HHS Releases $1 Billion Biotech Research Tax Credit Guidelines

The Department of Health and Human Services, with the Department of Treasury, has released detailed guidelines for biotechnology companies interested in applying for the research tax credit introduced in the Health Care bill earlier this year. The Qualifying Therapeutic Discovery Project Credit provides a 50 percent income tax credit for investments in certified research projects made in 2009 and 2010. A total of $1 billion in credits will be available. Applications for certification must be submitted to the Internal Revenue Service (IRS) by July 21 for the primary allocation round. If any portion of the $1 billion remains available, there may be additional application rounds.

The IRS will certify up to $10 million in investments made by individual companies in 2009 and 2010. Companies may seek certification for more than one project, but a single company can receive only $5 million in tax credits. In order to qualify, research projects must meet the topic qualifications set out in the Patient Protection and Affordable Care Act of 2010 (see the May 5, 2010 issue). The IRS will certify projects that have the greatest potential to create and sustain high-quality, high-paying jobs and to advance U.S. competitiveness in life, biological and medical sciences.

Certain expenses are not eligible for certification through the program. Employee salaries, interest payments, facility maintenance expenses and service costs are excluded. The IRS also has the discretion to exclude any other expenses from consideration, and to certify only a portion of any application.

Preliminary reviews of applications submitted before July 21 will be completed by September 30. Applications from the first round will be approved or denied by October 29. If requested, the IRS may issue grants instead of tax credits for the amount certified.

The guidelines are available on the IRS website at: http://www.irs.gov/pub/irs-drop/n-10-45.pdf.