termined without regard to whether the 

11 items described in such subparagraph (A) 

12 exceed the items described in such sub13 paragraph (B)), and 

14 ‘‘(iii) each partner or shareholder 

15 shall be treated for purposes of subsection 

16 (b) as having W–2 wages for the taxable 

17 year in an amount equal to such person’s 

18 allocable share of the W–2 wages of the 

19 partnership or S corporation for the tax20 able year (as determined under regulations 

21 prescribed by the Secretary). 

22 ‘‘(B) TRUSTS AND ESTATES.—In the case 

23 of a trust or estate— 

24 ‘‘(i) the items referred to in subpara25 graph (A)(ii) (as determined therein) and 


pamtmann on DSKBC07HB2PROD with BILLS
8 

•HR 7767 IH

1 the W–2 wages of the trust or estate for 

2 the taxable year, shall be apportioned be3 tween the beneficiaries and the fiduciary 

4 (and among the beneficiaries) under regu5 lations prescribed by the Secretary, and 

6 ‘‘(ii) for purposes of paragraph (2), 

7 adjusted gross income of the trust or es8 tate shall be determined as provided in sec9 tion 67(e) with the adjustments described 

10 in such paragraph. 

11 ‘‘(C) REGULATIONS.—The Secretary may 

12 prescribe rules requiring or restricting the allo13 cation of items and wages under this paragraph 

14 and may prescribe such reporting requirements 

15 as the Secretary determines appropriate. 

16 ‘‘(2) APPLICATION TO INDIVIDUALS.—In the 

17 case of an individual, subsection (a)(2) shall be ap18 plied by substituting ‘adjusted gross income’ for 

19 ‘taxable income’. For purposes of the preceding sen20 tence, adjusted gross income shall be determined 

21 after application of sections 86, 135, 137, 219, 221, 

22 222, and 469. 

23 ‘‘(3) SPECIAL RULE FOR AFFILIATED

24 GROUPS.— 


pamtmann on DSKBC07HB2PROD with BILLS
9 

•HR 7767 IH

1 ‘‘(A) IN GENERAL.—All members of an ex2 panded affiliated group shall be treated as a 

3 single corporation for purposes of this section. 

4 ‘‘(B) EXPANDED AFFILIATED GROUP.— 

5 For purposes of this section, the term ‘ex6 panded affiliated group’ means an affiliated 

7 group as defined in section 1504(a), deter8 mined— 

9 ‘‘(i) by substituting ‘more than 50 

10 percent’ for ‘at least 80 percent’ each place 

11 it appears, and 

12 ‘‘(ii) without regard to paragraphs (2) 

13 and (4) of section 1504(b). 

14 ‘‘(C) ALLOCATION OF CREDIT.—Except as 

15 provided in regulations, the credit under sub16 section (a) shall be allocated among the mem17 bers of the expanded affiliated group in propor18 tion to each member’s respective amount (if 

19 any) of qualified medical and drug manufac20 turing income. 

21 ‘‘(4) TRADE OR BUSINESS REQUIREMENT.— 

22 This section shall be applied by only taking into ac23 count items which are attributable to the actual con24 duct of a trade or business. 


pamtmann on DSKBC07HB2PROD with BILLS
10 

•HR 7767 IH

1 ‘‘(5) COORDINATION WITH MINIMUM TAX.—For 

2 purposes of determining alternative minimum tax3 able income under section 55, qualified medical and 

4 drug manufacturing income shall be determined 

5 without regard to any adjustments under sections 56 

6 through 59. 

7 ‘‘(6) UNRELATED BUSINESS TAXABLE IN8 COME.—For purposes of determining the tax im9 posed by section 511, subsection (a)(1)(B) shall be 

10 applied by substituting ‘unrelated business taxable 

11 income’ for ‘taxable income’. 

12 ‘‘(7) REGULATIONS.—The Secretary shall pre13 scribe such regulations as are necessary to carry out 

14 the purposes of this section, including regulations 

15 which prevent more than 1 taxpayer from being al16 lowed a credit under this section with respect to any 

17 activity described in subsection (c)(4)(A).’’. 

18 (b) TREATMENT UNDER BASE EROSION TAX.—Sec19 tion 59A(b)(1)(B)(ii) of such Code is amended by striking 

20 ‘‘plus’’ at the end of subclause (I), by redesignating sub21 clause (II) as subclause (III), and by inserting after sub22 clause (I) the following new subclause: 

23 ‘‘(II) the credit allowed under 

24 section 38 for the taxable year which 

25 is properly allocable to the domestic 


pamtmann on DSKBC07HB2PROD with BILLS
11 

•HR 7767 IH

1 medical and drug manufacturing cred2 it determined under section 45U(a), 

3 plus’’. 

4 (c) PART OF GENERAL BUSINESS CREDIT.—Section 

5 38(b) of such Code is amended by striking ‘‘plus’’ at the 

6 end of paragraph (32), by striking the period at the end 

7 of paragraph (33) and inserting ‘‘, plus’’, and by adding 

8 at the end the following new paragraph: 

9 ‘‘(34) the domestic medical and drug manufac10 turing credit determined under section 45U(a).’’. 

11 (d) CREDIT ALLOWED AGAINST ALTERNATIVE MIN12 IMUM TAX.—Section 38(c)(4)(B) of such Code is amended 

13 by redesignating clauses (x) through (xii) as clauses (xi) 

14 through (xiii), respectively, and by inserting after clause 

15 (ix) the following new clause: 

16 ‘‘(x) the credit determined under sec17 tion 45U,’’. 

18 (e) CLERICAL AMENDMENT.—The table of sections 

19 for subpart D of part IV of subchapter A of chapter 1 

20 of such Code is amended by adding at the end the fol21 lowing new item: 

‘‘Sec. 45U. Domestic medical and drug manufacturing credit.’’. 

22 (f) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2020. 


pamtmann on DSKBC07HB2PROD with BILLS
12 

•HR 7767 IH

1 SEC. 2. QUALIFYING ADVANCED MEDICAL MANUFAC2 TURING EQUIPMENT CREDIT. 

3 (a) IN GENERAL.—Subpart E of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 is amended by adding at the end the following new 

6 section: 

7 ‘‘SEC. 48D. QUALIFYING ADVANCED MEDICAL MANUFAC8 TURING EQUIPMENT CREDIT. 

9 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

10 qualifying advanced medical manufacturing equipment 

11 credit determined under this section for any taxable year 

12 is the applicable percentage of the basis of any qualifying 

13 advanced medical manufacturing equipment placed in 

14 service during such taxable year. 

15 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

16 subsection (a), the applicable percentage is— 

17 ‘‘(1) 30 percent in the case of equipment which 

18 is placed in service before January 1, 2028, 

19 ‘‘(2) 20 percent in the case of equipment which 

20 is placed in service during calendar year 2028, 

21 ‘‘(3) 10 percent in the case of equipment which 

22 is placed in service during calendar year 2029, and 

23 ‘‘(4) 0 percent in the case of equipment which 

24 is placed in service after December 31, 2029. 

25 ‘‘(c) QUALIFYING ADVANCED MEDICAL MANUFAC26 TURING EQUIPMENT.—For purposes of this section, the 


pamtmann on DSKBC07HB2PROD with BILLS
13 

•HR 7767 IH

1 term ‘qualifying advanced medical manufacturing equip2 ment’ means property of a character subject to the allow3 ance for depreciation— 

4 ‘‘(1) which is machinery or equipment that is 

5 designed and used to manufacture a— 

6 ‘‘(A) drug (as such term is defined in sec7 tion 201(g)(1) of the Federal Food, Drug, and 

8 Cosmetic Act), 

9 ‘‘(B) device (as such term is defined in sec10 tion 201(h) of such Act), or 

11 ‘‘(C) biological product (as such term is 

12 defined in section 351(i) of the Public Health 

13 Service Act), 

14 ‘‘(2) which has been identified by the Secretary 

15 (after consultation with the Secretary of Health and 

16 Human Services) as machinery or equipment that— 

17 ‘‘(A) incorporates novel technology or uses 

18 an established technique or technology in a new 

19 or innovative way, or 

20 ‘‘(B) that can improve medical product 

21 quality, address shortages of medicines, and 

22 speed time-to-market, 

23 ‘‘(3) which is placed in service in the United 

24 States by the taxpayer, and 


pamtmann on DSKBC07HB2PROD with BILLS
14 

•HR 7767 IH

1 ‘‘(4) with respect to which depreciation is allow2 able. 

3 ‘‘(d) CERTAIN QUALIFIED PROGRESS EXPENDI4 TURES RULES MADE APPLICABLE.—Rules similar to the 

5 rules of subsections (c)(4) and (d) of section 46 (as in 

6 effect on the day before the enactment of the Revenue 

7 Reconciliation Act of 1990) shall apply for purposes of 

8 this section. 

9 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

10 such regulations or other guidance as may be necessary 

11 to carry out the purposes of this section, including regula12 tions which prevent abuse or fraud.’’. 

13 (b) TREATMENT UNDER BASE EROSION TAX.—Sec14 tion 59A(b)(1)(B)(ii) of such Code, as amended under sec15 tion 1 of this Act, is further amended by striking ‘‘plus’’ 

16 at the end of subclause (II), by redesignating subclause 

17 (III) as subclause (IV), and by inserting after subclause 

18 (II) the following new subclause: 

19 ‘‘(III) the credit allowed under 

20 section 46 for the taxable year which 

21 is properly allocable to the qualifying 

22 advanced medical manufacturing 

23 equipment credit determined under 

24 section 48D(a), plus’’. 


pamtmann on DSKBC07HB2PROD with BILLS
15 

•HR 7767 IH

1 (c) PART OF INVESTMENT CREDIT.—Section 46 of 

2 such Code is amended by striking ‘‘and’’ at the end of 

3 paragraph (5), by striking the period at the end of para4 graph (6) and inserting ‘‘, and’’, and by adding at the 

5 end the following new paragraph: 

6 ‘‘(7) the qualifying advanced medical manufac7 turing equipment credit.’’. 

8 (d) CLERICAL AMENDMENT.—The table of sections 

9 for subpart D of part IV of subchapter A of chapter 1 

10 of such Code is amended by adding at the end the fol11 lowing new item: 

‘‘Sec. 48D. Qualifying advanced medical manufacturing equipment credit.’’. 

12 (e) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to periods after the date of the 

14 enactment of this section under rules similar to the rules 

15 of section 48(m) of the Internal Revenue Code of 1986 

16 (as in effect on the date of the enactment fo the Revenue 

17 Reconciliation Act of 1990). 

Æ 


pamtmann on DSKBC07HB2PROD with BILLS