I

106TH CONGRESS

1ST SESSION H. R. 1274

To amend the Internal Revenue Code of 1986 to provide a credit for medical

research related to developing vaccines against widespread diseases.

IN THE HOUSE OF REPRESENTATIVES

MARCH 24, 1999

Ms. PELOSI (for herself, Mr. RANGEL, Ms. ESHOO, Ms. KILPATRICK, Mr.

LEWIS of Georgia, MCDERMOTT, Mr. MCNULTY, Mr. MATSUI, and Ms.

WOOLSEY) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Commerce, for a period to be subsequently determined by the Speaker, in

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to provide

a credit for medical research related to developing vaccines against widespread diseases.

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 ‘‘Lifesaving Vaccine

5 Technology Act of 1999’’.
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1 SEC. 2. CREDIT FOR MEDICAL RESEARCH RELATED TO DE2 VELOPING VACCINES AGAINST WIDESPREAD

3 DISEASES.

4 (a) IN GENERAL.—Subpart D of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of

6 1986 (relating to business related credits) is amended by

7 adding at the end the following new section:

8 ‘‘SEC. 45D. CREDIT FOR MEDICAL RESEARCH RELATED TO

9 DEVELOPING VACCINES AGAINST WIDE10 SPREAD DISEASES.

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

12 the vaccine research credit determined under this section

13 for the taxable year is an amount equal to 30 percent of

14 the qualified vaccine research expenses for the taxable

15 year.

16 ‘‘(b) QUALIFIED VACCINE RESEARCH EXPENSES.—

17 For purposes of this section—

18 ‘‘(1) QUALIFIED VACCINE RESEARCH EX19 PENSES.—

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

21 provided in this paragraph, the term ‘qualified

22 vaccine research expenses’ means the amounts

23 which are paid or incurred by the taxpayer dur24 ing the taxable year which would be described

25 in subsection (b) of section 41 if such sub-
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1 section were applied with the modifications set

2 forth in subparagraph (B).

3 ‘‘(B) MODIFICATIONS.—For purposes of

4 subparagraph (A), subsection (b) of section 41

5 shall be applied—

6 ‘‘(i) by substituting ‘vaccine research’

7 for ‘qualified research’ each place it ap8 pears in paragraphs (2) and (3) of such

9 subsection, and

10 ‘‘(ii) by substituting ‘75 percent’ for

11 ‘65 percent’ in paragraph (3)(A) of such

12 subsection.

13 ‘‘(C) EXCLUSION FOR AMOUNTS FUNDED

14 BY GRANTS, ETC.—The term ‘qualified vaccine

15 research expenses’ shall not include any amount

16 to the extent such amount is funded by any

17 grant, contract, or otherwise by another person

18 (or any governmental entity).

19 ‘‘(2) VACCINE RESEARCH.—The term ‘vaccine

20 research’ means research to develop vaccines and

21 microbicides for—

22 ‘‘(A) malaria,

23 ‘‘(B) tuberculosis,

24 ‘‘(C) HIV, or
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1 ‘‘(D) any infectious disease (of a single eti2 ology) which, according to the World Health

3 Organization, causes over 1,000,000 human

4 deaths annually.

5 ‘‘(c) COORDINATION WITH CREDIT FOR INCREASING

6 RESEARCH EXPENDITURES.—

7 ‘‘(1) IN GENERAL.—Except as provided in para8 graph (2), any qualified vaccine research expenses

9 for a taxable year to which an election under this

10 section applies shall not be taken into account for

11 purposes of determining the credit allowable under

12 section 41 for such taxable year.

13 ‘‘(2) EXPENSES INCLUDED IN DETERMINING

14 BASE PERIOD RESEARCH EXPENSES.—Any qualified

15 vaccine research expenses for any taxable year which

16 are qualified research expenses (within the meaning

17 of section 41(b)) shall be taken into account in de18 termining base period research expenses for pur19 poses of applying section 41 to subsequent taxable

20 years.

21 ‘‘(d) SPECIAL RULES.—

22 ‘‘(1) LIMITATIONS ON FOREIGN TESTING.—No

23 credit shall be allowed under this section with re24 spect to any vaccine research (other than human

25 clinical testing) conducted outside the United States.
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1 ‘‘(2) CERTAIN RULES MADE APPLICABLE.—

2 Rules similar to the rules of paragraphs (1) and (2)

3 of section 41(f) shall apply for purposes of this sec4 tion.

5 ‘‘(3) ELECTION.—This section (other than sub6 section (e)) shall apply to any taxpayer for any tax7 able year only if such taxpayer elects to have this

8 section apply for such taxable year.

9 ‘‘(e) SHAREHOLDER EQUITY INVESTMENT CREDIT

10 IN LIEU OF RESEARCH CREDIT.—

11 ‘‘(1) IN GENERAL.—For purposes of section 38,

12 the vaccine research credit determined under this

13 section for the taxable year shall include an amount

14 equal to 20 percent of the amount paid by the tax15 payer to acquire qualified research stock in a cor16 poration if—

17 ‘‘(A) the amount received by the corpora18 tion for such stock is used within 18 months

19 after the amount is received to pay qualified

20 vaccine research expenses of the corporation for

21 which a credit would (but for subparagraph (B)

22 and subsection (d)(3)) be determined under this

23 section, and

24 ‘‘(B) the corporation waives its right to the

25 credit determined under this section for the
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1 qualified vaccine research expenses which are

2 paid with such amount.

3 ‘‘(2) QUALIFIED RESEARCH STOCK.—For pur4 poses of paragraph (1), the term ‘qualified research

5 stock’ means any stock in a C corporation—

6 ‘‘(A) which is originally issued after the

7 date of the enactment of the Lifesaving Vaccine

8 Technology Act of 1999,

9 ‘‘(B) which is acquired by the taxpayer at

10 its original issue (directly or through an under11 writer) in exchange for money or other property

12 (not including stock), and

13 ‘‘(C) as of the date of issuance, such cor14 poration meets the gross assets tests of sub15 paragraphs (A) and (B) of section 1202(d)(1).’’

16 (b) INCLUSION IN GENERAL BUSINESS CREDIT.—

17 (1) IN GENERAL.—Section 38(b) of such Code

18 is amended by striking ‘‘plus’’ at the end of para19 graph (11), by striking the period at the end of

20 paragraph (12) and inserting ‘‘, plus’’, and by add21 ing at the end the following new paragraph:

22 ‘‘(13) the vaccine research credit determined

23 under section 45D.’’.
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1 (2) TRANSITION RULE.—Section 39(d) of such

2 Code is amended by adding at the end the following

3 new paragraph:

4 ‘‘(9) NO CARRYBACK OF SECTION 45D CREDIT

5 BEFORE ENACTMENT.—No portion of the unused

6 business credit for any taxable year which is attrib7 utable to the vaccine research credit determined

8 under section 45D may be carried back to a taxable

9 year ending before the date of the enactment of sec10 tion 45D.’’.

11 (c) DENIAL OF DOUBLE BENEFIT.—Section 280C of

12 such Code is amended by adding at the end the following

13 new subsection:

14 ‘‘(d) CREDIT FOR QUALIFIED VACCINE RESEARCH

15 EXPENSES.—

16 ‘‘(1) IN GENERAL.—No deduction shall be al17 lowed for that portion of the qualified vaccine re18 search expenses (as defined in section 45D(b)) oth19 erwise allowable as a deduction for the taxable year

20 which is equal to the amount of the credit deter21 mined for such taxable year under section 45D(a).

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

23 to the rules of paragraphs (2), (3), and (4) of sub24 section (c) shall apply for purposes of this sub25 section.’’.
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1 (d) DEDUCTION FOR UNUSED PORTION OF CRED2 IT.—Section 196(c) of such Code (defining qualified busi3 ness credits) is amended by striking ‘‘and’’ at the end of

4 paragraph (7), by striking the period at the end of para5 graph (8) and inserting ‘‘, and’’, and by adding at the

6 end the following new paragraph:

7 ‘‘(9) the vaccine research credit determined

8 under section 45D(a) (other than such credit deter9 mined under the rules of section 280C(d)(2)).’’.

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

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

12 of such Code is amended by adding at the end the fol13 lowing new item:

‘‘Sec. 45D. Credit for medical research related to developing vaccines against widespread diseases.’’.

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

15 this section shall apply to taxable years ending after the

16 date of the enactment of this Act.

17 (g) DISTRIBUTION OF VACCINES DEVELOPED USING

18 CREDIT.—It is the sense of the Congress that if credit

19 is allowed under section 45D of the Internal Revenue Code

20 of 1986 to any corporation or shareholder of a corporation

21 by reason of vaccine research expenses incurred by the

22 corporation in the development of a vaccine, such corpora23 tion should certify to the Secretary of the Treasury that,

24 within 1 year after that vaccine is first licensed, such cor-
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1 poration will establish a good faith plan utilizing tech2 nology transfer, differential pricing, in-country produc3 tion, or other mechanisms to maximize international ac4 cess to high quality and affordable vaccines. The preceding

5 sentence shall not be construed to waive rights to set

6 prices, patent ownership, or confidentiality of privileged

7 information.

8 (h) STUDY.—The Institute of Medicine shall conduct

9 a study of the effectiveness of the credit under section 45D

10 of the Internal Revenue Code of 1986 in stimulating vac11 cine research. Not later than the date which is 5 years

12 after the date of the enactment of this Act, the Institute

13 of Medicine shall submit to the Congress the results of

14 such study together with any recommendations it may

15 have to improve the effectiveness of such credit in stimu16 lating vaccine research.

17 SEC. 3. SENSE OF CONGRESS.

18 (a) ACCELERATION OF INTRODUCTION OF PRIORITY

19 VACCINES.—It is the sense of Congress that the President

20 and Federal agencies (including the Department of State,

21 the Department of Health and Human Services, and the

22 Department of the Treasury) should work together in vig23 orous support of the creation and funding of a multi-lat24 eral, international effort, such as a vaccine purchase fund,

25 to accelerate the introduction of vaccines to which the
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1 credit under section 45D of the Internal Revenue Code

2 of 1986 applies and of other priority vaccines into the

3 poorest countries in the world.

4 (b) FLEXIBLE PRICING.—It is the sense of Congress

5 that flexible or differential pricing for vaccines, providing

6 lowered prices for the poorest countries, is one of several

7 valid strategies to accelerate the introduction of vaccines

8 in developing countries.

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