New York’s fully refundable life sciences research and development tax credit could inspire start-up life science companies to take a second look at the otherwise high tax state as qualified companies could receive up to $500,000 for three years.
A qualified life sciences company must be a new business, have paid or incurred qualified research and development expenses in New York and receive a certificate from the Department of Economic Development once it has been verified that the company has met all the criteria to be eligible for the credit.
Life sciences is a broad term that can include a wide variety of industries such as agricultural biotechnology, regenerative medicine, biomedical engineering, biotechnology, medical devices, and stem cell research, among many others.
The credit is available for tax years beginning on or after January 1, 2018, but before January 1, 2028. Any research and development expenditures that occurred prior to January 1, 2018, would not qualify and cannot be included in the calculation.
The refundable credit is allowed for up to three consecutive years and is limited to $500,000 annually with a total lifetime cap of $1.5 million.
The credit does not require the applicants to create jobs however the number of jobs does dictate the percentage of the credit. If the average number of employees over the year is 10 or more then the credit is equal to 15% of the company’s R&D expenditures however if the company employs less than 10 people, the amount of the credit is equal to 20% of the company’s R&D expenditures.
The average is determined based on the number of full-time employees, excluding general executive officers, who are employed on March 31st, June 30th, September 30th and December 31st. The amount of credits available to all applicants is limited to $10 million for each year.
Deviations from the Federal R&D Tax Credit
Those familiar with the §41 Credit for Increasing Research Activities should note that a major variance from the Federal R&D Tax Credit is that New York State’s Life Science credit does not include contract research expenses in the computation of their qualified research expenditures.
Applicants may apply for the credit on or after January 1, 2018, but generally may want to wait until the end of each year as the application requires wage information for each of the employees excluding general officers.
Empire State Development will issue a certificate with the amount of tax credit allowed and the tax year the credit may be claimed.
Approved companies can claim the credit on the Form CT-648 for corporations and Form IT-648 for all others.
Life science companies that do not participate in this tax credit program could still be eligible to participate in the Excelsior Jobs Program.
Please contact us with any questions about the New York Life Sciences Tax Credit Program at firstname.lastname@example.org.