I

107TH CONGRESS

1ST SESSION H. R. 1504

To amend the Internal Revenue Code of 1986 to allow a credit against

income tax for research related to developing vaccines against widespread

diseases and ensure that such vaccines are affordable and widely distributed.

IN THE HOUSE OF REPRESENTATIVES

APRIL 4, 2001

Ms. PELOSI (for herself, Ms. DUNN, Mr. RANGEL, Mr. MCDERMOTT, Mrs.

MORELLA, Mrs. CHRISTENSEN, Mr. FOLEY, Mr. LEWIS of Georgia, Mr.

TOWNS, Mr. DEUTSCH, Mr. SERRANO, Ms. WOOLSEY, Mr. JEFFERSON,

Mr. FILNER, Mr. MCNULTY, Ms. ROYBAL-ALLARD, Mr. LANTOS, Mr.

ENGLISH, Mrs. THURMAN, Ms. DELAURO, Ms. MILLENDER-MCDONALD,

and Mr. WYNN) introduced the following bill; which was referred to the

Committee on Ways and Means, and in addition to the Committees on

Energy and Commerce, and International Relations, 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 allow a

credit against income tax for research related to developing vaccines against widespread diseases and ensure

that such vaccines are affordable and widely distributed.

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

2 This Act may be cited as the ‘‘Vaccines for the New

3 Millennium Act of 2001’’.

4 SEC. 2. CREDIT FOR MEDICAL RESEARCH RELATED TO DE5 VELOPING VACCINES AGAINST WIDESPREAD

6 DISEASES.

7 (a) IN GENERAL.—Subpart D of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of

9 1986 (relating to business related credits) is amended by

10 adding at the end the following new section:

11 ‘‘SEC. 45E. CREDIT FOR MEDICAL RESEARCH RELATED TO

12 DEVELOPING VACCINES AGAINST WIDE13 SPREAD DISEASES.

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

15 the vaccine research credit determined under this section

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

17 the qualified vaccine research expenses for the taxable

18 year.

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

20 For purposes of this section—

21 ‘‘(1) QUALIFIED VACCINE RESEARCH EX22 PENSES.—

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

24 provided in this paragraph, the term ‘qualified

25 vaccine research expenses’ means the amounts

26 which are paid or incurred by the taxpayer dur-
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1 ing the taxable year which would be described

2 in subsection (b) of section 41 if such sub3 section were applied with the modifications set

4 forth in subparagraph (B).

5 ‘‘(B) MODIFICATIONS; INCREASED INCEN6 TIVE FOR CONTRACT RESEARCH PAYMENTS.—

7 For purposes of subparagraph (A), subsection

8 (b) of section 41 shall be applied—

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

10 for ‘qualified research’ each place it ap11 pears in paragraphs (2) and (3) of such

12 subsection, and

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

14 ‘65 percent’ in paragraph (3)(A) of such

15 subsection.

16 ‘‘(C) EXCLUSION FOR AMOUNTS FUNDED

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

18 research expenses’ shall not include any amount

19 to the extent such amount is funded by any

20 grant, contract, or otherwise by another person

21 (or any governmental entity).

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

23 research’ means research to develop vaccines and

24 microbicides for—

25 ‘‘(A) malaria,
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1 ‘‘(B) tuberculosis,

2 ‘‘(C) HIV, or

3 ‘‘(D) any infectious disease (of a single eti4 ology) which, according to the World Health

5 Organization, causes over 1,000,000 human

6 deaths annually.

7 ‘‘(c) COORDINATION WITH CREDIT FOR INCREASING

8 RESEARCH EXPENDITURES.—

9 ‘‘(1) IN GENERAL.—Except as provided in para10 graph (2), any qualified vaccine research expenses

11 for a taxable year to which an election under this

12 section applies shall not be taken into account for

13 purposes of determining the credit allowable under

14 section 41 for such taxable year.

15 ‘‘(2) EXPENSES INCLUDED IN DETERMINING

16 BASE PERIOD RESEARCH EXPENSES.—Any qualified

17 vaccine research expenses for any taxable year which

18 are qualified research expenses (within the meaning

19 of section 41(b)) shall be taken into account in de20 termining base period research expenses for pur21 poses of applying section 41 to subsequent taxable

22 years.

23 ‘‘(d) SPECIAL RULES.—

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

25 credit shall be allowed under this section with re-
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1 spect to any vaccine research (other than human

2 clinical testing) conducted outside the United States.

3 ‘‘(2) PRE-CLINICAL RESEARCH.—No credit shall

4 be allowed under this section for pre-clinical re5 search unless such research is pursuant to a re6 search plan an abstract of which has been filed with

7 the Secretary before the beginning of such year. The

8 Secretary, in consultation with the Secretary of

9 Health and Human Services, shall prescribe regula10 tions specifying the requirements for such plans and

11 procedures for filing under this paragraph.

12 ‘‘(3) CERTAIN RULES MADE APPLICABLE.—

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

14 of section 41(f) shall apply for purposes of this sec15 tion.

16 ‘‘(4) ELECTION.—This section (other than sub17 section (e)) shall apply to any taxpayer for any tax18 able year only if such taxpayer elects to have this

19 section apply for such taxable year.

20 ‘‘(e) CREDIT TO BE REFUNDABLE FOR CERTAIN

21 TAXPAYERS.—

22 ‘‘(1) IN GENERAL.—In the case of an electing

23 qualified taxpayer—

24 ‘‘(A) the credit under this section shall be

25 determined without regard to section 38(c), and
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1 ‘‘(B) the credit so determined be allowed

2 under subpart C.

3 ‘‘(2) ELECTING QUALIFIED TAXPAYER.—For

4 purposes of this subsection, the term ‘electing quali5 fied taxpayer’ means, with respect to any taxable

6 year, any domestic C corporation if—

7 ‘‘(A) the aggregate gross assets of such

8 corporation throughout such taxable year are

9 $500,000,000 or less,

10 ‘‘(B) the net income tax (as defined in sec11 tion 38(c)) of such corporation is zero for such

12 taxable year and the 2 preceding taxable year,

13 ‘‘(C) as of the close of the taxable year, the

14 corporation is not under the jurisdiction of a

15 court in a title 11 or similar case (within the

16 meaning of section 368(a)(3)(A)), and

17 ‘‘(D) the corporation elects the application

18 of this subsection for such taxable year.

19 ‘‘(3) AGGREGATE GROSS ASSETS.—Aggregate

20 gross assets shall be determined under section

21 1202(d).

22 ‘‘(4) CONTROLLED GROUPS.—A corporation

23 shall be treated as meeting the requirement of para24 graph (2)(B) only if each person who is treated with

25 such corporation as a single employer under sub-
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1 sections (a) and (b) of section 52 also meets such re2 quirement.’’

3 (b) INCLUSION IN GENERAL BUSINESS CREDIT.—

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

5 is amended by striking ‘‘plus’’ at the end of para6 graph (12), by striking the period at the end of

7 paragraph (13) and inserting ‘‘, plus’’, and by add8 ing at the end the following new paragraph:

9 ‘‘(14) the vaccine research credit determined

10 under section 45E.’’.

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

12 Code is amended by adding at the end the following

13 new paragraph:

14 ‘‘(10) NO CARRYBACK OF SECTION 45E CREDIT

15 BEFORE ENACTMENT.—No portion of the unused

16 business credit for any taxable year which is attrib17 utable to the vaccine research credit determined

18 under section 45E may be carried back to a taxable

19 year ending before the date of the enactment of sec20 tion 45E.’’.

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

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

23 new subsection:

24 ‘‘(d) CREDIT FOR QUALIFIED VACCINE RESEARCH

25 EXPENSES.—
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1 ‘‘(1) IN GENERAL.—No deduction shall be al2 lowed for that portion of the qualified vaccine re3 search expenses (as defined in section 45E(b)) oth4 erwise 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 45E(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) of such Code (defining qualified busi13 ness credits) is amended by striking ‘‘and’’ at the end of

14 paragraph (8), by striking the period at the end of para15 graph (9) and inserting ‘‘, and’’, and by adding at the

16 end the following new paragraph:

17 ‘‘(10) the vaccine research credit determined

18 under section 45E(a) (other than such credit deter19 mined under the rules of section 280C(d)(2)).’’.

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

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

22 of such Code is amended by adding at the end the fol23 lowing new item:

‘‘Sec. 45E. Credit for medical research related to developing vaccines against widespread diseases.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years ending after the

3 date of the enactment of this Act.

4 (g) STUDY.—The Institute of Medicine shall conduct

5 a study of the degree to which the credit under section

6 45E of the Internal Revenue Code of 1986 has stimulated

7 vaccine research. Not later than the date which is 5 years

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

9 of Medicine shall submit to the Congress the results of

10 such study together with any recommendations it may

11 have to improve the effectiveness of such credit has stimu12 lated vaccine research.

13 SEC. 3. CREDIT FOR CERTAIN SALES OF LIFESAVING VAC14 CINES.

15 (a) IN GENERAL.—Subpart D of part IV of sub16 chapter A of chapter 1 of the Internal Revenue Code of

17 1986 (relating to business related credits) is amended by

18 adding at the end the following new section:

19 ‘‘SEC. 45F. CREDIT FOR CERTAIN SALES OF LIFESAVING

20 VACCINES.

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

22 lifesaving vaccine sale credit determined under this section

23 with respect to a taxpayer for the taxable year is an

24 amount equal to the amount of qualified vaccine sales for

25 the taxable year.
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1 ‘‘(b) QUALIFIED VACCINE SALES.—For purposes of

2 this section—

3 ‘‘(1) IN GENERAL.—The term ‘qualified vaccine

4 sales’ means the aggregate amount paid to the tax5 payer for a qualified sale.

6 ‘‘(2) QUALIFIED SALE.—

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

8 sale’ means a sale of a qualified vaccine—

9 ‘‘(i) to a nonprofit organization or to

10 a government of any foreign country (or

11 instrumentality of such a government), and

12 ‘‘(ii) for distribution in a developing

13 country.

14 ‘‘(B) DEVELOPING COUNTRY.—For pur15 poses of this paragraph, the term ‘developing

16 country’ means a country which the Secretary

17 determines to be a country with a lower middle

18 income or less (as such term is used by the

19 International Bank for Reconstruction and De20 velopment).

21 ‘‘(3) QUALIFIED VACCINE.—The term ‘qualified

22 vaccine’ means any vaccine and microbicide—

23 ‘‘(A) which is described in section

24 45E(b)(3)(C), and
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1 ‘‘(B) which is approved as a new drug

2 after the date of the enactment of this para3 graph by—

4 ‘‘(i) the Food and Drug Administra5 tion,

6 ‘‘(ii) the World Health Organization,

7 or

8 ‘‘(iii) the appropriate authority of a

9 county included in the list under section

10 802(b)(1) of the Federal Food, Drug, and

11 Cosmetic Act.

12 ‘‘(c) LIMIT ON AMOUNT OF CREDIT.—The maximum

13 amount of the credit allowable under subsection (a) with

14 respect to a sale shall not exceed the portion of the limita15 tion amount allocated under subsection (d) with respect

16 to such sale.

17 ‘‘(d) NATIONAL LIMITATION ON AMOUNT OF CRED18 ITS.—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (3), there is a lifesaving vaccine sale credit for

21 each calendar year equal to—

22 ‘‘(A) $100,000,000 for each of years 2002

23 through 2006, and

24 ‘‘(B) $125,000,000 for each of years 2007

25 through 2010.
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1 ‘‘(2) ALLOCATION OF LIMITATION.—The limita2 tion amount under paragraph (1) shall be allocated

3 for any calendar year by the Administrator of the

4 United States Agency for International Development

5 among organizations with an application approved

6 by the Administrator. The Administrator shall pre7 scribe the procedures for applications for an alloca8 tion under this subsection and the factors to be

9 taken into account in making such allocations. Such

10 applications shall be made at such time and in such

11 form and manner as the Administrator shall pre12 scribe and shall include a detailed plan for distribu13 tion of the vaccine.

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

15 the limitation amount under paragraph (1) for any

16 calendar year exceeds the aggregate amount allo17 cated under paragraph (2), such limitation for the

18 following calendar year shall be increased by the

19 amount of such excess. No amount may be carried

20 under the preceding sentence to any calendar year

21 after 2020.

22 ‘‘(e) SPECIAL RULES.—For purposes of this section,

23 rules similar to the rules of section 41(f)(2) shall apply.’’

24 (b) INCLUSION IN GENERAL BUSINESS CREDIT.—
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1 (1) IN GENERAL.—Section 38(b) of such Code

2 (relating to current year business credit) is amended

3 by striking ‘‘plus’’ at the end of paragraph (13), by

4 striking the period at the end of paragraph (14) and

5 inserting ‘‘, plus’’, and by adding at the end the fol6 lowing new paragraph:

7 ‘‘(15) the lifesaving vaccine sale credit deter8 mined under section 45F.’’.

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

10 Code (relating to transitional rules) is amended by

11 adding at the end the following new paragraph:

12 ‘‘(11) NO CARRYBACK OF SECTION 45F CREDIT

13 BEFORE ENACTMENT.—No portion of the unused

14 business credit for any taxable year which is attrib15 utable to the lifesaving vaccine sale credit deter16 mined under section 45F may be carried back to a

17 taxable year ending before the date of the enactment

18 of section 45F.’’.

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

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

21 of such Code is amended by adding at the end the fol22 lowing new item:

‘‘Sec. 45F. Credit for certain sales of lifesaving vaccines.’’.

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

24 this section shall apply to sales of vaccines after December

25 31, 2001, in taxable years ending after such date.
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1 SEC. 4. LIFESAVING VACCINE PURCHASE FUND.

2 (a) PURPOSE.—It is the purpose of this section to—

3 (1) create incentives for private sector research

4 into vaccines for HIV, malaria, tuberculosis, and

5 other major infectious diseases; and

6 (2) ensure that vaccines for major infectious

7 diseases are affordable and widely distributed.

8 (b) DEFINITIONS.—In this section:

9 (1) DEVELOPING COUNTRY.—The term ‘‘devel10 oping country’’ means a country which the Inter11 national Bank for Reconstruction and Development

12 (commonly referred to as the ‘World Bank’) deter13 mines to be a country with a lower middle income

14 or less.

15 (2) ELIGIBLE VACCINE.—The term ‘‘eligible

16 vaccine’’ has the meaning given the term ‘‘qualified

17 vaccine’’ in section 45F(b)(3) of the Internal Rev18 enue Code of 1986.

19 (c) ESTABLISHMENT OF FUND.—As of the date that

20 the Secretary of the Treasury (in this section referred to

21 as the ‘‘Secretary’’) determines that any eligible vaccine

22 is available for purchase, there is established in the Treas23 ury of the United States a fund to be known as the ‘‘Life24 saving Vaccine Purchase Fund’’ (in this section referred

25 to as the ‘‘Fund’’) consisting of amounts appropriated

26 under subsection (f).
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1 (d) INVESTMENT OF FUND.—Amounts in the Fund

2 shall be invested in accordance with section 9702 of title

3 31, United States Code, and any interest on, and proceeds

4 from any such investment shall be credited to and become

5 part of the Fund.

6 (e) USE OF FUND.—

7 (1) IN GENERAL.—The Secretary is authorized

8 to expend amounts in the Fund for purchases of eli9 gible vaccines. Such vaccines shall be distributed to

10 developing countries.

11 (2) PURCHASE AND DISTRIBUTION OF VAC12 CINES.—

13 (1) PURCHASE PRICES, ETC.—Vaccines pur14 chased by the Fund—

15 (A) shall be made at prices which take into

16 account the seller’s research and development

17 and manufacturing costs and the desirability of

18 the vaccine purchased, and

19 (B) shall be made under a funding formula

20 establishing a minimum price per dose and min21 imum technical requirements and a market test

22 requirement for the eligible vaccine.

23 (3) DISTRIBUTION.—Eligible vaccines pur24 chased by the Fund shall be distributed to devel25 oping countries under agreements between the
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1 United States Agency for International Development

2 and international organizations or recipient devel3 oping countries that provide for—

4 (A) consideration of the prevalence of the

5 disease treated by the eligible vaccine in the re6 cipient developing country;

7 (B) consideration of the ability of the re8 cipient country to effectively and safely deliver

9 the vaccines; and

10 (C) a required matching payment by the

11 recipient developing country based on the per

12 capita income of the country, in an amount not

13 in excess of 25 percent of the purchase price

14 paid for such vaccine.

15 (4) REGULATIONS.—The Secretary shall pro16 mulgate such regulations as are necessary to carry

17 out the provisions of this subsection.

18 (5) CONSULTATION.—The Secretary shall pro19 mulgate regulations under paragraph (4) after ex20 tensive consultation with—

21 (A) the International Bank for Reconstruc22 tion and Development (commonly referred to as

23 the ‘‘World Bank’’);

24 (B) the World Health Organization;
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1 (C) the Secretary of Health and Human

2 Services; and

3 (D) the Lifesaving Vaccine Advisory Com4 mission.

5 (f) APPROPRIATIONS.—

6 (1) IN GENERAL.—Subject to paragraph (2),

7 there are appropriated out of any funds in the

8 Treasury not otherwise appropriated such sums as

9 may be necessary to carry out the purposes of the

10 Fund for each of 10 fiscal years beginning with the

11 first fiscal year after the date that the Secretary de12 termines that any eligible vaccine is available for

13 purchase by the Fund.

14 (2) TRANSFER TO FUND.—The Secretary shall

15 transfer the amount appropriated under paragraph

16 (1) for a fiscal year to the Fund.

17 (3) AVAILABILITY.—Amounts appropriated

18 under this section shall remain available until ex19 pended.

20 SEC. 5. SENSES OF CONGRESS.

21 It is the sense of Congress that:

22 (1) MANUFACTURING CAPACITY.—Delivery of

23 vaccines to developing country populations is often

24 delayed a decade or more after these products are li25 censed for use in industrialized nations. This delay
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1 is due partly to inadequate manufacturing capacity

2 that limits supply of vaccines in the early years of

3 their distribution. The public sector has a role to

4 play in ensuring that manufacturing capacity for

5 vaccines for the priority diseases referred to in sec6 tion 45E(b)(2) of the Internal Revenue Code of

7 1986 (as added by this Act) is sufficient to secure

8 access to these vaccines simultaneously in industri9 alized and developing countries. It is appropriate for

10 the Federal government to consider a variety of

11 mechanisms in order to ensure adequate manufac12 turing capacity to meet this goal. These mechanisms

13 may include loan programs, accelerated depreciation,

14 revenue bonds, or infrastructure grants.

15 (2) DISTRIBUTION OF VACCINES DEVELOPED

16 USING CREDIT.—Given the important goal of ensur17 ing that all those in need, in both industrialized and

18 developing countries, reap the benefits of any vac19 cine or microbicide that is developed for HIV, tuber20 culosis, or malaria, and acknowledging the impor21 tance of intellectual property rights and the right of

22 corporations and shareholders of corporations to set

23 prices, retain patent ownership, and maintain con24 fidentiality of privileged information, corporations

25 and shareholders of corporations who elect to take
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1 the credit under section 45E of the Internal Revenue

2 Code of 1986 for research expenses incurred in the

3 development of a vaccine or microbicide shall certify

4 to the Secretary of the Treasury that, within 1 year

5 after that vaccine or microbicide is first licensed,

6 such corporation will establish a plan to maximize

7 distribution of such vaccine or microbicide in the de8 veloping world using such mechanisms as technology

9 transfer, differential pricing, and in-country produc10 tion where possible, or other mechanisms to maxi11 mize international access to high quality and afford12 able vaccines.

13 (3) CONTINUED SUPPORT OF GLOBAL EF14 FORTS.—The Federal government should continue

15 supporting the work of the Global Alliance for Vac16 cines and Immunizations and the Global Fund for

17 Children’s Vaccines as an appropriate and effective

18 vehicle to purchase and distribute these vaccines at

19 an affordable price once they are discovered in order

20 to distribute them to the developing world, as it does

21 with vaccines against hepatitis-B, haemophilus influ22 enza, and yellow fewer.

23 (4) TIERED PRICING.—Flexible or differential

24 pricing for vaccines, providing lowered prices for the

25 poorest countries, is one of several valid strategies to
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1 accelerate the introduction of vaccines in developing

2 countries.

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