Treasury Inspector General for Tax Administration
October 4, 2011
TIGTA - 2011-63
Contact: Karen Kraushaar
WASHINGTON -- The Internal Revenue Service (IRS) met legislative requirements when awarding credits and grants to participants in the Qualifying Therapeutic Discovery Project (QTDP) Program, according to a new report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
The QTDP is a tax benefit in the form of a credit or a grant targeted to therapeutic discovery projects that show a reasonable potential to treat areas of unmet medical need, reduce the cost of health care, and advance the goal of curing cancer within 30 years.
The QTDP Program is part of the new health care law, the Patient Protection and Affordable Care Act of 2010, and is included in Internal Revenue Code Section 48D. The Internal Revenue Service (IRS), in consultation with the United States Department of Health and Human Services, (HHS), implemented the QTDP Program.
The IRS entered into an agreement with the HHS to pay more than $1.5 million to the HHS for its review of packages that taxpayers submitted requesting a credit or a grant during the period June 25 to September 30, 2010. The QTDP Program’s tax benefit is available only to taxpayers with no more than 250 employees. It covers up to 50 percent of a taxpayer’s qualified investment.
To provide an immediate boost to United States biomedical research, the credit or grant was available for qualified investments made, or to be made, in Tax Years 2009 and 2010. To claim the credit or grant, a taxpayer must have applied for certification of its qualified investments. The amount of the credit or grant was limited to a maximum of $5 million per taxpayer, and the total amount available to all taxpayers was limited to $1 billion.
On June 18, 2010, the IRS announced it was accepting applications for the program. The law required that the QTDP Program be implemented within a very short time period. Applicants had only one month from the date the application was posted on IRS.gov to submit a completed Form 8942. The IRS and the HHS had only 30 calendar days after the submission deadline of the applications to certify the applicants.
Despite the unprecedented short time period allotted by the law for creating the QTDP Program, the IRS achieved its goal, TIGTA found. 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.
“The IRS did a good job administering this temporary program, which was designed to reduce health-care costs and encourage promising new therapies for the treatment of cancer,” said J. Russell George, Treasury Inspector General for Tax Administration.
All QTDP Program certified applicants were listed by the State where they are located 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 2009 tax return.TIGTA made two recommendations for improvement; IRS officials agreed with the recommendations.
Read the report.
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