New Jersey has been very active in courting high-tech firms this Summer. The state has eliminated a cap on its research and development tax credit, restored full funding to its Technology Business Tax Certificate Transfer (also known as the Net Operating Loss) program, and announced three new funds to help leverage tech business investments (two Edison Innovation funds and the Edison Innovation Growth Stars Fund). The incentives are for established and profitable companies, as well as start-up companies.
The Technology Business Tax Certificate Transfer Program enables approved, unprofitable Technology and Biotechnology Businesses to sell their Unused Net Operating Loss Carryover (NOL) and Unused Research and Development Tax Credits (R&D Tax Credits) to unaffiliated, profitable corporate taxpayers in the State of New Jersey for at least 80% of the value of the tax benefits. This allows unprofitable Technology and Biotechnology Businesses to turn their tax losses and credits into cash to buy equipment or facilities, or for other Allowable Expenditures. The New Jersey Economic Development Authority (EDA) determines eligibility and the New Jersey Division of Taxation determines the value of the tax benefits (NOL’s and R&D Tax Credits).
Financing Programs are also available under the Business Technology Tax Certificate Transfer Program. Here is how the Program works:
IF YOU ARE: An unprofitable New Jersey-based technology or biotechnology company with fewer than 225 U.S. employees (including parent company and all subsidiaries)
YOU CAN APPLY FOR: The ability to sell net operating losses and research and development (R&D) tax credits to unrelated profitable corporations
IN THE AMOUNT OF: Net operating losses and R&D tax credits may be sold for at least 80% of their value, up to a maximum lifetime benefit of $15 million per business
TO BE USED FOR: Growth and operations, either as working capital or to fund research
BENEFITS: The Technology Business Tax Certificate Transfer Program enables technology and biotechnology companies that have promise, but are not currently realizing a profit, to turn net operating losses and R&D tax credits into capital
- Up to $60 million is available annually, with $10 million set aside for businesses located in Innovation Zones. Any unused balance of the $10 million set-aside is reverted to the general program pool. (For Fiscal Year 2011, the total amount allocated to the program is $30 million, with $5 million set aside for businesses located in Innovation Zones.)
- Only technology and biotechnology companies whose primary business involves the provision of a scientific process, product or service are eligible.
- An eligible company must own, have filed for, or have a license to use protected, proprietary intellectual property (defined as a patent or a registered copyright).
- An eligible company cannot have had positive net operating income on either of its last two full-year income statements. In addition, an eligible company cannot have a parent company with positive net operating income, or be part of a consolidated group of affiliates for federal income tax purposes with positive net operating income.
- An eligible company must have at least one full-time employee working in New Jersey if incorporated less than three years, five full-time employees in New Jersey if incorporated more than three years but less than five years, or 10 full-time employees in New Jersey if incorporated more than five years.
- An eligible company must have financial statements for the three most recent full years of operation compiled, reviewed or audited by an independent CPA firm.
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