Type: Law Bulletins
Date: 05/24/2010

Guidance for $1 Billion Tax Credit Released Under Affordable Care Act

New Therapeutic Discovery credit will support biomedical research by small firms

The U.S. Department of the Treasury has announced the guidelines for applying for the new Therapeutic Discovery Project Program created by the recently-adopted health care reform legislation act (the new Patient Protection and Affordable Care Act). The program is designed to provide tax credits to small firms (less than 250 employees) engaged in projects that show significant potential to produce new therapies, address unmet medical needs, reduce the long-term growth of health care costs and advance the goal of curing cancer within the next 30 years. In addition to supporting biomedical research to find life-saving treatments, the Program credit allocation will also take into consideration which projects show the greatest potential to create and sustain high-quality, high-paying jobs in the United States, and to advance U.S. competitiveness in the fields of life, biological, and medical sciences. 

Importantly, a firm can elect to receive the credit as a grant, so even a company that is not yet profitable can benefit. The credit or grant is worth up to 50 percent of the cost of qualifying investments made in 2009 and 2010, up to a maximum credit or grant of $5 million per firm.  The entire grant program is limited to $1 billion overall.

The guidance describes the process by which firms can apply to have their research projects certified as eligible for the credit. The application window will extend from June 21 to July 21, 2010 – and applicants will receive a determination no later than October 29, 2010. The Department of Health and Human Services will review information provided by the applicant in order to determine whether a project is eligible for the credit.

The guidance describes the application process and requirements, including:

Qualifying Therapeutic Discovery Project definition: Projects must meet one of the following conditions:

  • Is the project (1) designed to develop a product to treat or prevent a disease or condition; (2) by conducting pre-clinical activities, clinical trials, or clinical studies, or by carrying out research protocols; and (3) for the purpose of securing approval of a new drug or biologic?
  • Is the project designed to diagnose a disease or condition?
  • Is the project designed to determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions?
  • Is the project designed to develop a product, process, or technology to further the delivery or administration of therapeutics?

Selection Criteria: Criteria that will be taken into account in selecting recipients include:

  • Is the project likely to result in one or more new therapies?
  • If yes, are the new therapy(ies) expected to (1) treat areas of unmet medical need? (2) prevent, detect, or treat chronic or acute diseases or conditions?
  • Is the project likely to reduce long-term health care costs in the U.S.?
  • Is the project likely to significantly advance the goal of curing cancer within the next 30 years?

For more information on the Qualifying Therapeutic Discovery Program and the application process, please contact a Taft attorney.

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