The New Jersey Economic Development Authority approved 49 businesses for 2020 to take part in New Jersey’s 22-year old Net-Operating Loss credit program, an incentive that helps companies offset many of the financial losses that come with research and development.
Under the NOL Program, technology and life sciences businesses can acquire R&D tax breaks, which can be sold for at least 80% of their value, capped at $15 million per business.
Proponents of the NOL program contend the incentive helps prop up budding companies hoping to develop new technologies in the state and finance their research, especially as businesses and public officials eye how to kickstart a post-COVID economic recovery.
With much of that research unprofitable, many of those companies might lack the ability to expand their operations, or could even go out of business, without the added state support, proponents argue.
“The NOL Program has historically been one of our most sought-after programs by entrepreneurs as they grow their companies here in the Garden State,” NJEDA Chief Executive Officer Tim Sullivan said in a March 12 statement.
All told, those 49 companies last year were approved to sell their tax credits for a combined $54.5 million. The NJEDA said that it’s awarded over $1 billion to more than 550 startups since the NOL program’s inception over 20 years ago.
In January, Gov. Phil Murphy signed a landmark $14.5 billion economic incentive package, which expanded the program from $60 million to $75 million a year.
That incentive package included an expansion of the NJEDA’s Angel Investor Tax Credit from $25 million to $35 million a year. That incentive is meant to encourage investments in start-ups by offering guaranteed returns of investment.
Under the program, an investor can sell their tax credit for up to 20 percent of their investment into certain technology startups in the state, or 25 percent for investments into low-income communities, federal opportunity zones or businesses owned by women or people of color.
Last April, the NJEDA rolled out a COVID-19 relief program called the Entrepreneur Guarantee Program. Under this state relief program, the agency set aside $5 million to provide loan guarantees – or collateral – for investments made as of March 9 when Gov. Phil Murphy declared the state’s public health emergency.
“What the EDA has done is said ‘we’ll provide a backstop on your risk because we know times are shaky … we’ll guarantee an investment up to a certain amount’ and on the flipside they’re saying ‘we’ll award you, by giving you a tax credit so you can have an additional rate on your return,” Aaron Price, president and chief executive officer of TechUnitedNJ, formerly the NJ Tech Council, said in an interview last year. “They’re trying to de-risk on the downside and provide greater incentives on the upside.”