Biopharma could be the most future-oriented industry of all. It takes years and years of research and development to create cures and treatments and then still more years of clinical trials and regulatory approval processes to bring new medicines to pharmacy shelves.
That’s why it’s discouraging to report that no legislative session in memory has so unnerved those who work in the life sciences in Connecticut.
The state’s legacy life sciences companies, and newer firms and organizations recruited here, have located in Connecticut in large part because of how policymakers have pledged to acknowledge the huge investments and long, complex product development pathways unique to biopharma.
For example, state lawmakers have specifically passed prudent tax policy:
- Acknowledging biopharma’s long product cycles and need for upfront investments by allowing years of spending without income to be used against income when and if it is realized
- Encouraging research and development (R&D) to be conducted in Connecticut
But both the treatment of net operating losses (NOLs) and use of R&D tax credits are under attack in various state budget proposals now being considered.
The draft budgets would effectively renege on the state’s commitments and critically undermine companies’ ability to rely on them. This would derail biopharma companies’ existing budgets and make accurate financial projections of Connecticut tax liability a near impossibility.
Compounding the assault on biopharma is the vast expansion of Connecticut’s sales tax embedded in the draft budget.
Even companies of modest size spend a great deal on services from accountants and all manner of other consulting professionals. In many cases, the cost of the proposed sales tax expansion would dwarf the value of credits earned for R&D and losses to be carried forward.
Only three states currently tax business services broadly (Hawaii, New Mexico and South Dakota). If Connecticut expands the sales tax on services as proposed it would put us at a severe competitive disadvantage to other states.
In fact, other states which in recent years thought they might go down this path ended up repealing the sales tax expansion quickly—in one case, only hours.
Lawmakers should reject any rollback of state tax policy commitments to enable biopharma and any innovative job creators to grow and thrive in Connecticut.