ADDITIONAL GUIDANCE FOR QUALIFYING THERAPEUTIC DISCOVERY PROJECT TAX CREDIT/GRANT FOR MEDICAL TECHNOLOGY COMPANIES

As On May 21, the Internal Revenue Service released additional guidance concerning the federal Qualifying Therapeutic Discovery Project Tax Credit/Grant.  This guidance supplements Oppenheimer’s April 12, 2010 MedTech Alert on this topic.

A Qualifying Therapeutic Discovery Project is one that:

• Treats or prevents diseases or conditions by conducting pre-clinical activities, clinical trials, clinical studies, or carrying out research protocols for the purpose of securing approval of a product under section 505(b) of the Federal Food, Drug, and Cosmetic Act or section 351(a) of the Public Health Service Act;
  
• Diagnoses diseases or conditions or determines molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions; or 
  
• Develops a product, process or technology to further delivery or administration of therapeutics.

The guidance clarifies that a Qualifying Therapeutic Discovery Project includes any product which diagnoses diseases or conditions, regardless of whether it determines molecular factors or is a molecular diagnostic. Similarly, the term “therapeutics” as used in the third prong above was defined broadly to mean a drug or medical device as defined in Section 201(g) and (h) of the Federal Food, Drug, and Cosmetic Act, respectively. 

The guidance also specified that even if companies qualify under the aforementioned criteria, they must also demonstrate that their project will:

• Result in new therapies to (a) treat unmet medical need or (b) prevent, detect, or treat chronic or acute diseases and conditions;
  
• Reduce long-term health care costs in the United States; or 
  
• Significantly advance the goal of curing cancer within 30 years.

Additionally applicants must explain their project’s potential to (i) create and sustain (directly or indirectly) high quality, high-paying jobs in the United States, and (ii) advance United States competitiveness in the fields of life, biological, and medical sciences.

The guidance also clarified that the Qualifying Therapeutic Discovery Project Tax Credit/Grant will be equally allocated to qualified applicants.  After the initial allocation, if any allocation was in excess of the amount requested by a given applicant, such amount will be redistributed equally to applicants who had not yet received their entire qualified amount.

While the Tax Credit application was originally scheduled to be released on the same date as the guidance, its release date has been extended to June 21, 2010.  Once the application becomes available, companies will have until July 21, 21010 (one (1) month) to apply for the Qualifying Therapeutic Discovery Project Tax Credit/Grant, as applications will not be accepted after July 21, 2010. As a result of the short application period and the specificity of information required by the application, prospective applicants are advised to start preparing their application information now.

Contact Us

If you have any questions about the content of this alert or are interested in receiving a free evaluation regarding whether you company meets the criteria for a Qualifying Therapeutic Discovery Project Tax Credit/Grant, please contact Gina DeConcini at 612.607.7377; Patrice Kloss at 612.607.7360 or Barbara Wrigley at 612.607.7595.

This alert is a copyrighted publication produced by Oppenheimer Wolff & Donnelly LLP. The information contained in this alert is of a general nature and is subject to change. Readers should not act without further inquiry and/or consultation with legal counsel.