26 Usc 45c

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26 USC 45C: Clinical testing expenses for certain drugs for rare diseases or conditions
Text contains laws through Pub. L. 113-271, except Pub. L. 113-235
Pending Updates: Pub L. 113-295 (12/19/2014) [View Details]
From Title 26-INTERNAL REVENUE CODE
Subtitle A-Income Taxes
CHAPTER 1-NORMAL TAXES AND SURTAXES
Subchapter A-Determination of Tax Liability
PART IV-CREDITS AGAINST TAX
Subpart D-Business Related Credits
Jump To:
Source Credit
References In Text
Amendments
Effective Date

§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 50 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).
(D) Special rule
For purposes of this paragraph, section 41 shall be deemed to remain in effect for periods after June
30, 1995, and before July 1, 1996, and periods after December 31, 2013.
(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; 1 and
(iii) which is conducted by or on behalf of the taxpayer to whom the designation under such section

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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
(A) In general
No credit shall be allowed under this section with respect to any clinical testing conducted outside the
United States unless(i) such testing is conducted outside the United States because there is an insufficient testing
population in the United States, and
(ii) 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.
(B) Special limitation for corporations to which section 936 applies
No credit shall be allowed under this section with respect to any clinical testing conducted by a
corporation to which an election under section 936 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,

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§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.)

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)(A)(ii), are classified to sections 355(b), (i) and 360bb,
respectively, of Title 21, Food and Drugs.
Section 351 of the Public Health Service Act, referred to in subsec. (b)(2)(A)(ii)(II), is
classified to section 262 of Title 42, The Public Health and Welfare.
AMENDMENTS
2013-Subsec. (b)(1)(D). Pub. L. 112–240 substituted "December 31, 2013" for "December 31,

2011".
2010-Subsec. (b)(1)(D). Pub. L. 111–312 substituted "December 31, 2011" for "December 31,

2009".
2008-Subsec. (b)(1)(D). Pub. L. 110–343 substituted "December 31, 2009" for "December 31,

2007".
2006-Subsec. (b)(1)(D). Pub. L. 109–432 substituted "2007" for "2005".
2004-Subsec. (b)(1)(D). Pub. L. 108–311 substituted "December 31, 2005" for "June 30,

2004".
1999-Subsec. (b)(1)(D). Pub. L. 106–170 substituted "June 30, 2004" for "June 30, 1999".
1998-Subsec. (b)(1)(D). Pub. L. 105–277 substituted "June 30, 1999" for "June 30, 1998".
1997-Subsec. (b)(1)(D). Pub. L. 105–34, §601(b)(2), substituted "June 30, 1998" for "May 31,

1997".
Subsec. (b)(2)(A)(ii)(II). Pub. L. 105–115 struck out "or 507" after "505(b)".
Subsec. (e). Pub. L. 105–34, §604(a), struck out subsec. (e) which read as follows:
"(e) Termination.-This section shall not apply to any amount paid or incurred"(1) after December 31, 1994, and before July 1, 1996, or
"(2) after May 31, 1997."
1996-Pub. L. 104–188, §1205(a)(1), renumbered section 28 of this title as this section.
Subsec. (a). Pub. L. 104–188, §1205(d)(1), 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".
Subsec. (b)(1)(D). Pub. L. 104–188, §1204(e), inserted ", and before July 1, 1996, and
periods after May 31, 1997" after "June 30, 1995".
Subsec. (d)(2) to (5). Pub. L. 104–188, §1205(d)(2), redesignated pars. (3) to (5) as (2) to (4),
respectively, and struck out former par. (2) which read as follows: "Limitation based on amount
of tax.-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."
Subsec. (e). Pub. L. 104–188, §1205(b), amended subsec. (e) generally. Prior to amendment,
subsec. (e) read as follows: "Termination.-This section shall not apply to any amount paid or
incurred after December 31, 1994."
1993-Subsec. (b)(1)(D). Pub. L. 103–66, §13111(a)(2), substituted "June 30, 1995" for "June
30, 1992".
Subsec. (e). Pub. L. 103–66, §13111(b), substituted "December 31, 1994" for "June 30,
1992".
1991-Subsec. (b)(1)(D). Pub. L. 102–227, §102(b), substituted "June 30, 1992" for "December
31, 1991".
Subsec. (e). Pub. L. 102–227, §111(a), substituted "June 30, 1992" for "December 31, 1991".
1990-Subsec. (b)(1)(D). Pub. L. 101–508, §11402(b)(2), substituted "December 31, 1991" for
"December 31, 1990".

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Subsec. (e). Pub. L. 101–508, §11411, substituted "December 31, 1991" for "December 31,
1990".
1989-Subsec. (b)(1)(D). Pub. L. 101–239 substituted "1990" for "1989".
1988-Subsec. (b)(1)(D). Pub. L. 100–647, §4008(c)(1), substituted "1989" for "1988".
Subsec. (b)(2)(A)(ii)(II). Pub. L. 100–647, §1018(q)(1), 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".
1986-Subsec. (b)(1). Pub. L. 99–514, §231(d)(3)(A)(i), (iv), substituted "41" for "30" in
subpars. (A), (B), and (D), and substituted "1988" for "1985" in subpar. (D).
Subsec. (b)(2)(A)(ii)(I). Pub. L. 99–514, §1879(b)(1)(A), substituted "the date such drug" for
"the date of such drug".
Subsec. (b)(2)(A)(ii)(II). Pub. L. 99–514, §1879(b)(1)(B), 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".
Subsec. (c). Pub. L. 99–514, §231(d)(3)(A)(i), (ii), substituted "41" for "30" in pars. (1) and (2)
and "41(b)" for "30(b)" in par. (2).
Subsec. (d)(1). Pub. L. 99–514, §1879(b)(2), 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."
Subsec. (d)(2). Pub. L. 99–514, §701(c)(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."
Subsec. (d)(3)(B). Pub. L. 99–514, §1275(c)(4), 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."
Subsec. (d)(4). Pub. L. 99–514, §231(d)(3)(A)(iii), substituted "section 41(f)" for "section 30
(f)".
Subsec. (e). Pub. L. 99–514, §232, substituted "1990" for "1987".
1984-Pub. L. 98–369, §471(c), renumbered section 44H of this title as this section.
Subsec. (b)(1)(A), (B), (D). Pub. L. 98–369, §474(g)(1)(A), substituted "section 30" for
"section 44F".
Subsec. (c)(1). Pub. L. 98–369, §474(g)(1)(A), substituted "section 30" for "section 44F".
Subsec. (c)(2). Pub. L. 98–369, §474(g)(1)(A), (B), substituted "section 30" for "section 44F"
and "section 30(b)" for "section 44F(b)".
Subsec. (d)(2). Pub. L. 98–369, §612(e)(1), 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)".
Subsec. (d)(4). Pub. L. 98–369, §474(g)(1)(C), substituted "section 30(f)" for "section 44F(f)".

EFFECTIVE DATE OF 2013 AMENDMENT

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

EFFECTIVE DATE OF 2010 AMENDMENT
Amendment by Pub. L. 111–312 applicable to amounts paid or incurred after Dec. 31, 2009,
see section 731(c) of Pub. L. 111–312, set out as a note under section 41 of this title.

EFFECTIVE DATE OF 2008 AMENDMENT
Amendment by Pub. L. 110–343 applicable to amounts paid or incurred after Dec. 31, 2007,
see section 301(e)(2) of Pub. L. 110–343, set out as a note under section 41 of this title.

EFFECTIVE DATE OF 2006 AMENDMENT
Amendment by Pub. L. 109–432 applicable to amounts paid or incurred after Dec. 31, 2005,
see section 104(a)(3) of Pub. L. 109–432, set out as a note under section 41 of this title.

EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by Pub. L. 108–311 applicable to amounts paid or incurred after June 30, 2004,
see section 301(b) of Pub. L. 108–311, set out as a note under section 41 of this title.
EFFECTIVE DATE OF 1999 AMENDMENT
Amendment by Pub. L. 106–170 applicable to amounts paid or incurred after June 30, 1999,
see section 502(a)(3) of Pub. L. 106–170, set out as a note under section 41 of this title.

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

EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 601(b)(2) of Pub. L. 105–34 applicable to amounts paid or incurred
after May 31, 1997, see section 601(c) of Pub. L. 105–34, set out as a note under section 41 of
this title.
Pub. L. 105–34, title VI, §604(b), Aug. 5, 1997, 111 Stat. 863 , provided that: "The
amendment made by subsection (a) [amending this section] shall apply to amounts paid or
incurred after May 31, 1997."

EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by section 1204(e) of Pub. L. 104–188 applicable to taxable years ending after
June 30, 1996, 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 section 1204(f) of Pub. L. 104–188, set out as a note under section 41 of this title.
Amendment by section 1205(a)(1), (b), (d)(1), (2) of Pub. L. 104–188 applicable to amounts
paid or incurred in taxable years ending after June 30, 1996, see section 1205(e) of Pub. L.
104–188, set out as a note under section 45K of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Pub. L. 103–66, title XIII, §13111(c), Aug. 10, 1993, 107 Stat. 421 , provided that: "The
amendments made by this section [amending this section and section 41 of this title] shall apply to
taxable years ending after June 30, 1992."

EFFECTIVE DATE OF 1991 AMENDMENT
Pub. L. 102–227, title I, §102(c), Dec. 11, 1991, 105 Stat. 1686 , provided that: "The
amendments made by this section [amending this section and section 41 of this title] shall apply to
taxable years ending after December 31, 1991."
Pub. L. 102–227, title I, §111(b), Dec. 11, 1991, 105 Stat. 1689 , provided that: "The
amendment made by this section [amending this section] shall apply to taxable years ending

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after December 31, 1991."

EFFECTIVE DATE OF 1990 AMENDMENT
Pub. L. 101–508, title XI, §11402(c), Nov. 5, 1990, 104 Stat. 1388–473 , provided that: "The
amendments made by this section [amending this section and section 41 of this title and repealing
provisions set out as a note under section 41 of this title] shall apply to taxable years beginning
after December 31, 1989."

EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1018(q)(1) of Pub. L. 100–647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which
such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under
section 1 of this title.
Amendment by section 4008(c)(1) of Pub. L. 100–647 applicable to taxable years beginning
after Dec. 31, 1988, see section 4008(d) of Pub. L. 100–647, set out as a note under section 41
of this title.

EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 231(d)(3)(A) of Pub. L. 99–514 applicable to taxable years beginning
after Dec. 31, 1985, see section 231(g) of Pub. L. 99–514, set out as a note under section 41 of
this title.
Amendment by section 701(c)(2) of Pub. L. 99–514 applicable to taxable years beginning
after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–
514, set out as an Effective Date note under section 55 of this title.
Amendment by section 1275(c)(4) of Pub. L. 99–514 applicable to taxable years beginning
after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–
514, set out as a note under section 931 of this title.
Pub. L. 99–514, title XVIII, §1879(b)(3), Oct. 22, 1986, 100 Stat. 2906 , provided that: "The
amendments made by this subsection [amending this section] shall apply to amounts paid or
incurred after December 31, 1982, in taxable years ending after such date."

EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(g) of Pub. L. 98–369 applicable to taxable years beginning after
Dec. 31, 1983, and to carrybacks from such years, see section 475(a) of Pub. L. 98–369, set
out as a note under section 21 of this title.
Amendment by section 612(e)(1) of Pub. L. 98–369, applicable to interest paid or accrued
after December 31, 1984, on indebtedness incurred after December 31, 1984, see section 612
(g) of Pub. L. 98–369, set out as an Effective Date note under section 25 of this title.
EFFECTIVE DATE
Pub. L. 97–414, §4(d), Jan. 4, 1983, 96 Stat. 2056 , provided that: "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 December 31, 1982, in taxable years ending after such date."

APPLICABILITY OF CERTAIN AMENDMENTS BY PUBLIC LAW 99–514 IN RELATION
TO TREATY OBLIGATIONS OF UNITED STATES
For applicability of amendment by section 701(c)(2) of Pub. L. 99–514 notwithstanding any
treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such
purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in
the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4)
of Pub. L. 100–647, set out as a note under section 861 of this title.

PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For 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 Pub. L. 99–514 require an

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amendment to any plan, such plan amendment shall not be required to be made before the
first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as
amended, set out as a note under section 401 of this title.
1 So in original. The semicolon probably should be a comma.

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