I 

109TH CONGRESS 

1ST SESSION H. R. 1650 

To amend the Internal Revenue Code of 1986 to allow tax credits to holders 

of stem cell research bonds. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 14, 2005 

Mrs. JOHNSON of Connecticut (for herself, Mr. CASTLE, Mr. BOSWELL, Mrs. 

CHRISTENSEN, Ms. LEE, Mr. RAMSTAD, Ms. LORETTA SANCHEZ of California, Mr. SHAYS, and Mr. SIMMONS) 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 allow tax 

credits to holders of stem cell research bonds. 

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 This Act may be cited as the ‘‘Stem Cell Research 

5 Investment Act of 2005’’. 

6 SEC. 2. INCENTIVES FOR STEM CELL RESEARCH. 

7 (a) IN GENERAL.—Chapter 1 of the Internal Rev8 enue Code of 1986 is amended by adding at the end the 

9 following new subchapter: 
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1 ‘‘Subchapter Z—Stem Cell Research Bonds 

‘‘Sec. 1400N. Credit to holders of qualified stem cell research bonds. 

2 ‘‘SEC. 1400N. CREDIT TO HOLDERS OF QUALIFIED STEM 

3 CELL RESEARCH BONDS. 

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax5 payer who holds a qualified stem cell research bond on 

6 a credit allowance date of such bond which occurs during 

7 the taxable year, there shall be allowed as a credit against 

8 the tax imposed by this chapter for such taxable year an 

9 amount equal to the sum of the credits determined under 

10 subsection (b) with respect to credit allowance dates dur11 ing such year on which the taxpayer holds such bond. 

12 ‘‘(b) AMOUNT OF CREDIT.— 

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

14 determined under this subsection with respect to any 

15 credit allowance date for a qualified stem cell re16 search bond is 25 percent of the annual credit deter17 mined with respect to such bond. 

18 ‘‘(2) ANNUAL CREDIT.—The annual credit de19 termined with respect to any qualified stem cell re20 search bond is the product of— 

21 ‘‘(A) the applicable credit rate, multiplied 

22 by 

23 ‘‘(B) the outstanding face amount of the 

24 bond. 
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1 ‘‘(3) APPLICABLE CREDIT RATE.—For purposes 

2 of paragraph (1), the applicable credit rate with re3 spect to an issue is the rate equal to an average 

4 market yield (as of the day before the date of 

5 issuance of the issue) on outstanding long-term cor6 porate debt obligations (determined under regula7 tions prescribed by the Secretary). 

8 ‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE9 DEMPTION.—In the case of a bond which is issued 

10 during the 3-month period ending on a credit allow11 ance date, the amount of the credit determined 

12 under this subsection with respect to such credit al13 lowance date shall be a ratable portion of the credit 

14 otherwise determined based on the portion of the 3- 

15 month period during which the bond is outstanding. 

16 A similar rule shall apply when the bond is re17 deemed. 

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

19 ‘‘(1) IN GENERAL.—The credit allowed under 

20 subsection (a) for any taxable year shall not exceed 

21 the excess of— 

22 ‘‘(A) the sum of the regular tax liability 

23 (as defined in section 26(b)) plus the tax im24 posed by section 55, over 
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1 ‘‘(B) the sum of the credits allowed under 

2 part IV of subchapter A (other than subpart C 

3 thereof, relating to refundable credits). 

4 ‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the 

5 credit allowable under subsection (a) exceeds the 

6 limitation imposed by paragraph (1) for such taxable 

7 year, such excess shall be carried to the succeeding 

8 taxable year and added to the credit allowable under 

9 subsection (a) for such taxable year. 

10 ‘‘(d) QUALIFIED STEM CELL RESEARCH BOND; 

11 CREDIT ALLOWANCE DATE.—For purposes of this sec12 tion— 

13 ‘‘(1) QUALIFIED STEM CELL RESEARCH

14 BOND.—The term ‘qualified stem cell research bond’ 

15 means any bond issued as part of an issue if— 

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

17 such issue are to be used for interdisciplinary 

18 scientific and medical research relating to stem 

19 cells, therapy development relating to stem 

20 cells, and development of pharmacologies and 

21 treatments through clinical trials relating to 

22 stem cells, 

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

24 government, 
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1 ‘‘(C) the issuer designates such bond for 

2 purposes of this section, and 

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

4 of such issue does not exceed 30 years. 

5 ‘‘(2) STEM CELL.— 

6 ‘‘(A) IN GENERAL.—The term ‘stem cell’ 

7 means a cell with the ability to divide for indefi8 nite periods in culture and give rise to special9 ized cells. 

10 ‘‘(B) LIMITATION.—Human embryonic 

11 stem cells shall be eligible for use in any re12 search supported by a bond issued under this 

13 section if the cells meet each of the following: 

14 ‘‘(i) The stem cells were derived from 

15 human embryos that were donated from in 

16 vitro fertilization clinics, were created sole17 ly for the purposes of fertility treatment, 

18 and were in excess of the clinical need of 

19 the individuals seeking such treatment. 

20 ‘‘(ii) Prior to the consideration of em21 bryo donation and through consultation 

22 with the individuals seeking fertility treat23 ment, it was determined that the embryos 

24 would never be implanted in a woman and 

25 would otherwise be discarded. 
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1 ‘‘(iii) The individuals seeking fertility 

2 treatment donated the embryos with writ3 ten informed consent that the embryos 

4 would be used for research purposes. 

5 ‘‘(iv) Neither the individuals for whom 

6 the embryo was created nor any other per7 son or entity which participated in the fer8 tility treatment through which the embryo 

9 was created received, directly or indirectly, 

10 any monetary incentive or other compensa11 tion with respect to the donation of the 

12 embryo. 

13 ‘‘(3) REPORT ON RESEARCHER ACTIVITIES.—A 

14 bond shall not be treated as a qualified stem cell re15 search bond unless the issue of which such bond is 

16 a part carries a requirement under which any person 

17 who receives proceeds from such issue for a purpose 

18 described in paragraph (1)(A) is obligated to submit 

19 to the issuer an annual report— 

20 ‘‘(A) describing the activities carried out 

21 (in whole or in part) with such proceeds during 

22 the preceding calendar year, and 

23 ‘‘(B) including a description of whether 

24 and to what extent research for a purpose de25 scribed in paragraph (1)(A) has been conducted 
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1 in accordance with the requirements imposed by 

2 the issuer of such bond. 

3 ‘‘(4) CREDIT ALLOWANCE DATE.—The term 

4 ‘credit allowance date’ means— 

5 ‘‘(A) March 15, 

6 ‘‘(B) June 15, 

7 ‘‘(C) September 15, and 

8 ‘‘(D) December 15. 

9 Such term includes the last day on which the bond 

10 is outstanding. 

11 ‘‘(5) BOND.—The term ‘bond’ includes any ob12 ligation. 

13 ‘‘(6) STATE.—The term ‘State’ includes the 

14 District of Columbia and any possession of the 

15 United States. 

16 ‘‘(e) LIMITATION ON AMOUNT OF BONDS DES17 IGNATED.— 

18 ‘‘(1) IN GENERAL.—The maximum aggregate 

19 face amount of bonds issued during any calendar 

20 year which may be designated under subsection (a) 

21 by any issuer shall not exceed the limitation amount 

22 allocated under paragraph (2) for such calendar year 

23 to such issuer. 

24 ‘‘(2) LIMITATION ON AMOUNT ALLOCATED TO

25 AN ISSUER.—Not more than 20 percent of the na-
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1 tional qualified stem cell research bond limitation for 

2 a calendar year may be allocated to an issuer for the 

3 calendar year. For the purposes of the preceding 

4 sentence, a local government within a State shall be 

5 treated as the State. 

6 ‘‘(3) NATIONAL LIMITATION ON AMOUNT OF

7 BONDS DESIGNATED.—There is a national qualified 

8 stem cell research bond limitation for each calendar 

9 year. Such limitation is— 

10 ‘‘(A) $10,000,000,000 for each of the cal11 endar years 2006, 2007, and 2008, and 

12 ‘‘(B) except as provided in subsection (f), 

13 zero after 2008. 

14 ‘‘(4) CARRYOVER OF UNUSED LIMITATION.—If 

15 for any calendar year— 

16 ‘‘(A) the aggregate amount allocated under 

17 paragraph (2), exceeds 

18 ‘‘(B) the amount of bonds issued during 

19 such year which are designated under sub20 section (a) pursuant to such allocation, 

21 the limitation amount under paragraph (3) for the 

22 following calendar year shall be increased by the 

23 amount of such excess. 

24 ‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross 

25 income includes the amount of the credit allowed to the 
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1 taxpayer under this section (determined without regard to 

2 subsection (c)) and the amount so included shall be treat3 ed as interest income. 

4 ‘‘(g) RECAPTURE OF PORTION OF CREDIT WHERE

5 CESSATION OF COMPLIANCE.— 

6 ‘‘(1) IN GENERAL.—If any bond which when 

7 issued purported to be a qualified stem cell research 

8 bond ceases to be a qualified stem cell research 

9 bond, the issuer shall pay to the United States (at 

10 the time required by the Secretary) an amount equal 

11 to the sum of— 

12 ‘‘(A) the aggregate of the credits allowable 

13 under this section with respect to such bond 

14 (determined without regard to subsection (c)) 

15 for taxable years ending during the calendar 

16 year in which such cessation occurs and the 2 

17 preceding calendar years, and 

18 ‘‘(B) interest at the underpayment rate 

19 under section 6621 on the amount determined 

20 under subparagraph (A) for each calendar year 

21 for the period beginning on the first day of 

22 such calendar year. 

23 ‘‘(2) FAILURE TO PAY.—If the issuer fails to 

24 timely pay the amount required by paragraph (1) 

25 with respect to such bond, the tax imposed by this 
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1 chapter on each holder of any such bond which is 

2 part of such issue shall be increased (for the taxable 

3 year of the holder in which such cessation occurs) by 

4 the aggregate decrease in the credits allowed under 

5 this section to such holder for taxable years begin6 ning in such 3 calendar years which would have re7 sulted solely from denying any credit under this sec8 tion with respect to such issue for such taxable 

9 years. 

10 ‘‘(3) SPECIAL RULES.— 

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

12 the taxable year shall be increased under para13 graph (2) only with respect to credits allowed 

14 by reason of this section which were used to re15 duce tax liability. In the case of credits not so 

16 used to reduce tax liability, the carryforwards 

17 and carrybacks under section 39 shall be appro18 priately adjusted. 

19 ‘‘(B) NO CREDITS AGAINST TAX.—Any in20 crease in tax under paragraph (2) shall not be 

21 treated as a tax imposed by this chapter for 

22 purposes of determining— 

23 ‘‘(i) the amount of any credit allow24 able under this part, or 
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1 ‘‘(ii) the amount of the tax imposed 

2 by section 55. 

3 ‘‘(h) BONDS HELD BY REGULATED INVESTMENT

4 COMPANIES.—If any qualified stem cell research bond is 

5 held by a regulated investment company, the credit deter6 mined under subsection (a) shall be allowed to share7 holders of such company under procedures prescribed by 

8 the Secretary. 

9 ‘‘(i) CREDITS MAY BE STRIPPED.—Under regula10 tions prescribed by the Secretary— 

11 ‘‘(1) IN GENERAL.—There may be a separation 

12 (including at issuance) of the ownership of a quali13 fied stem cell research bond and the entitlement to 

14 the credit under this section with respect to such 

15 bond. In case of any such separation, the credit 

16 under this section shall be allowed to the person who 

17 on the credit allowance date holds the instrument ev18 idencing the entitlement to the credit and not to the 

19 holder of the bond. 

20 ‘‘(2) CERTAIN RULES TO APPLY.—In the case 

21 of a separation described in paragraph (1), the rules 

22 of section 1286 shall apply to the qualified stem cell 

23 research bond as if it were a stripped bond and to 

24 the credit under this section as if it were a stripped 

25 coupon. 
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1 ‘‘(j) TREATMENT FOR ESTIMATED TAX PURPOSES.— 

2 Solely for purposes of sections 6654 and 6655, the credit 

3 allowed by this section to a taxpayer by reason of holding 

4 a qualified stem cell research bond on a credit allowance 

5 date shall be treated as if it were a payment of estimated 

6 tax made by the taxpayer on such date. 

7 ‘‘(k) CREDIT MAY BE TRANSFERRED.—Nothing in 

8 any law or rule of law shall be construed to limit the trans9 ferability of the credit allowed by this section through sale 

10 and repurchase agreements. 

11 ‘‘(l) REPORTING.— 

12 ‘‘(1) INITIAL REPORT.—Issuers of qualified 

13 stem cell research bonds shall submit reports similar 

14 to the reports required under section 149(e). 

15 ‘‘(2) ANNUAL REPORTS.—In addition to the re16 port required by paragraph (1), issuers of qualified 

17 stem cell research bonds shall submit a report not 

18 later than March 31 of each year to the Secretary. 

19 Each such report shall include a description of— 

20 ‘‘(A) the activities carried out (in whole or 

21 in part) with the proceeds of such bonds during 

22 the preceding calendar year, and 

23 ‘‘(B) whether and to what extent research 

24 for a purpose described in subsection (d)(1)(A) 
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1 has been conducted in accordance with the re2 quirements imposed by the issuer of such bond. 

3 ‘‘(m) TERMINATION.—This section shall not apply to 

4 any bond issued after September 30, 2008.’’. 

5 (b) REPORTING.—Subsection (d) of section 6049 of 

6 such Code (relating to returns regarding payments of in7 terest) is amended by adding at the end the following new 

8 paragraph: 

9 ‘‘(8) REPORTING OF CREDIT ON QUALIFIED

10 STEM CELL RESEARCH BONDS.— 

11 ‘‘(A) IN GENERAL.—For purposes of sub12 section (a), the term ‘interest’ includes amounts 

13 includible in gross income under section 

14 1400N(f) and such amounts shall be treated as 

15 paid on the credit allowance date (as defined in 

16 section 1400N(d)(3)). 

17 ‘‘(B) REPORTING TO CORPORATIONS, 

18 ETC.—Except as otherwise provided in regula19 tions, in the case of any interest described in 

20 subparagraph (A) of this paragraph, subsection 

21 (b)(4) of this section shall be applied without 

22 regard to subparagraphs (A), (H), (I), (J), (K), 

23 and (L)(i). 

24 ‘‘(C) REGULATORY AUTHORITY.—The Sec25 retary may prescribe such regulations as are 
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1 necessary or appropriate to carry out the pur2 poses of this paragraph, including regulations 

3 which require more frequent or more detailed 

4 reporting.’’. 

5 (c) CONFORMING AMENDMENT.—The table of sub6 chapters for chapter 1 of such Code is amended by adding 

7 at the end the following new item: 

‘‘SUBCHAPTER Z. STEM CELL RESEARCH BONDS’’. 

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

9 this section shall apply to obligations issued after Decem10 ber 31, 2005. 

Æ