24 Early-Stage Companies to Receive $75M Through NOL Program

Program Offers Non-Dilutive Funding for Working Capital or Research

On Oct 12, 2022

Twenty-four technology and biotechnology companies that are in their building and investing stages have been approved to participate in the state’s Technology Business Tax Certificate Transfer Program, more commonly known as the Net Operating Loss (NOL) Program, the New Jersey Economic Development Authority (NJEDA) announced. Combined, these companies were approved to receive a total of approximately $75 million through the program to fund working capital or research and development (R&D), the maximum amount available through the program.

Now in its 23rd year, the NOL Program enables participants to sell their New Jersey net operating losses and unused R&D tax credits to unrelated profitable corporations for cash. The NJEDA and the New Jersey Department of Treasury’s Division of Taxation jointly administer the NOL Program, which has routinely been hailed as a “lifeline” by entrepreneurs seeking capital for their companies.

The average award for companies approved to sell their net operating losses through the program in 2022 was over $3.1 million. Thirty-six percent of program applicants are private businesses, while the remaining 64% are publicly traded companies. Two applicants are located in an Opportunity Zone, and three are located in an Innovation Zone. Three of the 24 approved companies are participating in the NOL Program for the first time this year. To date, more than $1.17 billion in funding has been distributed to over 570 technology and life sciences companies since the program’s inception in the late 1990s. The complete list of approved participants can be found following this news release.

“One of the many advantages of the NOL Program is that it enables growing companies to obtain cash without sacrificing equity,” said NJEDA Chief Executive Officer Tim Sullivan “Bolstering the amount of extra capital that these businesses can use to create jobs, buy new equipment, or further R&D is a key way that we are working to fulfill Governor Phil Murphy’s goal of cementing New Jersey’s role as a national leader in innovation.”

In January 2021, Governor Murphy signed the New Jersey Economic Recovery Act of 2020 (ERA) which, in part, 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. This marks the second year that technology and life sciences companies have been able to benefit from the expanded NOL Program.

“Legislation created under the ERA has been extremely beneficial to New Jersey’s innovation community and to NOL Program participants in particular,” said NJEDA Chief Economic Transformation Officer Kathleen Coviello. “Companies that had previously maxed out of the program are able to participate once again due to the increased cap the Act provides to individual businesses. That extra capital has been instrumental in helping young companies commercialize their products and bring them to market.”

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 be applied to potentially reduce the buyer’s state tax obligation. The names of the buyers who chose to be publicly listed are on the NOL Program’s website.

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