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.

I 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. DOMESTIC MEDICAL AND DRUG MANUFAC- 3 TURING CREDIT. 4 (a) IN GENERAL.—Subpart D of part IV of sub- 5 chapter A of chapter 1 of the Internal Revenue Code of 6 1986 is amended by adding at the end the following new 7 section: 8 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 7767 IH ‘‘SEC. 45U. DOMESTIC MEDICAL AND DRUG MANUFAC- 1 TURING CREDIT. 2 ‘‘(a) IN GENERAL.—For purposes of section 38, the 3 domestic medical and drug manufacturing credit deter- 4 mined under this section for any taxable year is an amount 5 equal to 10.5 percent of the lesser of— 6 ‘‘(1) the qualified medical and drug manufac- 7 turing income of the taxpayer for the taxable year, 8 or 9 ‘‘(2) taxable income of the taxpayer for the tax- 10 able year. 11 ‘‘(b) CREDIT LIMITED TO WAGES PAID.— 12 ‘‘(1) IN GENERAL.—The amount of the credit 13 allowable under subsection (a) for any taxable year 14 shall not exceed 50 percent of the W–2 wages of the 15 taxpayer for the taxable year. 16 ‘‘(2) W–2 WAGES.—For purposes of this sec- 17 tion— 18 ‘‘(A) IN GENERAL.—The term ‘W–2 19 wages’ means, with respect to any person for 20 any taxable year of such person, the sum of the 21 amounts described in paragraphs (3) and (8) of 22 section 6051(a) paid by such person with re- 23 spect to employment of employees by such per- 24 son during the calendar year ending during 25 such taxable year. 26 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 7767 IH ‘‘(B) LIMITATION TO WAGES ATTRIB- 1 UTABLE TO DOMESTIC PRODUCTION.—Such 2 term shall not include any amount which is not 3 properly allocable to domestic medical and drug 4 manufacturing gross receipts for purposes of 5 subsection (c)(1). 6 ‘‘(C) RETURN REQUIREMENT.—Such term 7 shall not include any amount which is not prop- 8 erly included in a return filed with the Social 9 Security Administration on or before the 60th 10 day after the due date (including extensions) 11 for such return. 12 ‘‘(3) ACQUISITIONS, DISPOSITIONS, AND SHORT 13 TAXABLE YEARS.—The Secretary shall provide for 14 the application of this subsection in cases of a short 15 taxable year or where the taxpayer acquires, or dis- 16 poses of, the major portion of a trade or business or 17 the major portion of a separate unit of a trade or 18 business during the taxable year. 19 ‘‘(c) QUALIFIED MEDICAL AND DRUG MANUFAC- 20 TURING INCOME.—For purposes of this section— 21 ‘‘(1) IN GENERAL.—The term ‘qualified medical 22 and drug manufacturing income’ for any taxable 23 year means an amount equal to the excess (if any) 24 of— 25 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 7767 IH ‘‘(A) the taxpayer’s domestic medical and 1 drug manufacturing gross receipts for the tax- 2 able year, over 3 ‘‘(B) the sum of— 4 ‘‘(i) the cost of goods sold that are al- 5 locable to such receipts, and 6 ‘‘(ii) other expenses, losses, or deduc- 7 tions which are properly allocable to such 8 receipts. 9 ‘‘(2) ALLOCATION METHOD.—The Secretary 10 shall prescribe rules for the proper allocation of 11 items described in paragraph (1)(B) for purposes of 12 determining qualified medical and drug manufac- 13 turing income. Such rules shall provide for the prop- 14 er allocation of items whether or not such items are 15 directly allocable to domestic medical and drug man- 16 ufacturing gross receipts. 17 ‘‘(3) SPECIAL RULES FOR DETERMINING 18 COSTS.— 19 ‘‘(A) IN GENERAL.—For purposes of deter- 20 mining costs under clause (i) of paragraph 21 (1)(B), any item or service brought into the 22 United States shall be treated as acquired by 23 purchase, and its cost shall be treated as not 24 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 7767 IH less than its value immediately after it entered 1 the United States. 2 ‘‘(B) EXPORTS FOR FURTHER MANUFAC- 3 TURE.—In the case of any property described 4 in subparagraph (A) that had been exported by 5 the taxpayer for further manufacture, the in- 6 crease in cost or adjusted basis under subpara- 7 graph (A) shall not exceed the difference be- 8 tween the value of the property when exported 9 and the value of the property when brought 10 back into the United States after the further 11 manufacture. 12 ‘‘(4) DOMESTIC MEDICAL AND DRUG MANUFAC- 13 TURING GROSS RECEIPTS.— 14 ‘‘(A) IN GENERAL.—The term ‘domestic 15 medical and drug manufacturing gross receipts’ 16 means the gross receipts of the taxpayer which 17 are derived from any sale, exchange, or other 18 disposition of— 19 ‘‘(i) any active pharmaceutical ingre- 20 dient, or 21 ‘‘(ii) any qualified countermeasure, 22 which was manufactured or produced by the 23 taxpayer in whole or in significant part within 24 the United States. 25 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 7767 IH ‘‘(B) ACTIVE PHARMACEUTICAL INGRE- 1 DIENT.—The term ‘active pharmaceutical ingre- 2 dient’ means any substance or mixture of sub- 3 stances intended to be used in the manufacture 4 of a drug product and (when so used) becomes 5 an active ingredient in the drug product. 6 ‘‘(C) QUALIFIED COUNTERMEASURE.—The 7 term ‘qualified countermeasure’ has the mean- 8 ing given such term in section 319F–1(a)(2) of 9 the Public Health Service Act (42 U.S.C. 10 247d–6a(a)(2)).’’ 11 ‘‘(D) PARTNERSHIPS OWNED BY EX- 12 PANDED AFFILIATED GROUPS.—For purposes 13 of this paragraph, if all of the interests in the 14 capital and profits of a partnership are owned 15 by members of a single expanded affiliated 16 group at all times during the taxable year of 17 such partnership, the partnership and all mem- 18 bers of such group shall be treated as a single 19 taxpayer during such period. 20 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur- 21 poses of this section— 22 ‘‘(1) APPLICATION OF SECTION TO PASS-THRU 23 ENTITIES.— 24 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 7767 IH ‘‘(A) PARTNERSHIPS AND S CORPORA- 1 TIONS.—In the case of a partnership or S cor- 2 poration— 3 ‘‘(i) this section shall be applied at the 4 partner or shareholder level, 5 ‘‘(ii) each partner or shareholder shall 6 take into account such person’s allocable 7 share of each item described in subpara- 8 graph (A) or (B) of subsection (c)(1) (de- 9 termined without regard to whether the 10 items described in such subparagraph (A) 11 exceed the items described in such sub- 12 paragraph (B)), and 13 ‘‘(iii) each partner or shareholder 14 shall be treated for purposes of subsection 15 (b) as having W–2 wages for the taxable 16 year in an amount equal to such person’s 17 allocable share of the W–2 wages of the 18 partnership or S corporation for the tax- 19 able year (as determined under regulations 20 prescribed by the Secretary). 21 ‘‘(B) TRUSTS AND ESTATES.—In the case 22 of a trust or estate— 23 ‘‘(i) the items referred to in subpara- 24 graph (A)(ii) (as determined therein) and 25 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 7767 IH the W–2 wages of the trust or estate for 1 the taxable year, shall be apportioned be- 2 tween the beneficiaries and the fiduciary 3 (and among the beneficiaries) under regu- 4 lations prescribed by the Secretary, and 5 ‘‘(ii) for purposes of paragraph (2), 6 adjusted gross income of the trust or es- 7 tate shall be determined as provided in sec- 8 tion 67(e) with the adjustments described 9 in such paragraph. 10 ‘‘(C) REGULATIONS.—The Secretary may 11 prescribe rules requiring or restricting the allo- 12 cation of items and wages under this paragraph 13 and may prescribe such reporting requirements 14 as the Secretary determines appropriate. 15 ‘‘(2) APPLICATION TO INDIVIDUALS.—In the 16 case of an individual, subsection (a)(2) shall be ap- 17 plied by substituting ‘adjusted gross income’ for 18 ‘taxable income’. For purposes of the preceding sen- 19 tence, adjusted gross income shall be determined 20 after application of sections 86, 135, 137, 219, 221, 21 222, and 469. 22 ‘‘(3) SPECIAL RULE FOR AFFILIATED 23 GROUPS.— 24 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 7767 IH ‘‘(A) IN GENERAL.—All members of an ex- 1 panded affiliated group shall be treated as a 2 single corporation for purposes of this section. 3 ‘‘(B) EXPANDED AFFILIATED GROUP.— 4 For purposes of this section, the term ‘ex- 5 panded affiliated group’ means an affiliated 6 group as defined in section 1504(a), deter- 7 mined— 8 ‘‘(i) by substituting ‘more than 50 9 percent’ for ‘at least 80 percent’ each place 10 it appears, and 11 ‘‘(ii) without regard to paragraphs (2) 12 and (4) of section 1504(b). 13 ‘‘(C) ALLOCATION OF CREDIT.—Except as 14 provided in regulations, the credit under sub- 15 section (a) shall be allocated among the mem- 16 bers of the expanded affiliated group in propor- 17 tion to each member’s respective amount (if 18 any) of qualified medical and drug manufac- 19 turing income. 20 ‘‘(4) TRADE OR BUSINESS REQUIREMENT.— 21 This section shall be applied by only taking into ac- 22 count items which are attributable to the actual con- 23 duct of a trade or business. 24 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 7767 IH ‘‘(5) COORDINATION WITH MINIMUM TAX.—For 1 purposes of determining alternative minimum tax- 2 able income under section 55, qualified medical and 3 drug manufacturing income shall be determined 4 without regard to any adjustments under sections 56 5 through 59. 6 ‘‘(6) UNRELATED BUSINESS TAXABLE IN- 7 COME.—For purposes of determining the tax im- 8 posed by section 511, subsection (a)(1)(B) shall be 9 applied by substituting ‘unrelated business taxable 10 income’ for ‘taxable income’. 11 ‘‘(7) REGULATIONS.—The Secretary shall pre- 12 scribe such regulations as are necessary to carry out 13 the purposes of this section, including regulations 14 which prevent more than 1 taxpayer from being al- 15 lowed a credit under this section with respect to any 16 activity described in subsection (c)(4)(A).’’. 17 (b) TREATMENT UNDER BASE EROSION TAX.—Sec- 18 tion 59A(b)(1)(B)(ii) of such Code is amended by striking 19 ‘‘plus’’ at the end of subclause (I), by redesignating sub- 20 clause (II) as subclause (III), and by inserting after sub- 21 clause (I) the following new subclause: 22 ‘‘(II) the credit allowed under 23 section 38 for the taxable year which 24 is properly allocable to the domestic 25 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 7767 IH medical and drug manufacturing cred- 1 it determined under section 45U(a), 2 plus’’. 3 (c) PART OF GENERAL BUSINESS CREDIT.—Section 4 38(b) of such Code is amended by striking ‘‘plus’’ at the 5 end of paragraph (32), by striking the period at the end 6 of paragraph (33) and inserting ‘‘, plus’’, and by adding 7 at the end the following new paragraph: 8 ‘‘(34) the domestic medical and drug manufac- 9 turing credit determined under section 45U(a).’’. 10 (d) CREDIT ALLOWED AGAINST ALTERNATIVE MIN- 11 IMUM TAX.—Section 38(c)(4)(B) of such Code is amended 12 by redesignating clauses (x) through (xii) as clauses (xi) 13 through (xiii), respectively, and by inserting after clause 14 (ix) the following new clause: 15 ‘‘(x) the credit determined under sec- 16 tion 45U,’’. 17 (e) CLERICAL AMENDMENT.—The table of sections 18 for subpart D of part IV of subchapter A of chapter 1 19 of such Code is amended by adding at the end the fol- 20 lowing new item: 21 ‘‘Sec. 45U. Domestic medical and drug manufacturing credit.’’. (f) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to taxable years beginning after 23 December 31, 2020. 24 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 7767 IH SEC. 2. QUALIFYING ADVANCED MEDICAL MANUFAC- 1 TURING EQUIPMENT CREDIT. 2 (a) IN GENERAL.—Subpart E of part IV of sub- 3 chapter A of chapter 1 of the Internal Revenue Code of 4 1986 is amended by adding at the end the following new 5 section: 6 ‘‘SEC. 48D. QUALIFYING ADVANCED MEDICAL MANUFAC- 7 TURING EQUIPMENT CREDIT. 8 ‘‘(a) IN GENERAL.—For purposes of section 46, the 9 qualifying advanced medical manufacturing equipment 10 credit determined under this section for any taxable year 11 is the applicable percentage of the basis of any qualifying 12 advanced medical manufacturing equipment placed in 13 service during such taxable year. 14 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 15 subsection (a), the applicable percentage is— 16 ‘‘(1) 30 percent in the case of equipment which 17 is placed in service before January 1, 2028, 18 ‘‘(2) 20 percent in the case of equipment which 19 is placed in service during calendar year 2028, 20 ‘‘(3) 10 percent in the case of equipment which 21 is placed in service during calendar year 2029, and 22 ‘‘(4) 0 percent in the case of equipment which 23 is placed in service after December 31, 2029. 24 ‘‘(c) QUALIFYING ADVANCED MEDICAL MANUFAC- 25 TURING EQUIPMENT.—For purposes of this section, the 26 VerDate Sep 11 2014 16:15 Aug 15, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H7767.IH H7767 pamtmann on DSKBC07HB2PROD with BILLS 13 •HR 7767 IH term ‘qualifying adv [Text truncated for display. 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