Title: To amend the Internal Revenue Code of 1986 to provide for credits against tax for domestic medical and drug manufacturing and advanced medical manufacturing equipment.
Policy area: Taxation

Summary:
This bill allows employers tax credits for domestic medical and drug manufacturing expenses and for advanced medical manufacturing equipment.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7767 Introduced in House (IH)]

<DOC>






116th CONGRESS
  2d Session
                                H. R. 7767

   To amend the Internal Revenue Code of 1986 to provide for credits 
 against tax for domestic medical and drug manufacturing and advanced 
                    medical manufacturing equipment.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 23, 2020

 Mr. Wenstrup (for himself and Mr. Arrington) 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 provide for credits 
 against tax for domestic medical and drug manufacturing and advanced 
                    medical manufacturing equipment.

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

SECTION 1. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.

    (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. 45U. DOMESTIC MEDICAL AND DRUG MANUFACTURING CREDIT.

    ``(a) In General.--For purposes of section 38, the domestic medical 
and drug manufacturing credit determined under this section for any 
taxable year is an amount equal to 10.5 percent of the lesser of--
            ``(1) the qualified medical and drug manufacturing income 
        of the taxpayer for the taxable year, or
            ``(2) taxable income of the taxpayer for the taxable year.
    ``(b) Credit Limited to Wages Paid.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) for any taxable year shall not exceed 50 percent 
        of the W-2 wages of the taxpayer for the taxable year.
            ``(2) W-2 wages.--For purposes of this section--
                    ``(A) In general.--The term `W-2 wages' means, with 
                respect to any person for any taxable year of such 
                person, the sum of the amounts described in paragraphs 
                (3) and (8) of section 6051(a) paid by such person with 
                respect to employment of employees by such person 
                during the calendar year ending during such taxable 
                year.
                    ``(B) Limitation to wages attributable to domestic 
                production.--Such term shall not include any amount 
                which is not properly allocable to domestic medical and 
                drug manufacturing gross receipts for purposes of 
                subsection (c)(1).
                    ``(C) Return requirement.--Such term shall not 
                include any amount which is not properly included in a 
                return filed with the Social Security Administration on 
                or before the 60th day after the due date (including 
                extensions) for such return.
            ``(3) Acquisitions, dispositions, and short taxable 
        years.--The Secretary shall provide for the application of this 
        subsection in cases of a short taxable year or where the 
        taxpayer acquires, or disposes of, the major portion of a trade 
        or business or the major portion of a separate unit of a trade 
        or business during the taxable year.
    ``(c) Qualified Medical and Drug Manufacturing Income.--For 
purposes of this section--
            ``(1) In general.--The term `qualified medical and drug 
        manufacturing income' for any taxable year means an amount 
        equal to the excess (if any) of--
                    ``(A) the taxpayer's domestic medical and drug 
                manufacturing gross receipts for the taxable year, over
                    ``(B) the sum of--
                            ``(i) the cost of goods sold that are 
                        allocable to such receipts, and
                            ``(ii) other expenses, losses, or 
                        deductions which are properly allocable to such 
                        receipts.
            ``(2) Allocation method.--The Secretary shall prescribe 
        rules for the proper allocation of items described in paragraph 
        (1)(B) for purposes of determining qualified medical and drug 
        manufacturing income. Such rules shall provide for the proper 
        allocation of items whether or not such items are directly 
        allocable to domestic medical and drug manufacturing gross 
        receipts.
            ``(3) Special rules for determining costs.--
                    ``(A) In general.--For purposes of determining 
                costs under clause (i) of paragraph (1)(B), any item or 
                service brought into the United States shall be treated 
                as acquired by purchase, and its cost shall be treated 
                as not less than its value immediately after it entered 
                the United States.
                    ``(B) Exports for further manufacture.--In the case 
                of any property described in subparagraph (A) that had 
                been exported by the taxpayer for further manufacture, 
                the increase in cost or adjusted basis under 
                subparagraph (A) shall not exceed the difference 
                between the value of the property when exported and the 
                value of the property when brought back into the United 
                States after the further manufacture.
            ``(4) Domestic medical and drug manufacturing gross 
        receipts.--
                    ``(A) In general.--The term `domestic medical and 
                drug manufacturing gross receipts' means the gross 
                receipts of the taxpayer which are derived from any 
                sale, exchange, or other disposition of--
                            ``(i) any active pharmaceutical ingredient, 
                        or
                            ``(ii) any qualified countermeasure,
                which was manufactured or produced by the taxpayer in 
                whole or in significant part within the United States.
                    ``(B) Active pharmaceutical ingredient.--The term 
                `active pharmaceutical ingredient' means any substance 
                or mixture of substances intended to be used in the 
                manufacture of a drug product and (when so used) 
                becomes an active ingredient in the drug product.
                    ``(C) Qualified countermeasure.--The term 
                `qualified countermeasure' has the meaning given such 
                term in section 319F-1(a)(2) of the Public Health 
                Service Act (42 U.S.C. 247d-6a(a)(2)).''
                    ``(D) Partnerships owned by expanded affiliated 
                groups.--For purposes of this paragraph, if all of the 
                interests in the capital and profits of a partnership 
                are owned by members of a single expanded affiliated 
                group at all times during the taxable year of such 
                partnership, the partnership and all members of such 
                group shall be treated as a single taxpayer during such 
                period.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Application of section to pass-thru entities.--
                    ``(A) Partnerships and s corporations.--In the case 
                of a partnership or S corporation--
                            ``(i) this section shall be applied at the 
                        partner or shareholder level,
                            ``(ii) each partner or shareholder shall 
                        take into account such person's allocable share 
                        of each item described in subparagraph (A) or 
                        (B) of subsection (c)(1) (determined without 
                        regard to whether the items described in such 
                        subparagraph (A) exceed the items described in 
                        such subparagraph (B)), and
                            ``(iii) each partner or shareholder shall 
                        be treated for purposes of subsection (b) as 
                        having W-2 wages for the taxable year in an 
                        amount equal to such person's allocable share 
                        of the W-2 wages of the partnership or S 
                        corporation for the taxable year (as determined 
                        under regulations prescribed by the Secretary).
                    ``(B) Trusts and estates.--In the case of a trust 
                or estate--
                            ``(i) the items referred to in subparagraph 
                        (A)(ii) (as determined therein) and the W-2 
                        wages of the trust or estate for the taxable 
                        year, shall be apportioned between the 
                        beneficiaries and the fiduciary (and among the 
                        beneficiaries) under regulations prescribed by 
                        the Secretary, and
                            ``(ii) for purposes of paragraph (2), 
                        adjusted gross income of the trust or estate 
                        shall be determined as provided in section 
                        67(e) with the adjustments described in such 
                        paragraph.
                    ``(C) Regulations.--The Secretary may prescribe 
                rules requiring or restricting the allocation of items 
                and wages under this paragraph and may prescribe such 
                reporting requirements as the Secretary determines 
                appropriate.
            ``(2) Application to individuals.--In the case of an 
        individual, subsection (a)(2) shall be applied by substituting 
        `adjusted gross income' for `taxable income'. For purposes of 
        the preceding sentence, adjusted gross income shall be 
        determined after application of sections 86, 135, 137, 219, 
        221, 222, and 469.
            ``(3) Special rule for affiliated groups.--
                    ``(A) In general.--All members of an expanded 
                affiliated group shall be treated as a single 
                corporation for purposes of this section.
                    ``(B) Expanded affiliated group.--For purposes of 
                this section, the term `expanded affiliated group' 
                means an affiliated group as defined in section 
                1504(a), determined--
                            ``(i) by substituting `more than 50 
                        percent' for `at least 80 percent' each place 
                        it appears, and
                            ``(ii) without regard to paragraphs (2) and 
                        (4) of section 1504(b).
                    ``(C) Allocation of credit.--Except as provided in 
                regulations, the credit under subsection (a) shall be 
                allocated among the members of the expanded affiliated 
                group in proportion to each member's respective amount 
                (if any) of qualified medical and drug manufacturing 
                income.
            ``(4) Trade or business requirement.--This section shall be 
        applied by only taking into account items which are 
        attributable to the actual conduct of a trade or business.
            ``(5) Coordination with minimum tax.--For purposes of 
        determining alternative minimum taxable income under section 
        55, qualified medical and drug manufacturing income shall be 
        determined without regard to any adjustments under sections 56 
        through 59.
            ``(6) Unrelated business taxable income.--For purposes of 
        determining the tax imposed by section 511, subsection 
        (a)(1)(B) shall be applied by substituting `unrelated business 
        taxable income' for `taxable income'.
            ``(7) Regulations.--The Secretary shall prescribe such 
        regulations as are necessary to carry out the purposes of this 
        section, including regulations which prevent more than 1 
        taxpayer from being allowed a credit under this section with 
        respect to any activity described in subsection (c)(4)(A).''.
    (b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of 
such Code is amended by striking ``plus'' at the end of subclause (I), 
by redesignating subclause (II) as subclause (III), and by inserting 
after subclause (I) the following new subclause:
                                    ``(II) the credit allowed under 
                                section 38 for the taxable year which 
                                is properly allocable to the domestic 
                                medical and drug manufacturing credit 
                                determined under section 45U(a), 
                                plus''.
    (c) Part of General Business Credit.--Section 38(b) of such Code is 
amended by striking ``plus'' at the end of paragraph (32), by striking 
the period at the end of paragraph (33) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(34) the domestic medical and drug manufacturing credit 
        determined under section 45U(a).''.
    (d) Credit Allowed Against Alternative Minimum Tax.--Section 
38(c)(4)(B) of such Code is amended by redesignating clauses (x) 
through (xii) as clauses (xi) through (xiii), respectively, and by 
inserting after clause (ix) the following new clause:
                            ``(x) the credit determined under section 
                        45U,''.
    (e) Clerical Amendment.--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. 45U. Domestic medical and drug manufacturing credit.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2020.

SEC. 2. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.

    (a) In General.--Subpart E 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. 48D. QUALIFYING ADVANCED MEDICAL MANUFACTURING EQUIPMENT CREDIT.

    ``(a) In General.--For purposes of section 46, the qualifying 
advanced medical manufacturing equipment credit determined under this 
section for any taxable year is the applicable percentage of the basis 
of any qualifying advanced medical manufacturing equipment placed in 
service during such taxable year.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) 30 percent in the case of equipment which is placed 
        in service before January 1, 2028,
            ``(2) 20 percent in the case of equipment which is placed 
        in service during calendar year 2028,
            ``(3) 10 percent in the case of equipment which is placed 
        in service during calendar year 2029, and
            ``(4) 0 percent in the case of equipment which is placed in 
        service after December 31, 2029.
    ``(c) Qualifying Advanced Medical Manufacturing Equipment.--For 
purposes of this section, the term `qualifying advanced medical 
manufacturing equipment' means property of a character subject to the 
allowance for depreciation--
            ``(1) which is machinery or equipment that is designed and 
        used to manufacture a--
                    ``(A) drug (as such term is defined in section 
                201(g)(1) of the Federal Food, Drug, and Cosmetic Act),
                    ``(B) device (as such term is defined in section 
                201(h) of such Act), or
                    ``(C) biological product (as such term is defined 
                in section 351(i) of the Public Health Service Act),
            ``(2) which has been identified by the Secretary (after 
        consultation with the Secretary of Health and Human Services) 
        as machinery or equipment that--
                    ``(A) incorporates novel technology or uses an 
                established technique or technology in a new or 
                innovative way, or
                    ``(B) that can improve medical product quality, 
                address shortages of medicines, and speed time-to-
                market,
            ``(3) which is placed in service in the United States by 
        the taxpayer, and
            ``(4) with respect to which depreciation is allowable.
    ``(d) Certain Qualified Progress Expenditures Rules Made 
Applicable.--Rules similar to the rules of subsections (c)(4) and (d) 
of section 46 (as in effect on the day before the enactment of the 
Revenue Reconciliation Act of 1990) shall apply for purposes of this 
section.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary to carry out the purposes of this 
section, including regulations which prevent abuse or fraud.''.
    (b) Treatment Under Base Erosion Tax.--Section 59A(b)(1)(B)(ii) of 
such Code, as amended under section 1 of this Act, is further amended 
by striking ``plus'' at the end of subclause (II), by redesignating 
subclause (III) as subclause (IV), and by inserting after subclause 
(II) the following new subclause:
                                    ``(III) the credit allowed under 
                                section 46 for the taxable year which 
                                is properly allocable to the qualifying 
                                advanced medical manufacturing 
                                equipment credit determined under 
                                section 48D(a), plus''.
    (c) Part of Investment Credit.--Section 46 of such Code is amended 
by striking ``and'' at the end of paragraph (5), by striking the period 
at the end of paragraph (6) and inserting ``, and'', and by adding at 
the end the following new paragraph:
            ``(7) the qualifying advanced medical manufacturing 
        equipment credit.''.
    (d) Clerical Amendment.--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. 48D. Qualifying advanced medical manufacturing equipment 
                            credit.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to periods after the date of the enactment of this section under 
rules similar to the rules of section 48(m) of the Internal Revenue 
Code of 1986 (as in effect on the date of the enactment fo the Revenue 
Reconciliation Act of 1990).
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