The New Jersey Business & Industry Association testified Monday in strong support of a bill that would increase the qualified research expenses tax credit for corporations in targeted industries and basic research payment tax credits from 10% to 15%.
The intent of bill S-2707, which also allows refundable tax credits in the first year, comes directly from recommendations made in NJBIA’s Indicators of Innovation reports in 2020 and 2022.
The Senate Commerce Committee voted unanimously to advance the bill, which is sponsored by Sen. Linda Greenstein (D-14) and Sen. Michael Testa (R-1).
“This bill would ultimately modify New Jersey’s R&D Tax Credit to better align with prominent innovation states, including Massachusetts, New York, and California,” said NJBIA Chief Government Affairs Officer Christopher Emigholz.
“Re-emerging as a leading innovation state has been a longstanding priority of both NJBIA and Gov. Phil Murphy, and the pandemic has further demonstrated the importance of innovation for economic success. New Jersey must increase its overall competitiveness to retain and attract more innovative businesses.”
R&D tax credits are an important tool that federal and state governments use to incentivize spending on the R&D process for corporations, universities, laboratories, and other entities. Although R&D is a crucial part of developing new technology in various sectors, it is also costly, as there is no guarantee that a research project will turn into a commercially viable product.
New Jersey’s current R&D tax credit is 10% of excess qualified research expenditures over a base amount, plus an additional 10% of basic research payments.
“While this credit incentivizes R&D across all sectors in the state, it does fall short compared to the R&D tax credit in Massachusetts and California, as well as the Life Sciences R&D tax credit in New York,” Emigholz said.
Emigholz said the strategic sectors the government should emphasize are those identified by Gov. Murphy in his Economic Development Plan and currently prioritized by the NJEDA’s Office of Economic Transformation. They include Technology, Life Sciences, Offshore Wind, Clean Energy, Transportation & Logistics, Advanced Manufacturing, Food & Beverage, and Finance & Professional Services.