Treasury issues guidance on tax breaks for new therapies

The Treasury Department on Friday issued guidance on the therapeutic discovery tax credit. The provision provides tax credits and grants to small firms that show potential to produce new and cost-saving therapies and was a part of the health reform bill. 

The credit covers up to 50 percent of the cost of qualifying biomedical research, up to a maximum credit of $5 million per firm and $1 billion overall and is only available to firms with fewer than 250 employees. The credit is effective for investments made in 2009 and 2010. Firms can also opt to receive a grant instead of a tax credit. 

Senate Finance Chairman Max Baucus (D-Mont.) championed this provision during the health reform debate in Congress and today trumpeted his support for the Treasury providing guidance on it. 

"We created this credit because nearly every American knows someone who has been touched by an illness for which we are still looking for a cure, and it is my hope that this credit will spur new breakthroughs that will advance our understanding and save lives," Baucus said in prepared remarks.

The guidance released today by the IRS and Treasury describes the process by which firms can apply to have their research projects certified as eligible for the credit.