September 9, 2020
As explained in a press release issued by NJEDA last July, New Jersey businesses can apply to sell their net operating losses and/or unused research and development (R&D) tax credits in exchange for non-dilutive capital. The deadline for the annual program, which is traditionally June 30, was extended by Governor Murphy (Executive Order 159) to September 30, 2020, due to the COVID-19 pandemic.
The NOL program is 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, start-up, tenant fit-out, working capital, salaries, and research and development expenditures.
“New Jersey’s early-stage technology and life sciences businesses will play a critical role as we move into a post-Coronavirus economy and connecting these companies with the funding they need to succeed is one of our top priorities,” said NJEDA Chief Executive Officer Tim Sullivan. “As we continue to find new ways to provide much-needed funding to businesses within New Jersey’s innovation ecosystem, the NOL Program has been a proven mechanism for helping small businesses through their most difficult periods.”
The NOL Program offers numerous benefits to its participants, including:
- The funding is non-dilutive, meaning that entrepreneurs do not have to give up equity in their companies to receive the money.
- Emerging companies can use the funding they receive as working capital, and the businesses to which they sell are able to lower their tax burden.
- The average historical award is over $1 million.
- Nearly 90% of applicants successfully receive funding.
To participate in this year’s NOL Program, companies must apply online by September 30, 2020. New Jersey state taxes must be filed to participate in the program.
More than 540 businesses have been approved for an estimated $1 billion in awards through the NOL Program since its inception in 1999. Last year, 46 companies were approved to share $60 million, the maximum amount of funding allocated for the program. This was the second year in a row that the program hit its cap.
For more information on the NOL Program, including frequently asked questions, a complete list of eligibility requirements, and program details, please visit http://www.njeda.com/nol. Questions about the NOL program may be submitted to [email protected].
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. You can contact me at [email protected] and Marty at [email protected]. As always, we are happy to help.
Stay safe,
Rich Higgins, CPA
Managing Principal - New Jersey Office
McCarthy & Company
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
