Qualifying Therapeutic Discovery Project Tax Credit for Small and Medium-Sized Biotech Companies


The Patient Protection and Affordable Care Act (the “Act”), enacted on March 23, 2010, established the Qualifying Therapeutic

Discovery Project Credit (the “Credit”). The Credit represents a significant financial benefit to small and medium-sized

biotechnology and life sciences companies (must not employ more than 250 employees in all businesses of the taxpayer). The

Credit is available in the form of a 50 percent federal income tax credit or cash grant for “qualified investments” necessary for and related to “qualifying therapeutic discovery projects” incurred in a taxable year beginning in 2009 or 2010. The aggregate amount of credits and grants that can be awarded to all taxpayers under the Credit program is capped at $1 billion. The Credit will have the effect of reducing a qualifying taxpayer’s tax liability and, if the taxpayer has no tax liability, it can receive a nontaxable grant for the same amount.

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