As part of the Patient Protection and Affordable Care Act signed into law on March 23, 2010, the federal government set aside $1 billion toward the Qualifying Therapeutic Discovery Project Program. According to the IRS in their Q and A on the Tax Credit or Grant for Qualifying Therapeutic Discovery Projects:
The credit is a tax benefit targeted to therapeutic discovery projects that show a reasonable potential to:
Allocation of the credit will also take into consideration which projects show the greatest potential to create and sustain high-quality, high-paying U.S. jobs and to advance U.S. competitiveness in life, biological and medical sciences.
What Expenses Qualify?
Per the instructions to the Form 8942, up to $10 million in costs paid or incurred during 2009 and 2010 in connection with your approved project qualify. Eligible expenses include:
Employee wages
Supplies and lab costs
Equipment purchases
Payments to third-party contractors
Other costs "necessary for and directly related to the conduct of the project"
Not all costs qualify, however. Make sure to exclude salaries paid to the CEO, interest expense, and facility costs including mortgage or rent payments, insurance, utilities, and maintenance costs. More information is available in IRS Notice 2010-45.
Quick Deadline:
You'll need to act quickly to apply for this grant. The deadline to submit the Form 8942 is July 21, 2010. With the application, you'll also need to include a Project Information Memorandum.
While the IRS is collecting this information, the US Department of Health and Human Services will be the organization to determine whether your project meets the requirements for this program. The IRS will then dole out the $1 billion based on the total eligible costs of all the certified projects. While the maximum grant is 50% of each project's cost, the percentage will drop across the board if total costs for all of the approved projects exceed $2 billion.
Assuming you get the paperwork submitted by the July 21st deadline, expect to hear from the IRS by the end of October whether your therapeutic discovery project has been accepted into this lucrative program.
About The MDTAXES Network
The MDTAXES website (www.mdtaxes.com) has been up and running since 1995 and contains a thorough analysis of the tax issues relevant to healthcare professionals. The site includes a monthly newsletter, a message board monitored by the CPA members, and a variety of basic financial planning tools including a Financial APGAR test. Visitors to the site can sign up to receive their informative monthly newsletter via e-mail.
Unlike other directories of CPAs, MDTAXES grants their CPA members exclusivity by metropolitan area. This allows the members to focus on developing a healthcare niche within their CPA practices, and to keep current with all the tax breaks and pitfalls common to these professionals.
