Sounds like a scam, right? But it’s not.
Each year NJTechWeekly.com pleads with the New Jersey startup community to look at a program from the State of New Jersey that will give not-yet-profitable tech and life-science startups an average of $1 million in undiluted cash to do with as they please: plow it into R&D, hire more people, use it for working capital or finance new equipment.
The bottom line of the Technology Business Tax Certificate Transfer (NOL) Program is that local startups that have intellectual property are permitted to sell their R&D tax credits or their state tax losses to unrelated profitable companies, like PSEG, that need tax breaks. There is a newly updated “set aside” for this program of $70 million per year. And the New Jersey Economic Development Authority (NJEDA) says that 90 percent of those who apply are approved.
You must have intellectual property to qualify. Another requirement is that you cannot have had any net operating income during the past two full years; this also applies to any entity that owns or controls at least 50% of your company, whether directly or indirectly. And there is a minimum and maximum number of W2 employees that you can have, depending on how long you have been in business. There’s a lifetime limit of $15 million for any one company over the years.
If you are interested in the NOL program, don’t plan on moving out of New Jersey any time soon. The state will recapture the money if you do.
The NJEDA is accepting applications online for this year’s NOL program. The deadline this year is June 30, 2021. That’s right around the corner. The NJEDA is holding a webinar on May 18 at noon, so you can learn more about the program. The link to the webinar is: http://tiny.cc/NJEDANOL. The passcode is NOL.
“Creating a stronger innovation economy in New Jersey means creating a pathway for early-stage technology and life sciences companies to continue research or operations before they reach the point of profitability,” said Tim Sullivan, CEO of the NJEDA. “The NOL Program is helping to cultivate the growth of this vital sector and spur the creation of even more New Jersey success stories.”
New Jersey startups that have taken advantage of the NOL Program have nothing but good things to say about it. If you fit the requirements of this program, you should go for it! Don’t wait until the last minute. There are criteria you must meet and tons of paperwork you must file. You also must get your tax returns done and find a buyer for your losses, but the NJEDA will help there.