R&D Tax Credit Enhancement Act
The R&D Tax Credit Enhancement Act modernizes the state’s research and development incentives to better support life sciences, health technology, and collaborative research partnerships. By expanding eligibility, increasing credit value, and improving access for startups and nonprofits, the Act encourages commercialization of academic research and early-stage innovation. Its goal is to retain homegrown talent, attract investment, and build a more competitive innovation economy.
Key Provisions
Expanded Eligibility Scope: Allows universities, nonprofit research institutes, and early-stage life sciences companies to qualify for R&D tax credits.
Credit Value Increase and Refundability Option: Raises the base and incremental credit values and provides partial refundability or transferability for qualifying small firms.
Inclusion of Collaborative R&D: Permits credits for joint research projects with academic institutions, hospitals, and clinical research organizations.
Qualified Expenses Clarification: Explicitly includes clinical trials, regulatory preparation, research personnel, lab equipment, and prototype development.
Application and Documentation Reform: Streamlines the credit application process with standardized documentation and expedited review for firms under 50 employees.
Model Language
Section 1. Short Title. This Act shall be known and may be cited as the "R&D Tax Credit Enhancement Act."
Section 2. Purpose. The purpose of this Act is to modernize and expand the state’s R&D tax credit program to better support innovation, commercialization, and job creation in priority sectors including health sciences, biotechnology, and university-based research.
Section 3. Definitions.
(a) "Qualified research organization" means any business, university, or nonprofit entity conducting R&D within the state.
(b) "Qualified research expenses" include wages, contract research, equipment, clinical trial costs, and other activities consistent with federal IRC Section 41.
(c) "Department" means the state agency responsible for revenue or economic development.
Section 4. Credit Expansion and Eligibility.
(a) The following entities shall be eligible for the state R&D tax credit: (1) C-corporations, S-corporations, LLCs, or 501(c)(3) nonprofits with qualifying research activity; (2) Public universities, academic medical centers, and affiliated research institutions.
(b) Eligible activities include: (1) Early-stage product or process development; (2) Clinical and translational research; (3) Collaborative research projects.
Section 5. Credit Value and Structure.
(a) The R&D tax credit shall equal: (1) 10% of annual qualified research expenses; or (2) 15% for collaborative research conducted with in-state academic institutions.
(b) Startups and small firms with fewer than 50 full-time employees may elect: (1) A refundable credit of up to $250,000; or (2) A transferable credit with approval of the Department.
Section 6. Application and Compliance.
(a) The Department shall create a streamlined application process for firms under 50 employees.
(b) Applicants must submit: (1) Documentation of research expenditures; (2) Description of activities and partners involved; (3) Verification of in-state operations.
Section 7. Monitoring and Reporting.
(a) The Department shall publish an annual report including: (1) Number of applicants and credits issued (2) Total qualified R&D investment supported; (3) Sectoral and geographic distribution of credit recipients.
Section 8. Appropriations and Sunset.
(a) The Department shall not issue more than $30 million annually in refundable or transferable credits under this Act.
(b) This Act shall sunset after six years unless reauthorized by the Legislature.
Section 9. Severability. If any provision of this Act is held invalid, the remainder shall remain in full force and effect.
Section 10. Effective Date. This Act shall take effect on January 1 of the year following its enactment.