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CLIENT ALERT: $1 Billion in Federal Tax Credits and Grants Available to Eligible Life Science Companies

As part of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, approved in March 2010, small life science companies in the United States are eligible for $1 billion in funds available as tax credits and grants.  On May 21, 2010, the U.S. Department of the Treasury announced that the Internal Revenue Service (IRS) had released the process by which companies can apply for the Qualifying Therapeutic Discovery Project Credit. The Credit is established under Section 48D of the Internal Revenue Code.

A tax credit of up to 50% of qualified investments in a "qualifying therapeutic discovery project" ("QTDP") made in 2009 or 2010 is available for employers with less than 250 employees.  The maximum credit is $5 million per company.  A grant of the same amount as the tax credit is available if a company is unable to currently use a tax credit, for instance if a company is not yet profitable.

As disclosed in Section 48D(d)(3)A), a project must have a reasonable potential to produce new therapies, address unmet medical needs, reduce healthcare costs, or advance the goal of curing cancer to be certified as eligible for the credit. The Department of Health and Human Services will evaluate the projects for their potential to meet those goals.  The IRS will certify all or a portion of the qualifying investment in those qualifying projects that have the greatest potential to i) create and sustain jobs and ii) advance competitiveness of the United States. 

Companies may submit applications for certification by the IRS starting June 21, 2010.  Applications cannot be postmarked later than July 21, 2010.  Determinations will be made by the IRS no later than October 29, 2010.  The $1 billion in funds is expected to go quickly.

Information is available at http://www.treas.gov/press/releases/tg712.htm.