Important Information about the New Biotech Tax Credit
As a follow-up to last month’s feature on the new biotech tax credit, John Pennett, CPA — Partner, Life Science Practice Director at Amper, Politziner & Mattia, LLP, in Edison, NJ — provides important information about what you need to do to apply:
The IRS issued Form 8942 on June 18, 2010 and begins accepting applications for the $1 billion Qualifying Therapeutic Discovery Project Program. Applications must be postmarked no later than July 21, 2010.
A complete application includes the following:
- Form 8942, Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program. To view the form and its instructions, please click Form 8942 and instructions.
- Project Information Memorandum. To view the form, please click here.
- Consent to Public Disclosure of Certain Qualifying Therapeutic Discovery Project Program Application Information. Click here to download the form.
- Form 2848, Power of Attorney and Declaration of Representative. Click here to download the form.
A complete application includes the following:
- File the application by mail instead of online.
- For purposes of this application, an applicant (whether or not publicly traded) may not treat any portion of the remuneration of its principal executive officer, or an individual acting in such a capacity, as a qualified investment, even where that person is engaged in work directly related to the conduct of a qualifying therapeutic discovery project.
- In addition, if the applicant is a publicly traded corporation, the applicant may not treat any portion of the remuneration of its three highest compensated officers for the taxable year (other than the principal executive officer or the principal financial officer) as a qualified investment, even where those individuals are engaged in work directly related to the conduct of a qualifying therapeutic discovery project.
- However, if the applicant is not a publicly traded corporation, then the remuneration of its three highest compensated officers (and other employees) may be treated as a qualified investment if those individuals engage in work directly related to the conduct of a qualifying therapeutic discovery project, such as primary research or laboratory scientific efforts.
- Applicants should file a return for 2009 under the assumption that they will not be receiving a credit or grant in lieu of credit under Section 48D. If an applicant is certified by the IRS for a 2009 Section 48D credit or grant in lieu of credit, then the IRS will provide special processing instructions for the filing of amended 2009 returns to reflect any reduction in credits under Sections 41 and 45C.
- A medical device designed to diagnose diseases or conditions could qualify as a qualifying therapeutic discovery project (see question 2 in the Project Information Memorandum). In addition, a device designed to determine molecular factors related to diseases or conditions (a molecular diagnostic device) to guide therapeutic decisions could qualify (see question 3 in the Project Information Memorandum). Also a product, process, or technology that furthers the delivery or administration of therapeutics qualifies under question 4.
- If a company is already receiving other grant money, an applicant must reduce the amount of a project’s qualified investment for any grant that is not included in gross income.
- Generally, legal and/or accounting fees are not considered qualified investments.
- If the applicant requested a grant and the amount of actual costs paid or incurred for qualified investment is less than the amount requested on the application, the applicant needs to file an amended Form 8942 within 15 days after the close of the applicant’s tax year to show the actual costs paid or incurred for qualified investment.
- If the project ceases to be a QTDP, the applicant needs to recapture the amount of the QTDP grant by increasing the applicant’s tax for the tax year that the QTDP grant is made.
For more information, click Frequently Asked Questions (FAQs): IRS and HHS Questions and Answers. |
