United States Code

USC most recently checked for updates: Apr 22, 2024

§ 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.

(Added Pub. L. 97–414, § 4(a), Jan. 4, 1983, 96 Stat. 2053, § 44H; renumbered § 28 and amended Pub. L. 98–369, div. A, title IV, §§ 471(c), 474(g), title VI, § 612(e)(1), July 18, 1984, 98 Stat. 826, 831, 912; Pub. L. 99–514, title II, §§ 231(d)(3)(A), 232, title VII, § 701(c)(2), title XII, § 1275(c)(4), title XVIII, § 1879(b)(1), (2), Oct. 22, 1986, 100 Stat. 2178, 2180, 2340, 2599, 2905; Pub. L. 100–647, title I, § 1018(q)(1), title IV, § 4008(c)(1), Nov. 10, 1988, 102 Stat. 3585, 3653; Pub. L. 101–239, title VII, § 7110(a)(3), Dec. 19, 1989, 103 Stat. 2323; Pub. L. 101–508, title XI, §§ 11402(b)(2), 11411, Nov. 5, 1990, 104 Stat. 1388–473, 1388–479; Pub. L. 102–227, title I, §§ 102(b), 111(a), Dec. 11, 1991, 105 Stat. 1686, 1688; Pub. L. 103–66, title XIII, § 13111(a)(2), (b), Aug. 10, 1993, 107 Stat. 420; renumbered § 45C and amended Pub. L. 104–188, title I, §§ 1204(e), 1205(a)(1), (b), (d)(1), (2), Aug. 20, 1996, 110 Stat. 1775, 1776; Pub. L. 105–34, title VI, §§ 601(b)(2), 604(a), Aug. 5, 1997, 111 Stat. 862, 863; Pub. L. 105–115, title I, § 125(b)(2)(O), Nov. 21, 1997, 111 Stat. 2326; Pub. L. 105–277, div. J, title I, § 1001(b), Oct. 21, 1998, 112 Stat. 2681–888; Pub. L. 106–170, title V, § 502(a)(2), Dec. 17, 1999, 113 Stat. 1919; Pub. L. 108–311, title III, § 301(a)(2), Oct. 4, 2004, 118 Stat. 1178; Pub. L. 109–432, div. A, title I, § 104(a)(2), Dec. 20, 2006, 120 Stat. 2934; Pub. L. 110–343, div. C, title III, § 301(a)(2), Oct. 3, 2008, 122 Stat. 3865; Pub. L. 111–312, title VII, § 731(b), Dec. 17, 2010, 124 Stat. 3317; Pub. L. 112–240, title III, § 301(a)(2), Jan. 2, 2013, 126 Stat. 2326; Pub. L. 113–295, div. A, title I, § 111(b), Dec. 19, 2014, 128 Stat. 4014; Pub. L. 114–113, div. Q, title I, § 121(a)(2), Dec. 18, 2015, 129 Stat. 3049; Pub. L. 115–97, title I, § 13401(a), Dec. 22, 2017, 131 Stat. 2133; Pub. L. 115–141, div. U, title IV, § 401(a)(17), (d)(1)(D)(iii), Mar. 23, 2018, 132 Stat. 1185, 1206.)
cite as: 26 USC 45C