ORPHAN DRUG TAX CREDIT.

SEC. 1205. ORPHAN DRUG TAX CREDIT. (a) Recategorized as a Business Credit.— (1) In general.— Section 28 (relating to clinical testing expenses for certain drugs for rare diseases or conditions) is transferred to subpart D of part IV of subchapter A of chapter 1, inserted after section 45B, and redesignated as section 45C. (2) Conforming amendment.— Subsection (b) of section 38 (relating to general business credit) is amended by striking “plus” at the end of paragraph (10), by striking the period at the end of paragraph (11) and inserting “, plus”, and by adding at the end the following new paragraph: “(12) the orphan drug credit determined under section 45C(a).”. (3) Clerical amendments.— (A) The table of sections for subpart B of such part IV is amended by striking the item relating to section 28. (B) The table of sections for subpart D of such part IV is amended by adding at the end the following new item: “Sec. 45C. Clinical testing expenses for certain drugs for rare diseases or conditions.”. (b) Credit Termination.— Subsection (e) of section 45C, as redesignated by subsection (a)(1), is amended to 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.”. (c) No Pre-July 1, 1996 Carrybacks.— Subsection (d) of section 39 (relating to carryback and carryforward of unused credits) is amended by adding at the end the following new paragraph: “(7) No carryback of section 45c credit before july 1, 1996.— No portion of the unused business credit for any taxable year which is attributable to the orphan drug credit determined under section 450 may be carried back to a taxable year ending before July 1, 1996.”. (d) Additional Conforming Amendments.— (1) Section 45C(a), as redesignated by subsection (a)(1), is amended by striking “There shall be allowed as a credit against the tax imposed by this chapter for the taxable year”110 STAT. 1776 and inserting “For purposes of section 38, the credit determined under this section for the taxable year is”. (2) Section 45C(d), as so redesignated, is amended by striking paragraph (2) and by redesignating paragraphs (3), (4), and (5) as paragraphs (2), (3), and (4). (3) Section 29(b)(6)(A) is amended by striking “sections 27 and 28” and inserting “section 27”. (4) Section 30(b)(3)(A) is amended by striking “sections 27, 28, and 29” and inserting “sections 27 and 29”. (5) Section 53(d)(1)(B) is amended— (A) by striking “or not allowed under section 28 solely by reason of the application of section 28(d)(2)(B),” in clause (iii), and (B) by striking “or not allowed under section 28 solely by reason of the application of section 28(d)(2)(B)” in clause (iv)(II). (6) Section 55(c)(2) is amended by striking “28(d)(2),”. (7) Section 280C(b) is amended— (A) by striking “section 28(b)” in paragraph (1) and inserting “section 45C(b)”, (B) by striking “section 28” in paragraphs (1) and (2)(A) and inserting “section 45C”, and (C) by striking “subsection (d)(2) thereof” in paragraphs (1) and (2)(A) and inserting “section 38(c)”. (e) Effective Date.— The amendments made by this section shall apply to amounts paid or incurred in taxable years ending after June 30, 1996.