By Kim Coghill
WASHINGTON ¿ Legislation submitted in both the House and Senate last week gives biotechnology companies the chance to get a refundable tax credit in exchange for giving up research-related losses and credits.
The Washington-based Biotechnology Industry Organization (BIO) supports this bill that was submitted in the House by Phil Crane (R-Ill.) and Robert Matsui (R-Calif.), and in the Senate by Robert Torricelli (D-N.J.).
¿From our perspective there is no downside [to this legislation],¿ Philip Ufholz, BIO¿s tax and finance counsel, told BioWorld Today. ¿This is the No. 1 legislative priority in the biotech industry.¿
Under the proposal, long-term research companies can trade their credits and net operating losses at a discount of 75 percent in exchange for a refundable tax credit that must be used for research and development.
¿The key is that these companies need the money now,¿ Ufholz said. ¿They are not profitable; they need the money to continue their R&D so that they can develop a product and become profitable. Once they become profitable, they have to pay the government back all of the refunds that they received under this legislation. But they won¿t mind because once they are profitable, they¿ve got the money.¿
Corporations can receive the refund every year, Ufholz said, and the funds can be paid back in installments rather than in one lump sum.
Companies that qualify include domestic ¿C¿ corporations that meet the conditions for the 50 percent gain exclusion for small business stock, and which:
¿ Have no more than $500 million in gross assets, are not subject to a specialized tax regime, and are either engaged in or starting an active trade or business (other than a service, financial or extraction business);
¿ During the three prior taxable years neither have incurred federal income tax liability themselves, nor been under common control with a corporation that has incurred federal income tax liability, and;
¿ Are not the subject of bankruptcy or insolvency proceedings.