26Title 26The US tax code, read & explained

26 U.S.C. § 45C

§ 45C. Clinical testing expenses for certain drugs for rare diseases or conditions

787 words · amended 21 times · cited by 3 other sections

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No plain-English explainer yet. Below is the official text. Explainers are being added section by section.

History

Added in 1983 by the Public Law 97-414. Last changed March 23, 2018 by the Consolidated Appropriations Act, 2018.

Every change, newest first (22)
  1. March 23, 2018Consolidated Appropriations Act, 2018
  2. December 22, 2017Tax Cuts and Jobs Act (2017)
  3. December 18, 2015Consolidated Appropriations Act, 2016 (PATH Act)
  4. December 19, 2014Tax Increase Prevention Act of 2014
  5. January 2, 2013American Taxpayer Relief Act of 2012
  6. December 17, 2010Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
  7. October 3, 2008Emergency Economic Stabilization Act of 2008
  8. December 20, 2006Public Law 109-432
  9. October 4, 2004Public Law 108-311
  10. December 17, 1999Public Law 106-170
  11. October 21, 1998Public Law 105-277
  12. November 21, 1997Public Law 105-115
  13. August 5, 1997Taxpayer Relief Act of 1997
  14. August 20, 1996Small Business Job Protection Act of 1996
  15. August 10, 1993Omnibus Budget Reconciliation Act of 1993
  16. December 11, 1991Public Law 102-227
  17. November 5, 1990Omnibus Budget Reconciliation Act of 1990
  18. December 19, 1989Omnibus Budget Reconciliation Act of 1989
  19. November 10, 1988Technical and Miscellaneous Revenue Act of 1988
  20. October 22, 1986Tax Reform Act of 1986
  21. July 18, 1984Deficit Reduction Act of 1984
  22. January 4, 1983Public Law 97-414 · added this section

The law as written

Current through Public Law 119-102. Amendment notes omitted.

Structure

  1. (a) General rule
  2. (b) Qualified clinical testing expenses
  3. (c) Coordination with credit for increasing research expenditures
  4. (d) Definition and special rules
(a) General rule

For purposes of section 38, the credit determined under this section for the taxable year is an amount equal to 25 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).

(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 for a rare disease or condition under section 505(i) of the Federal Food, Drug, and Cosmetic Act (or regulations issued under such section),

(ii)

which occurs—

(I)

after the date such drug is designated under section 526 of such Act, and

(II)

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 the designation under such section 526 applies.

(B) Testing must be related to use for rare disease or condition

Human clinical testing shall be taken into account under subparagraph (A) only to the extent such testing is related to the use of a drug for the rare disease or condition for which it was designated under section 526 of the Federal Food, Drug, and Cosmetic Act.

(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) Definition and special rules
(1) Rare disease or condition

For purposes of this section, the term “rare disease or condition” means any disease or condition which—

(A)

affects less than 200,000 persons in the United States, or

(B)

affects more than 200,000 persons in the United States but for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug.

Determinations under the preceding sentence with respect to any drug shall be made on the basis of the facts and circumstances as of the date such drug is designated under section 526 of the Federal Food, Drug, and Cosmetic Act.

(2) Special limitations on foreign testing

No credit shall be allowed under this section with respect to any clinical testing conducted outside the United States unless—

(A)

such testing is conducted outside the United States because there is an insufficient testing population in the United States, and

(B)

such testing is conducted by a United States person or by any other person who is not related to the taxpayer to whom the designation under section 526 of the Federal Food, Drug, and Cosmetic Act applies.

(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.