Until recently, biotechnology was a small, relatively obscure industry with only a few states showing interest in the field. However, with the population of the United States getting older, the demand for biotechnology companies to develop “quality of life” enhancements has been what is likely to be a long-term upward spiral.

Until recently, biotechnology was a small, relatively obscure industry with only a few states showing interest in the field. However, with the population of the United States getting older, the demand for biotechnology companies to develop “quality of life” enhancements has been what is likely to be a long-term upward spiral.

As the industry grows, the demand increases for biotech companies to establish locations in different states. States now are trying to lure these companies by offering programs and support organizations. Here is a sampling.

California Technology in Partnership

California is known as the birth place of biotechnology. The state offers many economic programs to encourage biotechnology companies to establish themselves and grow.

The California Technology in Partnership (CalTIP), for example, provides grants to small and mid-sized companies to “match” federal funding for research and development up to $250,000.

This program supplements the state’s Research and Development Credit, which allows companies a credit of 15 percent for qualifying in-house research expenses and a 24 percent credit for outsourcing research activities.

Also available are organizations such as the Bay Bio and BIOCOM.

BayBio is Northern California’s bioscience association and BIOCOM similarly supports the San Diego life sciences community.

Both groups help companies interact with the surrounding communities to garner support, including between emerging companies and colleges and universities.

Massachusetts’ R&D Credit

Massachusetts has one the largest concentration of biotechnology and medical device companies in the world. The state offers support through its Research and Development (R&D) credit, which allows a company to claim a credit equal to 10 percent of any excess qualified research expense over a base amount, plus 15 percent of basic research payments.

Also available is the Investment Tax Credit, which allows a company a credit of 3 percent of the cost of qualifying tangible property, after deduction of any federally authorized credit.

Similar to California, Massachusetts has organizations that offer support to biotechnology and medical device companies to help them grow — Massachusetts Biotechnology Council (MBC) and MassMedic (Massachusetts Medical Device Industry Council).

MBC works to advance policy favorable for the industry and offers services and programs to its members to help them grow. MassMedic works in the same way, but specifically for the medical device industry.

Each organization links the biotechnology and medical device industries to academic resources, venture funding opportunities and avenues to commercialization.

Maryland’s Challenge and Enterprise Investment Programs

Maryland is another state that continues have a strong presence of biotechnology companies. Effective funding opportunities are available that help emerging and established companies, including the Challenge and Enterprise Investment Programs. These programs make direct equity investments in biotech companies with patented or proprietary products or manufacturing processes and marketing strategies in place.

The Challenge Investment Program provides emerging biotech companies with amounts of equity up to $150,000, with an initial investment of up to $50,000.

The Enterprise Investment Program works with established companies to move them to their next stage of development as a viable business offering with amounts of investment ranging from $150,000 to $500,000.

An R&D credit is also available for biotechnology companies. A credit for research and development expenses is allowed against corporate income tax in an amount equal to 3 percent (Basic R&D Credit) of the qualified expenses, not exceeding the Maryland base amount for the corporation.

In addition, a corporation may claim a credit in an amount equal to 10 percent (Growth R&D Credit) by which the qualified expenses incurred during the year exceed the Maryland base amount.

Keeping up with the Leaders

With the benefits of a strong biotechnology industry now clearly evident, New Jersey and Pennsylvania have begun establishing themselves as potential leaders.

New Jersey’s Technology Tax Credit Transfer Program

The leaders of New Jersey’s economic development programs understand that in order for the state to successfully compete in attracting and retaining biotechnology companies, innovative programs must to be offered.

One such program already in place allows emerging and expanding companies the opportunity to receive money for their expenses. The Technology Tax Credit Transfer Program allows New Jersey biotech and technology companies the chance to sell their unused net operating losses and unused R&D credits at a minimum of 75 percent of the net benefit. This is provided that the company employs fewer than 225 employees and 75 percent of the employees are in New Jersey.

Another program that New Jersey offers is the Springboard Fund, which provides recoverable grants that companies repay. Biotech and technology companies can apply to receive grants ranging from $50,000 to $250,000. Companies qualify if they employ fewer than 500 employees, and they receive preference if funds are matched by other outside funding sources.

This is a competitive program with grants awarded to companies that have an emerging viable product or service.

New Jersey is also introducing “Innovation Zones” that will be new centers for biotechnology in the state.

Innovation Zones will provide links between some of the state’s major universities and give biotechnology companies access to university resources. Biotechnology companies that reside in these zones will be given priority in applying for the Technology Tax Credit Transfer Program and the Springboard Fund.

Pennsylvania’s Life Sciences Greenhouse Initiative

Pennsylvania is on the verge of jumping to the top of the biotechnology list. A program leading to the jump is the PA Life Sciences Greenhouse Initiative, the result of a one time investment of $100 million received from settlement of tobacco litigation.

This initiative provides a flexible, innovative mechanism for the commercialization of biotechnology and other life sciences business opportunities. It provides transfer technology from research laboratories to entrepreneurial startup companies, and enhances collaboration between academic, entrepreneurial, corporate, financial and governmental partners.

Three Life Sciences Greenhouses have been developed — Pittsburgh Life Sciences Greenhouse, Life Sciences Greenhouse of Central Pennsylvania and BIOAdvance (the Biotechnology Greenhouse Corp. of Southeastern Pennsylvania).

Another opportunity for biotechnology companies is the Keystone Innovation Zones (KIZ), which will allow biotechnology companies to establish partnerships with colleges and universities. Companies will be able to tap into $25 million in tax credits available each year.

As the demand for biotech solutions increases, states will become increasingly aggressive in attracting and retaining biotech companies by creating programs and subsidizing their efforts via tax incentives and grants.

Several other states already are considering measures similar to those just described. The dramatic growth in the biotech industry that we have witnessed during the past several years is clearly just the first step in what will likely be an explosion of industry growth.

Barry Denneler is manager of tax incentives and the National Tax Benefit Exchange™ for Mintax Inc., an East Brunswick, N.J.,-based company that specializes in site selection and government incentives for new and expanding companies. He can be reached at (732) 723-90