II

106TH CONGRESS

1ST SESSION S. 1718

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

research related to developing vaccines against widespread diseases.

IN THE SENATE OF THE UNITED STATES

OCTOBER 12, 1999

Mr. KERRY (for himself and Mr. DURBIN) introduced the following bill; which

was read twice and referred to the Committee on Finance

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’’.

6 SEC. 2. CREDIT FOR MEDICAL RESEARCH RELATED TO DE7 VELOPING VACCINES AGAINST WIDESPREAD

8 DISEASES.

9 (a) IN GENERAL.—Subpart D of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of
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1 1986 (relating to business related credits) is amended by

2 adding at the end the following new section:

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

4 DEVELOPING VACCINES AGAINST WIDE5 SPREAD DISEASES.

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

7 the vaccine research credit determined under this section

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

9 the qualified vaccine research expenses for the taxable

10 year.

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

12 For purposes of this section—

13 ‘‘(1) QUALIFIED VACCINE RESEARCH EX14 PENSES.—

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

16 provided in this paragraph, the term ‘qualified

17 vaccine research expenses’ means the amounts

18 which are paid or incurred by the taxpayer dur19 ing the taxable year which would be described

20 in subsection (b) of section 41 if such sub21 section were applied with the modifications set

22 forth in subparagraph (B).

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

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

25 shall be applied—
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1 ‘‘(i) by substituting ‘vaccine research’

2 for ‘qualified research’ each place it ap3 pears in paragraphs (2) and (3) of such

4 subsection, and

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

6 ‘65 percent’ in paragraph (3)(A) of such

7 subsection.

8 ‘‘(C) EXCLUSION FOR AMOUNTS FUNDED

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

10 research expenses’ shall not include any amount

11 to the extent such amount is funded by any

12 grant, contract, or otherwise by another person

13 (or any governmental entity).

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

15 research’ means research to develop vaccines and

16 microbicides for—

17 ‘‘(A) malaria,

18 ‘‘(B) tuberculosis, or

19 ‘‘(C) HIV.

20 ‘‘(c) COORDINATION WITH CREDIT FOR INCREASING

21 RESEARCH EXPENDITURES.—

22 ‘‘(1) IN GENERAL.—Except as provided in para23 graph (2), any qualified vaccine research expenses

24 for a taxable year to which an election under this

25 section applies shall not be taken into account for
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1 purposes of determining the credit allowable under

2 section 41 for such taxable year.

3 ‘‘(2) EXPENSES INCLUDED IN DETERMINING

4 BASE PERIOD RESEARCH EXPENSES.—Any qualified

5 vaccine research expenses for any taxable year which

6 are qualified research expenses (within the meaning

7 of section 41(b)) shall be taken into account in de8 termining base period research expenses for pur9 poses of applying section 41 to subsequent taxable

10 years.

11 ‘‘(d) SPECIAL RULES.—

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

13 credit shall be allowed under this section with re14 spect to any vaccine research (other than human

15 clinical testing) conducted outside the United States

16 by any entity which is not registered with the Sec17 retary.

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

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

20 of section 41(f) shall apply for purposes of this sec21 tion.

22 ‘‘(3) ELECTION.—This section (other than sub23 section (e)) shall apply to any taxpayer for any tax24 able year only if such taxpayer elects to have this

25 section apply for such taxable year.
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1 ‘‘(e) SHAREHOLDER EQUITY INVESTMENT CREDIT

2 IN LIEU OF RESEARCH CREDIT.—

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

4 the vaccine research credit determined under this

5 section for the taxable year shall include an amount

6 equal to 20 percent of the amount paid by the tax7 payer to acquire qualified research stock in a cor8 poration if—

9 ‘‘(A) the amount received by the corpora10 tion for such stock is used within 18 months

11 after the amount is received to pay qualified

12 vaccine research expenses of the corporation for

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

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

15 section, and

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

17 credit determined under this section for the

18 qualified vaccine research expenses which are

19 paid with such amount.

20 ‘‘(2) QUALIFIED RESEARCH STOCK.—For pur21 poses of paragraph (1), the term ‘qualified research

22 stock’ means any stock in a C corporation—

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

24 date of the enactment of the Lifesaving Vaccine

25 Technology Act of 1999,
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1 ‘‘(B) which is acquired by the taxpayer at

2 its original issue (directly or through an under3 writer) in exchange for money or other property

4 (not including stock), and

5 ‘‘(C) as of the date of issuance, such cor6 poration meets the gross assets tests of sub7 paragraphs (A) and (B) of section 1202(d)(1).’’

8 (b) INCLUSION IN GENERAL BUSINESS CREDIT.—

9 (1) IN GENERAL.—Section 38(b) of the Internal

10 Revenue Code of 1986 (relating to current year

11 business credit) is amended by striking ‘‘plus’’ at the

12 end of paragraph (11), by striking the period at the

13 end of paragraph (12) and inserting ‘‘, plus’’, and

14 by adding at the end the following new paragraph:

15 ‘‘(13) the vaccine research credit determined

16 under section 45D.’’.

17 (2) TRANSITION RULE.—Section 39(d) of such

18 Code (relating to transitional rules) is amended by

19 adding at the end the following new paragraph:

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

21 BEFORE ENACTMENT.—No portion of the unused

22 business credit for any taxable year which is attrib23 utable to the vaccine research credit determined

24 under section 45D may be carried back to a taxable
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1 year ending before the date of the enactment of sec2 tion 45D.’’.

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

4 the Internal Revenue Code of 1986 (relating to certain

5 expenses for which credits are allowable) is amended by

6 adding at the end the following new subsection:

7 ‘‘(d) CREDIT FOR QUALIFIED VACCINE RESEARCH

8 EXPENSES.—

9 ‘‘(1) IN GENERAL.—No deduction shall be al10 lowed for that portion of the qualified vaccine re11 search expenses (as defined in section 45D(b)) oth12 erwise allowable as a deduction for the taxable year

13 which is equal to the amount of the credit deter14 mined for such taxable year under section 45D(a).

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

16 to the rules of paragraphs (2), (3), and (4) of sub17 section (c) shall apply for purposes of this sub18 section.’’.

19 (d) DEDUCTION FOR UNUSED PORTION OF CRED20 IT.—Section 196(c) of the Internal Revenue Code of 1986

21 (defining qualified business credits) is amended by strik22 ing ‘‘and’’ at the end of paragraph (7), by striking the

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

24 and by adding at the end the following new paragraph:
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1 ‘‘(9) the vaccine research credit determined

2 under section 45D(a) (other than such credit deter3 mined under the rules of section 280C(d)(2)).’’.

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

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

6 of the Internal Revenue Code of 1986 is amended by add7 ing at the end the following new item:

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

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

9 this section shall apply to taxable years ending after the

10 date of the enactment of this Act.

11 (g) DISTRIBUTION OF VACCINES DEVELOPED USING

12 CREDIT.—It is the sense of Congress that if a tax credit

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

14 of 1986 to any corporation or shareholder of a corporation

15 by reason of vaccine research expenses incurred by the

16 corporation in the development of a vaccine, such corpora17 tion should certify to the Secretary of the Treasury that,

18 within 1 year after that vaccine is first licensed, such cor19 poration will establish a good faith plan to maximize inter20 national access to high quality and affordable vaccines.

21 (h) STUDY.—The Secretary of the Treasury, in con22 sultation with the Institute of Medicine, shall conduct a

23 study of the effectiveness of the credit under section 45D

24 of the Internal Revenue Code of 1986 in stimulating vac-
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1 cine research. Not later than the date which is 4 years

2 after the date of the enactment of this Act, the Secretary

3 shall submit to the Congress the results of such study to4 gether with any recommendations the Secretary may have

5 to improve the effectiveness of such credit in stimulating

6 vaccine research.

7 SEC. 3. SENSE OF CONGRESS.

8 (a) ACCELERATION OF INTRODUCTION OF PRIORITY

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

10 and Federal agencies (including the Department of State,

11 the Department of Health and Human Services, and the

12 Department of the Treasury) should work together in vig13 orous support of the creation and funding of a multi-lat14 eral, international effort, such as a vaccine purchase fund,

15 to accelerate the introduction of vaccines to which the tax

16 credit under section 45D of the Internal Revenue Code

17 of 1986 applies and of other priority vaccines into the

18 poorest countries in the world.

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

20 that flexible or differential pricing for vaccines, providing

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

22 valid strategies to accelerate the introduction of vaccines

23 in developing countries.

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