I 
109TH CONGRESS 
1ST SESSION H. R. 1650 
To amend the Internal Revenue Code of 1986 to allow tax credits to holders 
of stem cell research bonds. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 14, 2005 
Mrs. JOHNSON of Connecticut (for herself, Mr. CASTLE, Mr. BOSWELL, Mrs. 
CHRISTENSEN, Ms. LEE, Mr. RAMSTAD, Ms. LORETTA SANCHEZ of Cali-
fornia, Mr. SHAYS, and Mr. SIMMONS) 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 allow tax 
credits to holders of stem cell research bonds. 
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 ‘‘Stem Cell Research 
Investment Act of 2005’’. 
SEC. 2. INCENTIVES FOR STEM CELL RESEARCH. 
(a) IN GENERAL.—Chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subchapter:
‘‘Subchapter Z—Stem Cell Research Bonds 
‘‘Sec. 1400N. Credit to holders of qualified stem cell research bonds. 
‘‘SEC. 1400N. CREDIT TO HOLDERS OF QUALIFIED STEM 
CELL RESEARCH BONDS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of a tax-
payer who holds a qualified stem cell research bond on 
a credit allowance date of such bond which occurs during 
the taxable year, there shall be allowed as a credit against 
the tax imposed by this chapter for such taxable year an 
amount equal to the sum of the credits determined under 
subsection (b) with respect to credit allowance dates dur-
ing such year on which the taxpayer holds such bond. 
‘‘(b) AMOUNT OF CREDIT.— 
‘‘(1) IN GENERAL.—The amount of the credit 
determined under this subsection with respect to any 
credit allowance date for a qualified stem cell re-
search bond is 25 percent of the annual credit deter-
mined with respect to such bond. 
‘‘(2) ANNUAL CREDIT.—The annual credit de-
termined with respect to any qualified stem cell re-
search bond is the product of— 
‘‘(A) the applicable credit rate, multiplied 
by 
‘‘(B) the outstanding face amount of the 
bond.
‘‘(3) APPLICABLE CREDIT RATE.—For purposes 
of paragraph (1), the applicable credit rate with re-
spect to an issue is the rate equal to an average 
market yield (as of the day before the date of 
issuance of the issue) on outstanding long-term cor-
porate debt obligations (determined under regula-
tions prescribed by the Secretary). 
‘‘(4) SPECIAL RULE FOR ISSUANCE AND RE-
DEMPTION.—In the case of a bond which is issued 
during the 3-month period ending on a credit allow-
ance date, the amount of the credit determined 
under this subsection with respect to such credit al-
lowance date shall be a ratable portion of the credit 
otherwise determined based on the portion of the 3- 
month period during which the bond is outstanding. 
A similar rule shall apply when the bond is re-
deemed. 
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.— 
‘‘(1) IN GENERAL.—The credit allowed under 
subsection (a) for any taxable year shall not exceed 
the excess of— 
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over
‘‘(B) the sum of the credits allowed under 
part IV of subchapter A (other than subpart C 
thereof, relating to refundable credits). 
‘‘(2) CARRYOVER OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) exceeds the 
limitation imposed by paragraph (1) for such taxable 
year, such excess shall be carried to the succeeding 
taxable year and added to the credit allowable under 
subsection (a) for such taxable year. 
‘‘(d) QUALIFIED STEM CELL RESEARCH BOND; 
CREDIT ALLOWANCE DATE.—For purposes of this sec-
tion— 
‘‘(1) 
QUALIFIED
STEM
CELL
RESEARCH 
BOND.—The term ‘qualified stem cell research bond’ 
means any bond issued as part of an issue if— 
‘‘(A) 95 percent or more of the proceeds of 
such issue are to be used for interdisciplinary 
scientific and medical research relating to stem 
cells, therapy development relating to stem 
cells, and development of pharmacologies and 
treatments through clinical trials relating to 
stem cells, 
‘‘(B) the bond is issued by a State or local 
government,
‘‘(C) the issuer designates such bond for 
purposes of this section, and 
‘‘(D) the term of each bond which is part 
of such issue does not exceed 30 years. 
‘‘(2) STEM CELL.— 
‘‘(A) IN GENERAL.—The term ‘stem cell’ 
means a cell with the ability to divide for indefi-
nite periods in culture and give rise to special-
ized cells. 
‘‘(B) 
LIMITATION.—Human 
embryonic 
stem cells shall be eligible for use in any re-
search supported by a bond issued under this 
section if the cells meet each of the following: 
‘‘(i) The stem cells were derived from 
human embryos that were donated from in 
vitro fertilization clinics, were created sole-
ly for the purposes of fertility treatment, 
and were in excess of the clinical need of 
the individuals seeking such treatment. 
‘‘(ii) Prior to the consideration of em-
bryo donation and through consultation 
with the individuals seeking fertility treat-
ment, it was determined that the embryos 
would never be implanted in a woman and 
would otherwise be discarded.
‘‘(iii) The individuals seeking fertility 
treatment donated the embryos with writ-
ten informed consent that the embryos 
would be used for research purposes. 
‘‘(iv) Neither the individuals for whom 
the embryo was created nor any other per-
son or entity which participated in the fer-
tility treatment through which the embryo 
was created received, directly or indirectly, 
any monetary incentive or other compensa-
tion with respect to the donation of the 
embryo. 
‘‘(3) REPORT ON RESEARCHER ACTIVITIES.—A 
bond shall not be treated as a qualified stem cell re-
search bond unless the issue of which such bond is 
a part carries a requirement under which any person 
who receives proceeds from such issue for a purpose 
described in paragraph (1)(A) is obligated to submit 
to the issuer an annual report— 
‘‘(A) describing the activities carried out 
(in whole or in part) with such proceeds during 
the preceding calendar year, and 
‘‘(B) including a description of whether 
and to what extent research for a purpose de-
scribed in paragraph (1)(A) has been conducted
in accordance with the requirements imposed by 
the issuer of such bond. 
‘‘(4) CREDIT
ALLOWANCE
DATE.—The term 
‘credit allowance date’ means— 
‘‘(A) March 15, 
‘‘(B) June 15, 
‘‘(C) September 15, and 
‘‘(D) December 15. 
Such term includes the last day on which the bond 
is outstanding. 
‘‘(5) BOND.—The term ‘bond’ includes any ob-
ligation. 
‘‘(6) STATE.—The term ‘State’ includes the 
District of Columbia and any possession of the 
United States. 
‘‘(e) LIMITATION
ON AMOUNT
OF BONDS DES-
IGNATED.— 
‘‘(1) IN
GENERAL.—The maximum aggregate 
face amount of bonds issued during any calendar 
year which may be designated under subsection (a) 
by any issuer shall not exceed the limitation amount 
allocated under paragraph (2) for such calendar year 
to such issuer. 
‘‘(2) LIMITATION ON AMOUNT ALLOCATED TO 
AN ISSUER.—Not more than 20 percent of the na-
tional qualified stem cell research bond limitation for 
a calendar year may be allocated to an issuer for the 
calendar year. For the purposes of the preceding 
sentence, a local government within a State shall be 
treated as the State. 
‘‘(3) NATIONAL
LIMITATION
ON
AMOUNT
OF 
BONDS DESIGNATED.—There is a national qualified 
stem cell research bond limitation for each calendar 
year. Such limitation is— 
‘‘(A) $10,000,000,000 for each of the cal-
endar years 2006, 2007, and 2008, and 
‘‘(B) except as provided in subsection (f), 
zero after 2008. 
‘‘(4) CARRYOVER OF UNUSED LIMITATION.—If 
for any calendar year— 
‘‘(A) the aggregate amount allocated under 
paragraph (2), exceeds 
‘‘(B) the amount of bonds issued during 
such year which are designated under sub-
section (a) pursuant to such allocation, 
the limitation amount under paragraph (3) for the 
following calendar year shall be increased by the 
amount of such excess. 
‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross 
income includes the amount of the credit allowed to the
taxpayer under this section (determined without regard to 
subsection (c)) and the amount so included shall be treat-
ed as interest income. 
‘‘(g) RECAPTURE OF PORTION OF CREDIT WHERE 
CESSATION OF COMPLIANCE.— 
‘‘(1) IN GENERAL.—If any bond which when 
issued purported to be a qualified stem cell research 
bond ceases to be a qualified stem cell research 
bond, the issuer shall pay to the United States (at 
the time required by the Secretary) an amount equal 
to the sum of— 
‘‘(A) the aggregate of the credits allowable 
under this section with respect to such bond 
(determined without regard to subsection (c)) 
for taxable years ending during the calendar 
year in which such cessation occurs and the 2 
preceding calendar years, and 
‘‘(B) interest at the underpayment rate 
under section 6621 on the amount determined 
under subparagraph (A) for each calendar year 
for the period beginning on the first day of 
such calendar year. 
‘‘(2) FAILURE TO PAY.—If the issuer fails to 
timely pay the amount required by paragraph (1) 
with respect to such bond, the tax imposed by this
chapter on each holder of any such bond which is 
part of such issue shall be increased (for the taxable 
year of the holder in which such cessation occurs) by 
the aggregate decrease in the credits allowed under 
this section to such holder for taxable years begin-
ning in such 3 calendar years which would have re-
sulted solely from denying any credit under this sec-
tion with respect to such issue for such taxable 
years. 
‘‘(3) SPECIAL RULES.— 
‘‘(A) TAX
BENEFIT
RULE.—The tax for 
the taxable year shall be increased under para-
graph (2) only with respect to credits allowed 
by reason of this section which were used to re-
duce tax liability. In the case of credits not so 
used to reduce tax liability, the carryforwards 
and carrybacks under section 39 shall be appro-
priately adjusted. 
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under paragraph (2) shall not be 
treated as a tax imposed by this chapter for 
purposes of determining— 
‘‘(i) the amount of any credit allow-
able under this part, or
‘‘(ii) the amount of the tax imposed 
by section 55. 
‘‘(h) BONDS HELD
BY REGULATED INVESTMENT 
COMPANIES.—If any qualified stem cell research bond is 
held by a regulated investment company, the credit deter-
mined under subsection (a) shall be allowed to share-
holders of such company under procedures prescribed by 
the Secretary. 
‘‘(i) CREDITS MAY BE STRIPPED.—Under regula-
tions prescribed by the Secretary— 
‘‘(1) IN GENERAL.—There may be a separation 
(including at issuance) of the ownership of a quali-
fied stem cell research bond and the entitlement to 
the credit under this section with respect to such 
bond. In case of any such separation, the credit 
under this section shall be allowed to the person who 
on the credit allowance date holds the instrument ev-
idencing the entitlement to the credit and not to the 
holder of the bond. 
‘‘(2) CERTAIN RULES TO APPLY.—In the case 
of a separation described in paragraph (1), the rules 
of section 1286 shall apply to the qualified stem cell 
research bond as if it were a stripped bond and to 
the credit under this section as if it were a stripped 
coupon.