New Tax Incentive for Biotech Companies

The recently enacted healthcare legislation contains a new incentive for biotech companies known as the Qualifying Therapeutic Discovery Project Credit (Therapeutic Credit). Enacted as Sec. 48D of the Internal Revenue Code, the Therapeutic Credit will allow some businesses to claim a credit for 50 percent of their qualified investment in qualifying therapeutic discovery projects for 2009 and 2010. Two aspects set this incentive apart from similar programs. First, it is available only to businesses with 250 or fewer employees. Second, taxpayers may elect to receive grants in lieu of tax credits.

Qualifying therapeutic discovery projects include those designed to accomplish the following: treat or prevent diseases or conditions by conducting pre-clinical or clinical activities for the purpose of securing Food and Drug Administration approval of a product; diagnose diseases or conditions, or determine the molecular factors related to diseases or conditions, by developing molecular diagnostics to guide therapeutic decisions; or develop products, processes and technologies to further the delivery or administration of therapeutics.

However, the Therapeutic Credit is not available to all eligible businesses that apply. Because there is a limited pool of money allocated to these credits/grants, the Treasury will review and select applicants based on the project’s potential to result in new therapies for areas of unmet need or to prevent, detect or treat chronic or acute diseases or conditions; reduce long-term healthcare costs or advance the goal of curing cancer within 30 years; and advance U.S. competitiveness in biotechnology while creating and sustaining high-paying jobs in the U.S.

For more information about the Therapeutic Credit, go to www. forbes.com/2010/03/26/health-reform-biotechtax-credit-personal-finance dean-zerbe.html.