Title: Reinvigorating Antibiotic and Diagnostic Innovation Act of 2017
Policy area: Taxation

Summary:
Reinvigorating Antibiotic and Diagnostic Innovation Act of 2017
This bill amends the Internal Revenue Code to allow tax credits for 50% of the clinical testing expenses for: (1) infectious disease products that are intended to treat a serious or life-threatening infection, including one caused by an antibacterial or antifungal resistant pathogen or a qualifying pathogen listed by the Department of Health and Human Services as having the potential to pose a serious threat to public health; and (2) in-vitro diagnostic devices that identify in less than four hours the presence, concentration, or characteristics of a serious or life-threatening infection.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1840 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 1840

 To amend the Internal Revenue Code of 1986 to allow a credit against 
  tax for clinical testing expenses for qualified infectious disease 
                   drugs and rapid diagnostic tests.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 30, 2017

Mr. Paulsen (for himself, Mr. Thompson of California, Mr. Gene Green of 
 Texas, Mr. Walz, Mr. Rush, and Mr. Shimkus) 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 a credit against 
  tax for clinical testing expenses for qualified infectious disease 
                   drugs and rapid diagnostic tests.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reinvigorating Antibiotic and 
Diagnostic Innovation Act of 2017''.

SEC. 2. CLINICAL TESTING EXPENSES FOR QUALIFIED INFECTIOUS DISEASE 
              PRODUCTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45S. CLINICAL TESTING EXPENSES FOR QUALIFIED INFECTIOUS DISEASE 
              PRODUCTS.

    ``(a) General Rule.--For purposes of section 38, the qualified 
infectious disease product credit determined under this section for the 
taxable year is an amount equal to 50 percent of the qualified clinical 
testing expenses for the taxable year.
    ``(b) Qualified Clinical Testing Expenses.--For purposes of this 
section--
            ``(1) Qualified clinical testing expenses.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified clinical testing 
                expenses' means the amounts which are paid or incurred 
                by the taxpayer during the taxable year which would be 
                described in subsection (b) of section 41 if such 
                subsection were applied with the modifications set 
                forth in subparagraph (B).
                    ``(B) Modifications.--For purposes of subparagraph 
                (A), subsection (b) of section 41 shall be applied--
                            ``(i) by substituting `clinical testing' 
                        for `qualified research' each place it appears 
                        in paragraphs (2) and (3) of such subsection, 
                        and
                            ``(ii) by substituting `100 percent' for 
                        `65 percent' in paragraph (3)(A) of such 
                        subsection.
                    ``(C) Exclusion for amounts funded by grants, 
                etc.--The term `qualified clinical testing expenses' 
                shall not include any amount to the extent such amount 
                is funded by any grant, contract, or otherwise by 
                another person (or any governmental entity).
                    ``(D) Special rule.--For purposes of this 
                paragraph, section 41 shall be deemed to remain in 
                effect for periods after enactment of this section.
            ``(2) Clinical testing.--
                    ``(A) In general.--The term `clinical testing' 
                means any human clinical testing--
                            ``(i) which is carried out under an 
                        exemption for a drug being tested as an 
                        antibiotic or antifungal drug under section 
                        505(i) of the Federal Food, Drug, and Cosmetic 
                        Act (or regulations issued under such section),
                            ``(ii) which occurs before the date on 
                        which an application with respect to such drug 
                        is approved under section 505(b) of such Act 
                        or, if the drug is a biological product, before 
                        the date on which a license for such drug is 
                        issued under section 351 of the Public Health 
                        Service Act, and
                            ``(iii) which is conducted by or on behalf 
                        of the taxpayer to whom exemption under section 
                        505(i) of such Act is granted.
                    ``(B) Testing must be related to use as qualified 
                infectious disease product.--Human clinical testing 
                shall be taken into account under subparagraph (A) only 
                to the extent such testing is related to the use of the 
                drug as a qualified infectious disease product.
    ``(c) Coordination With Credit for Increasing Research 
Expenditures.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        qualified clinical testing expenses 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 for such taxable year.
            ``(2) Expenses included in determining base period research 
        expenses.--Any qualified clinical testing expenses for any 
        taxable year which are qualified research expenses (within the 
        meaning of section 41(b)) shall be taken into account in 
        determining base period research expenses for purposes of 
        applying section 41 to subsequent taxable years.
    ``(d) Definitions and Special Rules.--
            ``(1) Qualified infectious disease product.--For purposes 
        of this section, the term `qualified infectious disease 
        product' means any drug or biological product for human use 
        that--
                    ``(A) is intended to treat a serious or life-
                threatening infection, including those caused by--
                            ``(i) an antibacterial or antifungal 
                        resistant pathogen (including novel or emerging 
                        infectious pathogens), or
                            ``(ii) qualifying pathogens listed by the 
                        Secretary of Health and Human Services under 
                        section 505E(f) of the Federal Food, Drug, and 
                        Cosmetic Act (21 U.S.C. 351 et seq.), and
                    ``(B) is intended to treat an infection for which 
                there is an unmet medical need as defined by the 
                Secretary of Health and Human Services.
            ``(2) Special limitation on foreign testing.--
                    ``(A) In general.--No credit shall be allowed under 
                this section with respect to any clinical testing 
                conducted outside the United States unless--
                            ``(i) such testing is conducted outside the 
                        United States because there is an insufficient 
                        testing population in the United States, and
                            ``(ii) such testing is conducted by a 
                        United States person or by any other person who 
                        is not related to the taxpayer to whom 
                        exemption under section 505(i) of the Federal 
                        Food, Drug, and Cosmetic Act is granted.
                    ``(B) Insufficient testing population.--For 
                purposes of this section, the testing population in the 
                United States is insufficient if there are not within 
                the United States the number of available and 
                appropriate human subjects needed to produce reliable 
                and timely data from the clinical investigation.
            ``(3) Certain rules made applicable.--Rules similar to the 
        rules of paragraphs (1) and (2) of section 41(f) shall apply 
        for purposes of this section.
            ``(4) Election.--This section shall apply to any taxpayer 
        for any taxable year only if such taxpayer elects (at such time 
        and in such manner as the Secretary may by regulations 
        prescribe) to have this section apply for such taxable year.
    ``(e) Transferability.--
            ``(1) In general.--Any taxpayer holding a credit under this 
        section may transfer for valuable consideration unused but 
        otherwise allowable credit for use by a qualified 
        pharmaceutical research taxpayer. A taxpayer that transfers any 
        amount of credit under this section shall file a notification 
        of such transfer to the Secretary in accordance with procedures 
        and forms prescribed by the Secretary.
            ``(2) Use of transferred credit.--Any qualified 
        pharmaceutical research taxpayer that receives credit that has 
        been transferred shall use such credit for the taxable year in 
        which the transfer occurred. Any unused amounts of such credit 
        may be carried back or forward to other taxable years in 
        accordance with section 39.
            ``(3) Definition of qualified pharmaceutical research 
        taxpayer.--For purposes of this section, the term `qualified 
        pharmaceutical research taxpayer' means any domestic 
        corporation the primary mission of which is pharmaceutical 
        research or development.''.
    (b) Made Part of Business Credit.--Section 38(b) of such Code is 
amended by striking ``plus'' at the end of paragraph (35), by striking 
the period at the end of paragraph (36) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(37) the qualified infectious disease product credit 
        determined under section 45S(a).''.
    (c) Clerical Amendments.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45S. Clinical testing expenses for qualified infectious disease 
                            products.''.
    (d) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after the date of the enactment of this 
Act.

SEC. 3. CLINICAL TESTING EXPENSES FOR RAPID INFECTIOUS DISEASES 
              DIAGNOSTIC TESTS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986, as amended by section 2, is 
amended by adding at the end the following new section:

``SEC. 45T. CLINICAL TESTING EXPENSES FOR RAPID INFECTIOUS DISEASES 
              DIAGNOSTIC TESTS.

    ``(a) General Rule.--For purposes of section 38, the credit 
determined under this section for the taxable year is an amount equal 
to 50 percent of the qualified clinical testing expenses for the 
taxable year.
    ``(b) Qualified Clinical Testing Expenses.--For purposes of this 
section--
            ``(1) Qualified clinical testing expenses.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the term `qualified clinical testing 
                expenses' means the amounts which are paid or incurred 
                by the taxpayer during the taxable year which would be 
                described in subsection (b) of section 41 if such 
                subsection were applied with the modifications set 
                forth in subparagraph (B).
                    ``(B) Modifications.--For purposes of subparagraph 
                (A), subsection (b) of section 41 shall be applied--
                            ``(i) by substituting `clinical testing' 
                        for `qualified research' each place it appears 
                        in paragraphs (2) and (3) of such subsection, 
                        and
                            ``(ii) by substituting `100 percent' for 
                        `65 percent' in paragraph (3)(A) of such 
                        subsection.
                    ``(C) Exclusion for amounts funded by grants, 
                etc.--The term `qualified clinical testing expenses' 
                shall not include any amount to the extent such amount 
                is funded by any grant, contract, or otherwise by 
                another person (or any governmental entity).
                    ``(D) Special rule.--For purposes of this 
                paragraph, section 41 shall be deemed to remain in 
                effect for periods after enactment of this section.
            ``(2) Clinical testing.--
                    ``(A) In general.--The term `clinical testing' 
                means any human clinical testing--
                            ``(i) which is carried out under an 
                        exemption for a device being tested under 
                        section 520(g) of the Federal Food, Drug, and 
                        Cosmetic Act (or regulations issued under such 
                        section),
                            ``(ii) which is related only to such use as 
                        a qualified rapid infectious diseases 
                        diagnostic test,
                            ``(iii) which occurs before the date on 
                        which an application with respect to such 
                        device receives premarket approval, if 
                        required, under section 515 of such Act, or 
                        receives clearance, if required, under section 
                        510(k) of such Act, and
                            ``(iv) which is conducted by or on behalf 
                        of the taxpayer to whom the exemption under 
                        section 520(g) of such Act was granted.
    ``(c) Coordination With Credit for Increasing Research 
Expenditures.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        qualified clinical testing expenses 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 for such taxable year.
            ``(2) Expenses included in determining base period research 
        expenses.--Any qualified clinical testing expenses for any 
        taxable year which are qualified research expenses (within the 
        meaning of section 41(b)) shall be taken into account in 
        determining base period research expenses for purposes of 
        applying section 41 to subsequent taxable years.
    ``(d) Definitions and Special Rules.--
            ``(1) Qualified rapid infectious diseases diagnostic 
        test.--For purposes of this section, the term `qualified rapid 
        infectious diseases diagnostic test' means an in-vitro 
        diagnostic (IVD) device that provides results in less than four 
        hours and that is used to identify or detect the presence, 
        concentration, or characteristics of a serious or life-
        threatening infection, including those caused by (1) an 
        antibacterial or antifungal resistant pathogen, including novel 
        or emerging infectious pathogens or (2) qualifying pathogens 
        listed by the Secretary of Health and Human Services under 
        Chapter V (21 U.S.C. 351 et seq.) section 505E(f).
            ``(2) Special limitation on foreign testing.--
                    ``(A) In general.--No credit shall be allowed under 
                this section with respect to any clinical testing 
                conducted outside the United States unless--
                            ``(i) such testing is conducted outside the 
                        United States because there is an insufficient 
                        testing population in the United States, and
                            ``(ii) such testing is conducted by a 
                        United States person or by any other person who 
                        is not related to the taxpayer to whom the 
                        exemption under section 520(g) of Federal Food, 
                        Drug, and Cosmetic Act was granted.
                    ``(B) Insufficient testing population.--For 
                purposes of this section, the testing population in the 
                United States is insufficient if there are not within 
                the United States the number of available and 
                appropriate human subjects needed to produce reliable 
                and timely data from the clinical investigation.
            ``(3) Certain rules made applicable.--Rules similar to the 
        rules of paragraphs (1) and (2) of section 41(f) shall apply 
        for purposes of this section.
            ``(4) Election.--This section shall apply to any taxpayer 
        for any taxable year only if such taxpayer elects (at such time 
        and in such manner as the Secretary may by regulations 
        prescribe) to have this section apply for such taxable year.
    ``(e) Transferability.--
            ``(1) In general.--Any taxpayer holding a credit under this 
        section may transfer for valuable consideration unused but 
        otherwise allowable credit for use by a qualified diagnostics 
        research taxpayer. A taxpayer that transfers any amount of 
        credit under this section shall file a notification of such 
        transfer to the Secretary in accordance with procedures and 
        forms prescribed by the Secretary.
            ``(2) Use of transferred credit.--Any qualified diagnostics 
        research taxpayer that receives credit that has been 
        transferred shall use such credit for the taxable year in which 
        the transfer occurred. Any unused amounts of such credit may be 
        carried back or forward to other taxable years in accordance 
        with section 39.
            ``(3) Definition of qualified diagnostics research 
        taxpayer.--For purposes of this section, the term `qualified 
        diagnostics research taxpayer' means any domestic corporation 
        that derives--
                    ``(A) any gross income from research or development 
                on diagnostic tests used to identify or detect the 
                presence, concentration or characteristics of a serious 
                or life-threatening infectious disease or pathogen; or
                    ``(B) any gross income from research or development 
                on qualified infectious disease products within the 
                meaning given to such term in section 505E(g) of the 
                Federal, Food, Drug, and Cosmetic Act; or
                    ``(C) more than 50 percent of its gross income from 
                activities related to health care.''.
    (b) Made Part of Business Credit.--Section 38(b) of such Code, as 
amended by section 2, is amended by striking ``plus'' at the end of 
paragraph (36), by striking the period at the end of paragraph (37) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(38) the credit determined under section 45T(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code, as amended by 
section 2, is amended by adding at the end the following new item:

``Sec. 45T. Clinical testing expenses for rapid infectious diseases 
                            diagnostic tests.''.
    (d) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after the date of the enactment of this 
Act.
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