The NYC Biotechnology Tax Credit offers a valuable financial incentive to investors and owners of qualified biotechnology companies. This credit can offset various taxes including business corporation tax, general corporation tax, and unincorporated business tax.
Eligibility Criteria
To be eligible, a company must:
- Engage in Biotechnology: This involves manipulating living organisms to create products that enhance life and health, along with related scientific research and services.
- Fulfill at least one of these conditions:
a. Maintain a ratio of research and development funds to net sales equal to or greater than the average of all companies surveyed by the National Science Foundation.
b. Have primary products or services classified as emerging technologies. - Employ no more than 100 full-time employees, with at least 75% based in New York City. State residency is not a requirement.
- Have a research and development to net sales ratio of at least 6%.
- Record annual product sales of no more than $10 million.
- Generate gross revenues (including those of affiliates and related members) of no more than $20 million in the previous year.
How to Apply
Applications should be submitted by January 15 following the calendar year for the claimed credit. If this date is a weekend or holiday, the deadline extends to the next business day. Applications can be filed online or mailed to the New York City Department of Finance.
Credit Calculation and Refund
The credit comprises:
- 18% of the cost of research and development property and other incurred fees in emerging technology activities.
- 9% of qualified research expenses.
- 100% of high-technology training expenses, up to $4,000 per employee per year.
For eligible entities, the credit can total up to $250,000 for new or expanding firms in New York City. If the credit exceeds the current year’s tax liability, it can be refunded or applied to the next year’s tax. For combined group filers, the credit is computed separately and applied against the combined tax.
Example
Consider a hypothetical company with:
- $1,000,000 in research and development property costs: $180,000 at 18%
- $500,000 in qualified research expenses: $45,000 at 9%
- $20,000 in high-technology training expenses for 5 employees: $20,000 at limit of $4,000 per employee
The total credit would be $245,000. If the company’s tax liability for the year is $25,000, the remaining $220,000 of the credit can be refunded or applied to the next year’s tax.
For more detailed information about the NYC Biotechnology Tax Credit, please visit the official website. If you have any questions or need further support, please contact a member of Withum’s Life Science tax team. We are dedicated to supporting your success in the biotechnology field and helping you leverage these financial incentives, effectively.
Author: Sergio Benavides, CPA | [email protected]
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For more information on this topic, please contact a member of Withum’s Life Science Services Team.
