New Jersey Programs Promoting Investments in Life Sciences and Technology Businesses

New Jersey Programs Promoting Investments in Life-Sciences and Technology Businesses

The state of New Jersey has made its intention to attract emerging technology businesses clear. Taxpayers need to look no further than the number of programs spearheaded by the New Jersey Economic Development Authority (NJEDA) to note that the state has budgeted large sums to accomplish this goal. It is our experience that few too many taxpayers are aware of these programs’ existence, so we have compiled the programs and highlighted the key takeaways below.

Angel Investor Tax Credit Program:

• A 20 – 25 percent tax credit or cash rebate will be given to an investor making a qualified investment[1] in a New Jersey emerging technology business[2].
• The tax credit can be applied against corporate business tax, gross income tax, or refunded entirely in cash, depending how the qualified investment is made.
• To participate in this program, the emerging technology business must complete an application within six months of the qualified investment.
• Depending upon the size of the qualified investment, there are associated non-refundable fees as part of the application process.
• You can find the application link here: https://application.njeda.com/angeltaxcredit.aspx

[1] A qualified investment is a non‐refundable transfer of cash made directly (or indirectly through a holding company) to a New Jersey Emerging Technology Business by an Investor that is not a related person to the technology business. To be a Qualified Investment, at the time of the transfer of cash, the transfer must be in exchange for either:

a. stock, interests in partnerships or joint ventures, licenses (exclusive or non‐exclusive), rights to use technology, marketing rights, warrants, options, convertible debt that subsequently converted into equity, or any assets like those included herein, including but not limited to options or rights to acquire any of the assets included herein; or

b. Purchase, Production, or Research agreement
The amount and assets received in exchange for cash must be clearly stated in a contractual agreement, i.e., Stock Purchase Agreement for equity investment.

[2] A New Jersey Emerging Technology Businesses is a company that meets all four of the following requirements:

1. 1. 1. Employs fewer than 225 employees, with at least 75 percent filling a position in New Jersey, and
      2. Does business, employs or owns capital or property, or maintains an office in New Jersey, and
      3. Has its primary business one of the following eligible technologies: Advanced Computing, Advanced Materials, Biotechnology, Electronic Devices, Information Technology, Life Sciences, Medical Devices, Mobile Communications, or Renewable Energy Technology, and
   1. Conducts at least one of the following activities in New Jersey:
      1. Qualified research expenses paid or incurred for research conducted in its most recent fiscal year prior to the Qualified Investment, or

      2. Conducts pilot scale manufacturing in the State of New Jersey, or

      3. Conducts technology commercialization in this State

 

Edison Innovation Angel Growth Fund:

• New Jersey based technology companies with a minimum trailing 12-month commercial revenues of $250,000 are allowed to apply for up to $250,000 subordinated convertible debt financing.
  • • The company must be structured as a C-corporation or an LLC.
    • The company must employ 75 percent of its W-2 employees in New Jersey or commit to growing ten high-paying jobs[3] over two years.
    • The company must be a developer/owner of protected proprietary technology.
    • The company must have a full-time management team with domain experience.
    • The company’s founders/management team must have equity in the Company (sweat equity not considered).
    • The company must occupy physical commercial office space.
    • 2:1 Angel match funding requirement that must be received within 90 days prior to submitting an application.
    • A Division of Taxation Tax Clearance Certificate is required.
    • Application fees, commitment fees, and closing fees apply.
    • To begin an application, please reach out to [email protected].

[3] High paying jobs: minimum salary of $75,000

 

Edison Innovation Venture Capital (VC) Growth Fund:

• New Jersey-based technology companies with a minimum trailing 12-month commercial revenues of $500,000 can apply for up to $1,000,000 of growth capital.
  • • The company must be structured as a C-corporation or an LLC.
    • The company must employ 75 percent of its W-2 employees in New Jersey or commit to growing ten high-paying jobs[4] over two years.
    • The company must be a developer/owner of protected proprietary technology.
    • The company must have a full-time management team with domain experience.
    • The company’s founders/management team must have equity in the Company (sweat equity not considered).
    • The company must occupy physical commercial office space.
    • 1:1 fresh matching funds from venture capital firm received within 90 days prior to submitting an application.
    • Division of Taxation Tax Clearance Certificate is required.
    • Application fees, commitment fees, and closing fees apply.

[4] High paying jobs: minimum salary of $75,000

 

Edison Innovation Growth Stars Fund:

• New Jersey-based technology companies with a minimum trailing 12-month commercial revenues of $2,000,000 can apply for up to $500,000 subordinated convertible debt financing.
  • • The company must be structured as a C-corporation or an LLC.
    • The company must employ 75 percent of its W-2 employees in New Jersey or commit to growing ten high-paying jobs[5] over two years.
    • The company must be a developer/owner of protected proprietary technology.
    • The company must have a full-time management team with domain experience.
    • The company’s founders/management team must have equity in the Company (sweat equity not considered).
    • The company must occupy physical commercial office space.
    • 1:1 fresh matching funds from venture capital firm received within 90 days prior to application
    • A Division of Taxation Tax Clearance Certificate is required.
    • Application fees, commitment fees, and closing fees apply.

 

New Jersey Ignite:

• Provides rent assistance for up to months for early-stage technology and life sciences companies.
• The early-stage company must:
• • • Be registered to do business in New Jersey.
    • Be a qualified emerging technology business.
    • Be applying within seven years of formation.
    • Have fewer than ten employees.
    • Have less than $1,000,000 in trailing 12-month gross sales.
    • Have at least one full-time New Jersey employee in a qualified collaborative workspace[6].
    • Have not previously utilized another collaborative workspace in New Jersey.
    • Commit to working at the facility beyond the grant term for 1x the length of the total grant.
    • Application link: https://application.njeda.com/application_information_IGNITE.aspx
    • There is no application fee.

[5] High-paying jobs: minimum salary of $75,000

[6] Collaborative workspace: located and registered in New Jersey; able to procure a Division of Taxation Tax Clearance Certificate; minimum of five unique paying tenants over the last two years; has operating costs such as rent or mortgage; offers at lease on type of workspace: private office space, hot desks or dedicated desks; commits to hosting at least eight innovation ecosystem building events in a year; certifies that the workspace charges rent to tenants at market-rats; commits to matching EDA’s grant to the tenant company on a 1:2 basis.

Technology Business Tax Certificate Transfer (NOL) Program:

• Enables technology and life sciences companies to sell their New Jersey net operating losses (NOLs) and/or research and development tax credits for cash. The market price for the benefit is generally 88-94 cents on the dollar. The minimum price is 80 cents.
• The applicant must have the following to be eligible:
  • Protected and proprietary intellectual property (e.g., pending or issued patents, copyrights, or exclusive licensing agreements).
    • Headquarters and employees are located in New Jersey.
    • No more than 224 employees.
    • A minimum number of employees that live and work in New Jersey:
      • One New Jersey employee if the company formed for less than three years.
      • Five New Jersey employees if the company formed for more than three but less than five years.
      • 10 New Jersey employees if the company formed five years or more.
    • All New Jersey employees must be offered healthcare coverage.
    • No positive operating income for the last two years, as shown on US GAAP financial statements prepared by an independent CPA.
    • The company must file New Jersey Corporate Business tax returns.
  • The Deadline for the 2022 tax year has closed, and the 2023 tax year deadline has yet to be announced.
    • • The Application link will go live once the date is announced. WG will update this article at this time.
  • Application and approval fees apply (maximum fees of $20,000).

 

Venture Fund Investments:

• • • One of the NJEDA’s goals is to form collaborative partnerships with venture capital fund managers active in New Jersey’s technology and life Since 1999 the NJEDA has committed $51 million to 15 venture capital funds. Since then, those same venture capital funds have committed 6x the NJEDA investment into 60 New Jersey early-stage companies. For those pursuing venture funding, here is a list of the the NJEDA has partnered with:
      • • Edison Partners
        • FF Venture Capital
        • Milestone Venture Partners
        • Newark Venture Partners
        • NewSpring Capital
        • Osage Venture Partners
        • Quaker Partners
        • NextStage Capital
        • Tech Council Ventures
        • OMNI Capital

 

Angel Match Program:

• • • It is designed to disburse funding to targeted industries from the State Small Business Credit Initiative on a 1:1 basis up to $500,000.
    • Targeted industries include Advanced Transportation and Logistics, Advanced Manufacturing, Aviation, Autonomous Vehicle and Zero-emissions, Clean Energy, Clean Technology, Life Sciences, Hemp Processing, Information and High Technology, Finance, and Insurance.
    • The applicant must meet the following requirements for eligibility:
      • • Structured as a C-Corporation or as an LLC.
        • Located in a physical commercial office, co-working, or incubator space in New Jersey; the Company must also agree to remain located, with at least 50percent of full-time employees, in New Jersey for the duration of the loan.
        • At least 50 percent of full-time employees working in New Jersey.
        • No more than 100 total employees working for the company.
        • A minimum of two full-time founders/ C-level executives working in New Jersey.
        • The company must be registered to do business in New Jersey and in good standing as certified by a valid New Jersey Tax Clearance Certificate.
        • The company’s primary business is commercializing and marketing a product (service-based offerings would not be considered eligible).
        • Must have minimum revenues of $100,000 within the trailing 12 months (TTM).
        • Research, grants, consulting, or other any other method that could be considered service-based revenue are excluded.
        • Capital efficient and scalable – revenue growth will significantly outpace the expense growth and funding requirements.
        • Funds will only be matched if derived from at least two investors.
        • Investors must be an investment entity (Venture Capital Fund, Angel Fund, Family Office, Investment Partnership, or LLC) or an individual member of an organized investment group. Funds raised from employees or family members will not be considered.
        • Minimum investment amount of $100,000 from outside investors.
        • Investments must be in the form of preferred equity with a defined price per share.
        • Investor funds to be matched by the Angel Match Program note must be closed within 60 days from receipt of a NJEDA commitment letter.
    • Application fee: $1,000
    • The program application must first originate with an email to [email protected] to schedule a consultation with an NJEDA agent.

Each program offered by the state of New Jersey has rules and regulations that applicants must strictly adhere to. They have seen success in the execution of applications with these programs to ensure that they are applied for correctly and improve the applicant’s approval chance.

If you have any questions, please contact your WG business advisor.