# § 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—
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.
**(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.
**(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.
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**Source Credit**: (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.)
## 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 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
2018—Subsec. (b)(2)(A)(ii)(II). , substituted “, and” for “; and”.
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.
2017—Subsec. (a). substituted “25 percent” for “50 percent”.
2015—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.”
2014—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 .”
2013—Subsec. (b)(1)(D). substituted “” for “”.
2010—Subsec. (b)(1)(D). substituted “” for “”.
2008—Subsec. (b)(1)(D). substituted “” for “”.
2006—Subsec. (b)(1)(D). substituted “2007” for “2005”.
2004—Subsec. (b)(1)(D). substituted “” for “”.
1999—Subsec. (b)(1)(D). substituted “” for “”.
1998—Subsec. (b)(1)(D). substituted “” for “”.
1997—Subsec. (b)(1)(D). , substituted “” for “”.
Subsec. (b)(2)(A)(ii)(II). struck out “or 507” after “505(b)”.
Subsec. (e). , struck out subsec. (e) which read as follows:
“(e) .—This section shall not apply to any amount paid or incurred—
“(1) after , and before , or
“(2) after .”
1996—, renumbered as this section.
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”.
Subsec. (b)(1)(D). , inserted “, and before , and periods after ” after “”.
Subsec. (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.”
Subsec. (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 .”
1993—Subsec. (b)(1)(D). , substituted “” for “”.
Subsec. (e). , substituted “” for “”.
1991—Subsec. (b)(1)(D). , substituted “” for “”.
Subsec. (e). , substituted “” for “”.
1990—Subsec. (b)(1)(D). , substituted “” for “”.
Subsec. (e). , substituted “” for “”.
1989—Subsec. (b)(1)(D). substituted “1990” for “1989”.
1988—Subsec. (b)(1)(D). , substituted “1989” for “1988”.
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”.
1986—Subsec. (b)(1). , (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). , substituted “the date such drug” for “the date of such drug”.
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”.
Subsec. (c). , (ii), substituted “41” for “30” in pars. (1) and (2) and “41(b)” for “30(b)” in par. (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.”
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.”
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.”
Subsec. (d)(4). , substituted “section 41(f)” for “section 30(f)”.
Subsec. (e). , substituted “1990” for “1987”.
1984—, renumbered as this section.
Subsec. (b)(1)(A), (B), (D). , substituted “section 30” for “section 44F”.
Subsec. (c)(1). , substituted “section 30” for “section 44F”.
Subsec. (c)(2). , (B), substituted “section 30” for “section 44F” and “section 30(b)” for “section 44F(b)”.
Subsec. (d)(2). , substituted “section 26(b)” for “section 25(b)”.
, 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). , substituted “section 30(f)” for “section 44F(f)”.
## Statutory Notes and Related Subsidiaries
### Effective Date of 2017 Amendment
> “The amendments made by this section [amending this section and
>
> ] shall apply to taxable years beginning after
>
> .”
, , , provided that:
### Effective Date of 2015 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2014 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2013 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2010 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2008 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2006 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 2004 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 1999 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 1998 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
### Effective Date of 1997 Amendment
Amendment by applicable to amounts paid or incurred after , see , set out as a note under .
> “The amendment made by subsection (a) [amending this section] shall apply to amounts paid or incurred after
>
> .”
, , , provided that:
### Effective Date of 1996 Amendment
Amendment 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 .
Amendment 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
> “The amendments made by this section [amending this section and
>
> ] shall apply to taxable years ending after
>
> .”
, , , provided that:
### Effective Date of 1991 Amendment
> “The amendments made by this section [amending this section and
>
> ] shall apply to taxable years ending after
>
> .”
, , , provided that:
> “The amendment made by this section [amending this section] shall apply to taxable years ending after
>
> .”
, , , provided that:
### Effective Date of 1990 Amendment
> “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
Amendment 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 .
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1986 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
Amendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as an Effective Date note under .
Amendment by applicable to taxable years beginning after , with certain exceptions and qualifications, see , set out as a note under .
> “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
Amendment by applicable to taxable years beginning after , and to carrybacks from such years, see , set out as a note under .
Amendment by , applicable to interest paid or accrued after , on indebtedness incurred after , see , set out as an Effective Date note under .
### Effective Date
> “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
For 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 .
### Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For 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
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 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 .