I
107TH CONGRESS
2D SESSION
H. R. 4821
To amend the Internal Revenue Code of 1986 to limit the deduction for
advertising of FDA approved prescription drugs by the manufacturer
of such drugs to the level of such manufacturer’s research and develop-
ment expenditures, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 22, 2002
Mr. PALLONE (for himself, Mr. GEPHARDT, Mr. STARK, Mr. WYNN, Mr.
SANDERS, Mr. LANGEVIN, Mr. BERRY, Mr. STRICKLAND, Mr. WEXLER,
Ms. DELAURO, Mr. RODRIGUEZ, Mr. ALLEN, and Mr. BROWN of Ohio)
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 limit the
deduction for advertising of FDA approved prescription
drugs by the manufacturer of such drugs to the level
of such manufacturer’s research and development ex-
penditures, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Fair Advertising and
Increased Research (FAIR) Act’’.
SEC. 2. LIMITATION ON TAX DEDUCTIONS FOR ADVER-
TISING BY FDA PRESCRIPTION DRUG MANU-
FACTURERS.
(a) IN GENERAL.—Part IX of subchapter B of chap-
ter 1 of subtitle A of the Internal Revenue Code of 1986
(relating to items not deductible) is amended by adding
at the end the following:
‘‘SEC. 280I. LIMITATION ON TAX DEDUCTIONS FOR ADVER-
TISING BY FDA PRESCRIPTION DRUG MANU-
FACTURERS.
‘‘(a) IN GENERAL.—No deduction shall be allowed
under this chapter for any taxable year for any expendi-
ture relating to the advertising, promoting, or marketing
(in any medium) of any FDA prescription drug manufac-
tured by the taxpayer to the extent the aggregate amount
of such expenditures exceeds the taxpayer’s aggregate re-
search and development expenditures for such taxable
year.
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) FDA PRESCRIPTION
DRUGS.—The term
‘FDA prescription drug’ means any drug or biologi-
cal approved by the Federal Drug Administration
which requires a prescription of a physician for its
use by an individual.
‘‘(2) RESEARCH AND DEVELOPMENT EXPENDI-
TURES.—The term ‘research and development ex-
penditures’ means any expenditures which may be
treated as expenses under section 174.
‘‘(3) AGGREGATION
RULES.—All members of
the same controlled group of corporations (within
the meaning of section 52(a)) and all persons under
common control (within the meaning of section
52(b)) shall be treated as 1 person.’’.
(b) CONFORMING AMENDMENT.—The table of sec-
tions for such part IX is amended by adding after the
item relating to section 280H the following:
‘‘Sec. 280I. Limitation on tax deductions for advertising by
FDA prescription drug manufacturers.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
(d) TRANSFER TO THE FEDERAL HOSPITAL INSUR-
ANCE TRUST FUND OF RESULTING BUDGETARY SAV-
INGS.—There is appropriated to the Federal Hospital In-
surance Trust Fund established under section 1817 of the
Social Security Act amounts equal to the increase in Fed-
eral revenues resulting from the amendment made by sub-
section (a). Such appropriated amounts shall be trans-
ferred from the general fund of the Treasury on the basis
of estimates of such revenues made by the Secretary of
the Treasury.
Æ