Opinion: Apply for the New Jersey EDA’s Net Operating Loss Program—It’s Like Found Money
It seems that every year I write the same story: There’s 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 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 allowed to sell their R&D tax credits or their state tax losses to companies, like PSE&G, that need tax breaks. There is $60 million set aside for this program.
So now you know the catch: You have to have intellectual property to qualify. Another requirement is that you can’t 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 employees that you can have, depending on how long you’ve been in business.
If you’re 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.
Some $10 million has been set aside for businesses in innovation zones in Camden, Newark and the greater New Brunswick area. The remaining $50 million is available for tech companies outside these areas.
The New Jersey Economic Development Authority (EDA) has begun accepting applications online for this year’s NOL program. The deadline is June 30, 2018.
“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 EDA. “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 R&D tax credit have nothing but good things to say about it.
A promotional video about the program by the EDA | Courtesy NJ EDA
Last year, we spoke to Ryan Shearman, founder and CEO of FUSAR (Kearny). The startup had been pouring money and effort for years into the R&D on its hardware- and software-connected mobility products for action sports.
He told us, “We have spent about $2 million in R&D over the last three years, and last year recouped $100,000 through the NOL program. This year I expect it to be $100,000 again. For a company that is still in its infancy, that’s a huge amount of capital.”
Last year was the first time that Atlantic City-based Impactivate Networks participated in the NOL Program. Impactivate Networks is an information technology company that operates and maintains 100 digital displays along the Atlantic City Boardwalk, informing visitors of upcoming events and providing advertisers with access to millions of Boardwalk visitors via full-motion video and sound.
“We heard about the NOL Program when we attended the New Jersey Founders & Funders last year, and learned more about it through discussions with members of the EDA’s Technology and Life Sciences team,” said Michael Binder, president and CEO of Impactivate Networks. “The funding we received has proven invaluable as we continue to build out our network and promote even more events and businesses in the Atlantic City area.”
Our advice: Don’t wait until the last minute to look into the program. There are criteria you must meet and paperwork you must file. You also have to get your tax returns done and find a buyer for your credits. The EDA will help out there.
