Deadline Looming for Maryland Biotech Credit

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The annual application process for Maryland’s Biotechnology Investment Incentive Tax Credit (Biotech Credit) will begin on June 1, 2017. The Biotech Credit can offer significant income tax savings to both potential investors in a Maryland biotechnology company and current investors considering making additional investment in a Maryland biotechnology company. The Maryland Department of Commerce, which administers the Biotech Credit, will accept the initial paper applications between June 1st and June 23rd.

The amount of the credit is generally 50% of the investment in a qualified Maryland biotechnology company up to $250,000. Those amounts are increased to a credit of 75% and up to $500,000 if the qualified Maryland biotechnology company is located in Allegany, Dorchester, Garrett, or Somerset counties. There are a number of eligibility requirements that must be met, for both the investor and the company, in order for a credit to be certified by the Department. First, with respect to the investor, the investment must be at least $25,000. In addition, after making the proposed investment, a qualified investor cannot own or control more than 25% of the equity interests in the company. The eligibility requirements for the company include that it must:

  • be primarily engaged in the research, development, or commercialization of innovative and proprietary technology that comprises, interacts with, or analyzes biological material including biomolecules (DNA, RNA, or protein), cells, tissues, or organs;
  • have its headquarters and base of operations in Maryland;
  • have fewer than 50 full-time employees;
  • not have its securities publicly traded; and
  • not have been in active business for more than 12 years.

The active business limitation was increased from 10 to 12 years by legislation enacted earlier this year. The legislation also allows the credit for investments made in a company actively in business for up to 15 years; if, the Department determines that additional time is warranted to allow for the company to complete a regulatory approval process.

The initial applications will be accepted by the Department from June 1st to June 23rd. Separate applications are required for both the company and the investor. Applicants should read the application instructions carefully, as a number of documents are required to accompany the application (e.g., copies of investment agreement between investor and company, and formal business plan).  The paper applications are the first step in the application process. The Department, in response to applications that are deemed complete, will issue the applicants a user name and reference number to be used in the second step of the application procedure, which is a first come first served online submission that begins on July 3rd. The application and additional information on procedures can be found on the Department’s website.

If you have additional questions about business tax credit available in Maryland, please contact your Aronson tax advisor or Michael L. Colavito, Jr. at 301.231.6200.

About Michael Colavito, Jr.

Michael Colavito, Jr. has written 17 post in this blog.

Michael L. Colavito, Jr. is a senior manager in Aronson LLC’s Tax Services Group, where he provides multi-state taxation services pertaining to income, franchise, sales and use, and property taxes. Michael’s experience also includes representing clients at all stages of tax controversy, from audit through appellate litigation, and advising them on restructurings, state tax refund and planning opportunities.

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