Applications for expanded version of Net Operating Loss program now available

Tech, life science companies can now apply to sell NOLs and unused R&D tax credits for cash

Imagine being an early-state technology or life science company able to sell your net operating losses and unused research & development tax credits to unrelated, profitable corporations for cash?

Applications for an expanded program that has allowed companies to do just that for more than two decades are now available.

The New Jersey Economic Development Authority announced Thursday it is accepting applications for its 2021 Net Operating Loss program, which was expanded through the New Jersey Economic Recovery Act of 2020.

The EDA is accepting applications online through June 30. Apply here.

Hailed as a lifeline for companies that have not yet reached profitability, the capital raised through this program can be used for costs including, but not limited to, the expenses of fixed assets, such as the construction, acquisition and development of real estate; materials; startup; tenant fit-out; working capital; salaries; and R&D expenditures.

The NJEDA will host an informational webinar about the NOL Program at noon May 18. The program will review eligibility requirements.

Webinar registration information can be found here.

If you miss it, a recorded version of the webinar will be made available here.

The EDA and the Department of Treasury’s Division of Taxation jointly administer the program.

To date, more than $1.07 billion in funding has been distributed to over 550 technology and life sciences companies since the program’s inception in the late 1990s. The average award for companies approved to sell their net operating losses through the program in 2020 was $1.1 million.

The NOL Program was expanded in January 2021, when Gov. Phil Murphy signed the New Jersey Economic Recovery Act of 2020. Part of the act increased the program’s annual cap from $60 million to $75 million. It also increased the lifetime cap for an individual applicant from $15 million to $20 million.

In addition to being vital to emerging companies, the NOL Program also provides enormous benefits to the profitable companies that are buying the net operating losses and unused R&D tax credits.

A profitable company can purchase tax credits at a discount, based on the market price at the time. These tax credits have traditionally traded somewhere between 88 and 94 cents on the dollar. Once purchased, the tax credits can then be applied to reduce the buyer’s state tax obligation.

For example: a purchase of $1 million of tax credit at 92 cents on the dollar would enable a buyer to decrease its New Jersey taxes payable by $1 million for the price of $920,000, representing a savings of $80,000. The names of the buyers who chose to be publicly listed are on the NOL Program’s website.

Entities interested in becoming a buyer through the NOL Program can visit the website or reach out via email for more information.