To keep emerging technology companies in New York, the New York City Council renewed the biotechnology tax credit for tax years beginning after January 1, 2023 and before January 1, 2026. 1 The biotechnology credit allows qualified emerging technology companies (QETCs) engaged in biotechnologies to claim up to $3 million in annual tax credits. 2 The NYC Department of Finance will undergo a rulemaking process to determine how the credit should be allocated among eligible taxpayers. 3
Eligibility Requirements
A QETC is a company located in New York City with total annual product sales of $10 million or less and meets either of the following criteria:
- Its primary products or services are classified as "emerging technologies," 4or
- It has research and development (R&D) activities in New York City, and its ratio of R&D funds to net sales equals or exceeds the average (as determined by the National Science Foundation, or comparable successor survey). 5
The taxpayer must also meet all the following criteria to claim the credit:
- 100 full-time employees or less, with at least 75% of those employees employed in New York City; 6
- A ratio of R&D expenses to net sales equal to or greater than 6%; 7
- Gross revenues not exceeding $20 million for the immediately preceding year. 8
Mechanics of the Tax Credit
Assuming the above conditions are met, the Biotechnology Tax Credit Equals the sum of the following expenses:
- 18% of the cost or other basis of research and development property; 9
- 9% of qualified research expenses; 10plus
- 100% of high-technology training expenses, limited to $4,000 per employee. 11
Footnotes
1.Int. No. 1070-A (accessible at https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6252756&GUID=E666ABFA-22DA-43FA-B20D-63E13F398F43&Options=&Search=).
2.Id.
3.Id.
4.Id. Biotechnologies, remanufacturing, and advanced materials and processing are all considered "emerging technologies."SeePBA ยง 3102-e (accessible at https://www.nysenate.gov/legislation/laws/PBA/3102-E).
5.Int. No. 1070-A (accessible at https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6252756&GUID=E666ABFA-22DA-43FA-B20D-63E13F398F43&Options=&Search=).
6.Id.
7.Id.
8.Id.
9.Research and development property is "property that is used for purposes of research and development in the experimental or laboratory sense."Id.
10.Qualified research expenses are "expenses associated with in-house research and processes... costs associated with the dissemination of development activities.... [and] costs associated with the preparation of patent applications."Id.
11.Id.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
