Hailed as a lifeline for companies that have not yet reached profitability, the capital raised through this program can be used for costs including, but not limited to, the expenses of fixed assets, such as the construction, acquisition and development of real estate; materials; start-up; tenant fit-out; working capital; salaries; and R&D expenditures. The NJEDA and the New Jersey Department of Treasury’s Division of Taxation jointly administer the program.
To date, more than $1.07 billion in funding has been distributed to over 550 technology and life sciences companies since the program’s inception in the late 1990s. The average award for companies approved to sell their net operating losses through the program in 2020 was $1.1 million.
The NOL Program was expanded in January 2021, when Governor Phil Murphy signed the New Jersey Economic Recovery Act of 2020. Part of the Act increased the program’s annual cap from $60 million to $75 million. It also increased the lifetime cap for an individual applicant from $15 million to $20 million.
“Governor Murphy is committed to making New Jersey the State of Innovation with the most diverse and inclusive innovation ecosystem the nation,” said NJEDA Chief Executive Officer Tim Sullivan. “The NOL program plays an important role in achieving these goals by providing resources early-stage companies need to become profitable and prepare for long-term growth. The expanded program, which is now available, will support more companies that will contribute to New Jersey’s leadership in technology and life sciences innovation.”
In addition to being vital to emerging companies, the NOL Program also provides enormous benefits to the profitable companies that are buying the net operating losses and unused R&D tax credits. A profitable company can purchase tax credits at a discount, based on the market price at the time. These tax credits have traditionally traded somewhere between 88 and 94 cents on the dollar. Once purchased, the tax credits can then be applied to reduce the buyer’s state tax obligation. For example: a purchase of $1,000,000 of tax credit at 92 cents on the dollar would enable a buyer to decrease their New Jersey taxes payable by $1,000,000 for the price of $920,000, representing a savings of $80,000. The names of the buyers who chose to be publicly listed are on the NOL Program’s website. Entities interested in becoming a buyer through the NOL Program can visit the website http://www.njeda.com/nol or reach out via email firstname.lastname@example.org for more information.