Maryland’s life sciences ecosystem has become a key hub along the eastern shore of the United States due to its position in infectious disease research and vaccine development and manufacturing. While the state saw an infusion of billions of dollars in government financing in the development of vaccines, Maryland’s Biotechnology Investment Incentive Tax Credit, is a tool that has been used to attract venture capital funding in the state.
The tax credit was established in 2005 to incentivize venture capital investment into the state of Maryland. Since 2016, the most recent year for full data, the state has offered more than $70 million in tax credits to 114 different entities. That, in turn, has generated about $140 million in investments into the state’s life sciences ecosystem, the Baltimore Business Journal reported.
The tax credit is an incentive for investors from across the globe to provide financing for companies within Maryland. The Biotechnology Investment Incentive Tax Credit (BIITC) provides the investor with a refundable state income tax credit for a seed or early-stage investment in a qualified company.
Specifically, investors are qualified for an income tax credit equal to 33% of an eligible investment up to $250,000 for a qualified company. However, for companies located within Allegany, Dorchester, Garrett or Somerset, the amount climbs to 50% for an investment up to $500,000. That means a $100,000 investment from a venture capitalist into a company in these 50% counties will see a guaranteed return of $50,000 from Maryland.
That 50% mark for those counties is expected to change to a flat 33% across the board. The decision is to boost funding for startups and early-stage companies rather than those that have been established for many years.
Karen Glenn Hood, communications director for the Department of Commerce, stated that the tax credit is not intended to drive job creation. Instead, it’s intended to incentivize investment in early stage companies and foster the development of new companies.
For some companies, the BIITC has provided a windfall of financing that is being used to advance research into a myriad of disease indications, with about ten companies primarily benefitting from the credit since 2015.
American Gen Technologies has garnered about $7.6 million, Cellphire has picked up $5.3 million, while Clear Guide Medical earned $4.2 million in credits over the past six years. Other companies consistently benefiting from the tax credits include Ibex Biosciences, BrainScope and Sonavex.
Jeff Galvin, chief executive officer of American Gene Technologies, which is developing cell and gene therapies for HIV, touted the benefits of the BIITC. In an email to the Journal, Galvin said that Maryland would be a “desert” for risk capital without the credit.
Multiple states offer tax credits to support R&D efforts in the life sciences. For example, in New York, taxpayers can claim up to 50% of their federal R&D credit related to expenditures within that state.
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