26 U.S.C. § 45C | Clinical testing expenses for certain drugs for rare diseases or conditions

(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.

Pub. L. 97–414, § 4(a)Jan. 4, 198396 Stat. 2053 Pub. L. 98–369, div. A, title IVJuly 18, 198498 Stat. 826 Pub. L. 99–514, title IIOct. 22, 1986100 Stat. 2178 Pub. L. 100–647, title I, § 1018(q)(1)Nov. 10, 1988102 Stat. 3585 Pub. L. 101–239, title VII, § 7110(a)(3)Dec. 19, 1989103 Stat. 2323 Pub. L. 101–508, title XINov. 5, 1990104 Stat. 1388–473 Pub. L. 102–227, title IDec. 11, 1991105 Stat. 1686 Pub. L. 103–66, title XIII, § 13111(a)(2)Aug. 10, 1993107 Stat. 420 Pub. L. 104–188, title IAug. 20, 1996110 Stat. 1775 Pub. L. 105–34, title VIAug. 5, 1997111 Stat. 862 Pub. L. 105–115, title I, § 125(b)(2)(O)Nov. 21, 1997111 Stat. 2326 Pub. L. 105–277, div. J, title I, § 1001(b)Oct. 21, 1998112 Stat. 2681–888 Pub. L. 106–170, title V, § 502(a)(2)Dec. 17, 1999113 Stat. 1919 Pub. L. 108–311, title III, § 301(a)(2)Oct. 4, 2004118 Stat. 1178 Pub. L. 109–432, div. A, title I, § 104(a)(2)Dec. 20, 2006120 Stat. 2934 Pub. L. 110–343, div. C, title III, § 301(a)(2)Oct. 3, 2008122 Stat. 3865 Pub. L. 111–312, title VII, § 731(b)Dec. 17, 2010124 Stat. 3317 Pub. L. 112–240, title III, § 301(a)(2)Jan. 2, 2013126 Stat. 2326 Pub. L. 113–295, div. A, title I, § 111(b)Dec. 19, 2014128 Stat. 4014 Pub. L. 114–113, div. Q, title I, § 121(a)(2)Dec. 18, 2015129 Stat. 3049 Pub. L. 115–97, title I, § 13401(a)Dec. 22, 2017131 Stat. 2133 Pub. L. 115–141, div. U, title IV, § 401(a)(17)Mar. 23, 2018132 Stat. 1185 (Added , , , § 44H; renumbered § 28 and amended , §§ 471(c), 474(g), title VI, § 612(e)(1), , , 831, 912; , §§ 231(d)(3)(A), 232, title VII, § 701(c)(2), title XII, § 1275(c)(4), title XVIII, § 1879(b)(1), (2), , , 2180, 2340, 2599, 2905; , title IV, § 4008(c)(1), , , 3653; , , ; , §§ 11402(b)(2), 11411, , , 1388–479; , §§ 102(b), 111(a), , , 1688; , (b), , ; renumbered § 45C and amended , §§ 1204(e), 1205(a)(1), (b), (d)(1), (2), , , 1776; , §§ 601(b)(2), 604(a), , , 863; , , ; , , ; , , ; , , ; , , ; , , ; , , ; , , ; , , ; , , ; , , ; , (d)(1)(D)(iii), , , 1206.)

Editorial Notes

References in Text

Sections 505(b), (i) and 526 of the Federal Food, Drug, and Cosmetic Act, referred to in subsecs. (b)(2)(A) and (d)(1), (2)(B), are classified to sections 355(b), (i) and 360bb, respectively, of Title 21, Food and Drugs.

section 262 of Title 42Section 351 of the Public Health Service Act, referred to in subsec. (b)(2)(A)(ii)(II), is classified to , The Public Health and Welfare.

Amendments

Pub. L. 115–141, § 401(a)(17)2018—Subsec. (b)(2)(A)(ii)(II). , substituted “, and” for “; and”.

Pub. L. 115–141, § 401(d)(1)(D)(iii)Subsec. (d)(2). , struck out subpar. (A) designation and heading, redesignated cls. (i) and (ii) of former subpar. (A) as subpars. (A) and (B), respectively, realigned margins, and struck out former subpar. (B) which related to special limitation for corporations to which former section 936 applied.

Pub. L. 115–972017—Subsec. (a). substituted “25 percent” for “50 percent”.

Pub. L. 114–1132015—Subsec. (b)(1)(D). struck out subpar. (D). Text read as follows: “If section 41 is not in effect for any period, such section shall be deemed to remain in effect for such period for purposes of this paragraph.”

Pub. L. 113–295June 30, 1995July 1, 1996December 31, 20132014—Subsec. (b)(1)(D). amended subpar. (D) generally. Prior to amendment, text read as follows: “For purposes of this paragraph, section 41 shall be deemed to remain in effect for periods after , and before , and periods after .”

Pub. L. 112–240December 31, 2013December 31, 20112013—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 111–312December 31, 2011December 31, 20092010—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 110–343December 31, 2009December 31, 20072008—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 109–4322006—Subsec. (b)(1)(D). substituted “2007” for “2005”.

Pub. L. 108–311December 31, 2005June 30, 20042004—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 106–170June 30, 2004June 30, 19991999—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 105–277June 30, 1999June 30, 19981998—Subsec. (b)(1)(D). substituted “” for “”.

Pub. L. 105–34, § 601(b)(2)June 30, 1998May 31, 19971997—Subsec. (b)(1)(D). , substituted “” for “”.

Pub. L. 105–115Subsec. (b)(2)(A)(ii)(II). struck out “or 507” after “505(b)”.

Pub. L. 105–34, § 604(a)Subsec. (e). , struck out subsec. (e) which read as follows:

Termination“(e) .—This section shall not apply to any amount paid or incurred—

December 31, 1994July 1, 1996“(1) after , and before , or

May 31, 1997“(2) after .”

Pub. L. 104–188, § 1205(a)(1)section 28 of this title1996—, renumbered as this section.

Pub. L. 104–188, § 1205(d)(1)Subsec. (a). , substituted “For purposes of section 38, the credit determined under this section for the taxable year is” for “There shall be allowed as a credit against the tax imposed by this chapter for the taxable year”.

Pub. L. 104–188, § 1204(e)July 1, 1996May 31, 1997June 30, 1995Subsec. (b)(1)(D). , inserted “, and before , and periods after ” after “”.

Pub. L. 104–188, § 1205(d)(2)Limitation based on amount of taxSubsec. (d)(2) to (5). , redesignated pars. (3) to (5) as (2) to (4), respectively, and struck out former par. (2) which read as follows: “.—The credit allowed by this section for any taxable year shall not exceed the excess (if any) of—

“(A) the regular tax (reduced by the sum of the credits allowable under subpart A and section 27), over

“(B) the tentative minimum tax for the taxable year.”

Pub. L. 104–188, § 1205(b)TerminationDecember 31, 1994Subsec. (e). , amended subsec. (e) generally. Prior to amendment, subsec. (e) read as follows: “.—This section shall not apply to any amount paid or incurred after .”

Pub. L. 103–66, § 13111(a)(2)June 30, 1995June 30, 19921993—Subsec. (b)(1)(D). , substituted “” for “”.

Pub. L. 103–66, § 13111(b)December 31, 1994June 30, 1992Subsec. (e). , substituted “” for “”.

Pub. L. 102–227, § 102(b)June 30, 1992December 31, 19911991—Subsec. (b)(1)(D). , substituted “” for “”.

Pub. L. 102–227, § 111(a)June 30, 1992December 31, 1991Subsec. (e). , substituted “” for “”.

Pub. L. 101–508, § 11402(b)(2)December 31, 1991December 31, 19901990—Subsec. (b)(1)(D). , substituted “” for “”.

Pub. L. 101–508, § 11411December 31, 1991December 31, 1990Subsec. (e). , substituted “” for “”.

Pub. L. 101–2391989—Subsec. (b)(1)(D). substituted “1990” for “1989”.

Pub. L. 100–647, § 4008(c)(1)1988—Subsec. (b)(1)(D). , substituted “1989” for “1988”.

Pub. L. 100–647, § 1018(q)(1)Subsec. (b)(2)(A)(ii)(II). , amended subcl. (II) generally. Prior to amendment, subcl. (II) read as follows: “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 Services Act, and”.

Pub. L. 99–514, § 231(d)(3)(A)(i)1986—Subsec. (b)(1). , (iv), substituted “41” for “30” in subpars. (A), (B), and (D), and substituted “1988” for “1985” in subpar. (D).

Pub. L. 99–514, § 1879(b)(1)(A)Subsec. (b)(2)(A)(ii)(I). , substituted “the date such drug” for “the date of such drug”.

Pub. L. 99–514, § 1879(b)(1)(B)Subsec. (b)(2)(A)(ii)(II). , inserted “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 Services Act”.

Pub. L. 99–514, § 231(d)(3)(A)(i)Subsec. (c). , (ii), substituted “41” for “30” in pars. (1) and (2) and “41(b)” for “30(b)” in par. (2).

Pub. L. 99–514, § 1879(b)(2)Subsec. (d)(1). , amended par. (1) generally. Prior to amendment, par. (1) read as follows: “For purposes of this section, the term ‘rare disease or condition’ means any disease or condition which occurs so infrequently in the United States that 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.”

Pub. L. 99–514, § 701(c)(2)Subsec. (d)(2). , amended par. (2) generally. Prior to amendment, par. (2) read as follows: “The credit allowed by this section for any taxable year shall not exceed the taxpayer’s tax liability for the taxable year (as defined in section 26(b)), reduced by the sum of the credits allowable under subpart A and section 27.”

Pub. L. 99–514, § 1275(c)(4)Subsec. (d)(3)(B). , struck out “934(b) or” before “936” in heading and amended text generally. Prior to amendment, text read as follows: “No credit shall be allowed under this section with respect to any clinical testing conducted by a corporation to which section 934(b) applies or to which an election under section 936 applies.”

Pub. L. 99–514, § 231(d)(3)(A)(iii)Subsec. (d)(4). , substituted “section 41(f)” for “section 30(f)”.

Pub. L. 99–514, § 232Subsec. (e). , substituted “1990” for “1987”.

Pub. L. 98–369, § 471(c)section 44H of this title1984—, renumbered as this section.

Pub. L. 98–369, § 474(g)(1)(A)Subsec. (b)(1)(A), (B), (D). , substituted “section 30” for “section 44F”.

Pub. L. 98–369, § 474(g)(1)(A)Subsec. (c)(1). , substituted “section 30” for “section 44F”.

Pub. L. 98–369, § 474(g)(1)(A)Subsec. (c)(2). , (B), substituted “section 30” for “section 44F” and “section 30(b)” for “section 44F(b)”.

Pub. L. 98–369, § 612(e)(1)Subsec. (d)(2). , substituted “section 26(b)” for “section 25(b)”.

Pub. L. 98–369, § 474(g)(2), amended par. (2) generally, substituting “shall not exceed the taxpayer’s tax liability for the taxable year (as defined in section 25(b), reduced by the sum of the credits allowable under subpart A and section 27” for “shall not exceed the amount of the tax imposed by this chapter for the taxable year reduced by the sum of the credits allowable under a section of this subpart having a lower number or letter designation than this section, other than the credits allowable by sections 31, 39, and 43. For purposes of the preceding sentence, the term ‘tax imposed by this chapter’ shall not include any tax treated as not imposed by this chapter under the last sentence of section 53(a)”.

Pub. L. 98–369, § 474(g)(1)(C)Subsec. (d)(4). , substituted “section 30(f)” for “section 44F(f)”.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 13401(c)Dec. 22, 2017131 Stat. 2134

section 280C of this titleDecember 31, 2017“The amendments made by this section [amending this section and ] shall apply to taxable years beginning after .”

, , , provided that:

Effective Date of 2015 Amendment

Pub. L. 114–113Dec. 31, 2014section 121(d)(1) of Pub. L. 114–113 section 38 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2014 Amendment

Pub. L. 113–295Dec. 31, 2013section 111(c) of Pub. L. 113–295 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2013 Amendment

Pub. L. 112–240Dec. 31, 2011section 301(d)(1) of Pub. L. 112–240 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2010 Amendment

Pub. L. 111–312Dec. 31, 2009section 731(c) of Pub. L. 111–312 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2008 Amendment

Pub. L. 110–343Dec. 31, 2007section 301(e)(2) of Pub. L. 110–343 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2006 Amendment

Pub. L. 109–432Dec. 31, 2005section 104(a)(3) of Pub. L. 109–432 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 2004 Amendment

Pub. L. 108–311June 30, 2004section 301(b) of Pub. L. 108–311 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 1999 Amendment

Pub. L. 106–170June 30, 1999section 502(a)(3) of Pub. L. 106–170 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 1998 Amendment

Pub. L. 105–277June 30, 1998section 1001(c) of Pub. L. 105–277 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Effective Date of 1997 Amendment

section 601(b)(2) of Pub. L. 105–34May 31, 1997section 601(c) of Pub. L. 105–34 section 41 of this titleAmendment by applicable to amounts paid or incurred after , see , set out as a note under .

Pub. L. 105–34, title VI, § 604(b)Aug. 5, 1997111 Stat. 863

May 31, 1997“The amendment made by subsection (a) [amending this section] shall apply to amounts paid or incurred after .”

, , , provided that:

Effective Date of 1996 Amendment

section 1204(e) of Pub. L. 104–188June 30, 1996section 1204(f) of Pub. L. 104–188 section 41 of this titleAmendment by applicable to taxable years ending after , and not to be taken into account under section 6654 or 6655 of this title in determining amount of any installment required to be paid for a taxable year beginning in 1997, see , set out as a note under .

Pub. L. 104–188June 30, 1996section 1205(e) of Pub. L. 104–188 section 45K of this titleAmendment by section 1205(a)(1), (b), (d)(1), (2) of applicable to amounts paid or incurred in taxable years ending after , see , set out as a note under .

Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, § 13111(c)Aug. 10, 1993107 Stat. 421

section 41 of this titleJune 30, 1992“The amendments made by this section [amending this section and ] shall apply to taxable years ending after .”

, , , provided that:

Effective Date of 1991 Amendment

Pub. L. 102–227, title I, § 102(c)Dec. 11, 1991105 Stat. 1686

section 41 of this titleDecember 31, 1991“The amendments made by this section [amending this section and ] shall apply to taxable years ending after .”

, , , provided that:

Pub. L. 102–227, title I, § 111(b)Dec. 11, 1991105 Stat. 1689

December 31, 1991“The amendment made by this section [amending this section] shall apply to taxable years ending after .”

, , , provided that:

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11402(c)Nov. 5, 1990104 Stat. 1388–473

section 41 of this title section 41 of this titleDecember 31, 1989“The amendments made by this section [amending this section and and repealing provisions set out as a note under ] shall apply to taxable years beginning after .”

, , , provided that:

Effective Date of 1988 Amendment

section 1018(q)(1) of Pub. L. 100–647 Pub. L. 99–514 section 1019(a) of Pub. L. 100–647 section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, , to which such amendment relates, see , set out as a note under .

section 4008(c)(1) of Pub. L. 100–647Dec. 31, 1988section 4008(d) of Pub. L. 100–647 section 41 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

Effective Date of 1986 Amendment

section 231(d)(3)(A) of Pub. L. 99–514Dec. 31, 1985section 231(g) of Pub. L. 99–514 section 41 of this titleAmendment by applicable to taxable years beginning after , see , set out as a note under .

section 701(c)(2) of Pub. L. 99–514Dec. 31, 1986section 701(f) of Pub. L. 99–514 section 55 of this titleAmendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as an Effective Date note under .

section 1275(c)(4) of Pub. L. 99–514Dec. 31, 1986section 1277 of Pub. L. 99–514 section 931 of this titleAmendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as a note under .

Pub. L. 99–514, title XVIII, § 1879(b)(3)Oct. 22, 1986100 Stat. 2906

December 31, 1982“The amendments made by this subsection [amending this section] shall apply to amounts paid or incurred after , in taxable years ending after such date.”

, , , provided that:

Effective Date of 1984 Amendment

section 474(g) of Pub. L. 98–369Dec. 31, 1983section 475(a) of Pub. L. 98–369 section 21 of this titleAmendment by applicable to taxable years beginning after , and to carrybacks from such years, see , set out as a note under .

section 612(e)(1) of Pub. L. 98–369December 31, 1984December 31, 1984section 612(g) of Pub. L. 98–369 section 25 of this titleAmendment by , applicable to interest paid or accrued after , on indebtedness incurred after , see , set out as an Effective Date note under .

Effective Date

Pub. L. 97–414, § 4(d)Jan. 4, 198396 Stat. 2056

December 31, 1982“The amendments made by this section [enacting this section and amending sections 280C and 6096 of this title] shall apply to amounts paid or incurred after , in taxable years ending after such date.”

, , , provided that:

Savings Provision

section 401(d)(1)(D)(iii) of Pub. L. 115–141Mar. 23, 2018Mar. 23, 2018section 401(e) of Pub. L. 115–141 section 23 of this titleFor provisions that nothing in amendment by be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to , for purposes of determining liability for tax for periods ending after , see , set out as a note under .

Public Law 99–514Applicability of Certain Amendments by in Relation to Treaty Obligations of United States

section 701(c)(2) of Pub. L. 99–514Oct. 22, 1986Pub. L. 100–647 Pub. L. 99–514 Pub. L. 100–647 section 861 of this titleFor applicability of amendment by notwithstanding any treaty obligation of the United States in effect on , with provision that for such purposes any amendment by title I of be treated as if it had been included in the provision of to which such amendment relates, see section 1012(aa)(2), (4) of , set out as a note under .

Plan Amendments Not Required Until January 1, 1989

Pub. L. 99–514Jan. 1, 1989section 1140 of Pub. L. 99–514 section 401 of this titleFor provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after , see , as amended, set out as a note under .