This is the inaugural year of the Connecticut Bioscience Growth Council, formed to foster collaboration among Connecticut biotech and biopharma companies and—just as important—with state policy makers.
And just in time, as it happens.
The council’s dual mission is being tested and proving vital this year as state lawmakers consider many bills affecting life sciences companies—including a state budget proposal that could undermine their growth in Connecticut.
Biotech and biopharma companies make huge investments of time and money in researching, testing and obtaining regulatory approvals for new medicines and devices.
Typically, it takes $1.5 billion and more than 12 years to bring a new medicine from concept to consumers. That’s why it’s critical for state policy to recognize and support this research- and development-intensive business model.
Connecticut has become a leader in doing what it takes to attract and retain biotech-biopharma companies with a range of tax incentives that enable this long-term research and development (R&D) to start, and finish, here.
These are incentives that can only be earned by Connecticut companies for activity that’s performed and fulfilled here.
They include a competitive general research and development credit; a credit for R&D activity greater than that conducted in the prior year; a 65-cents-on-the-dollar R&D tax credit exchange for tech companies, a net operating loss (NOL) carry forward provision and a sales and use tax exemption for laboratory equipment.
Connecticut has combined incentives for life sciences industry research and development with focused life sciences economic development. UConn’s state-of-the-art stem cell and regenerative medicine research facilities, Yale University, and the Jackson Laboratory campus are examples of how well this strategy has worked.
But everything that’s been done to build a vibrant life sciences sector with a growing and high-paying jobs base is at risk with the proposed biennial budget now before the legislature.
In addition to making the corporate tax surcharge essentially permanent, that budget would meddle with various formulas for calculating R&D tax credits and the NOL timeframe, making them essentially meaningless.
For example, under the Governor’s proposed budget in 2016, companies could use only 35% of the value of the R&D tax credit.
The council has testified in support of HB 5978, which actually would increase the R&D tax credit and authorize the redemption of unused or “stranded” R&D tax credits.
It’s very good policy, but it’s also moot if the proposed budget becomes law.
Capping research and development credits at 35% of their value for 2015, 45% of their value for 2017 and at 60% of their value in the years thereafter–and bringing use of net operating losses down from 70 to 50% of their value – sends precisely the wrong message to Connecticut’s base of biotechs and biopharmas and, of course, to companies we hope to recruit here.
The changes send a message that our incentives cannot be counted on, our policies are inconsistent, and our agreed-upon rates are really just place-holding labels: 35% is the new 100%.
Massachusetts’s R&D tax credit makes the Bay State our most formidable competitor in building a biopharma cluster and attracting biopharma companies. For starters, it’s a permanent feature of the Massachusetts tax code.
The rate of the Massachusetts R&D tax credit is not diminished by separate formulas elsewhere in the state’s tax code or budget legislation. It can be used to reduce a corporation’s tax to the Massachusetts minimum corporate tax, $456.
The Bioscience Growth Council will be working hard to make the case for research and development, for R&D tax incentives and for nurturing, not undermining, the jobs and laboratories of Connecticut’s biotech/biopharma industry.