What is the Maryland Biotechnology Investment Incentive Tax Credit (BIITC)?
Maryland is particularly proud of the biohealth companies and biotech innovations that have emerged from their state. Some proud achievements include being the first to develop a rapid test for Ebola, the first to map the human genome, and Maryland companies even play an “outsized role in the worldwide hunt for a coronavirus vaccine.” Maryland boasts 500+ Biotech companies, 2700 Life Science Firms, and a 700% increase in VC funding.
In an effort to continue this momentum and spur new growth, Maryland has offered the Biotechnology Investment Incentive Tax Credit (BIITC) for investors. In essence, the BIITC provides an income tax credit for investors of up to $250,000 for each qualified startup per year.
Up to $250,000 credit for investing in Maryland biotech startups?! Do I qualify??
In order to qualify for the BIITC, you must be an entity/individual that invests at least $25,000 in a QMBC (“Qualified Maryland Biotech Company”), as defined by the Maryland Department of Commerce. The credit is available to the investors in the startup, not the startup itself.
The startup does not claim the BIITC on its own Maryland return. Instead, qualified investors receive the refundable tax credit on their Maryland income tax returns. Regardless, if you are a QMBC, you should let your investors know about the BIITC credit.
What is a QMBC?
A QMBC is a startup that:
- Is headquartered in and has its base operations in Maryland
- Has fewer than 50 employees
- Is in active business no longer than 12 years
- Certified by Maryland Commerce as a QMBC
Maryland defines “active business” to mean that the Department can reasonably determine and establish the nature of the company’s commercial biotechnology research, development, or production operations. Merely organizing the entity, appointing officers, raising initial capital, or opening an office is not enough to be considered “active” for BIITC purposes.
How do I get certified as a QMBC?
To use the BIITC, your company has to be certified by the Maryland Department of Commerce as a Qualified Maryland Biotechnology Company (QMBC). The certification process runs through Commerce’s online portal and centers on the Form B QMBC application.
At a high level, a biotech startup that wants QMBC status should:
- Confirm it meets the basic statutory criteria (Maryland HQ and base of operations, fewer than 50 full‑time employees, in active business no longer than 12 years, at least one full‑time non‑executive biotech researcher in Maryland, not publicly traded, and not already over the $7,000,000 BIITC cap).
- Gather required documentation, such as:
- Organizational documents and a recent Maryland SDAT certificate of good standing
- A business plan and description of biotechnology research, development, or commercialization activities
- Information on intellectual property, licenses, and lab/experimentation activities
- Capitalization details (equity, grants, or long‑term debt) showing at least 100,000 dollars of capital
- Create an account in Maryland Commerce’s online system and submit the Form B QMBC application with all attachments before the published deadline for that fiscal year.
Maryland Commerce reviews Form B applications to determine whether the company is primarily engaged in qualifying biotechnology activities and meets all QMBC requirements. If approved, the company is certified as a QMBC, which then allows eligible investors to submit Form A investor applications and compete for BIITC allocations through the online queue process.
Because timelines, forms, and exact documentation can change from year to year, founders should always check the current BIITC page on the Maryland Department of Commerce site or work with a tax advisor before applying.
Who benefits from the Maryland BIITC?
Investors in the startup benefit from the Maryland Biotechnology Investment Incentive Tax Credit, not the actual company nor the startup executives and employees (unless, of course, the employees/executives meet the qualifications as investors).
Both Maryland residents and non‑residents can qualify as investors, as long as they meet BIITC’s investment and filing requirements, but investors from certain tax haven jurisdictions are excluded.
How much is the credit worth?
Under current guidance, BIITC generally provides a refundable Maryland income tax credit equal to 33% of a qualified investment in a QMBC, up to $250,000 in credits per investor per company each year. Certain investors may qualify for enhanced credits of 50-75% of their eligible investment, up to $500,000 in credits, when investing in QMBCs located in specific Maryland zones such as Opportunity Zones, RISE Zones, or designated counties.
Is there limited funding for this credit?
Yes, the BIITC is on a first come first serve basis. Apply as soon as possible.
What is an “active business” for a biotech company?
Maryland defines “active business” to mean that the Department can reasonably determine and establish the nature of the company’s commercial biotechnology research, development, or production operations. Merely organizing the entity, appointing officers, raising initial capital, or opening an office is not enough to be considered “active” for BIITC purposes.
Who are the essential employees in order for a biotech company to be certified?
The company must have at least one full-time, non-executive employee engaged in biotechnology research in Maryland.
Find out more
Because BIITC is a state program that can be modified through legislation or annual budget decisions, biotech founders and investors should always review the latest guidance from the Maryland Department of Commerce or consult a tax advisor before relying on specific percentages, caps, or application dates.
For the full statute version, please visit §10–725. Biotechnology Investment Tax Credit
For the full regulations, please visit Title 24: Dept of Commerce. Subtitle 05: Economic Development. Chapter 03: Biotechnology Incentive Tax Credit.
Kruze has deep biotechnology accounting experience. Our team has helped dozens of VC-backed life sciences startups with their bookkeeping, tax and finance needs. Learn more about Kruze’s biotech accounting services.
