Archive for the ‘Tax Credit’ Category

Qualified Therapeutic Discovery Program (QTDP) awards – What you need to know

Saturday, December 18th, 2010

Author: Rick White and Robert Tobey

Qualified Therapeutic Discovery Program (QTDP) awards were recently issued and 45 biotechnology companies in Virginia were awarded more than $11 million in federal tax credits and grants.  Accounting for those funds under tax basis accounting as well as Generally Accepted Accounting Principles (GAAP) can be difficult. The grants themselves are not taxable, but many grant recipients will need to amend their 2009 tax returns in order to take full advantage of the grants.  They may also need to make certain elections with their 2010 filings.

How to account for the grants under GAAP is a little less clear.  Some have suggested that since the awards were based upon research and development expenditures that the R&D costs should be reduced by the amount of the grants.  However, most experts seem to feel that the grants should be recognized “below the line” (below operating income) as an other, non-recurring income.

Very few CPAs are familiar with the QTDP grants, however, the clients that we helped submit QTDP applications received 18% of the total grant amounts awarded in the state of Virginia.    If you have questions on QTDP issues or other biotech, life-sciences, I.T. or technology business concerns, please contact Rick White or Robert Tobey.

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Guidance Addresses Tax Breaks For Hiring New Employees

Thursday, October 28th, 2010

Employers are exempted from paying the employer 6.2% share of Social Security (i.e., OASDI) employment taxes on wages paid in 2010 to newly hired qualified individuals. These are workers who: (1) begin employment with the employer after Feb. 3, 2010 and before Jan. 1, 2011, (2) certify by signed affidavit, under penalties of perjury, that they haven’t been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer; (3) do not replace other employees of the employer (unless those employees left voluntarily or for cause), and (4) aren’t related to the employer under special definitions. The payroll tax relief applies only for wages paid from Mar. 19, 2010 through Dec. 31, 2010.

Employers also may qualify for an up-to-$1,000 tax credit for retaining qualified individuals. The workers must be employed by the employer for a period of not less than 52 consecutive weeks, and their wages for such employment during the last 26 weeks of the period must equal at least 80% of the wages for the first 26 weeks of the period.

The IRS had issued guidance on these tax breaks in the form of frequently asked questions (FAQs). Updated FAQs explain: when an employee is considered to begin work; how the exemption can be claimed for a new hire who replaces a prior employee; that the exemption can be taken for someone who was self-employed for the entire 60-day lookback period; that minors may sign the HIRE Act employee affidavit (Form W-11); and what counts as wages for the retention credit.

Source: RIA

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Posted in Business News, Tax, Tax Credit | 9 Comments »

Qualified Therapeutic Discovery Tax Credit

Wednesday, May 5th, 2010

A taxpayer planning on applying for the discretionary tax credit under new Internal Revenue Code (IRC) §48D must immediately begin documenting why the IRS should choose its qualifying therapeutic discovery project and award the taxpayer credits rather than awarding these to other applicants’ therapeutic discovery projects.

This new tax credit was added to the IRC under the Patient Protection and Affordable Care Act (P.L. 111-148).  It provides that a taxpayer, which is a company employing no more than 250 people, through either a tax credit or cash grant, may seek to recover up to 50% for a qualified investment made in 2009 and 2010 in a qualifying therapeutic discovery project.

A qualified investment is described in the legislation as the aggregate amount of costs paid or incurred in 2009 and 2010 for expenses necessary for and directly related to the conduct of a qualifying therapeutic discovery project.  A qualifying investment does not include compensation paid to the company’s CEO or certain other officers, interest expense, facilities maintenance expense, certain indirect general and administrative costs, or any other expenditure as determined by the Secretary of the Treasury as appropriate to carry out the purpose of the legislation.

A qualifying therapeutic discovery project is a project designed to develop a product, process, or therapy to diagnose, treat, or prevent diseases and afflictions by conducting pre-clinical activities, clinical trials, clinical studies, and research protocols, or by developing technology or products designed to diagnose diseases and conditions, including molecular and companion drugs and diagnostic, or to further the delivery or administration of therapeutics.

A taxpayer interested in qualifying for these credits must first apply for IRS/ Department of Health and Human Service (HHS) certification, explaining, in a compelling, well-written, believable narrative which nonscientists can understand, why the taxpayer and the project qualify for the credit.  In evaluating applications the IRS and HHS are seeking projects which will reasonably result in:

1)      new ways to treat unmet medical needs;

2)      prevention, treatment, or detection of chronic or acute diseases;

3)      reduced U.S. healthcare costs over time; or

4)      significant advances toward curing cancer within 30 years.

It is expected competition for the $1billion of tax credits allotted under IRC §48D will be stiff.  A taxpayer interested in applying for these credits must be ready to submit its application as soon as the program commences, which is currently planned for May 23.
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Contact Robert Tobey if you would like to discuss how your company may qualify for the IRC §41D credit or would like to engage us to help draft your application.  We will post updates on guidance for applying for these credits as it becomes available.

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