- New Qualifying Therapeutic Discovery Project Credit Will Benefit Biotech Companies
- April 26, 2010 | Authors: Laura H. Cox; Michael J. Moeddel; Mark E. Sims
- Law Firm: Keating Muething & Klekamp PLL - Cincinnati Office
The Patient Protection and Affordable Care Act adds a new provision to the Internal Revenue Code that could provide a significant benefit to small and mid-size companies in the biotechnology industry. The Act, which was signed by President Obama on March 23, authorizes the Secretary of the Treasury to award up to $1 billion in qualifying therapeutic discovery project credits in 2009 and 2010. The credit is equal to 50% of an eligible taxpayer’s qualified investment in a qualifying therapeutic discovery project.
Qualifying therapeutic discovery projects include projects that are designed to treat, prevent, or diagnose diseases or conditions, as well as projects designed to develop products, processes or technologies to further the delivery or administration of therapeutics. Taxpayers must apply to receive the credit, and any taxpayer with 250 or fewer employees is eligible to submit an application. In lieu of the tax credit, eligible taxpayers can apply for a grant equal to 50% of the taxpayer’s qualified investment.
The Act requires the Secretary of the Treasury, in conjunction with the Department of Health and Human Services, to establish a program to consider and certify qualified investments no later than May 21, 2010. Therefore, regulations detailing the required form and content of the credit and grant applications will likely be released in mid-May. In the meantime, there are several steps that taxpayers in the biotech industry could take to prepare for the application process, including evaluating current and planned projects to determine which projects could qualify for the credit and itemizing qualified investment expenses.