I
106TH CONGRESS
1ST SESSION
H. R. 1039
To amend the Internal Revenue Code of 1986 to provide for a medical
innovation tax credit for clinical testing research expenses attributable
to academic medical centers and other qualified hospital research organi-
zations.
IN THE HOUSE OF REPRESENTATIVES
MARCH 9, 1999
Mr. SAM JOHNSON of Texas (for himself, Mr. LEVIN, Mr. RAMSTAD, Mr.
ENGLISH, Mr. HOUGHTON, Mr. MCNULTY, Ms. DUNN, Mr. HULSHOF,
Mr. FOLEY, Mr. KLECZKA, Mr. CUNNINGHAM, Mr. LUTHER, Mr. SHOWS,
Mr. PRICE of North Carolina, Mr. FROST, Mr. DOOLEY of California, Mr.
MEEHAN, Mr. TALENT, Ms. LOFGREN, Mr. SHERMAN, Ms. KAPTUR, Mr.
CONYERS, Mr. GOSS, Mr. COBURN, Ms. PRYCE of Ohio, Mr. BENTSEN,
Mr. HOSTETTLER, Mr. CROWLEY, Mr. SANDLIN, Mrs. CAPPS, and Mr.
PAUL) 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 provide
for a medical innovation tax credit for clinical testing
research expenses attributable to academic medical cen-
ters and other qualified hospital research organizations.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. CREDIT FOR CLINICAL TESTING RESEARCH EX-
PENSES ATTRIBUTABLE TO CERTAIN QUALI-
FIED ACADEMIC INSTITUTIONS INCLUDING
TEACHING HOSPITALS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
inserting after section 41 the following:
‘‘SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the medical innovation credit determined under this sec-
tion for the taxable year shall be an amount equal to 20
percent of the excess (if any) of—
‘‘(1) the qualified medical innovation expenses
for the taxable year, over
‘‘(2) the medical innovation base period
amount.
‘‘(b) 
QUALIFIED
MEDICAL
INNOVATION
EX-
PENSES.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified medical
innovation expenses’ means the amounts which are
paid or incurred by the taxpayer during the taxable
year directly or indirectly to any qualified academic
institution for clinical testing research activities.
‘‘(2) CLINICAL
TESTING
RESEARCH
ACTIVI-
TIES.—
with an institution of higher education as de-
scribed in section 3304(f).
‘‘(B) TEACHING
HOSPITAL.—A teaching
hospital which—
‘‘(i) is publicly supported or owned by
an 
organization 
described 
in 
section
501(c)(3), and
‘‘(ii) is affiliated with an organization
meeting the requirements of subparagraph
(A).
‘‘(C) FOUNDATION.—A medical research
organization described in section 501(c)(3)
(other than a private foundation) which is affili-
ated with, or owned by—
‘‘(i) an organization meeting the re-
quirements of subparagraph (A), or
‘‘(ii) a teaching hospital meeting the
requirements of subparagraph (B).
‘‘(D) 
CHARITABLE
RESEARCH
HOS-
PITAL.—A hospital that is designated as a can-
cer center by the National Cancer Institute.
‘‘(4) EXCLUSION
FOR
AMOUNTS
FUNDED
BY
GRANTS, ETC.—The term ‘qualified medical innova-
tion expenses’ shall not include any amount to the
extent such amount is funded by any grant, con-
tract, or otherwise by another person (or any gov-
ernmental entity).
‘‘(c) 
MEDICAL
INNOVATION
BASE
PERIOD
AMOUNT.—For purposes of this section, the term ‘medical
innovation base period amount’ means the average annual
qualified medical innovation expenses paid by the taxpayer
during the 3-taxable year period ending with the taxable
year immediately preceding the first taxable year of the
taxpayer beginning after December 31, 1998.
‘‘(d) SPECIAL RULES.—
‘‘(1) LIMITATION ON FOREIGN TESTING.—No
credit shall be allowed under this section with re-
spect to any clinical testing research activities con-
ducted outside the United States.
‘‘(2) CERTAIN
RULES
MADE
APPLICABLE.—
Rules similar to the rules of subsections (f) and (g)
of section 41 shall apply for purposes of this section.
‘‘(3) ELECTION.—This section shall apply to
any taxpayer for any taxable year only if such tax-
payer elects to have this section apply for such tax-
able year.
‘‘(4) COORDINATION
WITH
CREDIT
FOR
IN-
CREASING
RESEARCH
EXPENDITURES
AND
WITH
CREDIT FOR CLINICAL TESTING EXPENSES FOR CER-
TAIN DRUGS FOR RARE DISEASES.—Any qualified
medical innovation expense for a taxable year to
which an election under this section applies shall not
be taken into account for purposes of determining
the credit allowable under section 41 or 45C for
such taxable year.
‘‘(e) TERMINATION.—This section shall not apply to
any expense paid or incurred after the date specified in
section 41(h)(1)(B).’’.
(b) CREDIT TO BE PART OF GENERAL BUSINESS
CREDIT.—
(1) IN GENERAL.—Section 38(b) of such Code
(relating to current year business credits) is amend-
ed by striking ‘‘plus’’ at the end of paragraph (11),
by striking the period at the end of paragraph (12)
and inserting ‘‘, plus’’, and by adding at the end the
following:
‘‘(13) the medical innovation expenses credit
determined under section 41A(a).’’.
(2) TRANSITION RULE.—Section 39(d) of such
Code is amended by adding at the end the following
new paragraph:
‘‘(9) NO CARRYBACK OF SECTION 41A CREDIT
BEFORE
ENACTMENT.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the medical innovation credit determined
under section 41A may be carried back to a taxable
year beginning before January 1, 1999.’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C of
such Code is amended by adding at the end the following
new subsection:
‘‘(d) CREDIT FOR INCREASING MEDICAL INNOVA-
TION EXPENSES.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the qualified medical inno-
vation expenses (as defined in section 41A(b)) other-
wise allowable as a deduction for the taxable year
which is equal to the amount of the credit deter-
mined for such taxable year under section 41A(a).
‘‘(2) CERTAIN RULES TO APPLY.—Rules similar
to the rules of paragraphs (2), (3), and (4) of sub-
section (c) shall apply for purposes of this sub-
section.’’
(d) DEDUCTION FOR UNUSED PORTION OF CRED-
IT.—Section 196(c) of such Code (defining qualified busi-
ness credits) is amended by resdesignating paragraphs (5)
through (8) as paragraphs (6) through (9), respectively,
and by inserting after paragraph (4) the following new
paragraph:
‘‘(5) the medical innovation expenses credit de-
termined under section 41A(a) (other than such
credit determined under the rules of section
280C(d)(2)),’’.
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of such Code is amended by adding after the item relating
to section 41 the following:
‘‘Sec. 41A. Credit for medical innovation expenses.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
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