Yesterday, House Ways & Means Republicans dropped a tax package that will encourage the development of new medicines for pandemic threats and encourage investment in the biotech industry. We got the scoop from our federal government affairs and tax teams.
Two bills in the package would provide more incentives for infectious disease research.The Start-ups for Cures Act and The More Cures Act, both sponsored by Rep. Devin Nunes (R-CA), include enhancements to the R&D credit including an increased credit amount and refundability for qualifying research expenses.
Another encourages investment in companies engaged in infectious disease drug development. The Infectious Disease Therapies Research and Innovation Act, sponsored by Rep. Mike Kelly (R-PA), helps small biotechs raise investment funds by allowing credits and losses associated with qualifying research to pass through to investors to offset other income.
The package also includes one of BIO’s top capital formation priorities: Reform of the net operating loss (NOL) limitations under Section 382 of the tax code.
Section 382 is an important anti-abuse measure to limit the use of a failing company’s losses by a profitable company. Unfortunately, these limits are also unintentionally triggered by investment in thriving small biotechs. The American Innovation Act sponsored by Rep. Vern Buchanan (R-FL) would call off Section 382 for investments during a company’s startup phase, thereby preserving these valuable tax assets and encouraging investment.
What they’re saying: “These bills are vital for America’s future in order to increase investment in American innovation—leading to more cures not just for COVID-19, but for any future health crisis our country may face,” said Ways and Means Republican Leader Kevin Brady (R-TX).
Why it matters: These bills will help provide liquidity for and encourage investment in pre-revenue companies developing treatments for COVID-19—and help the country and the world prepare to face future pandemic viruses. In addition, allowing startups to preserve their NOLs will help encourage investment in pre-revenue biotechs focused not only on fighting COVID-19, but also those working on all kinds of solutions to heal, fuel, and feed the world.
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