May 11, 2010
Therapeutic Discovery Project Credit (TDPC) Can Provide Cash
The TDPC was part of the Patient Protection and Affordable Care Act of 2010 (the "Act") which was signed into law by the President on March 23, 2010. This credit applies to taxpayers not employing more than 250 employees and is available as either a tax credit or a grant for working toward the diagnosis, treatment or prevention of diseases. The ability for this credit to be awarded as a grant makes this a very meaningful benefit for companies that do not have taxable income.
Credit or Grant Amount
The TDPC (which has been codified as IRC Section 48D) provides for a 50% credit on “certified costs” incurred in 2009 and 2010 for a “qualifying therapeutic discovery project”. The goal of this credit is to create jobs in the United States while advancing our competitiveness in the fields of life, biological, and medical sciences.
A “qualifying therapeutic discovery project” is a “project which is designed to:
- treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, clinical studies, or carrying out research protocols,
- diagnose diseases or conditions or to determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapy decisions, or
- to develop a product, process, or technology to further the delivery or administration of therapeutics.
Projects must have the potential to result in new therapies, reduce long-term health care costs, or cure cancer within 30 years.
A “certified cost” is defined as one that is necessary for and directly related to the conduct of a qualifying therapeutic discovery project. Although that may appear vague, this language is not significantly different than that related to the Research Credit pursuant to IRC Section 41. The TDPC does provide for some additions and exclusions but the underlying theme of trying to look at expenses closely related to the laboratory prevails. It is also worthy to note that any expenditures included in the TDPC would not be eligible for the Research Credit.
Limitations on Awards
Unlike the Research Credit, there is only $1 billion set aside in the Bill for this credit and a formal application and approval process is required with the IRS. Furthermore, credits and grants will be approved on a first come, first serve basis so there is a limited opportunity to receive this benefit. Unfortunately, the application has not been released at this time but the IRS has been given a mandate to have the application process available by May 21st so applicants can pull together critical information.
Companies eligible for these benefits include biotechnology, biopharma, pharmaceuticals, medical device and other companies that are targeting the advancement of health care.
How can Marcum LLP help?
Marcum LLP has extensive experience working with companies to claim the Research Tax Credit and can assist potential candidates in identifying qualifying projects and certified costs for the TDPC. Your Marcum Tax Advisor will help companies:
- Analyze projects for qualification,
- Capture certified costs,
- Collect support and substantiate any claim made,
- Prepare and submit applications for the credit or grant, and
- Providing audit defense if needed.
Should you have any questions related to the Therapeutic Discovery Project Credit (TDPC), contact your MarcumRachlin Tax Professional.