Biotech’s $1 Billion Tax Credits Are Up for Grabs! OK, Now Everybody Relax
The rules regarding the Qualifying Therapeutic Discovery Project Credit have now been released by the Treasury Department. You can read the fact sheet, and detailed description of the legislation yourself, but here are 10 key points I came away with after reading them.
1. The first thing that everyone can do is relax. In contrast to rumors that have been floating around, the program is not set up on a “first come, first served” basis, and nobody needs to get these applications in on Monday to push theirs to the top of heap. The Formal IRS applications (Form 8942) will not be available until June 21st or thereabouts. Those who had lined up their staffs to work this entire weekend should send them home early today with instructions to enjoy the weekend!
2. The application period opens on June 21 and ends on July 21. The postmark on the application is deemed to be the date of delivery. Preliminary review of the applications is to be completed by Sept. 30; this is to ensure that applicants are eligible taxpayers and that their applications are complete. Applicants will receive determinations as to whether or not they qualify for credits and/or grants, and how much they will receive, by Oct. 29. Note: there is no conference or appeals process for these grants and credits. If you don’t get one, or you are not happy with the amount awarded, there is no way to change the decision. Separate applications are required for each project that you wish to apply for.
3. The maximum credit or grant that any one company can obtain is $5 million, based on certification of $10 million in qualified investments, since the credit or grants are funded at a 50 percent rate. I read a report of one company that had planned on asking for $42 million in credits. Not going to happen. The government wants to spread the money around, hence the $5 million cap. The money is likely to be spread around geographically as well.
4. The total amount to be spent by the government $1 billion. Applicants can request grants or credits for project spending that already occurred in 2009, during 2010, or for projects that spanned both years. It is not known if more money will be added at a later date (that is a political decision).
5. Though not explicitly stated, it appears that all projects will be ranked and the money allotted to the highest ranking applications first. According to the published materials “the service determines that the taxpayers project is among the projects that have the greatest potential…..”.
6. Applications will require a DUNS number (available for free from Dun and Bradstreet) and must register with the Central Contractor Registration.
7. Winning companies will have their applications and amounts awarded subject to public disclosure (see the above attached documents for how this works, and how proprietary information is handled).
8. The government has estimated that the average time that applicants will spend on the applications to be about 12 hours and seven minutes. The government expects about 1,200 applications!
9. Brochures, DVDs, and other types of presentations are NOT permitted as part of the application. No additional information can be incorporated by reference.
10. The applications do not appear to be very lengthy. There are some yes and no questions, as well as certain Project Information Memoranda. A project overview is required with a 250-word limit, and there are three additional questions that also have 250-word limits. A few of the questions will allow for the inclusion of five literature citations. Those of you that have written up thousands of words to document your case are going to have to do some serious editing once the applications come out.