4:00 PM
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Nov 10, 2017
 |  BC Extra  |  Politics & Policy

Senate tax plan diverges from House on key biopharma issues

Editor's Note: This article was updated on Nov 10, 2017 at 4:00 PM PST

The first draft of the Senate tax reform bill varies widely from the House version on several key issues for the biopharma industry, including its treatment of the Orphan Drug tax credit, carried interest and payments to related foreign subsidiaries.

The Senate bill seeks to reduce the Orphan Drug tax credit by capping eligible expenses, which is in contrast to a proposal in the House bill that seeks to completely eliminate the credit.

The “Chairman’s Mark” of the Tax Cuts and Jobs Act released by the Senate Finance Committee late Thursday proposes capping eligible expenses in two key ways. First, the proposal would limit the Orphan Drug credit to 50% “of so much of qualified clinical testing expenses for the taxable year as exceeds 50 percent of the average qualified clinical testing expenses for the three taxable years preceding the taxable year for which the credit is being determined.”

In the event that there are no eligible Orphan Drug expenses in at least one of the preceding three years, the credit is equal to 25%.

In layman’s terms, this would create a tax credit range of 25-50% for qualified expenses depending on the level and rate of change of expenditures.

The current version of the credit is a flat 50%...

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