Under the New Jersey Emerging Technology and Biotechnology Financial Assistance Program, emerging technology and biotechnology companies may be allowed to transfer unused net operating losses and research and development credits to another corporate entity through a certificate program in exchange for private financial assistance from the entity acquiring the surrendered tax benefits. For those companies that qualify, the program could provide the opportunity to unlock some immediate value from their net operating loss and R&D credit carry forwards in New Jersey by “selling” them to another corporate entity for cash, which would then need to be reinvested in their business operations in New Jersey.

A new or expanding emerging technology or biotechnology company seeking to transfer tax benefits to a corporation business taxpayer in exchange for private financial assistance must utilize the proceeds to fund expenses incurred in connection with its operations in New Jersey. This reinvestment of proceeds could include expenses relating to:

• The purchase of fixed assets
• Tenant fit-out
• Working capital
• Salaries
• Research and development, etc.

There are also requirements that the company receiving proceeds under this program continue or maintain its headquarters operation or base of operations in New Jersey for a period of time after receipt of the proceeds.

Participation in the program is subject to an application process which is administered by the New Jersey Economic Development Authority. Applications are due by June 30 each year.

If you have qualifying technology or biotechnology companies in your portfolio that have ongoing operations in New Jersey, this program offers the potential of generating an immediate cash infusion without any further equity dilution or interest cost. KLR can help in determining whether your portfolio company qualifies for the program, determine how much combined tax benefits the company has available for surrender in exchange for private financial assistance, prepare the documentation necessary to support the amount of R&D credits generated in New Jersey, as well as assist with the application process and identification of a buyer.