Sec. 201. Credit for pharmaceutical and medical device production activities in distressed zones
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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: For purposes of section 38, the distressed zone pharmaceutical and medical device production credit for the taxable year shall be an amount equal to the applicable percentage of the qualified production activity expenditures of the taxpayer for the taxable year. For purposes of this section— Except as provided in paragraph (2), the term applicable percentage means 25 percent.
In the case of any qualified pharmaceutical or medical device production business a substantial portion of the employees of which reside in a distressed zone, the applicable percentage shall be 30 percent. For purposes of this section— The term qualified production activity expenditures means— wages paid or incurred to an employee of the taxpayer for services performed by such employee in the conduct of a qualified pharmaceutical or diagnostic medical device production business in a distressed zone (but only if the employee’s principal place of employment is in a distressed zone), and qualified pharmaceutical or medical device production expenditures.
The term qualified pharmaceutical or medical device production business means the trade or business of producing qualified pharmaceuticals in commercial quantities. The term qualified pharmaceuticals means pharmaceuticals, active pharmaceutical ingredients, excipients, medical diagnostic devices, or personal protective equipment. The term pharmaceuticals — means any drug (as defined in section 201 of the Federal Food, Drug, and Cosmetic Act); and includes a biological product (as defined in section 351 of the Public Health Service Act).
The term active pharmaceutical ingredients has the meaning given to such term in section 207.1 of title 21, Code of Federal Regulations (or any successor regulations). The term excipient — means any inactive ingredient that is intentionally added to a pharmaceutical that is not intended to exert therapeutic effects at the intended dosage, other than by acting to improve product delivery; and includes any such filler, extenders, diluent, wetting agent, solvent, emulsifier, preservative, flavor, absorption enhancer, sustained release matrix, and coloring agent.
The term medical diagnostic device means any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) intended for use in the diagnosis of disease or other conditions. The term personal protective equipment means— any device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act) that is a face mask, filtering facepiece respirator, face shield, surgical mask, gown, other apparel, or glove that is intended for a medical purpose; and any particulate filtering air purifying respiratory protective device that is approved by the National Institute for Occupational Safety and Health under part 84 of title 42, Code of Federal Regulations (or successor regulations).
The term wages shall include so much of the eligible employer’s qualified health plan expenses as are properly allocable to such wages. For purposes of this paragraph, the term qualified health plan expenses means amounts paid or incurred by the eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1)), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a) of such Code. For purposes of this paragraph, qualified health plan expenses shall be allocated to qualified wages in such manner as the Secretary may prescribe.
Except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among employees and pro rata on the basis of periods of coverage (relative to the periods to which such wages relate). The term qualified pharmaceutical or medical device production expenditures means amount paid or incurred (whether or not chargeable to capital account) for qualified property used in the conduct of a qualified pharmaceutical or medical device production business in a distressed zone (but only if the primary use of such property is in a distressed zone).
The term qualified property means any tangible personal property (other than a building or its structural components) used in the conduct of a qualified pharmaceutical or medical device production business in a distressed zone (but only if the primary use of such property is in a distressed zone). Such term shall not include any property described in section 50(b) (determined as if the United States included Puerto Rico). For purposes of this section, the term distressed zone means a population census tract— which has been designated as a qualified opportunity zone under section 1400Z–1, and which has a poverty rate in excess of 30 percent for the calendar year prior to the calendar year that includes the date of enactment of this section.
In the case of a domestic corporation that is a United States shareholder of a qualified controlled foreign corporation, the credit under subsection
(a)(determined without regard to this paragraph) shall be increased by an amount equal to 30 percent of the corporation’s pro rata share (determined under rules similar to the rules of section 951(a)(2)) of qualified production activity expenditures of such controlled foreign corporation for the taxable year of the qualified controlled foreign corporation ending with or within the taxable year of the domestic corporation. For purposes of subparagraph (A), the term qualified controlled foreign corporation means, for any taxable year, a controlled foreign corporation which does not have gross income that is effectively connected with the conduct of a trade or business within the United States for such taxable year . If a credit is determined under this section with respect to any property by reason of any qualified production activity expenditures described in subsection (b)(1)(B), the basis of such property shall be reduced by the amount of the credit so determined. Any qualified production activity expenditures taken into account in determining the amount of the credit under subsection
(a)shall not be taken into account in determining a credit under any other provision of this chapter. If, during any taxable year, property take into account under subsection (c)(1)(B) is disposed of, or otherwise ceases to be used by the taxpayer in the active trade or business of producing qualified pharmaceuticals in commercial quantities, before the close of the recapture period, then the tax under this chapter for such taxable year shall be increased by the recapture percentage of the aggregate decrease in the credits allowed under section 38 for all prior taxable years which would have resulted solely from reducing to zero any credit determined under this section with respect to such property. For purposes of subparagraph (A), the recapture percentage shall be determined in the same manner as under section 50(a)(1)(B). In the case of any taxpayer to whom a credit is allowed by reason of subsection (e)(1), paragraph
(1)shall be applied by substituting the controlled foreign corporation with respect to which the taxpayer is a United States shareholder for the taxpayer . For purposes of this paragraph, rules similar to the rules of paragraphs (3), (4), and
(5)(other than subparagraph
(A)thereof) of section 50(a)(1) shall apply. . Section 38(c)(4)(B) of such Code is amended by redesignating clauses (x), (xi), and
(xii)as clauses (xi), (xii), and (xiii), respectively, and by inserting after clause
(ix)the following new clause: the credit determined under section 45U, . 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)(as so amended) the following new subclause: the credit allowed under section 38 for the taxable year which is properly allocable to the distressed zone pharmaceutical and medical device production credit determined under section 45U(a), plus . Section 280C of such Code is amended by adding at the end the following new subsection: No deduction shall be allowed for that portion of the qualified production activity expenditures (as defined in section 45U(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the distressed zone pharmaceutical and medical device production credit determined for such taxable year under section 45U(a). . 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: the distressed zone pharmaceutical and medical device production credit determined under section 45U(a). . The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following new item: Sec. 45U. Distressed zone pharmaceutical and medical device production credit. . The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.