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Swift files bill to aid start-ups in MA

Biotech firms could sell their tax credits to generate cash

Acting Governor Jane Swift yesterday filed legislation that would enable biotech
and some other advanced technology companies to sell tax credits earned from
investments in research and development.

By Jeffrey Krasner, Globe Staff,

If enacted by the Legislature, the pilot program would help start-ups generate cash
from their tax credits even if they don’t have profits, which are necessary for most
companies to take advantage of tax credits.

”Symbolically it’s important and strategically it’s the way we need to be going,” said
Elizabeth Ames, the state’s director of economic development. ”New Jersey is doing
this, and it’s a way of getting in the game and signaling how important this industry is
to our future.”

Biotechnology industry officials praised Swift’s bill but said they had hoped the
administration would go even further, enabling companies to sell net operating loss
carryforwards, losses from previous years that profitable companies can use to offset
current tax bills.

”This is helpful, but net operating losses are better,” said Janice T. Bourque, chief
executive of the Massachusetts Biotechnology Council, at the group’s annual meeting
yesterday. ”This is a good step in the right direction.”

Companies that increase their spending on research and development are able to take
10 percent of the annual increase and deduct that amount from their corporate income
taxes. However, the tax credits expire after 15 years.

That leaves many biotechnology companies out in the cold, because they have very
long product development cycles. Companies may work for 15 years just to book their
first revenues, let alone reach profitability.

The proposed program would enable the companies to sell those tax credits to firms
that are already profitable, for at least 75 percent of their face value. The company
buying the tax credits gets a writeoff; the company selling them gets cash to fund
operations.

The pilot program is limited to a total of $5 million.

”We have been asking for this, suggesting it, and pushing for it for a long time,” said
Alison Taunton-Rigby, a director of the biotechnology council and also Synaptic
Pharmaceuticals Corp. of Paramus, N.J. Taunton-Rigby said that firm has been able to
access hundreds of thousands of dollars under New Jersey’s program. ”It’s a way of
putting capital into a company when it needs it,” she said.

Both industry and government officials admit that the program will face a steep
challenge in the Legislature, which is dealing with an projected budget deficit of $2
billion for the coming fiscal year.

”In this fiscal crunch, the chances of it being implemented are probably remote,” said
Bourque.

Jeffrey Krasner can be reached at [email protected].

http://www.boston.com/dailyglobe2/095/business/Swift_files_bill_to_aid_start_ups+.shtml

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