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.
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” - which we’ll define in a moment). The credit is available to the investors in the startup, not the startup itself. 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:
How do I get certified as a QMBC?
You will need to apply here: https://www.mdbiotaxcredit.org/
Learn about some of the biggest tax mistakes startups can make - including not understanding the tax credits available to them.
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).
Is there limited funding for this credit?
Yes, the BIITC is on a first come first serve basis. Apply as soon as possible. There are currently 240 startups in the queue as of 3/11/21.
What is an “active business” for a biotech company?
““Active business” means that the Department can reasonably determine and establish the nature of the Company’s commercial biotechnology research, development or production operations. The mere legal organization, appointment or election of officers or managers, initial capitalization, and establishment of business offices of a company, alone or in combination, are not sufficient to establish that the company is engaged in active business for the purposes of this tax credit.”
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.”
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.
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