Relates to the refundability of the investment tax credit for research and development property

Title of bill

An act to amend the tax law, in relation to refundability of the investment tax credit for research and development property

Purpose or general idea of bill

To enable bioscience companies to obtain a refund of tax credits, which are not deductible from income, for investment in research and development facilities.

Summary of specific provisions

This bill amends paragraph (e) of subdivision 12 of section 210 of the tax law to enable companies that conduct basic, applied or translational research that leads to the development of products that improve human health or agriculture and require approval by the Federal Food and Drug Administration to receive a refund of an allowable tax credit for investment in research and development facilities, when such companies are unable to deduct the credit from income.

Justification

The bioscience sector is a rapidly growing industry characterized by scientific discovery, technological innovation, and highly skilled, well-paying jobs across a range of occupations. The bioscience industry has been identified as a target industry for development in New York State. New York has a strong foundation in the biological and medical research institutions and hospitals required to attract and grow this industry. Academic and medical institutions in the state rank third nationally in research funding from the National Institutes of Health and second in life sciences research and development expenditures. This foundation has enabled the state to become a leader in bioscience development and employment. The Milken Institute, in a nationwide study, estimated that the biosciences industry contributed $8.4 billion to New York's economy in 2006, over $.5 billion in State and local taxes, and over $3.75 billion in annual wages.

In spite of the impressive industry growth to date, New York has not developed bioscience industry clusters commensurate with its research base and with those in the leading states of California and Massachusetts. We have lost many promising bioscience start-ups to other states due to a lack of affordable space and insufficient support for the high initial costs involved in developing bioscience products. Other states have been spending billions of dollars to support bioscience research and to leverage academic and medical research institutions by creating translational research facilities, bioscience industry incubators and parks, and by providing financial support for early-stage bioscience companies.

New York could improve the cash flow of start-up and early biosciehce firms, thus encouraging their growth, by making an existing tax credit refundable. Product development in this industry can take over ten years and companies often do not show a profit during this time. The state's existing investment tax credit for research and development facilities is available to bioscience firms, but often cannot be used due to their lack of net income. Making this credit refundable would help bioscience firms start-up in New York and remain viable while they are conducting research and development and, thus, expand their operations in New York when they reach the product marketing stage.

Prior legislative history

A10267 of 2007-2008

Fiscal implications

This credit is currently available; however, rather being deducted over multiple tax years, the credit could be refunded in the year it is earned, thus changing the timing of the tax expenditure.

Effective date

First of January next succeeding the date on which it shall have become law.