The Patient Protection and Affordable Care Act, the comprehensive health care reform legislation signed into law by President Obama on March 23, 2010, authorizes one billion dollars in tax credits to firms making qualified research investments in tax years beginning in 2009 and 2010. Small businesses that invest in clinical research related to disease prevention or treatment, diagnosis and molecular diagnostics, or the development of therapeutic processes or technologies can apply for a credit in the amount of fifty percent of incurred costs necessary for and directly related to such research. The Act requires that the Secretary of the Treasury and the Secretary of Health and Human Services establish program regulations by May 22, 2010. Also of note to biotech firms but outside of the scope of this advisory, the Act sets forth an approval pathway for biosimilar biologics, a parallel, but substantively different, regulatory structure to that for generic pharmaceuticals.
Unlike other available credits, like the standard research activities credit, the Qualifying Therapeutic Discovery Project tax credit is refundable. As a result, firms that have no or little tax liability can receive a cash grant in lieu of a credit against taxes owed.