Massing at the Starting Line for the $1B Program Tax/Grant Program
Small life-sciences companies in the US will get funds in the form of tax credits or as a grant covering 50% of project development costs (for 2009 and 2010) for companies with fewer than 250 workers. The plan, part of the US healthcare overhaul approved in March, is expected to be open to hundreds of biotech, medical device and diagnostic companies that are both public and privately held.
Although the plan was broadly outlined in the new law, the particulars and the application, developed in consultation with the Department of Health and Human Services are due by this weekend. That announcement is imminent. The plan, which creates section 48d of the IRS Code, is expected to be similar to $2.3 B in tax credits related to alternative energy that was included in the economic stimulus package. The idea was to help the small companies that were facing a massive cash shortfall during the credit crunch.
The definition of a “qualifying therapeutic discovery project” is very broad under the bill. In summary, it must be a program that aims to secure approval of a product from the FDA, related to research and treatment-related diagnostics, or something related to how a therapy is delivered to a patient. The law says the funds will go to programs that show “reasonable potential” of meeting their development goals, and have the greatest chance of creating jobs in the US and further the country’s competitiveness in the field.
Certain costs won’t qualify under the program, including facility maintenance costs, interest expenses and compensation of certain executives. Also, companies can’t “double dip” by claiming costs deducted under other programs or funds received through other government grants. It is expected to be popular.
Companies that are partially owned by a tax-exempt organization such as a university, sometimes the source of initial research are also disqualified from the program. It is unclear if there will be a cap on the amounts claimed per company or project, in order to increase the number of participants. Another unknown is how the applications will be evaluated: judged on their merits; on a first-to-file basis that could cause a frantic rush, or a combination of both.
Although the details are unclear, he expects the process will be similar to the energy program that required a preliminary application that got approved, followed by a more substantial final application. (HWM and T Gryta, DowJones)
