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.