Opinion: If You Have Intellectual Property, But No Profits Yet, Check Out the NJEDA’s Net Operating Loss Program

Here’s the thing: There’s a program from the New Jersey Economic Development Authority (NJEDA) that will give not-yet-profitable tech and life-science startups over $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 Program, also known as the “Net Operating Loss (NOL) Program,” is that local startups that own, have filed for, or have a license to use protected, proprietary intellectual property (defined as a patent or a registered copyright) 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 a $75 million cap on this program these days, up from $60 million. The lifetime cap for an individual applicant was also increased: from $15 million to $20 million. Last year almost all the recipients were life-science or pharma companies, but I know that there are many, many New Jersey tech companies that could benefit from this program. The average award for companies approved to sell their net operating losses through the program in 2021 was $1.82 million. 

One tech startup that qualified last year was IoTecha, based in Cranbury. The company’s IoT.ON platform aims to accelerate the electric vehicle revolution by providing an integrated platform consisting of software, hardware and cloud components for the smart and connected charging infrastructure and for the power grid integration of electric vehicles of all kinds. IoTecha customers are energy and power companies, charge point operators and manufacturers of both electric vehicles and charging stations for these vehicles. 

Another was Malbek, a startup that offers an AI-based Contract Lifecycle Management (CLM) platform, and just opened an official headquarters in Princeton.  

In addition to needing intellectual property to qualify, your company can’t have had any positive operating income during the past two full years; this also applies to any entity that owns or controls at least 50 percent 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 $15 million of the $75 million program allocation is reserved for eligible companies that are operating within the boundaries of the state’s three “Innovation Zones” (Newark, Camden and the Greater New Brunswick area), located in “Opportunity Zones” and/or certified as women- or minority-owned. 

The NJEDA has begun accepting applications online for this year’s NOL program. The deadline is June 30. 

According to the NJEDA, potential applicants interested in learning more should visit the program website, which covers the eligibility requirements in detail. Companies are strongly encouraged to review the reference materials and watch the program and application-process review video posted there. 

Come on, New Jersey tech startups! Don’t let this capital sit in the state’s coffers. Take advantage of this opportunity. 

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