Frequently Asked Questions for Tax Incentive

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Tax Incentive Program

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 $1 billion initiative that was signed into law in June of 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. For more information, visit www.masslifesciences.com.

What is the Life Sciences Tax Incentive Program?

The Life Sciences Tax Incentive Program was established as part of the Center’s enabling legislation  Massachusetts Life Sciences Center is pleased to announce that it is offering up to $20 million in tax incentives in the 2016 round of the program to companies engaged in life sciences research and development, commercialization and manufacturing in Massachusetts.

What constitutes “life sciences?”

For purposes of the 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.

Are awardees required to be “Certified Life Sciences” companies?

Yes, and granting of certification status occurs only in conjunction with an award by the Center’s Board of Directors. Funding under the Program is available only to a Certified Life Sciences Company. Certification as a Certified Life Sciences Company pursuant to the Life Sciences Statute is valid for 5 years starting with the tax year in which certification is granted. A Certified Life Sciences Company must file an annual report with the MLSC detailing whether it has met the specific employment generation targets established in its certification proposal. Companies do not have to be certified prior to submitting a Life Sciences Tax Incentive Program application.

If the awardee fails to meet the specified targets, the applicant’s status as a Certified Life Sciences Company may be subject to revocation. The Life Sciences Statute contains procedures for revocation of certification, and provisions regarding denial and recapture of benefits, if the MLSC determines that representations made by a Certified Life Sciences Company in its certification proposal are materially at variance with the conduct of the life sciences company after receiving certification. In such a case, revocation of certification is effective on the first day of the year in which the MLSC determines that a material variance commenced. The Center’s Annual Report and Multiple Awards Policy specifies the compliance outcomes based on an awardee’s actual achievement for a calendar year including outcomes requiring revocation. The policy can be located at http://www.masslifesciences.com/programs/tax/

What Tax Incentives are available to Life Sciences Companies?

The Life Sciences Act provides for ten different incentives which address the significant capital expenditures associated with the life sciences 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 (refundable)
  • FDA user fees credit (refundable)
  • Extension of net operating losses from 5 to 15 years
  • Elimination of throwback provision
  • 90% refund of already-available excess §38M research credits (refundable)
  • 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 credit (refundable)

For more information about the Program in general, or about the individual incentives offered under the Program (including information provided by the Massachusetts Department of Revenue’s Technical Information Release and the Life Sciences Jobs Incentive Refundable Credit), please visit our website at http://www.masslifesciences.com/programs/tax

Can a Life Sciences Company apply for both the Life Sciences Investment Tax Credit and the Economic Development Incentive Program?

Yes, subject to certain limitations described below.

The Life Sciences Investment Tax Credit (LS-ITC) is jointly administered by the MLSC and the Massachusetts Department of Revenue (DOR). Under the LS-ITC, life sciences companies are eligible to receive up to 10% of the cost of qualifying property acquired, constructed, reconstructed or erected during the taxable year and used exclusively in the Commonwealth.

The Economic Development Incentive Program (EDIP) Investment Tax Credit (EDIP-ITC) is administered by the Massachusetts Office of Business Development. Under the EDIP-ITC companies are eligible to receive up to 5% of the cost of qualifying property.

If a life sciences company is awarded an LS-ITC with respect to a specific project (i.e. Project A), they are eligible for no more than a 2% EDIP-ITC with respect to the same qualifying property. The percentage of the LS-ITC (up to 10%) awarded by the Center will depend on a number of factors and may result in companies not receiving the full amount of the requested LS-ITC. Therefore, once a company has received the LS-ITC on a qualifying property, no matter the dollar amount, the same qualifying property is limited to no more than a 2% EDIP-ITC.

The same life sciences company may also apply for an LS-ITC and EDIP-ITC for a different qualifying property associated with a different project (i.e., Project B) and would be subject to the same cap of no more than 2% EDIP-ITC on top of the LS-ITC on Project B. If, however, a company chooses not to apply for an LS-ITC on a particular qualifying property, such company would be eligible for up to the full 5% EDIP-ITC for that same property.

For more information about the EDIP and certified projects, visit: http://www.mass.gov/hed/economic/eohed/bd/econ-development/

Are applicants required to have Massachusetts operations?

Yes, applicants must be engaged in life sciences research, development, manufacturing or commercialization in the Commonwealth of Massachusetts.

Can a company that received a prior MLSC Tax Incentive award apply for an award from the current round of the Program?

Yes, companies are eligible to apply each year to the MLSC’s Tax Incentive Program. In addition to achieving award criteria, existing awardees must be in compliance with the Center’s Annual Report and Multiple Awards Policy which specifies the criteria for achieving additional awards. The policy can be located at http://www.masslifesciences.com/programs/tax

If an applicant terminates an MLSC Tax Incentive Agreement in the 16 months prior to the 2016 Program awards date (planned for April 2017), the applicant is not eligible to receive an award from the 2016 Program.

The Center’s Tax Award Termination policy can be located at http://www.masslifesciences.com/programs/tax

What if an organization previously declined a tax program award?

A company that declined a prior tax program award is not considered a termination and is not subject to the  MLSC Tax Program Termination Policy. Per the policy, Companies may decline their awards in the following ways: (1) an awardee notifies the MLSC in writing that they will not accept the award; or (2) following the execution of a tax agreement, an awardee notifies the MLSC in writing that the company has not claimed any incentives either by filing with MADOR or, in the case of the sales tax exemptions, with vendors. The MLSC Tax Program Termination Policy can be located at http://www.masslifesciences.com/programs/tax

Can companies apply for more than one tax incentive?

Yes. Companies may request more than one tax incentive in any given year.

Is the Tax Incentive Program only for Research & Development hires?

No. All permanent MA full time equivalent hires in the applicant’s organization qualify including, but not limited to, manufacturing, research & development, commercial operations, administration, finance, marketing and sales.

What size company is the Tax Incentive Program targeting?

The Life Sciences Tax Incentive Program is open to all life science companies regardless of size. The Center is encouraging small and medium-sized eligible companies that have 250 or fewer full-time employees globally to apply to the program.

Is there a minimum number of net new jobs to be eligible for the Tax Program?

Yes, applicants must commit to creating and retaining 10 new new full time equivalent employees (FTE’s). Applicants must also have 10 active full time equivalent employees (FTE’s) at the time of application.

Is this Tax Program only applicable for companies within certain geographic regions in Massachusetts?

No. The Tax Incentive Program is open to all companies regardless of location. In prior rounds of the Program nearly 53% of the awards made have been given to companies outside of the Greater Boston area.

Will there be information sessions?

Yes. For the Tax Incentive Program, information sessions are scheduled to be held on:

 

Location Date Time Address
Waltham January 13, 2017 9-11am 1100 Winter Street (Center Entrance) 1st Floor
Cambridge January 19, 2017 9-11am MassBio, 300 Technology Square, 8th  Floor
Lowell January 24,2017 9-11am M2D2 110 Canal Street, 4th Floor
Marlborough January 26,2017 9-11am The Campus at Marlborough

Stanford Room

110 Campus Drive

Waltham February 2, 2017 9-11am 1000 Winter Street (North Entrance) 1st Floor

 

RSVPS are requested. Interested parties should RSVP at http://www.masslifesciences.com/programs/tax or Eventbrite. In case of inclement weather, please check our website and we will notify people through email who have RSVP’d. The decision to cancel an information session will be planned to be made no later than 24 hours in advance of the session. For more information, please check the Center’s website at http://www.masslifesciences.com/programs/tax

How do companies apply for awards under the 2016 Tax Incentive Program?

Companies interested in applying for awards under the Program should first review the Program Solicitation and application, which will be available starting on January 5, 2017 at the MLSC’s web site: http://www.masslifesciences.com/programs/tax. Each company may submit only one application.

Applications may only be submitted online and the MLSC will not accept paper submissions.

Consult your tax advisor for tax advice. The MLSC does not provide any tax advice or guidance regarding which tax incentives are appropriate for your company.

Submitting Certificates of Good Standing

Two certificates of good standing are required to be submitted with the application: one from the Commonwealth of Massachusetts Secretary of State and one from the Massachusetts Department of Revenue (DOR). Both certificates should be dated no earlier than December 1, 2016.

In regards to the submission of the DOR Certificate which may take some time for applicant to obtain, applicants may upload verification of the request of such Certificate of Good Standing. Upon receipt by applicant, the DOR Certificate of Good Standing should be sent to the MLSC at taxprogram@masslifesciences.com.

Once an application is submitted will applicant be able to change responses to the questions?

No, unless the change is related to the applicant’s identifying information. For example, applicants will not be able to modify their 2017 headcount commitment once their application is submitted. It is advisable that applicants be conservative in their commitment. It is the applicant’s responsibility to review their application prior to submission. Applicants are able to print out and review a copy of their application prior to submission.

Should applicants submit confidential information as part of an application?

The MLSC is subject to the requirements of the Massachusetts Records Law, M.G.L. c.66, which governs the retention, disclosure, disposition and archiving of public records. However, “public records” do not include certain materials or data which fall within a specifically enumerated exemption set forth in the MLSC’s enabling act, M.G.L. Chapter 23I.  Such exemption that may be applicable to documents submitted by a company is for any documentary materials or data made or received by MLSC that consists of trade secrets or commercial or financial information regarding the operation of any business conducted by the company, or regarding the competitive position of such company in a particular field of endeavor (Trade Secrets Exemption). In the event that a company wishes to submit certain documents to MLSC and believes such a document or documents may be proprietary in nature and may fall within the parameters of the Trade Secrets Exemption, the company should identify such materials in its application as Confidential.

Please refer to Section 8.1 of the Program Solicitation, which sets forth the MLSC’s policy regarding the Public Records Law and disclosure of confidential information

What is the application deadline?

The application deadline for the Program is noon EST on February 16, 2017.

When does the Center anticipate making award announcements?

The Center anticipates making award announcements by the end of April 2017.

What is the process for reviewing applications?

MLSC staff will conduct a review and analysis of all applications to ensure that applicants are eligible for the Program and to apply guidelines developed in collaboration with the Massachusetts Department of Revenue (DOR) regarding projections of anticipated tax revenues from job creation. The DOR then conducts an analysis through a calculation of the tax revenue impact on the Commonwealth of the proposed incentive awards. Subsequent to DOR’s review and written approval by the Commissioner of DOR, the Center then confers with the Board’s Investment Committee and provides the total costs of such incentives to the Secretary of Administration and Finance.

Who makes the award decisions?

The MLSC consults throughout the review process with the Massachusetts Department of Revenue (DOR). Based on DOR’s input, the Commonwealth’s Secretary of Administration and Finance provides express approval for the cost of the tax incentives for the fiscal year. Following these statutorily-mandated procedures, the Center’s Board of Directors then has final authority for approving all tax incentives under the Program.

What criteria will be applied in making the award decisions?

Applicant companies to the 2016 Life Sciences Tax Incentive Program will be evaluated on whether they meet the following criteria and other factors included in the Program Solicitation:

a. Ability to create and retain jobs for five (5) years. It therefore is imperative that Applicants provide accurate information regarding actual, permanent full-time Massachusetts employees (over 35 hours per week) and credible estimates regarding projected employment targets. Third party contractors or employees paid by employment agencies should not be counted as employees under the Program.

b.Wide geographic distribution of life sciences operations in Massachusetts;

c. Wide distribution of life sciences technologies and industries supported by MLSC; and

d.Diversity among businesses at different stages of product development and commercialization.

 

A complete summary of the official criteria used to select recipients of tax incentives under the Program are included in the Program Solicitation on the MLSC’s website at: http://www.masslifesciences.com/programs/tax

What are the recipients’ contractual and compliance requirements?

The Tax Incentive Program is jointly administered by the MLSC and the Massachusetts Department of Revenue (DOR), which oversees the technical administration of the incentives.  Jobs that are created must be maintained for at least five years. The Tax Incentive Program mandates that awarded companies submit reports and respond to inquiries by the MLSC and DOR regarding employment figures, revenue generation, amount of private capital leveraged, and information as to the recipient’s operations and business affairs. If a company receiving a tax incentive under the Program does not meet and maintain their job creation commitment, the credit may be recaptured or “clawed back” by DOR, requiring that the company pay back all or a portion of the tax incentives (i.e., credits, refunds, etc.) that it has received. The MLSC’s Annual Report and Multiple Awards Policy specifies the compliance outcomes based on an awardee’s actual achievement for a calendar year including outcomes requiring revocation. The policy can be located at http://www.masslifesciences.com/programs/tax

For purposes of headcount reporting including establishing an Applicant’s baseline Massachusetts headcount to determine compliance with their net new job creation commitment, full- time equivalents (FTE) employees (35 hours or more per week) from the following companies, subsidiaries, or divisions will be included:

  • Massachusetts FTE headcount of Applicant and Applicant’s wholly-owned MA subsidiaries and divisions;
  • Massachusetts FTE headcount of Applicant’s parent company and/or the parent company’s wholly owned subsidiaries and divisions only if 75% or more of parent company’s total global consolidated annual revenues are derived from “Life Sciences” as defined below.

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, as defined in chapter 23I, section 2 of the MGL.

Successful applicants will be required to execute a Tax Incentive Agreement with the MLSC that sets forth the requirements of the incentive and the terms and conditions of compliance. A sample copy of the standard tax agreement is available, together with the Program Solicitation on the MLSC’s website at: http://www.masslifesciences.com/programs/tax

Will the Center have any rights to intellectual property developed by the applicant by virtue of any award?

No. Awards under the Program are tax incentives only, and the MLSC will not have any claim to an applicant’s intellectual property solely by virtue of an award under the Program.

When will awardees be allowed to use the tax incentive(s)?

All Tax Incentive Agreements executed by successful applicants will stipulate that tax incentive(s) may only be claimed after July 1, 2017 including, without limitation, in the calculation of estimated taxes.

How is headcount defined under the program?

For purposes of headcount reporting including establishing an Applicant’s baseline Massachusetts headcount to determine compliance with their net new job creation commitment, full- time equivalents (FTE) employees (35 hours or more per week) from the following companies, subsidiaries, or divisions will be included:

  • Massachusetts FTE headcount of Applicant and Applicant’s wholly-owned MA subsidiaries and divisions;
  • Massachusetts FTE headcount of Applicant’s parent company and/or the parent company’s wholly owned subsidiaries and divisions only if 75% or more of parent company’s total global consolidated annual revenues are derived from “Life Sciences” as defined below.

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, as defined in chapter 23I, section 2 of the MGL.

Third party contractors or employees paid by employment agencies cannot be counted as employees under the program.

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