• Health Care Reform Law Provides Tax Credits and Grants for Certain Companies Engaged in Medical Research
  • July 1, 2010 | Authors: Molly G. Huggins; David L. Kyger; Lorraine H. Spencer
  • Law Firms: Smith Moore Leatherwood LLP - Raleigh Office ; Smith Moore Leatherwood LLP - Greensboro Office ; Smith Moore Leatherwood LLP - Atlanta Office
  • The Therapeutic Discovery Project Program, part of the health care reform legislation passed by Congress this year, provides a tax credit and grants to small companies engaged in certain types of medical research.  The tax credit covers up to 50% of direct costs of qualifying therapeutic discovery projects, up to a maximum credit of $5 million per company, with an overall program limit of $1 billion.  The tax credit is available for investments made in 2009 and 2010.  Qualifying companies can opt to receive a cash grant instead of a tax credit.

    Requirements

    In order to qualify for the tax credit or cash grant, a company must have fewer than 250 employees.  A "qualifying therapeutic discovery project" is one that is designed:

    1. to treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, and clinical studies, or carrying out research protocols, for the purpose of securing approval of a product under section 505(b) of the Federal Food, Drug, and Cosmetic Act or section 351(a) of the Public Health Service Act;

    2. to diagnose diseases or conditions or to determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions; or

    3. to develop a product, process, or technology to further the delivery or administration of therapeutics.

    Additionally, the project must show reasonable potential:

    1. to result in new therapies to treat areas of unmet medical need, or to prevent, detect, or treat chronic or acute diseases and conditions;

    2. to reduce long-term health care costs in the United States; or

    3. to significantly advance the goal of curing cancer within the next 30 years.

    Deadline

    The U.S. Department of Treasury issued detailed guidelines last month regarding certification of qualified investments eligible for the tax credit or grant.  Qualified companies wishing to participate should act promptly, as the deadline for application is July 21, 2010.