I 

109TH CONGRESS 

2D SESSION H. R. 5115 

To amend the Internal Revenue Code of 1986 to modernize the tax treatment 

of biomedical research corporations. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 6, 2006 

Ms. HART (for herself, Mr. ENGLISH of Pennsylvania, and Mr. WELLER) 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 modernize 

the tax treatment of biomedical research corporations. 

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

3 SECTION 1. SHORT TITLE. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘U.S. Healthcare Technologies Competitiveness Act of 

6 2006’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment 

10 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.— 

Sec. 1. Short title. 

TITLE I—PROVISIONS RELATING TO CORPORATE TAX 

INCENTIVES 

Sec. 101. Modify change of ownership rules. 

Sec. 102. Net operating losses under alternative minimum tax. 

Sec. 103. Research credit expansion. 

Sec. 104. Medical innovation tax credit. 

Sec. 105. Orphan drug credit expansion. 

Sec. 106. Countermeasures and pandemic flu research incentives. 

Sec. 107. Countermeasures equity tax credit. 

Sec. 108. Biotechnology science parks. 

Sec. 109. Expensing for qualified medical research equipment. 

TITLE II—PROVISIONS RELATING TO INVESTOR TAX INCENTIVES 

Sec. 201. Capital gains rollover. 

Sec. 202. Treatment of ordinary losses. 

Sec. 203. Equity credit for incubational firms. 

Sec. 204. Modification of passive loss rules. 

Sec. 205. Modification of subchapter S rules. 

Sec. 206. Treatment of bonds for biomedical research facilities as exempt facility bonds. 

Sec. 207. Incentives for biotechnology zones. 

4 TITLE I—PROVISIONS RELATING 

5 TO CORPORATE TAX INCEN6 TIVES 

7 SEC. 101. MODIFY CHANGE OF OWNERSHIP RULES. 

8 (a) IN GENERAL.—Subsection (l) of section 382 is 

9 amended by adding at the end the following new para10 graph: 

11 ‘‘(9) CERTAIN FINANCING TRANSACTIONS OF

12 BIOMEDICAL RESEARCH CORPORATIONS.— 

13 ‘‘(A) GENERAL RULE.—In the case of a 

14 biomedical research corporation, any owner 


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1 shift involving a 5-percent shareholder which 

2 occurs as the result of a qualified investment or 

3 qualified transaction during the testing period 

4 shall be treated for purposes of this section 

5 (other than this paragraph) as occurring before 

6 the testing period. 

7 ‘‘(B) BIOMEDICAL RESEARCH CORPORA8 TION.—For purposes of this paragraph, the 

9 term ‘biomedical research corporation’ means, 

10 with respect to any qualified investment, any 

11 domestic corporation subject to tax under this 

12 subchapter which is not in bankruptcy and 

13 which, as of the time of the closing on such in14 vestment— 

15 ‘‘(i) holds the rights to a drug or bio16 logic for which an investigational new drug 

17 application is in effect under section 505 

18 of the Federal Food, Drug, and Cosmetic 

19 Act, or holds the rights to a device for 

20 which an investigational device exemption 

21 is approved under section 520(g) of such 

22 Act, and 

23 ‘‘(ii) certifies that, as of the time of 

24 such closing, the drug, biologic, or device 

25 is, or in the 6 month period beginning 3 


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1 months before such closing has been, 

2 under study pursuant to an investigational 

3 use exemption under section 505(i) or sec4 tion 520(g) of the Federal Food, Drug, 

5 and Cosmetic Act. 

6 ‘‘(C) QUALIFIED INVESTMENT.—For pur7 poses of this paragraph, the term ‘qualified in8 vestment’ means any acquisition of stock by a 

9 shareholder (who after such acquisition is a less 

10 than 50 percent shareholder) in a biomedical 

11 research corporation if such stock is acquired at 

12 its original issue (directly or through an under13 writer) solely in exchange for cash. 

14 ‘‘(D) QUALIFIED TRANSACTION.—For pur15 poses of this paragraph, the term ‘qualified 

16 transaction’ means any acquisition of stock in a 

17 biomedical research corporation if such stock is 

18 acquired as part of a merger or acquisition by 

19 another biomedical research corporation that is 

20 a loss corporation. If the acquiring loss corpora21 tion is a member of a controlled group of cor22 porations under section 1563(a), the group 

23 must be a loss group. 

24 ‘‘(E) STOCK ISSUED IN EXCHANGE FOR

25 CONVERTIBLE DEBT.—For purposes of this 


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1 paragraph, stock issued by a biomedical re2 search corporation in exchange for its convert3 ible debt (or stock deemed under this section to 

4 be so issued) shall be treated as stock acquired 

5 by the debt holder at its original issue and sole6 ly in exchange for cash if the debt holder pre7 viously acquired the convertible debt at its 

8 original issue and solely in exchange for cash. 

9 In the case of an acquisition of stock in ex10 change for convertible debt, the requirements of 

11 this paragraph shall be applied separately as of 

12 the time of closing on the investment in con13 vertible debt, and as of the time of actual con14 version (or deemed conversion under this sec15 tion) of the convertible debt for stock. 

16 ‘‘(F) BIOMEDICAL RESEARCH CORPORA17 TION MUST MEET 3-YEAR EXPENDITURE AND

18 CONTINUITY OF BUSINESS TESTS WITH RE19 SPECT TO ANY QUALIFIED INVESTMENT.— 

20 ‘‘(i) IN GENERAL.—This paragraph 

21 shall not apply to a qualified investment or 

22 transaction in a biomedical research cor23 poration unless such corporation meets the 

24 expenditure test for each year of the measVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 uring period and the continuity of business 

2 test. 

3 ‘‘(ii) MEASURING PERIOD.—For pur4 poses of this subparagraph, the term 

5 ‘measuring period’ means, with respect to 

6 any qualified investment or transaction, 

7 the taxable year of the biomedical research 

8 corporation in which the closing on the in9 vestment occurs, and the 2 preceding tax10 able years. 

11 ‘‘(iii) EXPENDITURE TEST.—A bio12 medical research corporation meets the ex13 penditure test of this subparagraph for a 

14 taxable year if at least 35 percent of its ex15 penditures for the taxable year (including, 

16 for purposes of this clause, payments in re17 demption of its stock) are expenditures de18 scribed in section 41(b) or clinical and pre19 clinical expenses. 

20 ‘‘(iv) CONTINUITY OF BUSINESS

21 TEST.—A biomedical research corporation 

22 meets the continuity of business test if, at 

23 all times during the 2-year period following 

24 a qualified investment or transaction, such 


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1 corporation continues the business enter2 prise of such corporation. 

3 ‘‘(G) EFFECT OF CORPORATE REDEMP4 TIONS ON QUALIFIED INVESTMENTS.—Rules 

5 similar to the rules of section 1202(c)(3) shall 

6 apply to qualified investments under this para7 graph except that ‘stock acquired in a qualified 

8 investment’ shall be substituted for ‘qualified 

9 small business stock’ each place it appears 

10 therein. 

11 ‘‘(H) EFFECT OF OTHER TRANSACTIONS

12 BETWEEN BIOMEDICAL RESEARCH CORPORA13 TIONS AND INVESTORS MAKING QUALIFIED IN14 VESTMENTS.— 

15 ‘‘(i) IN GENERAL.—If, during the 2- 

16 year period beginning 1 year before any 

17 qualified investment, the biomedical re18 search corporation engages in another 

19 transaction with a member of its qualified 

20 investment group and such biomedical re21 search corporation receives any consider22 ation other than cash in such transaction, 

23 there shall be a presumption that stock re24 ceived in the otherwise qualified investment 


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1 transaction was not received solely in ex2 change for cash. 

3 ‘‘(ii) QUALIFIED INVESTMENT

4 GROUP.—For purposes of this subpara5 graph, the term ‘qualified investment 

6 group’ means, with respect to any qualified 

7 investment, one or more persons who re8 ceive stock issued in exchange for the 

9 qualified investment, and any person re10 lated to such persons within the meaning 

11 of section 267(b) or section 707(b). 

12 ‘‘(iii) REGULATIONS.—The Secretary 

13 may promulgate regulations exempting 

14 from this subparagraph transactions which 

15 are customary in the bioscience research 

16 industry and are of minor value relative to 

17 the amount of the qualified investment. 

18 The Secretary may issue such regulations 

19 as may be appropriate to achieve the pur20 poses of this paragraph to prevent abuse 

21 and to provide for treatment of biomedical 

22 research corporations under sections 383 

23 and 384 that is consistent with the pur24 poses of this paragraph.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2006. 

4 SEC. 102. NET OPERATING LOSSES UNDER ALTERNATIVE 

5 MINIMUM TAX. 

6 (a) IN GENERAL.—Section 56(d)(1) (defining alter7 native tax net operating loss deduction) is amended by 

8 striking ‘‘and’’ at the end of subparagraph (A), by striking 

9 the period at the end of subparagraph (B) and inserting 

10 ‘‘, and’’, and by adding at the end the following new sub11 paragraph: 

12 ‘‘(C) in the case of biomedical research 

13 corporations (as defined in section 

14 382(l)(9)(B)), the amount of such deduction 

15 shall not exceed the alternative minimum tax16 able income determined without regard to such 

17 deduction.’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 this section shall apply to taxable years beginning after 

20 December 31, 2006. 

21 SEC. 103. RESEARCH CREDIT EXPANSION. 

22 (a) PERMANENT EXTENSION OF RESEARCH CRED23 IT.— 


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1 (1) IN GENERAL.—Section 41 (relating to cred2 it for increasing research activities) is amended by 

3 striking subsection (h). 

4 (2) CONFORMING AMENDMENT.—Paragraph (1) 

5 of section 45C(b) is amended by striking subpara6 graph (D). 

7 (3) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to amounts paid or in9 curred after the date of the enactment of this Act. 

10 (b) INCREASE IN RATES OF ALTERNATIVE INCRE11 MENTAL CREDIT.—Subparagraph (a) of section 41(c)(4) 

12 (relating to election of alternative incremental credit) is 

13 amended— 

14 (1) in clause (i) by striking ‘‘2.65 percent’’ and 

15 inserting ‘‘3 percent’’, 

16 (2) in clause (ii) by striking ‘‘3.2 percent’’ and 

17 inserting ‘‘4 percent’’, and 

18 (3) in clause (iii) by striking ‘‘3.75 percent’’ 

19 and inserting ‘‘5 percent’’. 

20 (c) ALTERNATIVE SIMPLIFIED CREDIT FOR QUALI21 FIED RESEARCH EXPENSES.— 

22 (1) IN GENERAL.—Subsection (c) of section 41 

23 (relating to base amount) is amended by redesig24 nating paragraphs (5) and (6) as paragraphs (6) 


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1 and (7), respectively, and by inserting after para2 graph (4) the following new paragraph: 

3 ‘‘(5) ELECTION OF ALTERNATIVE SIMPLIFIED

4 CREDIT.— 

5 ‘‘(A) IN GENERAL.—At the election of the 

6 taxpayer, the credit determined under sub7 section (a)(1) shall be equal to 12 percent of so 

8 much of the qualified research expenses for the 

9 taxable year as exceeds 50 percent of the aver10 age qualified research expenses for the 3 tax11 able years preceding the taxable year for which 

12 the credit is being determined. 

13 ‘‘(B) SPECIAL RULE IN CASE OF NO

14 QUALIFIED RESEARCH EXPENSES IN ANY OF 3

15 PRECEDING TAXABLE YEARS.— 

16 ‘‘(i) TAXPAYERS TO WHICH SUBPARA17 GRAPH APPLIES.—The credit under this 

18 paragraph shall be determined under this 

19 subparagraph if the taxpayer does not have 

20 qualified research expenses in any 1 of the 

21 3 taxable years preceding the taxable year 

22 for which the credit is being determined. 

23 ‘‘(ii) CREDIT RATE.—The credit de24 termined under this subparagraph shall be 


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1 equal to 6 percent of the qualified research 

2 expenses for the taxable year. 

3 ‘‘(C) ELECTION.—An election under this 

4 paragraph shall apply to the taxable year for 

5 which made and all succeeding taxable years 

6 unless revoked with the consent of the Sec7 retary. An election under this paragraph may 

8 not be made for any taxable year to which an 

9 election under paragraph (4) applies.’’. 

10 (2) COORDINATION WITH ELECTION OF ALTER11 NATIVE INCREMENTAL CREDIT.—Section 

12 41(c)(4)(B) (relating to election) is amended by add13 ing at the end the following: ‘‘An election under this 

14 paragraph may not be made for any taxable year to 

15 which an election under paragraph (5) applies.’’. 

16 (d) CONTRACT RESEARCH EXPENSES.—Subpara17 graph (D) of section 41(b)(3) (relating to contract re18 search expenses) is amended— 

19 (1) in the heading by inserting ‘‘BIOMEDICAL

20 RESEARCH CORPORATIONS,’’ after ‘‘ELIGIBLE SMALL

21 BUSINESSES,’’, and 

22 (2) in clause (i) by redesignating subclauses 

23 (II) and (III) as subclauses (III) and (IV) respec24 tively, and by inserting after subclause (I) the fol25 lowing new subclause: 


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1 ‘‘(II) a biomedical research cor2 poration (as defined in section 

3 382(l)(9)(B)),’’. 

4 (e) BASIC RESEARCH EXPENSES OF QUALIFYING

5 BIOMEDICAL RESEARCH CORPORATION.—Section 

6 41(e)(3) is amended is amended to read as follows: 

7 ‘‘(3) QUALIFIED ORGANIZATION BASE PERIOD

8 AMOUNT.—For purposes of this subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 organization base period amount’ means an 

11 amount equal to the sum of— 

12 ‘‘(i) the minimum basic research 

13 amount, plus 

14 ‘‘(ii) the maintenance-of-effort 

15 amount. 

16 ‘‘(B) BIOMEDICAL RESEARCH CORPORA17 TION.—In the case of a biomedical research 

18 corporation, the qualified organization base pe19 riod amount is zero.’’. 

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

21 this section shall apply to taxable years beginning after 

22 December, 31, 2006. 

23 SEC. 104. MEDICAL INNOVATION TAX CREDIT. 

24 (a) IN GENERAL.—Subpart D of part IV of sub25 chapter A of chapter 1 (relating to business related credVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 its) is amended by inserting after section 41 the following 

2 new section: 

3 ‘‘SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES. 

4 ‘‘(a) GENERAL RULE.— For purposes of section 38, 

5 the medical innovation credit determined under this sec6 tion for the taxable year shall be an amount equal to 40 

7 percent of the excess (if any) of— 

8 ‘‘(1) the qualified medical innovation expenses 

9 for the taxable year, over 

10 ‘‘(2) the medical innovation base period 

11 amount. 

12 ‘‘(b) QUALIFIED MEDICAL INNOVATION EX13 PENSES.—For purposes of this section— 

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

15 innovation expenses’ means the amounts paid or in16 curred by the taxpayer during the taxable year di17 rectly or indirectly to any qualified academic institu18 tion for clinical testing research activities. 

19 ‘‘(2) CLINICAL TESTING RESEARCH ACTIVI20 TIES.— 

21 ‘‘(A) IN GENERAL.—The term ‘clinical 

22 testing research activities’ means human clinical 

23 testing conducted at any qualified academic in24 stitution in the development of any product, 

25 which occurs before— 


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1 ‘‘(i) the date on which an application 

2 with respect to such product is approved 

3 under section 505(b), 506, or 507 of the 

4 Federal Food, Drug, and Cosmetic Act, 

5 ‘‘(ii) the date on which a license for 

6 such product is issued under section 351 of 

7 the Public Health Service Act, or 

8 ‘‘(iii) the date on which classification 

9 or approval of such product which is a de10 vice intended for human use is given under 

11 section 513, 514, or 515 of the Federal 

12 Food, Drug, and Cosmetic Act. 

13 ‘‘(B) PRODUCT.—The term ‘product’ 

14 means any drug, biologic, or medical device. 

15 ‘‘(3) QUALIFIED ACADEMIC INSTITUTION.—The 

16 term ‘qualified academic institution’ means any of 

17 the following institutions: 

18 ‘‘(A) EDUCATIONAL INSTITUTION.—An or19 ganization described in section 170(b)(1)(A)(iii) 

20 which is owned or affiliated with an institution 

21 of higher education as described in section 

22 3304(f). 

23 ‘‘(B) TEACHING HOSPITAL.—A teaching 

24 hospital which— 


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1 ‘‘(i) is publicly supported or owned by 

2 an organization described in section 

3 501(c)(3), and 

4 ‘‘(ii) is affiliated with an organization 

5 meeting the requirements of subparagraph 

6 (A). 

7 ‘‘(C) FOUNDATION.—A medical research 

8 organization described in section 501(c)(3) 

9 (other than a private foundation) which is affili10 ated with, or owned by— 

11 ‘‘(i) an organization meeting the re12 quirements of subparagraph (A), or 

13 ‘‘(ii) a teaching hospital meeting the 

14 requirements of subparagraph (B). 

15 ‘‘(D) CHARITABLE RESEARCH HOS16 PITAL.—A hospital that is designated as a can17 cer center by the National Cancer Institute. 

18 ‘‘(4) EXCLUSION FOR AMOUNTS FUNDED BY

19 GRANTS, ETC.—The term ‘qualified medical innova20 tion expenses’ shall not include any amount to the 

21 extent such amount is funded by any grant, con22 tract, or otherwise by another person (or any gov23 ernmental entity). 

24 ‘‘(c) MEDICAL INNOVATION BASE PERIOD

25 AMOUNT.—For purposes of this section, the term ‘medical 


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1 innovation base period amount’ means the average annual 

2 qualified medical innovation expenses paid by the taxpayer 

3 during the 3-taxable year period ending with the taxable 

4 year immediately preceding the first taxable year of the 

5 taxpayer beginning after December 31, 2006. 

6 ‘‘(d) SPECIAL RULES.— 

7 ‘‘(1) LIMITATION ON FOREIGN TESTING.—No 

8 credit shall be allowed under this section with re9 spect to any clinical testing research activities con10 ducted outside the United States. 

11 ‘‘(2) CERTAIN RULES MADE APPLICABLE.— 

12 Rules similar to the rules of subsections (f) and (g) 

13 of section 41 shall apply for purposes of this section. 

14 ‘‘(3) ELECTION.—This section shall apply to 

15 any taxpayer for any taxable year only if such tax16 payer elects to have this section apply for such tax17 able year. 

18 ‘‘(4) COORDINATION WITH CREDIT FOR IN19 CREASING RESEARCH EXPENDITURES AND WITH

20 CREDIT FOR CLINICAL TESTING EXPENSES FOR CER21 TAIN DRUGS FOR RARE DISEASES.—Any qualified 

22 medical innovation expense for a taxable year to 

23 which an election under this section applies shall not 

24 be taken into account for purposes of determining 


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1 the credit allowable under section 41 or 45C for 

2 such taxable year.’’. 

3 (b) CREDIT TO BE PART OF GENERAL BUSINESS

4 CREDIT.— 

5 (1) IN GENERAL.—Section 38(b) (relating to 

6 current year business credits) is amended by striking 

7 ‘‘and’’ at the end of paragraph (29), by striking the 

8 period at the end of paragraph (30) and inserting ‘‘, 

9 and’’, and by adding at the end the following new 

10 paragraph: 

11 ‘‘(31) the medical innovation credit determined 

12 under section 41A(a).’’. 

13 (2) TRANSITION RULE.—Section 39(d) is 

14 amended by adding at the end the following new 

15 paragraph: 

16 ‘‘(9) NO CARRYBACK OF SECTION 41A CREDIT

17 BEFORE ENACTMENT.—No portion of the unused 

18 business credit for any taxable year which is attrib19 utable to the medical innovation credit determined 

20 under section 41A may be carried back to a taxable 

21 year beginning before January 1, 2007.’’. 

22 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C is 

23 amended by adding at the end the following new sub24 section: 

25 ‘‘(e) MEDICAL INNOVATION CREDIT.— 


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1 ‘‘(1) IN GENERAL.—No deduction shall be al2 lowed for that portion of the qualified medical inno3 vation expenses (as defined in section 41A(b)) other4 wise allowable as a deduction for the taxable year 

5 which is equal to the amount of the credit deter6 mined for such taxable year under section 41A(a). 

7 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar 

8 to the rules of paragraphs (2), (3), and (4) of sub9 section (c) shall apply for purposes of this sub10 section.’’. 

11 (d) DEDUCTION FOR UNUSED PORTION OF CRED12 IT.—Section 196(c) (defining qualified business credits) is 

13 amended by striking ‘‘and’’ at the end of paragraph (12), 

14 by striking the period at the end of paragraph (13) and 

15 inserting ‘‘, and’’, and by inserting after paragraph (13) 

16 the following new paragraph: 

17 ‘‘(14) the medical innovation credit determined 

18 under section 41A(a).’’. 

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

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

21 is amended by adding after the item relating to section 

22 41 the following new item: 

‘‘Sec. 41A. Credit for medical innovation expenses.’’. 

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

24 this section shall apply to taxable years beginning after 

25 December 31, 2006. 


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1 SEC. 105. ORPHAN DRUG CREDIT EXPANSION. 

2 (a) IN GENERAL.—Subclause (I) of section 

3 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is 

4 amended to read as follows: 

5 ‘‘(I) after the date that the application is 

6 filed for designation under such section 526 of 

7 such Act, and’’. 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to amounts paid or incurred in tax10 able years beginning after December 31, 2006. 

11 SEC. 106. COUNTERMEASURES AND PANDEMIC FLU RE12 SEARCH INCENTIVES. 

13 (a) ELECTION OF FEDERAL TAX INCENTIVE RE14 GIME.— 

15 (1) IN GENERAL.—A biomedical research cor16 poration (as defined in section 382(l)(9)(B) of the 

17 Internal Revenue Code of 1986) may elect to apply 

18 the tax incentive described in subparagraph (A), 

19 (B), or (C) for a taxable year, but such biomedical 

20 research corporation may not elect to apply more 

21 than one such tax incentive for such taxable year. 

22 (A) RESEARCH AND DEVELOPMENT LIM23 ITED PARTNERSHIPS TO FUND COUNTER24 MEASURE RESEARCH.— 

25 (i) IN GENERAL.—A biomedical re26 search corporation that elects the tax inVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 centive described in this subparagraph may 

2 establish a limited partnership organized 

3 primarily for research related to covered 

4 countermeasures, but only if such corpora5 tion is a qualified small business as deter6 mined under section 1202(d) of the Inter7 nal Revenue Code of 1986, by substituting 

8 ‘‘$750,000,000’’ for ‘‘$50,000,000’’ each 

9 place it appears. For purposes of this sub10 paragraph, section 469 of such Code shall 

11 not apply with respect to a limited partner12 ship established under this subparagraph. 

13 (ii) COVERED COUNTERMEASURE.— 

14 The term ‘‘covered countermeasure’’ has 

15 the meaning given such term in division C 

16 of the Department of Defense, Emergency 

17 Supplemental Appropriations to Address 

18 Hurricanes in the Gulf of Mexico, and 

19 Pandemic Influenza Act, 2006. 

20 (B) CAPITAL GAINS EXCLUSION FOR IN21 VESTORS TO FUND COUNTERMEASURE RE22 SEARCH.—A biomedical research corporation 

23 that elects the tax incentive described in this 

24 subparagraph may issue a class of stock for re25 search related to covered countermeasures (as 


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1 defined in subparagraph (A)(ii)) under section 

2 1202 of the Internal Revenue Code of 1986 

3 with the following modifications: 

4 (i) INCREASED EXCLUSION FOR NON5 CORPORATE TAXPAYERS.—Subsection (a) 

6 of section 1202 of such Code shall be ap7 plied by substituting ‘‘100 percent’’ for 

8 ‘‘50 percent’’. 

9 (ii) APPLICATION TO CORPORATE TAX10 PAYERS.—Subsection (a) of section 1202 

11 of such Code shall be applied without re12 gard to the phrase ‘‘other than a corpora13 tion’’. 

14 (iii) REDUCTION IN HOLDING PE15 RIOD.—Subsection (a) of section 1202 of 

16 such Code shall be applied by substituting 

17 ‘‘3 years’’ for ‘‘5 years’’. 

18 (iv) NONAPPLICATION OF PER-ISSUER

19 LIMITATION.—Section 1202 of such Code 

20 shall be applied without regard to sub21 section (b) (relating to per-issuer limita22 tions on taxpayer’s eligible gain). 

23 (v) STOCK OF LARGER BUSINESSES

24 ELIGIBLE FOR EXCLUSION.—Paragraph 

25 (1) of section 1202(d) of such Code (definVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 ing qualified small business) shall be ap2 plied by substituting ‘‘$750,000,000’’ for 

3 ‘‘$50,000,000’’ each place it appears. 

4 (vi) MODIFICATION OF WORKING CAP5 ITAL LIMITATION.—Section 1202(e)(6) of 

6 such Code shall be applied— 

7 (I) in subparagraph (B), by sub8 stituting ‘‘5 years’’ for ‘‘2 years’’, and 

9 (II) without regard to the last 

10 sentence. 

11 (vii) NONAPPLICATION OF MINIMUM

12 TAX PREFERENCE.—Section 57(a) of such 

13 Code (relating to general rule for items of 

14 tax preference) shall be applied without re15 gard to paragraph (7). 

16 (C) TAX CREDIT TO FUND COUNTER17 MEASURE RESEARCH.—A biomedical research 

18 corporation that elects the tax incentive de19 scribed in this subparagraph may elect to apply 

20 the tax credit described in subsection (b). 

21 (2) REPORTING.—Each biomedical research 

22 corporation shall submit to the Secretary of the 

23 Treasury such information regarding its election of 

24 a tax incentive under this section as the Secretary 

25 determines necessary. 


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1 (b) TAX CREDIT TO FUND COUNTERMEASURE RE2 SEARCH.— 

3 (1) IN GENERAL.—Subpart D of part IV of 

4 subchapter A of chapter 1 (relating to business re5 lated credits) is amended by adding at the end the 

6 following new section: 

7 ‘‘SEC. 45N. CREDIT FOR MEDICAL RESEARCH RELATED TO 

8 DEVELOPING COUNTERMEASURES. 

9 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

10 in the case of a biomedical research corporation that 

11 makes an election, pursuant to section 106(a) of the U.S. 

12 Healthcare Technologies Competitiveness Act of 2006, to 

13 have this section apply, the countermeasures research 

14 credit determined under this section for the taxable year 

15 is an amount equal to 35 percent of the eligible counter16 measures research expenses for the taxable year. 

17 ‘‘(b) ELIGIBLE COUNTERMEASURES RESEARCH EX18 PENSES.—For purposes of this section— 

19 ‘‘(1) ELIGIBLE COUNTERMEASURES RESEARCH

20 EXPENSES.— 

21 ‘‘(A) IN GENERAL.—Except as otherwise 

22 provided in this paragraph, the term ‘eligible 

23 countermeasures research expenses’ means 

24 amounts paid or incurred by the taxpayer dur25 ing the taxable year for research, including preVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 clinical research and animal model development, 

2 which would be described in subsection (b) of 

3 section 41 if such subsection were applied with 

4 the modifications set forth in subparagraph (B) 

5 of this paragraph and that the Secretary of 

6 Health and Human Services determines has 

7 significant potential to lead to the development 

8 of a covered countermeasure. 

9 ‘‘(B) MODIFICATIONS; INCREASED INCEN10 TIVE FOR CONTRACT RESEARCH PAYMENTS.— 

11 For purposes of subparagraph (A), subsection 

12 (b) of section 41 shall be applied— 

13 ‘‘(i) by substituting ‘eligible counter14 measures research’ for ‘qualified research’ 

15 each place it appears in paragraphs (2) 

16 and (3) of such subsection, and 

17 ‘‘(ii) by substituting ‘100 percent’ for 

18 ‘65 percent’ in paragraph (3)(A) of such 

19 subsection. 

20 ‘‘(C) EXCLUSION FOR AMOUNTS FUNDED

21 BY GRANTS, ETC.—The term ‘eligible counter22 measures research expenses’ shall not include 

23 any amount to the extent such amount is fund24 ed by any grant, contract, or otherwise by an25 other person (or any governmental entity). 


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1 ‘‘(2) COVERED COUNTERMEASURE.—The term 

2 ‘covered countermeasure’ has the meaning given 

3 such term in division C of the Department of De4 fense, Emergency Supplemental Appropriations to 

5 Address Hurricanes in the Gulf of Mexico, and Pan6 demic Influenza Act, 2006. 

7 ‘‘(c) COORDINATION WITH CREDIT FOR INCREASING

8 RESEARCH EXPENDITURES.— 

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), any eligible countermeasures research ex11 penses for a taxable year shall not be taken into ac12 count for purposes of determining the credit allow13 able under section 41 for such taxable year. 

14 ‘‘(2) EXPENSES INCLUDED IN DETERMINING

15 BASE PERIOD RESEARCH EXPENSES.—Any eligible 

16 countermeasures research expenses for any taxable 

17 year which are qualified research expenses (within 

18 the meaning of section 41(b)) shall be taken into ac19 count in determining base period research expenses 

20 for purposes of applying section 41 to subsequent 

21 taxable years. 

22 ‘‘(d) COORDINATION WITH CREDIT FOR CLINICAL

23 TESTING EXPENSES FOR CERTAIN DRUGS FOR RARE

24 DISEASES.—Any eligible countermeasures research ex25 pense for a taxable year shall not be taken into account 


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1 for purposes of determining the credit allowable under sec2 tion 45C for such taxable year. 

3 ‘‘(e) CERTAIN RULES MADE APPLICABLE.—Rules 

4 similar to the rules of paragraphs (1) and (2) of section 

5 41(f) shall apply for purposes of this section.’’. 

6 (2) INCLUSION IN GENERAL BUSINESS CRED7 IT.—Section 38(b) (as amended by this Act) is fur8 ther amended by striking ‘‘and’’ at the end of para9 graph (30), by striking the period at the end of 

10 paragraph (31) and inserting ‘‘, and’’, and by add11 ing at the end the following new paragraph: 

12 ‘‘(32) the countermeasures research credit de13 termined under section 45N.’’. 

14 (3) DENIAL OF DOUBLE BENEFIT.—Section 

15 280C (as amended by this Act) is further amended 

16 by adding at the end the following new subsection: 

17 ‘‘(f) CREDIT FOR ELIGIBLE COUNTERMEASURES RE18 SEARCH EXPENSES.— 

19 ‘‘(1) IN GENERAL.—No deduction shall be al20 lowed for that portion of the eligible counter21 measures research expenses (as defined in section 

22 45N(b)) otherwise allowable as a deduction for the 

23 taxable year which is equal to the amount of the 

24 credit determined for such taxable year under sec25 tion 45N(a). 


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1 ‘‘(2) CERTAIN RULES TO APPLY.—Rules similar 

2 to the rules of paragraphs (2), (3), and (4) of sub3 section (c) shall apply for purposes of this sub4 section.’’. 

5 (4) DEDUCTION FOR UNUSED PORTION OF

6 CREDIT.—Section 196(c) (as amended by this Act) 

7 is further amended by striking ‘‘and’’ at the end of 

8 paragraph (13), by striking the period at the end of 

9 paragraph (14) and inserting ‘‘, and’’, and by add10 ing at the end the following new paragraph: 

11 ‘‘(15) the countermeasures research credit de12 termined under section 45N(a).’’. 

13 (5) TECHNICAL AMENDMENT.—The table of 

14 sections for subpart D of part IV of subchapter A 

15 of chapter 1 is amended by adding at the end the 

16 following new item: 

‘‘Sec. 45N. Credit for medical research related to developing countermeasures.’’. 

17 SEC. 107. COUNTERMEASURES EQUITY TAX CREDIT. 

18 (a) IN GENERAL.—Subpart D of part IV of sub19 chapter A of chapter 1 (as amended by this Act) is further 

20 amended by adding at the end the following new section: 

21 ‘‘SEC. 45O. COUNTERMEASURES EQUITY TAX CREDIT. 

22 ‘‘(a) ALLOWANCE OF CREDIT.— 

23 ‘‘(1) GENERAL RULE.—For purposes of section 

24 38, in the case of a taxpayer who holds a qualified 

25 countermeasures equity investment on a credit allowVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 ance date of such investment which occurs during 

2 the taxable year, the countermeasures equity tax 

3 credit determined under this section for such taxable 

4 year is an amount equal to the applicable percentage 

5 of the amount paid to the qualified countermeasures 

6 company solely in exchange for its stock at original 

7 issue. 

8 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

9 of paragraph (1), the applicable percentage is 40 

10 percent. 

11 ‘‘(3) CREDIT ALLOWANCE DATE.—For purposes 

12 of paragraph (1), the term ‘credit allowance date’ 

13 means, with respect to any qualified counter14 measures equity investment— 

15 ‘‘(A) the date on which such investment is 

16 initially made, and 

17 ‘‘(B) each of the 3 subsequent anniversary 

18 dates of such date. 

19 ‘‘(b) QUALIFIED COUNTERMEASURES EQUITY IN20 VESTMENT.—For purposes of this section— 

21 ‘‘(1) IN GENERAL.—The term ‘qualified coun22 termeasures equity investment’ means any equity in23 vestment in a qualified countermeasures company 

24 if— 


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1 ‘‘(A) such investment is acquired by the 

2 taxpayer at its original issue (directly or 

3 through an underwriter) solely in exchange for 

4 cash, 

‘‘(B) not less than 1 5 ⁄2 of such cash is used 

6 by the qualified countermeasures company with 

7 respect to research on covered countermeasures, 

8 and 

9 ‘‘(C) such investment is designated for 

10 purposes of this section by the qualified coun11 termeasures company. 

12 Such term shall not include any equity investment 

13 issued by a qualified countermeasures company more 

14 than 5 years after the date that such company re15 ceives an allocation under subsection (d). Any alloca16 tion not used within such 5-year period may be re17 allocated by the Secretary under subsection (d). 

18 ‘‘(2) LIMITATION.—The maximum amount of 

19 equity investments issued by a qualified counter20 measures company which may be designated under 

21 paragraph (1)(C) by such company shall not exceed 

22 the portion of the limitation amount allocated under 

23 subsection (d) to such company. 

24 ‘‘(3) TREATMENT OF SUBSEQUENT PUR25 CHASERS.—The term ‘qualified equity investment’ 


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1 includes any equity investment which would (but for 

2 paragraph (1)(A)) be a qualified equity investment 

3 in the hands of the taxpayer if such investment was 

4 a qualified equity investment in the hands of a prior 

5 holder. 

6 ‘‘(4) REDEMPTIONS.—A rule similar to the rule 

7 of section 1202(c)(3) shall apply for purposes of this 

8 subsection. 

9 ‘‘(5) EQUITY INVESTMENT.—The term ‘equity 

10 investment’ means any stock (other than non11 qualified preferred stock as defined in section 

12 351(g)(2)) in an entity which is a corporation. 

13 ‘‘(c) QUALIFIED COUNTERMEASURES COMPANY.— 

14 For purposes of this section— 

15 ‘‘(1) IN GENERAL.—The term ‘qualified coun16 termeasures company’ means any domestic bio17 medical research corporation (as defined in section 

18 328(l)(9)(B)) that the Secretary of Health and 

19 Human Services determines has significant potential 

20 to lead to the development of a covered counter21 measure. 

22 ‘‘(2) COVERED COUNTERMEASURE.—The term 

23 ‘covered countermeasure’ has the meaning given 

24 such term in division C of the Department of De25 fense, Emergency Supplemental Appropriations to 


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1 Address Hurricanes in the Gulf of Mexico, and Pan2 demic Influenza Act, 2006. 

3 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF INVEST4 MENTS DESIGNATED.— 

5 ‘‘(1) IN GENERAL.—There is a qualified coun6 termeasures equity tax credit limitation of 

7 $150,000,000 for each taxable year. 

8 ‘‘(2) ALLOCATION OF LIMITATION.—The limita9 tion under paragraph (1) shall be allocated by the 

10 Secretary among qualified countermeasures compa11 nies selected by the Secretary. In making allocations 

12 under the preceding sentence, the Secretary shall 

13 give priority to the extent to which it is reasonably 

14 anticipated that a qualified countermeasures com15 pany would have insufficient taxable income and tax 

16 liability to utilize research tax credits and other tax 

17 incentives provided by section 106 of the U.S. 

18 Healthcare Technologies Competitiveness Act of 

19 2006. 

20 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 

21 the qualified countermeasures equity tax credit limi22 tation for any taxable year exceeds the aggregate 

23 amount allocated under paragraph (2) for such year, 

24 such limitation for the succeeding taxable year shall 

25 be increased by the amount of such excess. 


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1 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—With respect to 

2 a qualified countermeasures equity investment in a quali3 fied countermeasures company, the countermeasures eq4 uity tax credit described in subsection (a) shall not apply 

5 in the case of a taxable year in which such qualified coun6 termeasures company elects to apply a tax incentive de7 scribed in section 106 of the U.S. Healthcare Technologies 

8 Competitiveness Act of 2006. 

9 ‘‘(f) RECAPTURE OF CREDIT IN CERTAIN CASES.— 

10 ‘‘(1) IN GENERAL.—If, at any time during the 

11 4-year period beginning on the date of the original 

12 issue of a qualified countermeasures equity invest13 ment in a qualified countermeasures company, there 

14 is a recapture event with respect to such investment, 

15 then the tax imposed by this chapter for the taxable 

16 year in which such event occurs shall be increased 

17 by the credit recapture amount. 

18 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur19 poses of paragraph (1), the credit recapture amount 

20 is an amount equal to the sum of— 

21 ‘‘(A) the aggregate decrease in the credits 

22 allowed to the taxpayer under section 38 for all 

23 prior taxable years which would have resulted if 

24 no credit had been determined under this sec25 tion with respect to such investment, plus 


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1 ‘‘(B) interest at the underpayment rate es2 tablished under section 6621 on the amount de3 termined under subparagraph (A) for each 

4 prior taxable year for the period beginning on 

5 the due date for filing the return for the prior 

6 taxable year involved. 

7 No deduction shall be allowed under this chapter for 

8 interest described in subparagraph (B). 

9 ‘‘(3) RECAPTURE EVENT.—For purposes of 

10 paragraph (1), there is a recapture event with re11 spect to a qualified countermeasures equity invest12 ment in a qualified countermeasures company if— 

13 ‘‘(A) such company ceases to be a qualified 

14 countermeasures company, or 

15 ‘‘(B) such investment is redeemed by such 

16 company. 

17 ‘‘(4) SPECIAL RULES.— 

18 ‘‘(A) TAX BENEFIT RULE.—The tax for 

19 the taxable year shall be increased under para20 graph (1) only with respect to credits allowed 

21 by reason of this section which were used to re22 duce tax liability. In the case of credits not so 

23 used to reduce tax liability, the carryforwards 

24 and carrybacks under section 39 shall be appro25 priately adjusted. 


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1 ‘‘(B) NO CREDITS AGAINST TAX.—Any in2 crease in tax under this subsection shall not be 

3 treated as a tax imposed by this chapter for 

4 purposes of determining the amount of any 

5 credit under this chapter or for purposes of sec6 tion 55. 

7 ‘‘(g) BASIS REDUCTION.—The basis of any qualified 

8 countermeasures equity investment shall be reduced by the 

9 amount of any credit determined under this section with 

10 respect to such investment. This subsection shall not apply 

11 for purposes of sections 1202, 1400B, and 1400F. 

12 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

13 such regulations as may be appropriate to carry out this 

14 section, including regulations which— 

15 ‘‘(1) prevent the abuse of the purposes of this 

16 section, 

17 ‘‘(2) impose appropriate reporting require18 ments, and 

19 ‘‘(3) apply the provisions of this section to 

20 newly formed entities.’’. 

21 (b) CREDIT TO BE PART OF GENERAL BUSINESS

22 CREDIT.—Section 38(b) (as amended by this Act) is fur23 ther amended by striking ‘‘and’’ at the end of paragraph 

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


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1 and inserting ‘‘, and’’, and by adding at the end the fol2 lowing: 

3 ‘‘(33) the countermeasures equity investment 

4 credit determined under section 45O(a).’’. 

5 (c) DEDUCTION FOR UNUSED PORTION OF CRED6 IT.—Section 196(c) (as amended by this Act) is further 

7 amended by striking ‘‘and’’ at the end of paragraph (14), 

8 by striking the period at the end of paragraph (15) and 

9 inserting ‘‘, and’’, and by adding at the end the following 

10 new paragraph: 

11 ‘‘(16) the countermeasures equity investment 

12 credit determined under section 45O(a),’’. 

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

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

15 (as amended by this Act) is further amended by adding 

16 after the item relating to section 45N the following: 

‘‘Sec. 45O. Countermeasures equity tax credit.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2006. 

20 SEC. 108. BIOTECHNOLOGY SCIENCE PARKS. 

21 (a) EXPENSING.— 

22 (1) IN GENERAL.—Section 179(d) (relating to 

23 definitions and special rules) is amended by adding 

24 at the end the following new paragraph: 


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1 ‘‘(11) APPLICATION OF SECTION TO PROPERTY

2 PLACED IN SERVICE IN BIOTECHNOLOGY SCIENCE

3 PARKS.— 

4 ‘‘(A) IN GENERAL.—In the case of any sec5 tion 179 property placed in service in any bio6 technology science park, this section shall be 

7 applied without regard to paragraphs (1) and 

8 (2) of subsection (b). 

9 ‘‘(B) BIOTECHNOLOGY SCIENCE PARK.— 

10 ‘‘(i) IN GENERAL.—The term ‘bio11 technology science park’ means a group of 

12 interrelated companies and institutions, in13 cluding suppliers, service providers, institu14 tions of higher education, start-up incuba15 tors, and trade associations, that— 

16 ‘‘(I) cooperates and competes in 

17 the field of biomedical research and 

18 medical devices, 

19 ‘‘(II) is located in the United 

20 States, 

21 ‘‘(III) promotes real estate devel22 opment, technology transfer, and 

23 partnerships between such companies 

24 and institutions, and 


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1 ‘‘(IV) is not a business or indus2 trial park. 

3 ‘‘(ii) BUSINESS OR INDUSTRIAL

4 PARK.—The term ‘business or industrial 

5 park’ means a for-profit real estate venture 

6 of businesses or industries which do not 

7 necessarily reinforce each other through 

8 supply chain or technology transfer mecha9 nisms.’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

11 by this subsection shall apply with respect to prop12 erty placed in service after the date of the enactment 

13 of this Act. 

14 (b) TAX CREDIT FOR RESEARCH ACTIVITIES.— 

15 (1) IN GENERAL.—Section 41(a) (relating to 

16 credit for increasing research activities) is amended 

17 by striking ‘‘and’’ at the end of paragraph (2), by 

18 striking the period at the end of paragraph (3) and 

19 inserting ‘‘, and’’, and by adding at the end the fol20 lowing new paragraph: 

21 ‘‘(4) 20 percent of the qualified research ex22 penses paid or incurred by the taxpayer in carrying 

23 on any trade or business located in a biotechnology 

24 science park during the taxable year.’’. 


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1 (2) BIOTECHNOLOGY SCIENCE PARK.—Section 

2 41(f) (relating to special rules) is amended by add3 ing at the end the following new paragraph: 

4 ‘‘(7) BIOTECHNOLOGY SCIENCE PARK.— 

5 ‘‘(A) IN GENERAL.—The term ‘bio6 technology science park’ means a group of 

7 interrelated companies and institutions, includ8 ing suppliers, service providers, institutions of 

9 higher education, start-up incubators, and trade 

10 associations, that— 

11 ‘‘(i) cooperates and competes in the 

12 field of biomedical research and medical 

13 devices, 

14 ‘‘(ii) is located in the United States, 

15 ‘‘(iii) promotes real estate develop16 ment, technology transfer, and partner17 ships between such companies and institu18 tions, and 

19 ‘‘(iv) is not a business or industrial 

20 park. 

21 ‘‘(B) BUSINESS OR INDUSTRIAL PARK.— 

22 The term ‘business or industrial park’ means a 

23 for-profit real estate venture of businesses or 

24 industries which do not necessarily reinforce 


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1 each other through supply chain or technology 

2 transfer mechanisms.’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to taxable years begin5 ning after December 31, 2006. 

6 (c) PRIVATE BUSINESS USE OF A BOND-FINANCED

7 FACILITY.— 

8 (1) IN GENERAL.—Subparagraph (A) of section 

9 141(b)(6) (defining private business use) is amended 

10 by inserting ‘‘or use in the performance of research 

11 using, in whole or in part, funds of the United 

12 States or any agency or instrumentality thereof’’ be13 fore ‘‘shall not be taken into account’’. 

14 (2) EFFECTIVE DATE.— 

15 (A) IN GENERAL.—The amendment made 

16 by this subsection shall apply to any use on or 

17 after the date of the enactment of this Act. 

18 (B) NO INFERENCE.—Nothing in the 

19 amendment made by this subsection shall be 

20 construed to create any inference with respect 

21 to the use of tax-exempt bond financed facilities 

22 before the effective date of such amendment. 


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1 SEC. 109. EXPENSING FOR QUALIFIED MEDICAL RESEARCH 

2 EQUIPMENT. 

3 (a) IN GENERAL.—Part VI of subchapter B of chap4 ter 1 (relating to itemized deductions for individuals and 

5 corporations) is amended by inserting after section 179D 

6 the following new section: 

7 ‘‘SEC. 179E. ELECTION TO EXPENSE CERTAIN MEDICAL RE8 SEARCH EQUIPMENT. 

9 ‘‘(a) TREATMENT AS EXPENSES.— A biomedical re10 search corporation (as defined in section 382(l)(9)(B)) 

11 may elect to treat the cost of any qualified medical re12 search property as an expense which is not chargeable to 

13 capital account. Any cost so treated shall be allowed as 

14 a deduction for the taxable year in which the qualified 

15 property is placed in service. 

16 ‘‘(b) ELECTION.— 

17 ‘‘(1) IN GENERAL.—An election under this sec18 tion for any taxable year shall be made on the tax19 payer’s return of the tax imposed by this chapter for 

20 the taxable year. Such election shall be made in such 

21 manner as the Secretary may by regulations pre22 scribe. 

23 ‘‘(2) ELECTION IRREVOCABLE.—Any election 

24 made under this section may not be revoked except 

25 with the consent of the Secretary. 


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1 ‘‘(c) QUALIFIED MEDICAL RESEARCH PROPERTY.— 

2 The term ‘qualified medical research property’ means any 

3 property— 

4 ‘‘(1) the original use of which commences with 

5 the taxpayer, 

6 ‘‘(2) that is placed in service by the taxpayer 

7 after the date of the enactment of this section, 

8 ‘‘(3) that is customary in the bioscience re9 search industry, and 

10 ‘‘(4) that is required for the taxpayer’s ad11 vanced biomedical research.’’. 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) Section 1245(a) is amended by inserting 

14 ‘‘179E,’’ after ‘‘179D,’’ both places it appears in 

15 paragraphs (2)(C) and (3)(C). 

16 (2) Section 263(a)(1) is amended by striking 

17 ‘‘or’’ at the end of subparagraph (J), by striking the 

18 period at the end of subparagraph (K) and inserting 

19 ‘‘, or’’, and by inserting after subparagraph (K) the 

20 following new subparagraph: 

21 ‘‘(L) expenditures for which a deduction is 

22 allowed under section 179E.’’. 

23 (3) Section 312(k)(3)(B) is amended by strik24 ing ‘‘or 179D’’ each place it appears in the heading 

25 and text and inserting ‘‘179D, or 179E’’. 


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1 (4) The table of sections for part VI of sub2 chapter B of chapter 1 of such Code is amended by 

3 inserting after the item relating to section 179D the 

4 following new item: 

‘‘Sec. 179E. Election to expense certain medical research equipment.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to properties placed in service after 

7 the date of the enactment of this Act. 

8 TITLE II—PROVISIONS RELAT9 ING TO INVESTOR TAX INCEN10 TIVES 

11 SEC. 201. CAPITAL GAINS ROLLOVER. 

12 (a) IN GENERAL.— 

13 (1) Section 1045(a) is amended by inserting 

14 ‘‘or biomedical research corporation stock’’ after 

15 ‘‘qualified small business stock’’ each place it ap16 pears herein. 

17 (2) Section 1045(b) is amended by redesig18 nating paragraphs (2), (3), (4), and (5) as para19 graphs (3), (4), (5), and (6), respectively, and by in20 serting after paragraph (1) the following new para21 graph: 

22 ‘‘(2) BIOMEDICAL RESEARCH CORPORATION.— 

23 The term ‘biomedical research corporation’ has the 

24 meaning given to such term in section 

25 382(l)(9)(B).’’. 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1) The heading for section 1045 is amended by 

3 inserting ‘‘OR BIOMEDICAL RESEARCH’’ after 

4 ‘‘SMALL BUSINESS’’ each time it appears. 

5 (2) The item relating to section 1045 in the 

6 table of sections for part III of subchapter O of 

7 chapter 1 is amended by inserting ‘‘or biomedical re8 search’’ after ‘‘small business’’ each time it appears. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to taxable years beginning after 

11 December 31, 2006. 

12 SEC. 202. TREATMENT OF ORDINARY LOSSES. 

13 (a) IN GENERAL.— 

14 (1) Section 1244(a) and (d) are amended by in15 serting ‘‘or biomedical research corporation stock’’ 

16 after ‘‘1244 stock.’’ 

17 (2) Section 1244 is amended by redesignating 

18 subsection (d) as subsection (e) and by inserting 

19 after subsection (c) the following new subsection: 

20 ‘‘(d) BIOMEDICAL RESEARCH CORPORATION STOCK

21 DEFINED.—For purposes of this section— 

22 ‘‘(1) IN GENERAL.—The term ‘biomedical re23 search corporation stock’ means stock in a domestic 

24 corporation if— 


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1 ‘‘(A) at the time such stock is issued, such 

2 corporation was a biomedical research corpora3 tion, and 

4 ‘‘(B) such stock was issued by such cor5 poration for money or other property (other 

6 than stock or securities). 

7 ‘‘(2) BIOMEDICAL RESEARCH CORPORATION.— 

8 ‘‘(A) IN GENERAL.— The term ‘biomedical 

9 research corporation’ means a corporation 

10 that— 

11 ‘‘(i) is subject to tax under this sub12 chapter at the time such stock is issued, 

13 ‘‘(ii) is not in bankruptcy, 

14 ‘‘(iii) holds the rights to a drug or 

15 biologic for which an investigational new 

16 drug application is in effect under section 

17 505 of the Federal Food, Drug, and Cos18 metic Act or holds the rights to a device 

19 for which an investigational device exemp20 tion is approved under section 520(g) of 

21 such Act, 

22 ‘‘(iv) certifies that, as of the time of 

23 such stock issuance, the drug, biologic, or 

24 device is, or in the 6-month period begin25 ning 3 months before such closing has 


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1 been, under study pursuant to an active in2 vestigational new drug or device applica3 tion approved by the Commissioner of the 

4 Food and Drug Administration, 

5 ‘‘(v) has aggregate gross assets before 

6 and after the issuance that do not exceed 

7 $50,000,000, and 

8 ‘‘(vi) agrees to submit such reports to 

9 the Secretary and to shareholders as the 

10 Secretary may require to carry out the 

11 purposes of this section.’’. 

12 (b) CONFORMING AMENDMENTS.— 

13 (1) The heading for section 1244 is amended by 

14 inserting ‘‘OR BIOMEDICAL RESEARCH’’ before 

15 ‘‘STOCK’’. 

16 (2) The item relating to section 1244 in the 

17 table of sections for part IV of subchapter P of 

18 chapter 1 is amended by inserting ‘‘or biomedical re19 search’’ before ‘‘stock.’’ 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to stock issued after December 31, 

22 2006. 

23 SEC. 203. EQUITY CREDIT FOR INCUBATIONAL FIRMS. 

24 (a) IN GENERAL.—Subpart D of part IV of sub25 chapter A of chapter 1 (as amended by this Act) is amendVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 ed by inserting after section 45O the following new sec2 tion: 

3 ‘‘SEC. 45P. INCUBATIONAL EQUITY TAX CREDIT. 

4 ‘‘(a) ALLOWANCE OF CREDIT.— 

5 ‘‘(1) GENERAL RULE.—For purposes of section 

6 38, in the case of a taxpayer who makes a qualified 

7 incubational equity investment during the taxable 

8 year, the incubational equity tax credit determined 

9 under this section for such taxable year is an 

10 amount equal to the applicable percentage of the 

11 amount paid to the qualified incubational company 

12 solely in exchange for its stock at original issue. 

13 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

14 of paragraph (1), the applicable percentage is 40 

15 percent. 

16 ‘‘(b) QUALIFIED INCUBATIONAL EQUITY INVEST17 MENT.—For purposes of this section— 

18 ‘‘(1) IN GENERAL.—The term ‘qualified incuba19 tional equity investment’ means any equity invest20 ment in a qualified incubational company if— 

21 ‘‘(A) such investment is acquired by the 

22 taxpayer at its original issue (directly or 

23 through an underwriter) solely in exchange for 

24 cash, 


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‘‘(B) not less than 1 1 ⁄2 of such cash is used 

2 by the qualified incubational company with re3 spect to qualifying research under section 41, 

4 and 

5 ‘‘(C) such investment is designated for 

6 purposes of this section by the qualified incuba7 tional company. 

8 Such term shall not include any equity investment 

9 issued by a qualified incubational company more 

10 than 5 years after the date that such company re11 ceives an allocation under subsection (d). Any alloca12 tion not used within such 5-year period may be re13 allocated by the Secretary under subsection (d). 

14 ‘‘(2) LIMITATION.—The maximum amount of 

15 equity investments issued by a qualified incubational 

16 company which may be designated under paragraph 

17 (1)(C) by such company shall not exceed the portion 

18 of the limitation amount allocated under subsection 

19 (f) to such company. 

20 ‘‘(3) TREATMENT OF SUBSEQUENT PUR21 CHASERS.—The term ‘qualified equity investment’ 

22 includes any equity investment which would (but for 

23 paragraph (1)(A)) be a qualified equity investment 

24 in the hands of the taxpayer if such investment was 


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1 a qualified equity investment in the hands of a prior 

2 holder. 

3 ‘‘(4) REDEMPTIONS.—A rule similar to the rule 

4 of section 1202(c)(3) shall apply for purposes of this 

5 subsection. 

6 ‘‘(5) EQUITY INVESTMENT.—The term ‘equity 

7 investment’ means any stock (other than non8 qualified preferred stock as defined in section 

9 351(g)(2)) in an entity which is a corporation. 

10 ‘‘(c) QUALIFIED INCUBATIONAL COMPANY.—For 

11 purposes of this section the term ‘qualified incubational 

12 company’ means any domestic biomedical research cor13 poration (as defined in section 382(l)(9)(B)) subject to tax 

14 under subchapter C of this chapter, that has 25 employees 

15 or less and gross assets of less than $25,000,000. 

16 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF INVEST17 MENTS DESIGNATED.— 

18 ‘‘(1) IN GENERAL.—There is an incubational 

19 equity tax credit limitation of $500,000,000 for each 

20 taxable year. 

21 ‘‘(2) ALLOCATION OF LIMITATION.—The limita22 tion under paragraph (1) shall be allocated by the 

23 Secretary among qualified incubational companies 

24 selected by the Secretary. In making allocations 

25 under the preceding sentence, the Secretary shall 


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1 give priority to the extent to which it is reasonably 

2 anticipated that a qualified incubational company 

3 would have insufficient taxable income and tax liabil4 ity to utilize the section 41 research tax credit. 

5 ‘‘(3) CARRYOVER OF UNUSED LIMITATION.—If 

6 the qualified incubational equity tax credit limitation 

7 for any taxable year exceeds the aggregate amount 

8 allocated under paragraph (2) for such year, such 

9 limitation for the succeeding taxable year shall be in10 creased by the amount of such excess. 

11 ‘‘(e) RECAPTURE OF CREDIT IN CERTAIN CASES.— 

12 ‘‘(1) IN GENERAL.—If, at any time during the 

13 4-year period beginning on the date of the original 

14 issue of a qualified incubational equity investment in 

15 a qualified incubational company, there is a recap16 ture event with respect to such investment, then the 

17 tax imposed by this chapter for the taxable year in 

18 which such event occurs shall be increased by the 

19 credit recapture amount. 

20 ‘‘(2) CREDIT RECAPTURE AMOUNT.—For pur21 poses of paragraph (1), the credit recapture amount 

22 is an amount equal to the sum of— 

23 ‘‘(A) the aggregate decrease in the credits 

24 allowed to the taxpayer under section 38 for all 

25 prior taxable years which would have resulted if 


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1 no credit had been determined under this sec2 tion with respect to such investment; plus 

3 ‘‘(B) interest at the underpayment rate es4 tablished under section 6621 on the amount de5 termined under subparagraph (A) for each 

6 prior taxable year for the period beginning on 

7 the due date for filing the return for the prior 

8 taxable year involved. 

9 No deduction shall be allowed under this chapter for 

10 interest described in subparagraph (B). 

11 ‘‘(3) RECAPTURE EVENT.—For purposes of 

12 paragraph (1), there is a recapture event with re13 spect to a qualified countermeasures equity invest14 ment in a qualified countermeasures company if— 

15 ‘‘(A) such company ceases to be a qualified 

16 biomedical research corporation (as defined in 

17 section 382(l)(9)(B)), or 

18 ‘‘(B) such investment is redeemed by such 

19 company. 

20 ‘‘(4) SPECIAL RULES.— 

21 ‘‘(A) TAX BENEFIT RULE.—The tax for 

22 the taxable year shall be increased under para23 graph (1) only with respect to credits allowed 

24 by reason of this section which were used to re25 duce tax liability. In the case of credits not so 


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1 used to reduce tax liability, the carryforwards 

2 and carrybacks under section 39 shall be appro3 priately adjusted. 

4 ‘‘(B) NO CREDITS AGAINST TAX.—Any in5 crease in tax under this subsection shall not be 

6 treated as a tax imposed by this chapter for 

7 purposes of determining the amount of any 

8 credit under this chapter or for purposes of sec9 tion 55. 

10 ‘‘(f) BASIS REDUCTION.—The basis of any qualified 

11 incubational equity investment shall be reduced by the 

12 amount of any credit determined under this section with 

13 respect to such investment. This subsection shall not apply 

14 for purposes of sections 1202, 1400B, and 1400F. 

15 ‘‘(g) REGULATIONS.—The secretary shall prescribe 

16 such regulations as may be appropriate to carry out this 

17 section, including regulations which— 

18 ‘‘(1) prevent the abuse of the purposes of this 

19 section, 

20 ‘‘(2) impose appropriate reporting require21 ments, and 

22 ‘‘(3) apply the provisions of this section to 

23 newly formed entities.’’. 

24 (b) CREDIT TO BE PART OF GENERAL BUSINESS

25 CREDIT.—Section 38(b) (as amended by this Act) is furVerDate Aug 31 2005 03:55 Apr 13, 2006 Jkt 049196 PO 00000 Frm 00052 Fmt 6652 Sfmt 6201 E:\BILLS\H5115.IH H5115

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1 ther amended by striking ‘‘and’’ at the end of paragraph 

2 (32), by striking the period at the end of paragraph (33) 

3 and inserting ‘‘, and’’, and by adding at the end the fol4 lowing: 

5 ‘‘(34) the incubational equity tax credit deter6 mined under section 45N(a).’’. 

7 (c) DEDUCTION FOR UNUSED PORTION OF CRED8 IT.—Section 196(c) of such Code (defining qualified busi9 ness credits), as amended by this section, is amended by 

10 striking ‘‘and’’ at the end of paragraph (15), by striking 

11 the period at the end of paragraph (16) and inserting ‘‘, 

12 and’’, and by adding at the end the following new para13 graph: 

14 ‘‘(17) the incubational equity tax credit deter15 mined under section 45P(a).’’. 

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

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

18 (as amended by this Act) is further amended by adding 

19 after the item relating to section 45O the following new 

20 item: 

‘‘Sec. 45P. Incubational equity tax credit.’’. 

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

22 this section shall apply to taxable years beginning after 

23 December 31, 2006. 

24 SEC. 204. MODIFICATION OF PASSIVE LOSS RULES. 

25 (a) IN GENERAL.—Section 469(i) is amended— 


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1 (1) by inserting ‘‘or biomedical research cor2 poration activities’’ after ‘‘real estate activities’’ each 

3 place it appears in paragraphs (1) and (4), and 

4 (2) by inserting ‘‘or biomedical or device re5 search corporation activity’’ after ‘‘real estate activ6 ity’’ in paragraph (6)(A). 

7 (b) BIOMEDICAL RESEARCH CORPORATION DE8 FINED.—Section 469(i) is amended by inserting the fol9 lowing new paragraph: 

10 ‘‘(7) BIOMEDICAL RESEARCH CORPORATION.— 

11 The term ‘biomedical research corporation’ has the 

12 meaning given such term in section 382(l)(9)(B).’’. 

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to losses incurred after December 

15 31, 2006. 

16 SEC. 205. MODIFICATION OF SUBCHAPTER S RULES. 

17 (a) IN GENERAL.—Section 1361(b)(1) is amended by 

18 inserting the following flush sentence: ‘‘In the case of a 

19 biomedical research corporation (as defined in section 

20 382(l)(9)(B)), subparagraph (A) shall be applied by sub21 stituting ‘150’ for ‘100’.’’ 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2006. 


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1 SEC. 206. TREATMENT OF BONDS FOR BIOMEDICAL RE2 SEARCH FACILITIES AS EXEMPT FACILITY 

3 BONDS. 

4 (a) TREATMENT AS EXEMPT FACILITY BONDS.— 

5 Subsection (a) of section 142 (relating to exempt facility 

6 bond) is amended by striking ‘‘or’’ at the end of paragraph 

7 (14), by striking the period at the end of paragraph (15) 

8 and inserting ‘‘, or’’, and by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(16) biomedical research facilities.’’. 

11 (b) BIOMEDICAL RESEARCH FACILITIES.—Section 

12 142 is amended by adding at the end the following new 

13 subsection: 

14 ‘‘(n) BIOMEDICAL RESEARCH FACILITY.—For pur15 poses of this section— 

16 ‘‘(1) IN GENERAL.— The term ‘biomedical re17 search facility’ means a facility owned by a private, 

18 for-profit entity primarily utilized for biomedical re19 search. 

20 ‘‘(2) BIOMEDICAL RESEARCH DESCRIBED.— 

21 The term ‘biomedical research’ refers to research 

22 into a drug or biologic (or related medical device) 

23 conducted pursuant to an investigational use exemp24 tion under section 505(i) of the Federal Food, Drug, 

25 and Cosmetic Act. 


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1 ‘‘(3) LIMITATION ON AGGREGATE FACE

2 AMOUNT OF TAX-EXEMPT FINANCING.— 

3 ‘‘(A) IN GENERAL.—An issue shall not be 

4 treated as an issue described in subsection 

5 (a)(16) unless— 

6 ‘‘(i) the Secretary has allocated an 

7 amount to such issue under this para8 graph, and 

9 ‘‘(ii) the aggregate face amount of 

10 bonds issued pursuant to such issue does 

11 not exceed such amount. 

12 ‘‘(B) ALLOCATION.— The Secretary may 

13 allocate amounts to issues under this paragraph 

14 in such manner as the Secretary determines ap15 propriate, except that the aggregate amount so 

16 allocated shall not exceed $15,000,000,000. 

17 ‘‘(C) REFUNDING BONDS.— Subparagraph 

18 (A) shall not apply with respect to any bond the 

19 proceeds of which are used exclusively to refund 

20 a bond issued pursuant to subsection (a)(16) 

21 (or a bond which is a part of a series of 

22 refundings of a bond so issued) if the amount 

23 of the refunding bond does not exceed the out24 standing amount of the refunded bond.’’. 


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1 (c) EXEMPTION FROM GENERAL STATE VOLUME

2 CAPS.—Paragraph (3) of section 146(g) (relating to ex3 ception for certain bonds) is amended by striking ‘‘or 

4 (15)’’ and inserting ‘‘(15), or (16)’’. 

5 (d) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to bonds issued after December 

7 31, 2006. 

8 SEC. 207. INCENTIVES FOR BIOTECHNOLOGY ZONES. 

9 (a) IN GENERAL.—Subchapter U of chapter 1 (relat10 ing to designation and treatment of empowerment zones, 

11 enterprise communities, and rural development investment 

12 areas) is amended by redesignating part V as part VI, by 

13 redesignating section 1397F as section 1397G, and by in14 serting after part IV the following new part: 

15 ‘‘PART V—INCENTIVES FOR BIOTECHNOLOGY 

16 ZONES 

‘‘Sec. 1397F. Credit to holders of qualified biotechnology zone bonds. 

17 ‘‘SEC. 1397F. CREDIT TO HOLDERS OF QUALIFIED BIO18 TECHNOLOGY ZONE BONDS. 

19 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli20 gible taxpayer who holds a qualified biotechnology zone 

21 bond on the credit allowance date of such bond which oc22 curs during the taxable year, there shall be allowed as a 

23 credit against the tax imposed by this chapter for such 

24 taxable year the amount determined under subsection (b). 


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1 ‘‘(b) AMOUNT OF CREDIT.— 

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

3 determined under this subsection with respect to any 

4 qualified biotechnology zone bond is the amount 

5 equal to the product of— 

6 ‘‘(A) the credit rate determined by the Sec7 retary under paragraph (2) for the month in 

8 which such bond was issued, multiplied by 

9 ‘‘(B) the face amount of the bond held by 

10 the taxpayer on the credit allowance date. 

11 ‘‘(2) DETERMINATION.—During each calendar 

12 month, the Secretary shall determine a credit rate 

13 which shall apply to bonds issued during the fol14 lowing calendar month. The credit rate for any 

15 month is the percentage which the Secretary esti16 mates will permit the issuance of qualified bio17 technology zone bonds without discount and without 

18 interest cost to the issuer. 

19 ‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The 

20 credit allowed under subsection (a) for any taxable year 

21 shall not exceed the excess of— 

22 ‘‘(1) the sum of the regular tax liability (as de23 fined in section 26(b)) plus the tax imposed by sec24 tion 55, over 


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1 ‘‘(2) the sum of the credits allowable under part 

2 IV of subchapter A (other than subpart C thereof, 

3 relating to refundable credits). 

4 ‘‘(d) QUALIFIED BIOTECHNOLOGY ZONE BOND.— 

5 For purposes of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘qualified bio7 technology zone bond’ means any bond issued as 

8 part of an issue if— 

9 ‘‘(A) 95 percent or more of the proceeds of 

10 such issue are to be used for a qualified pur11 pose with respect to a qualified biotechnology 

12 zone entity selected by an eligible State busi13 ness development agency, 

14 ‘‘(B) the bond is issued by a State or local 

15 Government within the jurisdiction of which 

16 such biotechnology zone is located, 

17 ‘‘(C) the issuer— 

18 ‘‘(i) designates such bond for purposes 

19 of this section, and 

20 ‘‘(ii) certifies that it has the written 

21 approval of the eligible State business de22 velopment agency for such bond issuance, 

23 and 


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1 ‘‘(D) the term of each bond which is part 

2 of such issue does not exceed the maximum 

3 term permitted under paragraph (2). 

4 ‘‘(2) TERM REQUIREMENT.—During each cal5 endar month, the Secretary shall determine the max6 imum term permitted under this paragraph for 

7 bonds issued during the following calendar month. 

8 Such maximum term shall be the term which the 

9 Secretary estimates will result in the present value 

10 of the obligation to repay the principal on the bond 

11 being equal to 50 percent of the face amount of the 

12 bond. Such present value shall be determined using 

13 as a discount rate the average annual interest rate 

14 of tax-exempt obligations having a term of 10 years 

15 or more which are issued during the month. If the 

16 term as so determined is not a multiple of a whole 

17 year, such term shall be rounded to the next highest 

18 whole year. 

19 ‘‘(3) QUALIFIED BIOTECHNOLOGY ZONE ENTI20 TY.— 

21 ‘‘(A) IN GENERAL.—The term ‘qualified 

22 biotechnology zone entity’ means any for-profit 

23 private entity in the business of biomedical re24 search (or a medical device manufacturer) if— 

25 ‘‘(i) such entity is not in bankruptcy, 


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1 ‘‘(ii) such entity holds the rights to a 

2 drug or biologic for which an investiga3 tional new drug application is in effect 

4 under section 505 of the Federal Food, 

5 Drug, and Cosmetic Act (or manufactures 

6 a related medical device), or holds the 

7 rights to a device for which an investiga8 tional device exemption is approved under 

9 section 520(g) of such Act, and 

10 ‘‘(iii) such entity certifies that, as of 

11 the time of such closing, the drug, biologic, 

12 or device is, or in the 6-month period be13 ginning 3 months before such closing has 

14 been, under study pursuant to an inves15 tigational use exemption under section 

16 505(i) or section 520(g) of the Federal 

17 Food, Drug, and Cosmetic Act. 

18 ‘‘(B) ELIGIBLE STATE DEVELOPMENT

19 AGENCY.—The term ‘eligible State development 

20 agency’ means any State agency with a purpose 

21 of developing a State’s biotechnology busi22 nesses. 

23 ‘‘(4) QUALIFIED PURPOSE.—The term ‘quali24 fied purpose’ means, with respect to any qualified 


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1 biotechnology zone, constructing or developing facili2 ties utilized in the biomedical research field. 

3 ‘‘(5) ELIGIBLE TAXPAYER.—The term ‘eligible 

4 taxpayer’ means— 

5 ‘‘(A) a bank (within the meaning of section 

6 581), 

7 ‘‘(B) an insurance company to which sub8 chapter L applies, or 

9 ‘‘(C) a corporation actively engaged in the 

10 business of lending money. 

11 ‘‘(e) LIMITATION ON AMOUNT OF BONDS DES12 IGNATED.— 

13 ‘‘(1) NATIONAL LIMITATION.—There is a na14 tional biotechnology zone bond limitation of 

15 $500,000,000 for each calendar year. 

16 ‘‘(2) ALLOCATION OF LIMITATION.—The na17 tional biotechnology zone bond limitation for a cal18 endar year shall be allocated by the Secretary among 

19 qualified companies selected by the Secretary. In 

20 making allocations under the preceding sentence, the 

21 Secretary shall give priority to the extent to which 

22 it is reasonably anticipated that a qualified company 

23 would have insufficient taxable income and tax liabil24 ity to utilize research tax credits and other similar 

25 credits. 


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1 ‘‘(3) DESIGNATION SUBJECT TO LIMITATION

2 AMOUNT.—The maximum aggregate face amount of 

3 bonds issued during any calendar year which may be 

4 designated under subsection (d)(1) with respect to 

5 any qualified biotechnology zone shall not exceed the 

6 limitation amount allocated to such academy under 

7 paragraph (2) for such calendar year. 

8 ‘‘(4) CARRYOVER OF UNUSED LIMITATION.—If, 

9 for any calendar year the limitation amount for any 

10 State, exceeds the amount of bonds issued during 

11 such year which are designated under subsection 

12 (d)(1) with respect to qualified biotechnology zone 

13 facilities within such State, the limitation amount 

14 for such State for the following calendar year shall 

15 be increased by the amount of such excess. 

16 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec17 tion— 

18 ‘‘(1) CREDIT ALLOWANCE DATE.—The term 

19 ‘credit allowance date’ means, with respect to any 

20 issue, the last day of the 1-year period beginning on 

21 the date of issuance of such issue and the last day 

22 of each successive 1-year period thereafter. 

23 ‘‘(2) BOND.—The term ‘bond’ includes any ob24 ligation. 


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1 ‘‘(3) STATE.—The term ‘State’ includes the 

2 District of Columbia and any possession of the 

3 United States. 

4 ‘‘(g) CREDIT INCLUDED IN GROSS INCOME.—Gross 

5 income includes the amount of the credit allowed to the 

6 taxpayer under this section.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) The table of parts for subchapter U of 

9 chapter 1 is amended by striking the last item and 

10 inserting the following: 

‘‘PART V. INCENTIVES FOR BIOTECHNOLOGY ZONES. 

‘‘PART VI. REGULATIONS.’’. 

11 (2) The table of sections for part V, as so re12 designated, is amended to read as follows: 

‘‘Sec. 1397G. Regulations.’’. 

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to obligations issued after Decem15 ber 31, 2006. 

Æ 


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