May 15 Certification Deadline Approaches on
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By Jack Troast February 2009 In January the Massachusetts Life Sciences Center (MLSC) began accepting applications for certification. Life Sciences firms seeking to access funding and benefits under the $1 Billion Massachusetts initiative must be “certified”. This includes benefits available in three areas: capital funding ($500 million); tax incentives ($250 million); and grants and investments ($250 million), as part of this 10 year program. The Advisory Services Practice Group at T3 Advisors, LLC(www.t3advisors.com) has been active in tracking the progress of the MLSC and the development of their programs. This is part of our commitment to combining expertise in both real estate and government incentives as a single comprehensive service for our corporate clients. We believe this is a unique capability led by Jack Troast, Managing Director of the Advisory Services Practice Group, who is a former senior economic development official in the Romney Administration and has over 20 years of real estate development experience. The life sciences funding is targeted for companies and projects that promote economic development and advance research, and report medical advances in treatments, therapies, and cures. The legislation, An Act Providing for the Investment in and Expansion of the Life Sciences Industry in the Commownwealth, (the “Act”), offers nine (9) new tax incentives. A brief summary of the key components of the tax incentives available to Massachusetts’ firms is as follows: Investment Tax Credit- The Act increases the credit from 5% to 10% of the cost of “qualifying property acquired, constructed, reconstructed, or erected during the taxable year.” The property must be exclusively used in the Commonwealth and the credit is 90% refundable if it cannot be used to offset net income. FDA User Fees Credit- Companies will be entitled to a new credit for user fees paid to the U.S. Food & Drug Administration (U.S.F.D.A). The fees must relate to an application to manufacture a human drug in the Commonwealth. This applies to user fees paid after June 16, 2008, and to be eligible, more than 50% of the R&D costs for the drug must have been incurred in Massachusetts. Extension of Net Operating Losses- The Act enables certified life sciences companies to carry-forward losses for up to 15 years (in lieu of the current 5 year carry-forward). Losses incurred prior to January 2009 will be adjusted based upon prior eligibility and may reduce the 15 year period as appropriate. Elimination of Throwback Provision for Sales Factor- Sales of “certified” firms shall be deemed taxable in the state of the purchaser “if the property purchased is delivered or shipped to another state.” This treatment will preclude such sales from inclusion in the numerator of the sales factor when applying the corporate apportionment formula. Refundable Research Credit-This provison of the Act will make the research credit refundable for certified companies that cannot fully utilize the credit in a given taxable year. The refundable credit shall be equal to 90% of the unused credit. Life Sciences Research Tax Credit-This provision of the bill will qualify certain expenditures that do not currently qualify under the existing research credit. This extends the credit to research activities performed both inside and outside the Commonwealth related to legally mandated clinical trials. This credit can reduce the corporate excise tax and may be carried-forward. Deduction for Clinical Testing Expenses- A new deduction will be a available for qualified clinical expenses pertaining to certain drugs for rare diseases. Designation as R&D Company- Formerly, life sciences R&D expenditures did not qualify for tax exemption under the sales and use tax. This provision will allow certified life sciences companies to claim sales tax exemptions as a “research and development corporation.” Sales Tax Exemption- A new provision will now permit a sales tax exemption for certain tangible personal property purchased for a certified life sciences company. This provision exempts sales of tangible personal property used in connection with new construction, renovations, and remediation of research, development or manufacturing facilities. The MLSC will accept applications for certification and the related life sciences tax credits through May 15, 2009. They anticipate announcing this years awards by September 15, 2009. Other benefits exist through two independent stimulus bills approved during the Romney Administration. This includes tax credits available to life sciences firms that create new qualified jobs. T3 Advisors would be pleased to assist your company in understanding this unique funding opportunity. Please let us know if you would like to arrange a consultation to review incentives available for a Life Sciences Companies doing business in Massachusetts. |
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