MVM Associates Inc., an economic development consulting firm based in Fort Washington, helped secure over $8 million for more than 50 Pennsylvania technology firms by obtaining and selling transferable technology tax credits on their behalf.
Several Lehigh Valley tech companies secured tax credits including: CDG Environmental, Hager Biosciences, Johnson McCormick Technologies, Third Eye Diagnostics and Viddler, all of Bethlehem.
Hager will receive a $100,000 cash benefit, which is the maximum amount that could be claimed, said Bel Mekonnen, Ph.D., CEO, president and founder of Hager Biosciences LLC, a biopharmaceutical company that focuses on preclinical stage drug discovery. The company is also a client of Ben Franklin Technology Partners of Northeastern Pennsylvania.
"We increased our revenue by $200,000, so that's how you claim the full tax credit that the state provides," said Mekonnen.
A portion of the funds that Hager will receive within the next few months will go toward hiring an associate level professional to work in the lab to focus on a drug discovery project, said Mekonnen. The money can also be used for building research and development infrastructure and to attract further investment.
Mekonnen said the company also received help from the Lehigh Valley Economic Development Corp. in Bethlehem to generate the preliminary results for a project that won the company a small business technology transfer research grant.
"By helping our clients secure and sell these tax credits, they were able to raise non-dilutive capital for their businesses," said Michael McCann, MVM associates president. "Many companies qualify to participate in tax incentive programs that can generate cash and aren't even aware of it. We want to help more firms capitalize on these opportunities in 2013."
MVM Associates identifies programs that offer sellable tax credits and then individuals and corporations with large Pennsylvania tax liabilities buy the credits. MVM Associates negotiates the sales, facilitates the transfer and distributes the funds to the technology firms after the credits are sold.
Pennsylvania is one of the few states with tax programs that directly benefit young technology firms. The benefits are provided as a sellable tax credit through programs including the Keystone Innovation Zone, Research and Development Tax Credit and others.
Since participating technology firms are typically young and without a sizeable tax liability, the state allows them to transfer these credits to other taxpayers that can use the credit. The proceeds then go back to the technology firm.