FDAnews Device Daily Bulletin

NEW TAX LEGISLATION IN U.S. HOUSE OFFERS INCENTIVES FOR DEVICE INDUSTRY GROWTH

April 25, 2006
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Rep. Melissa Hart (R-Pa) recently introduced the U.S. Healthcare Technologies Competitiveness Act, HR 5115. The legislation, which is due to go into effect after Dec. 31, 2006, is meant to modernize the tax code so that medical device and biotechnology companies can more easily attract and access funding while investing in R&D. The bill seeks to update tax laws to eliminate investment disincentives.

Features of the legislation include provisions for firms to: ensure that loss biotech and device companies that receive new capital or pursue business-driven mergers with another similar company do not violate I.R.C. section 382 limitations that curtail the use of net operating losses (NOLs); repeal the tax result that prevents loss companies from utilizing NOLs to offset more than 90 percent of their Alternative Minimum Tax liability; establish or expand on tax credits for R&D, medical innovation for clinical trials, and orphan drugs; establish countermeasure and pandemic flu tax incentives and similar incentives for setting property aside for a life sciences park; and allow companies to expense qualifying medical research equipment.

The legislation also provides financial incentives for investors such as a capital gains rollover, ordinary loss treatment, and equity credit for investors in biotech companies conducting "incubational" research.