IRS Provides Guidance on Application Process for Qualified Therapeutic Discovery Project Investment Tax Credits or Cash Grants

As we discussed in a previous e-alert, a new nonrefundable investment tax credit for certain taxpayers with “qualified investment” in a “qualified therapeutic discovery project (a “QTDP”) was created in recently enacted health care legislation. A taxpayer also may request a cash grant in lieu of the investment tax credit (the “QTDP tax credit”). On May 21, 2010, the Internal Revenue Service (the “IRS”) issued Notice 2010-45 establishing the QTDP certification program.

The application for certification will be on new IRS Form 8942 to be released no later than June 21, 2010. Thereafter, completed applications must be post-marked no later than July 21, 2010 for the primary allocation round. It is anticipated that the $1 billion cap for the QTDP tax credits and cash grants will be reached in the primary allocation round. An applicant must complete a separate IRS Form 8942 for each QTDP for which it is seeking a QTDP tax credit or cash grant. No applicant will be allocated more than $5 million in QTDP tax credits or cash grants. The IRS, in consultation with the Department of Health and Human Services, will allocate the QTDP tax credits or cash grants among the primary allocation round applicants and make award certifications no later than October 29, 2010.

Notice 2010-45 includes two Appendices: Appendix A entitled “Applications for Certification of Qualified Investments Attributable to Qualifying Therapeutic Discovery Projects” and Appendix B entitled “Consent to Public Disclosure of Certain Qualifying Therapeutic Discovery Project Program Application Information.” Appendix A sets forth specific information and questions that will be included as part of IRS Form 8942, including the Project Information Memorandum. Therefore, Appendix A is a helpful tool for an applicant in compiling the information (i.e., “getting a headstart”) that will be necessary to complete IRS Form 8942 when it is released. Note that the IRS may request additional information in IRS Form 8942 that is not set forth in Appendix A.

Appendix B is a consent to be signed by the applicant acknowledging that the IRS might publicly disclose information about the applicant’s QTDP if the IRS allocates QTDP tax credits or cash grants to the QTDP. An applicant is not required to provide the consent in order to receive an allocation of QTDP tax credits or cash grants.

More Information

Click here for the full text of Notice 2010-45 (PDF).

If you have any questions, please contact Will Becker, Thomas Popplewell, Thomas Ford or Robert McNamara.

Treasury Circular 230 Disclosure - This disclosure is provided to comply with Treasury Circular 230. This written advice is not intended or written to be used, and it cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed on the person.

This information is available for educational purposes only. Receipt of this communication does not create an attorney-client relationship with Andrews Kurth LLP and this memorandum does not offer specific legal advice to any person. Do not use this information as a substitute for specific legal advice.