New York offers life science companies research and development credit
INSIGHT ARTICLE |
New York recently began accepting applications for the New York Life Sciences Research and Development Tax Credit Program which is designed to support new life sciences businesses locating, inventing, commercializing and producing in New York State.
The credit was enacted as part of New York’s Fiscal Year 2018 budget and is applicable for tax years after Jan. 1, 2018. The fully refundable credit equals 20 percent of qualified expenses for a company with fewer than 10 employees, and 15 percent for a company that employs 10 or more. This program allows both taxable and non-taxable companies to monetize research and development credits in order to support research, growth and operations by allowing these benefits to be refunded as cash.
In order to be eligible for this program, companies must meet the following criteria:
- A company must be engaged in one of the following life science activities and be performing research and development in New York:
- agricultural biotechnology
- biomedical engineering
- academic medical centers
- chemical synthesis
- chemistry technology
- medical diagnostics
- medical image analysis
- marine biology
- medical devices
- medical nanotechnology
- natural product pharmaceuticals proteomics
- regenerative medicine
- RNA interference
- stem cell research
- medical and neurological clinical trials
- health robotics
- veterinary science
- Have research and development expenditures as defined as by [Section 41(b) of the IRC] incurred in New York State on or after Jan. 1, 2018. Qualified expenditures do not include contract research expenses
- Be a “new business” per New York Tax Law section 210-B(1)(f) or 606(a)(10)
The program is authorized to provide $10 million in benefits for each year, and each company is limited $500,000 per year for three consecutive years to a maximum lifetime tax benefit of $1.5 million. Applications can be filed any time after Jan. 1, 2018. The credits are allocated by the New York Department of Economic Development on a first-come-first-served basis, based upon the date of filing a complete application. Any applications that come in after the $10 million has been allocated will be treated as having been applied for in the next year. Credits must be applied for every year.
This program can be an excellent source of cash funding that can be reinvested back into the company to support research, product development, and staff augmentation. The provisions and requirements under this program are complex, and corporate taxpayers should consult their tax advisors to assess their eligibility.