Qualifying Therapeutic Discovery Projects (QTDP)
May 24th, 2010 | 
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On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act. The President subsequently signed the Health Care and Education Reconciliation Act of 2010 into law on March 30, 2010. While the extensive changes to the nation’s health care system were widely publicized and discussed, a little-known provision in the Acts could provide tremendous benefits to small and mid-sized companies in the Biotechnology and Pharmaceutical industries.
The new law establishes a Tax Credit for Qualifying Therapeutic Discovery Projects (QTDP). Governed by the newly-established Internal Revenue Code §48D, taxpayers may receive a credit equal to 50% of the aggregate amount of the costs paid or incurred after December 31, 2008 for expenses necessary for and directly related to the conduct of a QDTP. What is a QTDP?
A “Qualifying Therapeutic Discovery Project” would include projects that are designed to:
Treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, or clinical studies, or carrying out research protocols, for the purpose of securing approval of a drug or biologic;
Determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions; or
Develop processes, technologies, or products to further the delivery or administration of therapeutics.
Benefits
A unique feature of this benefit provides immediate cash recovery opportunities for taxpayers. Eligible taxpayers who may not be able to utilize tax credits may opt to receive Treasury Grants in lieu of tax credits. Even if the taxpayer does not have a tax liability for 2009 or 2010, it may receive a cash grant from the government.
Qualifications and Limitations
The Credit is limited to companies with 250 or fewer employees. Also, the total credits or treasury grants are limited to $1 billion for 2009 and 2010.
How to Apply
Taxpayers interested in earning QTDP credits or Treasury Grants must submit an application and supporting materials to the Treasury Department. The Treasury Department, in consultation with the Department of Health and Human Services, will then award the credits / grants to qualifying taxpayers. The Treasury Department will provide guidance on the application process and qualifications on or before May 21, 2010.
Time is of the Essence
The Treasury Department will likely begin accepting applications for 2009 awards by early summer 2010 (Congress has directed Treasury to implement the program within 60 days of passage). Taxpayers seeking these incentives should begin preparing their claims in short order. Since there is a finite amount of awards available ($1BB for two years), taxpayers should be prepared to submit their claims as early as possible.
The Engineered Tax Services Advantage
To secure these credits, taxpayers will need the guidance of professionals with experience in Federal Tax Credits and Incentives. ETS’s Credits & Incentives team has worked extensively with tax credits and negotiated incentives at the federal and state level, including the R&D Tax Credit. Further, ETS has assisted many clients in the Biotech, Pharmaceutical and Life Sciences industries with innovative and specialized tax strategies and incentives, giving us unique insights and experiences within the industry. ETS’s team will assist you in preparing your QTDP claim and will guide you through the process from start to finish.
Ask us what your company or property qualifies for…
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