This is the time of year that the New Jersey Economic Development Authority starts accepting applications for the Technology Business Tax Certificate Transfer Program, also known as the “NOL” (“Net Operating Loss”) program, for the next fiscal year, in this case 2017.
In essence, the NOL program lets biotech and other tech companies with protected intellectual property sell their New Jersey tax losses and/or research and development tax credits to raise cash to finance their growth and operations. An informative presentation of all of the program requirements can be found here. And an application can be found here. The deadline is June 30.
It’s a no-brainer for emerging New Jersey tech companies to at least see if they qualify for this program, but many don’t even take a look. After all, this is non-dilutive money. You don’t have to give up any part of your business for it.
Some examples of tech companies that have benefitted from this program are Connotate, a New Brunswick-based big data company; DataMotion, a Florham Park company whose secure email product has allowed it to pivot to secure healthcare applications, including file transfer; Glowpoint (Murray Hill and Denver), a video conferencing company; and Gold Group Enterprises in Asbury Park, also a health IT company.
In a recent EDA press release, Bob Gold, CEO of Clark-based Gold Group Enterprises, stated that “the NOL funding, as well as the great programs and support we get from EDA, are, and will be, paramount to our success. The funding enables us to quicken the pace of our product enhancements and research and development by providing funding to expand our software development team.”
Last year Jim Scott told us “This is a great program, we used this at ExpertPlan as part of our funding strategy. The cash received from the NOL was a great cushion and helped get us to cash flow positive sooner.”
Gold and Scott’s remarks echo what I’ve personally heard from other entrepreneurs and CEOs.
For the 2016 fiscal year, 18 companies classified as tech were approved, and each received an average of about $1.16 million.
At a recent Founders and Funders event, Kathleen Coviello, director of the Technology & Life Sciences Division (TLS) of the EDA, said that those allowed to sell their tax losses or R&D credits don’t have to worry about finding buyers. Their phones will start ringing as soon as the award is made public, which is usually in the fall.
The NOL program will cost you money to enter. There is a $2,500 application fee, and you will need the help of certified accountants, who’ll prepare your statements for the state government, which will cost you some time and money. But it could be well worth it. You may end up spending more or less $5,000 to get back $1,000,000.
So my call to action is this: If you are a startup or business that has grown recently, but still isn’t making money because you’re plowing it all back into the business, if you employ some people in New Jersey, and if you have some relevant intellectual property (IP), check out the NOL program. You may be glad you did.
See also our interview with Kathleen Coviello last year: Have Your Taxes Done? Have Operating Losses? IP? Then This NJ EDA Program Could Be For You