I 
109TH CONGRESS 
1ST SESSION H. R. 4082 
To permit biomedical research corporations to engage in certain financings 
and other transactions without incurring limitations on net operating 
loss carryforwards and certain built-in losses, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 19, 2005 
Ms. HART (for herself, Mr. NEAL of Massachusetts, Mr. REYNOLDS, Mr. 
ENGLISH of Pennsylvania, Mr. HAYWORTH, and Mr. GERLACH) intro-
duced the following bill; which was referred to the Committee on Ways 
and Means 
A BILL 
To permit biomedical research corporations to engage in 
certain financings and other transactions without incur-
ring limitations on net operating loss carryforwards and 
certain built-in losses, 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 ‘‘Biotechnology Future 
Investment Expansion Act of 2005’’.
SEC. 2. RESTORING THE BENEFIT OF TAX INCENTIVES FOR 
BIOMEDICAL 
RESEARCH 
AND 
CLINICAL 
TRIALS. 
(a) IN GENERAL.—Subsection (l) of section 382 of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following new paragraph: 
‘‘(9) CERTAIN
FINANCING
TRANSACTIONS
OF 
BIOMEDICAL RESEARCH CORPORATIONS.— 
‘‘(A) GENERAL RULE.—In the case of a 
biomedical research corporation, any owner 
shift involving a 5-percent shareholder which 
occurs as the result of a qualified investment or 
qualified transaction during the testing period 
shall be treated for purposes of this section 
(other than this paragraph) as occurring before 
the testing period. 
‘‘(B) BIOMEDICAL
RESEARCH
CORPORA-
TION.—For purposes of this paragraph, the 
term ‘biomedical research corporation’ means, 
with respect to any qualified investment, any 
domestic corporation subject to tax under this 
subchapter which is not in bankruptcy and 
which, as of the time of the closing on such in-
vestment— 
‘‘(i) holds the rights to a drug or bio-
logic for which an investigational new drug
application is in effect under section 505 
of the Federal Food, Drug, and Cosmetic 
Act, and 
‘‘(ii) certifies that, as of the time of 
such closing, the drug or biologic is, or in 
the 3 month period before and after such 
closing has been, under study pursuant to 
an investigational use exemption under sec-
tion 505(i) of the Federal Food, Drug, and 
Cosmetic Act. 
‘‘(C) QUALIFIED INVESTMENT.—For pur-
poses of this paragraph, the term ‘qualified in-
vestment’ means any acquisition of stock by a 
shareholder (who after such acquisition is a less 
than 50 percent shareholder) in a biomedical 
research corporation if such stock is acquired at 
its original issue (directly or through an under-
writer) solely in exchange for cash. 
‘‘(D) QUALIFIED TRANSACTION.—For pur-
poses of this paragraph, the term ‘qualified 
transaction’ means any acquisition of stock in a 
biomedical research corporation if such stock is 
acquired as part of a merger or acquisition by 
another biomedical research corporation that is 
a loss corporation. If the acquiring loss corpora-
tion is a member of a controlled group of cor-
porations under section 1563(a), the group 
must be a loss group. 
‘‘(E) STOCK
ISSUED
IN
EXCHANGE
FOR 
CONVERTIBLE
DEBT.—For purposes of this 
paragraph, stock issued by a biomedical re-
search corporation in exchange for its convert-
ible debt (or stock deemed under this section to 
be so issued) shall be treated as stock acquired 
by the debt holder at its original issue and sole-
ly in exchange for cash if the debt holder pre-
viously acquired the convertible debt at its 
original issue and solely in exchange for cash. 
In the case of an acquisition of stock in ex-
change for convertible debt, the requirements of 
this paragraph shall be applied separately as of 
the time of closing on the investment in con-
vertible debt, and as of the time of actual con-
version (or deemed conversion under this sec-
tion) of the convertible debt for stock. 
‘‘(F) BIOMEDICAL
RESEARCH
CORPORA-
TION MUST MEET 3-YEAR EXPENDITURE AND 
CONTINUITY
OF
BUSINESS
TESTS
WITH
RE-
SPECT TO ANY QUALIFIED INVESTMENT.—
‘‘(i) IN
GENERAL.—This paragraph 
shall not apply to a qualified investment or 
transaction in a biomedical research cor-
poration unless such corporation meets the 
expenditure test for each year of the meas-
uring period and the continuity of business 
test. 
‘‘(ii) MEASURING PERIOD.—For pur-
poses of this subparagraph, the term 
‘measuring period’ means, with respect to 
any qualified investment or transaction, 
the taxable year of the biomedical research 
corporation in which the closing on the in-
vestment occurs, and the 2 preceding tax-
able years. 
‘‘(iii) EXPENDITURE
TEST.—A bio-
medical research corporation meets the ex-
penditure test of this subparagraph for a 
taxable year if at least 35 percent of its ex-
penditures for the taxable year (including, 
for purposes of this clause, payments in re-
demption of its stock) are expenditures de-
scribed in section 41(b) or clinical and pre-
clinical expenditures.
‘‘(iv) 
CONTINUITY
OF
BUSINESS 
TEST.—A biomedical research corporation 
meets the continuity of business test if, at 
all times during the 2-year period following 
a qualified investment or transaction, such 
corporation continues the business enter-
prise of such corporation. 
‘‘(G) EFFECT
OF
CORPORATE
REDEMP-
TIONS
ON
QUALIFIED
INVESTMENTS.—Rules 
similar to the rules of section 1202(c)(3) shall 
apply to qualified investments under this para-
graph except that ‘stock acquired in a qualified 
investment’ shall be substituted for ‘qualified 
small business stock’ each place it appears 
therein. 
‘‘(H) EFFECT
OF
OTHER
TRANSACTIONS 
BETWEEN
BIOMEDICAL
RESEARCH
CORPORA-
TIONS AND INVESTORS MAKING QUALIFIED IN-
VESTMENTS.— 
‘‘(i) IN GENERAL.—If, during the 2- 
year period beginning 1 year before any 
qualified investment, the biomedical re-
search corporation engages in another 
transaction with a member of its qualified 
investment group and such biomedical re-
search corporation receives any consider-
ation other than cash in such transaction, 
there shall be a presumption that stock re-
ceived in the otherwise qualified investment 
transaction was not received solely in ex-
change for cash. 
‘‘(ii) 
QUALIFIED
INVESTMENT 
GROUP.—For purposes of this subpara-
graph, the term ‘qualified investment 
group’ means, with respect to any qualified 
investment, one or more persons who re-
ceive stock issued in exchange for the 
qualified investment, and any person re-
lated to such persons within the meaning 
of section 267(b) or section 707(b). 
‘‘(iii) REGULATIONS.—The Secretary 
shall promulgate regulations exempting 
from this subparagraph transactions which 
are customary in the bioscience research 
industry and are of minor value relative to 
the amount of the qualified investment. 
‘‘(I) REGULATIONS.—The Secretary may 
issue such regulations as may be appropriate to 
achieve the purposes of this paragraph, to pre-
vent abuse, and to provide for treatment of bio-
medical research corporations under sections 
383 and 384 that is consistent with the pur-
poses of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of enactment of this Act. 
Æ