Opportunity Bulletin - Federal Income Tax Credits and Grants for Small to Mid-sized Biotech Companies

April 29, 2010

Health care reform has produced a new tax credit and grant program for inventive small to mid-sized companies with R&D in therapeutics. Federal tax credits and grants will be awarded up to a national total of $1 billion for tax years 2009 and 2010 for winning, qualifying biotech projects. Companies with 250 or fewer employees are eligible, if they have a "qualifying therapeutic discovery project" designed to do any of the following:

Regulations and application forms will be issued in mid-May. Companies should start preparing now, as early submittals are most likely to receive awards. The IRS will select winning applications and distribute funds in the form of tax credits or cash grants. 

The tax credit or grant is available for "qualified investments" made in the 2009 and 2010 tax years. The qualified investment for a tax year is the aggregate amount of costs paid or incurred in that tax year for expenses necessary for and directly related to conducting the project. The amount of credit or grant a business can receive is equal to 50% of the qualified investment in the project.  For example, if a business makes a qualified investment of $2 million that is approved by the IRS, the business will receive either a $1 million tax credit or a $1 million grant.

Favored projects will include those that show reasonable potential to help cure cancer, create new therapies in the area of unmet medical need, treat chronic or acute disease, or reduce long-term health care costs in the United States. Projects that have high U.S. job-creation potential and will advance U.S. competitiveness will also have an advantage.

Because this is a competition, careful preparation of the applications required is essential.  Frost Brown Todd stands ready to assist clients that wish to pursue this valuable opportunity.  If you want to receive prompt details of the Treasury's application process and standards for certification when announced (by May 22), please contact any of the attorneys listed below:

Joseph J. Dehner - 513.651.6949 - jdehner@fbtlaw.com
Samuel G. Graber - 502.568.0248 - sgraber@fbtlaw.com
William G. Strench - 502.568.0207 - wstrench@fbtlaw.com
Steven J. Goldstein - 513.651.6131 - sgoldstein@fbtlaw.com