State Taxation of Qualified Therapeutic Discovery Project Grant/Credit?
The Patient Protection and Affordable Care Act, Public Law 111-148, and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152, were signed into law by the President on March 23 and 30, 2010, respectively. These two Acts are referred to as the “Affordable Care Act.”
The Affordable Care Act created an new credit or grant entitled, the Qualified Therapeutic Discovery Project Grant/Credit. The credit is in the Internal Revenue Code (IRC) as Section 48D. The credit is a federal tax credit or grant. Meaning, when it comes to state income tax, each taxpayer must determine whether or not the state they are filing in conforms to the IRC and will exclude the grant from federal taxable income. OR, will the state require the taxpayer to add back the grant to taxable income.
Most states have not specifically addressed how they will treat the grant or credit. California is one of the few states that has specifically addressed it, and said it does not conform to the Act, and taxes the grant.
In cases where a state has not specifically addressed it, it is necessary to review the applicable state's general conformity to the IRC. If you need assistance in determining your state's treatment, please contact me.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.