News & Announcements
No more Camping for Biotech Tax Credits Declared at Recent BioPark Event
May 20, 2010
The University of Maryland BioPark was the site for the recent May 13, 2010 seminar on much in-demand state and federal biotech tax credits that are a financial lifeline for some early stage companies. The accounting firm of Clifton Gunderson and the Maryland Department of Business and Economic Development (DBED) sponsored the event.
Speaking of Maryland’s $8 million biotech investor tax credit program, David Block, CEO of Gliknik, an emerging bioscience company in the BioPark working on cancer and autoimmune/inflammatory diseases, stated simply “this is the best program of any state for young biotech companies. Many of the companies that received the credit would not exist, but for this program.” Block offered several compelling reasons.
The program is market-based. Investors are the ones to decide which companies deserve to get funded, not the State. The 50 percent credit is a huge risk reduction for investors – especially important for therapeutics companies making new drugs, which are highly risky investments. A third advantage is that the program is bringing in investment to build Maryland’s biotech sector not just from investors within the state, but from outside as well.
From 2007-2010, Maryland invested $24 million into the program, which has generated at least $50 million in investments raised by 40 Maryland companies. According to Judy Britz, PhD, Executive Director of the Maryland Biotechnology Center, the number could be much larger based on some anecdotal evidence. She gave the example of Arginetix, another Maryland company, that leveraged an $800,000 investment through the tax credit program into $10.5 million in funding.
Scott Allocco, President of BioMarker Strategies, affirmed this view when he related how the $4 million that his company has received over the past three years through the tax credit program allowed his company to credibly apply for a National Cancer Institute SBIR grant that has generated an additional $2.3 million in funding.
Of particular interest to Maryland biotech executives were the new procedures to access the credits that become available on July 1. Memories of camping out for five days last year in the BioPark’s conference room in order to be the first in line to apply for the first-come, first-served credits were still fresh in the minds of some in the audience. Allocco apologized to those who were on the way to the beach that Friday when the line started.
Judy Britz reassured those present that there would be no camping this year. The qualifications and application remain essentially the same as before, but companies will submit their paperwork in advance of July 1 during an application window from June 1-25. Within 48 hours, each investor (not the company) will receive a user name and reference number to log in with on July 1 at 9:00 am. The order in which these electronic submissions are received will determine the queue for the credits-- just like buying the Springsteen ticket on Ticketmaster
The second half of the program was devoted to the federal government’s new Therapeutic Discovery Project tax credit, which is modeled in part after the Maryland program. Patricia Marshall a tax specialist at Clifton Gunderson expects the $1 billion two-year program to be oversubscribed by 3:1. Eligible companies will be able to apply for a refund on their 2009 and 2010 tax returns or receive a grant if they don't have the revenues yet on which to pay taxes for 50 percent of their expenses relating to discovery. These are expected to include items like salaries of people performing the research, supplies and contract research work. The IRS notice with the program specifics is expected to be posted online on May 21.
University of Maryland BioPark