Applications for the Massachusetts 2012 Life Sciences Tax Incentive (LSTI) Program are due on October 25, 2012, by noon. Incentives are a financial tool used by state and local governments throughout the United States to encourage private investment, business retention and job creation in exchange for tax breaks and/or cash subsidies. The LSTI Program offers tax incentives to companies engaged in life sciences research and development, commercialization and manufacturing in Massachusetts. If you represent a company that is connected to the life sciences industry and is contemplating adding jobs or making significant capital expenditures, you should consider whether your client could benefit from the incentives available under the LSTI program. However, any company thinking of applying for benefits under the LSTI Program should know that it is a competitive process with an annual cap.
What is the Massachusetts Life Sciences Center?
The Massachusetts Life Sciences Center (Center) is a quasi-public agency of the Commonwealth of Massachusetts tasked with implementing the Massachusetts Life Sciences Act, a 10-year, $1 billion initiative that was signed into law in June 2008. The Center’s mission is to create jobs in the life sciences and support vital scientific research that will improve the human condition. This work includes making financial investments in public and private institutions that are advancing life sciences research, development and commercialization as well as building ties between sectors of the Massachusetts life sciences community.
What is the Life Sciences Tax Incentive Program?
The LSTI Program authorizes up to $25 million in tax incentives each year for companies engaged in life sciences research and development, commercialization and manufacturing. The primary goal of the program is to incentivize life sciences companies to create new long-term jobs in Massachusetts.
What constitutes "life sciences?"
For purposes of the LSTI Program, “life sciences” means advanced and applied sciences that expand the understanding of human physiology and have the potential to lead to medical advances or therapeutic applications including, but not limited to, agricultural biotechnology, biogenerics, bioinformatics, biomedical engineering, biopharmaceuticals, biotechnology, chemical synthesis, chemistry technology, diagnostics, genomics, image analysis, marine biology, marine technology, medical devices, nanotechnology, natural product pharmaceuticals, proteomics, regenerative medicine, RNA interference, stem cell research and veterinary science.
What tax incentives are available to life sciences companies?
The LSTI Program provides for 10 different incentives that address the significant capital expenditures associated with the life sciences research and development (R&D) cycle, and the high costs of translating research into commercially viable products. Several of these incentives are refundable, enabling an awardee to receive cash from the Commonwealth, even if no income tax is paid. The Program consists of the following incentives:
Life sciences investment tax credit
U.S. Food and Drug Administration user fees credit
Extension of net operating losses from five to 15 years
Elimination of throwback provision
Ninety percent refund of already available excess §38M research credits
§38W life sciences research credit
Deduction for qualified orphan drug expenses
Designation as R&D company for sales tax purposes
Sales tax exemption for certain property
Life sciences jobs incentive refundable credit
The best approach to investigating any state or local economic development incentive program is a “you don’t get, unless you ask” philosophy. The definition of what constitutes a “life science company” is somewhat broad in practice. Moreover, the benefits of the program are diverse. So, a full analysis is necessary to understand whether your client is eligible for the program and to maximize the value of participating in the program. The program is a competitive process with an annual cap, so companies should not take a passive approach to applying.