NYC Biotechnology Tax Credit - DOF

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NYC Biotechnology Tax Credit

The NYC Biotechnology Tax Credit is designed to support investors and owners of qualified biotechnology companies. This tax credit can be applied against business corporation tax, general corporation tax, and unincorporated business tax. It covers certain expenses for businesses in the biotechnology field within New York City.

The aim of the Biotechnology Tax Credit is to enhance the success of small life-science firms by helping offset high startup costs, including research and development, incubator space, and clinical development processes. This tax incentive encourages job creation and supports related industries.

Eligibility

To qualify for the Biotechnology Tax Credit, a company must satisfy each of the following six criteria:

Engage in biotechnology.

Meet one or both of the following requirements:

The company must have a ratio of research and development funds to net sales that is equal to or exceeds the average ratio of all companies surveyed by the National Science Foundation.

The primary products or services of such company must be classified as emerging technologies.

Employ 100 or fewer full-time employees, with at least 75% based in New York City.

Have a research and development to net sales ratio of at least 6%.

Have annual product sales not exceeding $10 million.

Have gross revenues (including the gross revenues of affiliates and related members) of no more than $20 million in the preceding year.

How to Apply

Submit your application by January 15 following the calendar year for which you would like to claim the credit. If this date falls on a weekend or a holiday, the deadline extends to the next business day. Upon approval, the Department of Finance will issue a Certificate of Eligibility. Applications for 2024 must be filed by January 15, 2025.

You must register to file a business tax return at www.nyc.gov/eservices before you can file a biotechnology credit application online.

Once you have registered, you will be able to log in. From your account panel, click “More Requests,” then select “Biotechnology Credit Application” within the Business Credit Applications section.

Please note that if you are included as a subsidiary in a combined group filing a general corporation tax return, business corporation tax return, or other type of return, you must register in e-Services with your own EIN in order to apply for the Biotechnology credit.

The tax credit is valid for taxable years from January 1, 2023, to December 31, 2025. It can be claimed for a maximum of three consecutive tax years.

More Information

The Biotechnology Tax Credit can be refunded or applied against the next year's tax if it exceeds the current year's tax liability. For combined group filers, the credit is computed separately and applied against the combined tax. Visit our FAQs for details on emerging technologies and qualifying expenses.

Frequently Asked Questions

1. What is biotechnology?

Biotechnology involves scientific manipulation of living organisms for products that improve life and health and the associated scientific research, pharmacological, mechanical, and computational applications and services connected with these improvements.

2. What technologies qualify as “emerging technologies”?

Emerging technologies include advanced materials, defense technologies, electronic and photonic devices, information and communication technologies, and remanufacturing technologies. More specifically:

Advanced materials and processing technologies that involve the development, modification, or improvement of one or more materials or methods to produce devices and structures with improved performance characteristics or special functional attributes, or to activate, speed up, or otherwise alter chemical, biochemical, or medical processes.

Engineering, production, and defense technologies that involve knowledgebased control systems and architectures, advanced fabrication and design processes, equipment, and tools; or propulsion, navigation, guidance, nautical, aeronautical and astronautical ground and airborne systems, instruments, and equipment.

Electronic and photonic devices and components for use in producing electronic, optoelectronic, mechanical equipment, and products of electronic distribution with interactive media content.

Information and communication technologies, equipment and systems that involve advanced computer software and hardware, visualization technologies, and human interface technologies.

Remanufacturing technologies, defined as processes whereby eligible commodities are restored to their original performance standards and are thereby diverted from the solid waste stream, retaining the majority of components that have been through at least one life cycle, and replacing consumable portions to enable such commodities to be restored to their original functions.

3. What expenses qualify for the credit?

Qualifying expenses include property purchases, research, and employee training, with specific percentages and limits applied.

Purchase of Property: An eligible taxpayer is allowed a tax credit of 18% of the cost of a research and development property that is purchased by the taxpayer and placed in service in the calendar year that ends with or within the taxable year for which the credit is claimed. Example: If a property costing $1 million is purchased, $1 million x 18% = $180,000 in qualifying tax credits.

Research: An eligible taxpayer can receive a credit of 9% for qualified research expenses paid or incurred by the taxpayer in the calendar year that ends with or within the taxable year for which the credit is claimed.

Employee Training: An eligible taxpayer can receive a credit for up to 100% of high-technology training expenditures incurred during the calendar year that ends with or within the taxable year for which the credit is claimed. There is a limit of $4,000 per employee per calendar year. The employees must be full-time employees of the company during the time of the training and remain employed for at least 180 days following the training’s completion.

4. What additional training expenses qualify when relocating from an academic business incubator facility?

Relocation Tax Credit:

Eligibility: This credit is for taxpayers moving from an academic business incubator (partnered with an accredited post-secondary institution in the City) to another location within the City.

Calculation: The credit can include training expenses from the two years prior to moving, plus qualifying expenses from the relocation year.

Employment Requirements for Relocation Tax Credit:

Flexibility in Requirements: If an employee worked at least 750 hours in any 24-month period at the incubator, they don't need to meet the usual requirement of staying employed for 180 days after training.

Note: An academic incubator facility must collaborate with a New York City-based accredited post-secondary education institution and provide low-cost space, technical assistance, and educational opportunities.

5. How much credit can a company receive?

For Increasing Employment: If your company's average full-time employee count in the city is at least 105% of the year preceding the first year in which you received a credit, then you're eligible for 100% of the calculated credit, up to $250,000. If this 105% increase is not met, you're eligible for 50% of the credit, up to $125,000.

For New Businesses in NYC: Companies new to NYC or those without prior employees in the city aren't required to meet the 105% employee increase and can receive 100% of the credit in their first eligible year.

Special Rule for Academic Incubator Businesses: No credit is allowed if your full-time employee count in the city is less than 105% of the previous year’s count.

6. Are there limits on the credit amount for a single year?

Per Taxpayer Limit: Each taxpayer can receive a maximum of $250,000 per year. The credit cannot reduce your annual tax below the minimum legal requirement. Unused credit that meets this condition can be credited or refunded.

Overall Annual Cap: The total credit for all taxpayers cannot exceed $3 million annually. If the total claims exceed this, the Department of Finance will allocate the credits proportionally among eligible taxpayers by February 28 of the following year and notify them of their allocated credit amount. The taxpayer will then be able to claim the credit when filing a tax return.