H.R. 1396 — PILLS Act

This section establishes the short title of the Act as the “Producing Incentives for Long-term production of Lifesaving Supply of medicine Act” or the “PILLS Act.”

This section establishes a new generic drugs and biosimilars production credit under section 45BB of the Internal Revenue Code, allowing a credit against the section 38 general business credit for eligible components produced in the United States and sold to an unrelated person during the taxable year. The credit is equal to 30 percent of the value added to an eligible component, increased to 35 percent for the final production of a drug substance, drug product, or biological product, and further increased by up to 20 percent of the domestic content percentage for components containing U.S.-produced materials and components. As background, the credit applies to approved generic drugs, licensed biosimilars, and certain materials and services used in their production, but excludes components produced at facilities subject to an unresolved Food and Drug Administration warning letter issued on or after September 1, 2009, and property produced at facilities whose basis is taken into account for the section 48F credit after enactment. The section phases out the credit for eligible components sold after December 31, 2030, at 75 percent in calendar year 2031, 50 percent in 2032, 25 percent in 2033, and 0 percent after December 31, 2033, and disallows the credit for any taxpayer that is a foreign entity of concern at any time during the taxable year under 15 U.S.C. 4651.

This section establishes a new generic drugs and biosimilars investment tax credit under section 48F of the Internal Revenue Code of 1986 equal to 25 percent of the qualified investment for a qualified facility of an eligible taxpayer. As background, the credit applies to facilities in the United States or a U.S. territory whose primary purpose is producing eligible components for generic drugs and biosimilars. The section defines qualified investment as the basis of qualified property placed in service during the taxable year, including tangible property that is depreciable, constructed or acquired with original use beginning with the taxpayer, and used as an integral part of the facility to produce eligible components. It also includes buildings and structural components, but excludes space used for offices, administrative services, or other unrelated functions. The section excludes from qualified investment any basis attributable to qualified rehabilitation expenditures under section 47(c)(2) and applies rules similar to the progress expenditure rules under section 46(c)(4) and (d). The section defines an eligible taxpayer as any taxpayer that is not a foreign entity of concern under 15 U.S.C. 4651. It incorporates the meanings of “eligible component” and “production” from section 45BB(c)(1) and (6), respectively. The credit terminates for property the construction of which begins after December 31, 2028. The section also makes the credit eligible for elective payment and transferability by adding the new credit to sections 6417 and 6418 of the Internal Revenue Code. It further makes conforming amendments to sections 46 and 49 and adds the new section 48F to the table of sections. The amendments apply to property placed in service after December 31, 2026.