Making a successful application for R&D tax credits at the federal and state levels and New Jersey NOL sales is a highly complex process. PMBA took Arable through the four-step qualifying process for federal R&D tax credits. This process also helped identify what payroll is related to qualifying research and development activities. Once qualified per the federal guidelines, Arable was also qualified for the New Jersey R&D payroll tax credit.
As the company had at least two years of operating losses, PMBA worked through the Technology Business Tax Certificate Transfer Program qualification list. To outline the basics, in addition to two years of operating losses, the company must provide documentation of:
- Protected & Proprietary Intellectual Property (PPIP) – refers to patents (issued or pending), copyrights or licenses. Arable held patents. PMBA let them know that copyrighting their software code would also qualify. Frequently software companies do not believe they have intellectual property until they are made aware of this fact.
- Up to 224 Full-Time W2 Employees in the U.S. – Depending upon the company’s age, a certain number of those employees must be in New Jersey, and all must receive healthcare benefits.
- Financial Statements – These must have all schedules and footnotes prepared according to U.S. GAAP by an independent CPA.
- Corporate Taxes – The company must file Corporate Business Tax returns in the State of New Jersey.
Arable’s application for the incentives was filed with the New Jersey Economic Development Authority (NJEDA). Its corporate business tax returns were filed in time for the deadline for June 30 of the application year – 2017.
To be certain that the application was complete, PMBA followed an internal practice of submitting a pre-application to the NJEDA for review and comment. PMBA also took the application through its own checklist process at least three times to be certain that the NOLs were accurately reflected.