Tax Changes to Benefit Life Sciences Companies

In recent weeks and months, there have been many newsworthy legislative events affecting both the life sciences industry and the business community at large. Within that list are two significant national and state provisions that directly impact growing life sciences companies and which merit special discussion. To ensure that the life sciences companies in Northern California are aware of how they can potentially take advantage of these provisions, BayBio is holding a series of seminars on October 27 and 28, presented by local accounting firms, with tax implementation experts as well as briefings by policy directors from BayBio and BIO (Biotechnology Industry Organization).

The first is a provision within the federal housing package signed in late July, allowing for companies to utilize accumulated R&D or AMT credits in lieu of bonus depreciation to which they would have otherwise been entitled.  This carries the potential to allow up to $30 million in rebates to life sciences companies.  It is particularly pertinent for companies whose products have not yet made their way to market, who will be in stronger position to carry out clinical trials and product development, by providing them a limited investment incentive. 

Second, the state budget recently approved by the California legislature and Governor  Schwarzenegger included an extension of deductability Net Operating Losses from 10 to 20 years, of which BayBio members have been active advocates of for several years.  Previous state tax law allowed losses incurred by a company to be carried forward for only 10 years; however, the average time to successfully develop a life sciences product is 15 years and the average cost is $1.2 billion.  As a consequence, most life sciences companies lose 30 percent or more of their losses before they become profitable.  As part of an agreement in the current budget, BayBio secured the establishment of a 20-year NOL carry forward for NOLs starting in 2010.  This will particularly benefit any life sciences company engaged in research and development efforts and has not yet achieved profitability, or who experiences years of unprofitability.

Both of these are accompanied by important stipulations and timing limitations, so please join us to learn more about how these provisions came about legislatively, and how you can potentially take advantage of them.  To learn more and to register for a seminar, please contact BayBio Public Affairs and Community Relations Manager, Kathryn Bailey at kbailey@baybio.org.