The U.S. Department of the Treasury has released guidelines for the new Qualifying Therapeutic Discovery Project (QTDP) Program created under the healthcare reform package. The program calls for up to $1 billion in tax credits and/or cash grants for small life science firms that show significant potential to produce new and cost-saving therapies, support good jobs, and increase U.S. competitiveness.
The guidance released today by the Internal Revenue Service describes the process by which firms can apply to have their research projects certified as eligible for the credit. Companies may submit applications for certification beginning June 21, and applications must be postmarked no later than July 21, 2010. As part of the review process for research projects, the Department of Health and Human Services will evaluate each project for its potential to produce new therapies or reduce healthcare costs. The IRS will issue certifications by the end of October based on the determinations made by HHS.
Only companies of 250 employees or fewer are eligible to apply. The credit will cover up to 50% percent of the cost of qualifying biomedical research or up to $5 million per firm. To provide an immediate boost to U.S. biomedical research and the small businesses that conduct it, the credit is effective for investments made in 2009 and 2010.
Firms can opt to receive a grant instead of a tax credit, so start-ups that are not yet profitable can benefit as well. Any such grant is not includable in the taxpayer’s gross income. Additionally, unlike the SBIR program, companies that are majority owned by venture capital firms should be eligible for cash grants based on their qualified investments.
The therapeutic discovery tax credit is targeted to projects that show significant potential to produce new therapies, address unmet medical needs, reduce the long-term growth of healthcare costs, and advance the goal of curing cancer within the next 30 years. The credit's allocation will also take into consideration which projects show the greatest potential to create and sustain high-quality, high-paying jobs in the U.S. and to advance the country’s competitiveness in the fields of life, biological, and medical sciences.