Treasury
Inspector General for Tax Administration
Office of Audit
Legislative Requirements Were
Met When Awarding Credits and Grants for the Qualifying Therapeutic Discovery
Project Program
Issued on September 14, 2011
Highlights
Highlights
of Report Number: 2011-40-100 to the
Internal Revenue Service Commissioner for the Small Business/Self-Employed
Division.
IMPACT ON TAXPAYERS
The Qualifying
Therapeutic Discovery Project (QTDP) Program is a tax benefit (a credit or a
grant) targeted to therapeutic discovery projects that show a reasonable
potential to: 1) result in new therapies
to treat areas of unmet medical need; 2) reduce the long-term growth of health
care costs; and 3) advance the goal of curing cancer within 30 years. The QTDP Program’s tax benefit is available only to taxpayers with no more than
250 employees and covers up to 50 percent of a taxpayer’s qualified
investment. The Internal Revenue
Service (IRS) distributed $1 billion in credits and grants to 4,606 recipients.
WHY TIGTA DID THE AUDIT
This audit was initiated to determine whether
the QTDP Program met legislative requirements when considering and awarding
credits and grants to qualifying therapeutic discovery project applicants, and
whether the IRS implemented adequate controls to monitor the credits and grants.
WHAT
TIGTA FOUND
The
IRS met legislative requirements when awarding credits and grants to QTDP Program recipients.
Despite the unprecedented short time period allotted by the law
for creating the QTDP Program, the IRS
achieved its goal.
The IRS team administering the QTDP Program, in consultation with the
Department of Health and Human Services, processed 5,663 Applications for
Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program
(Form 8942). Of the 5,663 Forms
8942 received, 4,606 (81.3 percent) were approved for a credit or grant.
All QTDP Program certified applicants were
listed by State on IRS.gov, as required by law.
The IRS has internally revised and corrected the number of entities
receiving credits or grants, but it has not updated IRS.gov since
November 1, 2010.
The IRS prepared numerous documents that
record the process for implementing the QTDP Program. These documents will be helpful for
implementing future unique and similar projects.
A
compliance plan was developed and is being implemented. The plan includes reviewing the tax returns
of taxpayers who accepted QTDP Program credits and grants. The IRS mailed 326 letters to grant
recipients that had not yet filed an amended Tax Year 2009 tax return.
WHAT TIGTA RECOMMENDED
TIGTA recommended
that the Commissioner, Small Business/Self-Employed Division, ensure: 1) the information regarding the
applicant names and amounts allocated are updated on IRS.gov to accurately show
which taxpayers and projects were originally awarded QTDP Program credits and
grants; and 2) the QTDP Program line item is removed from the Investment Credit
(Form 3468) after a determination is made that all QTDP Program taxpayers have
filed their Tax Year 2010 returns.
The IRS agreed with the recommendations. The IRS plans to: 1) update the information
on IRS.gov regarding the applicant names and amounts allocated through July 31,
2011; and 2) by July 15, 2012, make a final update to IRS.gov to reflect any
activity from August 1, 2011, to the end of the QTDP Program. Concerning the second recommendation, the IRS
has notified the Forms and Publications function of the need to remove the QTDP
Program line from Form 3468 once it has determined that all QTDP Program taxpayers
have filed their Tax Year 2010 returns.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go
to:
http://www.treas.gov/tigta/auditreports/2011reports/201140100fr.html.
Email Address: TIGTACommunications@tigta.treas.gov
Phone
Number: 202-622-6500
Web Site: http://www.tigta.gov