‘‘(A) any change in the method of comput-
ing reserves or any other transaction or series
of transactions a principal purpose of which is
the acceleration or deferral of any item in order
to claim the benefits of such exclusion through
the application of this subsection, and
‘‘(B) organizing entities to act as cus-
tomers in order to satisfy any same country re-
quirement under this subsection.’’
(b) 
SPECIAL
RULES
FOR
DEALERS.—Section
954(c)(2)(C) of such Code is amended to read as follows:
‘‘(C) EXCEPTION FOR DEALERS.—Except
as provided by regulations, in the case of a reg-
ular dealer in property (within the meaning of
paragraph (1)(B)), forward contracts, option
contracts, or similar financial instruments (in-
cluding notional principal contracts and all in-
struments referenced to commodities), there
shall not be taken into account in computing
foreign personal holding income—
‘‘(i) any item of income, gain, deduc-
tion, or loss (other than any item described
in subparagraph (A), (E), or (G) of para-
graph (1)) from any transaction (including
hedging transactions) entered into in the
ordinary course of such dealer’s trade or
business as such a dealer, and
‘‘(ii) if such dealer is a dealer in secu-
rities (within the meaning of section 475),
any interest or dividend or equivalent
amount described in subparagraph (E) or
(G) of paragraph (1) from any transaction
(including any hedging transaction or
transaction 
described 
in 
section
956(c)(2)(J)) entered into in the ordinary
course of such dealer’s trade or business as
such a dealer in securities, but only if em-
ployees of the dealer which are located in
the country under the laws of which the
dealer is created or organized (or in the
case of a qualified business unit described
in section 989(a) which both maintains its
principal office and conducts substantial
business activity in a country, employees of
such unit which are located in such coun-
try) materially participate in such trans-
action.’’
(c) EXEMPTION FROM FOREIGN BASE COMPANY
SERVICES INCOME.—Paragraph (2) of section 954(e) of
such Code (as amended by subsection (d)) is amended by
striking ‘‘or’’ at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting
‘‘, or’’, and by adding at the end the following:
‘‘(C)(i) a transaction by the controlled for-
eign corporation if the income from the trans-
action is not foreign personal holding company
income by reason of subsection (h), or
‘‘(ii) a transaction by the controlled foreign
corporation if subsection (c)(2)(C)(ii) applies to
such transaction.’’
(d) REPEAL
OF CANCELED PROVISIONS.—Section
1175 of the Taxpayer Relief Act of 1997, and the amend-
ments made by such section, are hereby repealed, and the
Internal Revenue Code of 1986 shall be applied and ad-
ministered as if such section (and amendments) had never
been enacted.
Subtitle 
B—Credit 
for 
Clinical
Testing Research Expenses At-
tributable to Certain Qualified
Academic Institutions Including
Teaching Hospitals
SEC. 211. 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.—
‘‘(A) IN
GENERAL.—The term ‘clinical
testing research activities’ means human clinical
testing conducted at any qualified academic in-
stitution in the development of any product,
which occurs before—
‘‘(i) the date on which an application
with respect to such product is approved
under section 505(b), 506, or 507 of the
Federal Food, Drug, and Cosmetic Act,
‘‘(ii) the date on which a license for
such product is issued under section 351 of
the Public Health Service Act, or
‘‘(iii) the date classification or ap-
proval of such product which is a device in-
tended for human use is given under sec-
tion 513, 514, or 515 of the Federal Food,
Drug, and Cosmetic Act.
‘‘(B) 
PRODUCT.—The 
term 
‘product’
means any drug, biologic, or medical device.
‘‘(3) QUALIFIED ACADEMIC INSTITUTION.—The
term ‘qualified academic institution’ means any of
the following institutions:
‘‘(A) 
EDUCATIONAL
INSTITUTION.—A
qualified organization described in section
170(b)(1)(A)(iii) which is owned or affiliated
with an institution of higher education as de-
scribed in section 3304(f).
‘‘(B) CHARITABLE RESEARCH HOSPITAL.—
A charitable research hospital which—
‘‘(i) is owned by an organization de-
scribed in section 501(c)(3) and exempt
from taxation under section 501(a),
‘‘(ii) is not a private foundation, and
‘‘(iii) is designated as a cancer 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).