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Therapeutic Discovery Project Credit

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06.21.2010 | Advisory

The Therapeutic Discovery Project Credit program (the “Program”) was included in the recently enacted federal healthcare reform legislation to encourage investments in new therapies to prevent, diagnose, and treat acute and chronic diseases. Run by the U.S. Treasury Department in consultation with the Department of Health and Human Services, the Program is focused on smaller companies (250 or fewer employees) in the therapeutic discovery space.

The Program provides federal tax credits to encourage investments in new therapies to prevent, diagnose, and treat disease. The credits would be equal to 50% of investments in “qualifying therapeutic discovery projects” for 2009 and 2010, and will not exceed a maximum total credit of $5 million dollars per approved participant. Alternatively, approved participants can choose to take a credit as a grant instead of a tax credit, thus making the Program attractive to small companies who are unable to benefit from a tax credit that offsets income tax liability. In addition, qualified therapeutic discovery project expenditures would not qualify for the R&D credit, orphan drug credit, or bonus depreciation.

Qualifying therapeutic discovery projects include those designed to: treat or prevent diseases or conditions by conducting pre-clinical or clinical activities for securing FDA approval of a product; diagnose diseases, conditions, or determine molecular factors (or develop molecular diagnostics) related to such diseases or conditions; or develop products, processes, or technologies to further the delivery or administration of therapeutics.

Applications will be reviewed and selected on the basis of the project’s potential to reach one or more of the following criteria:

  • develop new therapies for areas of unmet need
  • prevent, detect, or treat chronic or acute diseases
  • reduce long-term healthcare costs
  • advance the goal of curing cancer within 30 years

As well, consideration will be given to those projects that show the greatest potential to advance U.S. competitiveness in the fields of life, biological, and medical sciences; and create and sustain high-paying jobs in the U.S.

There is a pool of $1 billion dollars for the credits and grants combined. The application window begins June 21, 2010 and closes July 21, 2010. Applicants will notified no later than October 29, 2010.

Interested parties should apply as soon as possible. For any questions you may have, please contact your Nutter attorney at 617-439-2000. Information is also available through MassBio, MassMEDIC and the Massachusetts Life Science Center, and the IRS website.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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