Legislation sponsored by Assembly Democrats Troy Singleton, Daniel Benson, Tim Eustace and Upendra J. Chivukula that would extend tax credits to stimulate investment in biotechnology businesses in the state was approved Monday by the Assembly.
“The biotechnology industry in New Jersey is growing, but lacks the needed private investment to support this growth,” said Singleton (D-Burlington). “This bill will help incentivize investment, promote New Jersey as a biotechnology business location and encourage biotechnology business cluster development in New Jersey to push the state ahead of the competition.”
According to an August media report, the number of biotech companies in the state rose from 300 in July 2010 to more than 340 today. The number of workers directly employed by these tech companies increased from 15,000 to 16,400 during the same time frame. However, money remains a concern. Per the report, these companies get most of their revenue from product sales. Venture capital funding accounts for only 16 percent of money raised, down from 26 percent in 2009.
The bill (A-2005), modeled after Maryland’s successful biotechnology investment incentive tax credit program, would provide a Corporation Business Tax credit and Gross Income Tax credit for qualified investment in certain biotechnology businesses. Qualified investment is an amount at risk that is exchanged for an ownership interest in the biotechnology business.
“These companies are looking to New Jersey, but we must ensure that they stay here, especially with fierce competition from other states,” said Benson (D-Middlesex/Mercer). “These incentives not only help these companies secure the funds they need, but lets these and other companies that might be looking to expand know that New Jersey is the right place to grow their research and business.”
“Similar legislation proved successful in pairing biotech companies with needed funding from investors in Maryland. There is no reason why we shouldn’t be creating the same opportunities for New Jersey’s biotech companies,” said Eustace (D-Bergen). “We should help make our businesses attractive to potential investors so they can flourish. Our economy will benefit from it.”
“This is a growing industry that needs our support. While more biotech companies are making New Jersey their home, the private investment needed for them to really thrive is not where it needs to be,” said Chivukula (D-Middlesex/Somerset). “These tax credits will hopefully reverse that trend. Strengthening our industries must be part of our game plan to reinvigorate the economy.”
The bill allows tax credits for 50 percent of qualified investment in qualified biotechnology businesses. Qualified investment must be in an amount of at least, but no more than $250,000, per investor per tax year. The bill caps the amount of credit available to all investors to $6 million per state fiscal year. To qualify, a business entity must be headquartered and operate predominately in the state, have been in operation for no more than 15 years, employ no more than 250 employees, be primarily engaged in biotechnology research, development or production, have no state tax or property tax delinquency, and have a business license in good standing, if applicable.
The bill creates an initial approval process for qualified investors to be administered by the Economic Development Authority (EDA) to vet qualified investment and enforce the bill’s $6 million annual cap. The initial approval process requires qualified investors to apply for initial approval from EDA at least 60 days before making investment. In addition to providing the recipient, form and amount of proposed investment, the investor applicant must attest to having no state tax or property tax delinquency and a business license in good standing, if applicable.
After receiving initial approval from EDA, the qualified investor has 30 days to make the investment. The qualified investor then has at least 10 but no more than 40 days to provide notice and proof of the investment to the EDA. The EDA then has 30 days to verify the investment relative to the initial approval and issue a tax credit claim form to the investor with a verified credit amount. The qualified investor then completes and submits the tax credit claim form with their annual tax return. Depending on the amount of credit allowed relative to the qualified investor’s tax liability and the order in which the Director of the Division of Taxation applies the credit in relation to other credits, excess qualified investment credit may be claimed as a refund.
The bill requires an annual report on the administration of the tax credit program to be produced by the Director of the Division of Taxation in consultation with the Executive Director of the EDA.
The bill was approved 47-26-3 by the Assembly and now awaits further consideration by the Senate.