New York State Life Sciences Credit

About the Credit

The Tax Engineers can help your business take maximum advantage of the Life Sciences Research and Development Tax Credit Program, introduced in New York State (NYS) to support new businesses that devote most of their efforts to research, development, technology transfer, and commercialization in
the life sciences.

The credit:

Is equal to 15% or 20% of qualified expenses for businesses with ≥15 or ≥20 employees, respectively.
Is refundable, i.e., it can be used to reduce the business’s tax liability to the statutory minimum and allow the business to treat the excess as an overpayment of tax to be credited or refunded.
Can be claimed for as many as three consecutive years, beginning with the first taxable year starting on or after January 1, 2018.
May be claimed at up to $500,000 per year, with a lifetime cap of $1.5 million.

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Is My Business a New Business?

A new business is one that satisfies the following tests:

The business has not been a taxpayer or, if an individual, has not operated the business entity in NYS for more than five years.
The business is not substantially similar in ownership and operation to another company that is or has been a taxpayer in NYS.
Less than 50% of the business is directly or indirectly owned or controlled by another company paying taxes in NYS. (Applicants are required to supply a description of the business’s ownership structure, including the percentage of ownership for each entity or individual owning 5% or more of the business.)

Does My Business Fall Under the Life Sciences Category?

The life sciences are defined as including:

Agricultural Biotechnology
Biomedical Engineering and Biotechnology

Biomedical Analytics

Bioinformatics
Genomics
Medical and Neurological Clinical Trials

Biochemistry

Chemistry Technology
Chemical Synthesis

Biopharmaceuticals

Biogenerics
Natural Product Pharmaceuticals Proteomics

Stem Cell Research and Regenerative Medicine
Marine Biology
Veterinary Science
Work Undertaken at Academic Medical Centers

What Expenses Qualify?

Qualified expenses are non-contract expenses incurred in NYS on or after January 1, 2018, that satisfy the conditions of §41(b) of the Internal Revenue Code (IRC). These expenses fall into three categories:

Any wages paid or incurred to an employee for engaging in qualified research.
Any amount paid or incurred for supplies used in the conduct of qualified research.
Any amount paid or incurred to another person for the right to use computers in the conduct of qualified research.

Qualified research here means activities satisfying the following four tests:

Business Component—The activities relate to a new or improved function, performance, reliability, or quality of a business component (i.e., any product, process, computer software, technique, formula, or invention which is to be held for sale, lease, or license, or used in a trade or business of the taxpayer.
Section 174 Test—Expenditures associated with the activity may be treated as specified research or experimental expenditures under §174 of the IRC. (Essentially, this means that the activity must involve the elimination of uncertainty concerning the development or improvement of a business component.)
Process of Experimentation—Substantially all of the activities must constitute elements of a process of experimentation.
Discovery of Technological Information—The information that is discovered in carrying out the activity must be technological in nature, i.e., they must rely on the principles of engineering, the physical or biological sciences, or computer science.

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