Buffalo’s economy continues to develop and
diversify, led by major growth in the healthcare and education
sectors. Particularly encouraging is the Buffalo
Billion, an economic investment development plan which was
developed at the request of Governor Andrew Cuomo whom has
committed to invest more than $1 billion in state funds in
order to lure additional private sector investment.
In addition to this, at least $5 billion in
economic-development projects are under way in the region, the
most in more than 50 years. The healthcare and education
sectors in New York are particularly driven by research and
development and the investments by governor Cuomo, as well as
the private sector businesses contributing to the $5 billion
in development, largely involve R&D as well.
The present article will discuss Buffalo’s most innovative
industries and present the federal and state tax credits
available to support ongoing R&D efforts.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
• New or improved products,
processes, or software
• Technological in nature
• Elimination of uncertainty
• Process of experimentation
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On January 2, 2013, President Obama
signed the bill extending the R&D Tax Credit for 2012 and
2013 tax years.
The New York State
R&D Tax Credit
Investments in R&D facilities are
eligible for a 9% corporate tax credit. Additional credits are
available to encourage the creation and expansion of emerging
technology businesses, including a three-year job creation
credit of $1,000 per employee and a capital credit for
investments in emerging technologies.
Buffalo Niagara Medical Campus
The Thomas R. Beecher, Jr. Innovation Center in downtown
Buffalo is a LEED- certified research and development space
catering to life sciences and biotech companies. The center
boasts that “This ever-changing campus environment encourages
groundbreaking advancements via innovation and entrepreneurism
and seeks to change the way healthcare, science, and energy
enhance quality of life”. There are over 50 companies on
the medical campus which use the schools resources to develop
patents, market products, and create new innovations. A
few of these companies are described below.
provides clinical laboratory services that improve currently
available chemotherapy cancer treatment options available to
the physician and patient, and also enable the pharmaceutical
industry to more rapidly and cost-effectively develop new
cancer treatment drugs.
Kinex Pharmaceuticals is a
specialty pharmaceutical company focused on the development
and commercialization of next generation therapies for cancer
and immunomodulatory diseases. Kinex has developed the
proprietary platform technologies, Mimetic and Opal. These
technology platforms allow the company to focus on both
oncology and immunology markets and the company is building
value in its compound assets by continually advancing clinical
programs and introducing new discoveries through its R&D
efforts. Kinex has emerged as a pipeline company with
compounds that address large markets with unmet medical needs.
Medical Acoustics is a
commercial-stage medical device company which employs acoustic
technologies for diagnostic and therapeutic medical
applications. The manufacturing of the Lung Flute, a medical
device helping patients suffering from chronic obstructive
pulmonary disease (COPD) is locally produced in Orchard Park.
ZeptoMetrix is a biotechnology
company that is privately held, serving the diagnostic and
pharmaceutical research products industries. Zeptometrix
provides large scale virus and bacterial production,
diagnostic kit development and manufacturing, controls and
calibrators for serology and amplification testing, custom
proficiency panel manufacturing and distribution, clinical
specimens for assay development, specialty panels and
The Buffalo Billion is a state
economic-development initiative for western New York that will
provide over a billion dollars in funding for a variety of
projects. Ideally, the plan aims to incentivize certain
private sector behavior that the government believes will
foster long term economic growth. The overall strategy
involves six major sub-categories, all of which are largely
focused on R&D. Specifically, Governor Cuomo
believes that investments in knowledge-based industry sectors
and innovation will spur economic growth.
Knowledge-based service sectors comprise nearly 75% of the
economic output of developed economies today. Our
society will be increasingly reliant on a pipeline of workers
trained for high-skill jobs, entrepreneurs willing to take
risks, and researchers able to generate novel ideas.
Manufacturing remains the third largest employment sector in
the Buffalo Niagara economy, representing 50,000 employees and
$6.3 billion in gross regional products (GRP), 11% of the
total. The Buffalo Billion initiative aims to spur
growth in this region, but the manufacturing activities on the
radar are not necessarily those which dominated the
manufacturing sector in the past. Particularly, the government
believes that industries based upon innovative, cutting edge
science are usually executed by relatively high-skilled
workers and have the most potential for growth in the
future. These industries are commonly referred to as
advanced manufacturing. They include at least four
clusters: advanced materials, machinery and metals chemicals,
and health/life sciences.
For more on R&D as it relates to advanced manufacturing
see the outline below. For more on the other three
industries visit http://www.rdtaxsavers.com/.
Advanced Materials companies working with metals, polymers
(thermoplastics and thermosets), ceramics, glasses, or
composites are likely to qualify for R&D tax credits when
engaged in the following activities:
Development of new materials and
modifications to existing ones generating superior
performance in one or more features that are central to
the application under consideration.
Improvement of the performance
characteristics (technology life cycle) and their sales
volume (product life cycle).
Processing of materials into
high-value added niche applications.
Creation of new or improved
processes for the manufacture of materials.
Miniaturization of electronic
Innovative use of existing
materials for medical applications and hybrid methods
which use new materials to assist the body in self repair.
Development of new or improved
Research and development of
Reprocessing of waste materials.
In addition to the four major clusters, the government’s plan
involves a significant investment of $350 million in a new
green-technology hub anchored by a factory which will make
solar panels. Solar panel development, like most
manufacturing endeavors, typically involves significant
R&D activities. Particularly, expenses incurred in
connection with developing any new technique that can be
employed in generating more electricity yield from a solar
panel will be credit eligible. Even expenses incurred in
developing novel techniques for lower costs or creating more
durable products will typically be credit eligible. As long as
the product involves some new feature or upgrade there should
be a good opportunity for a credit.
In addition to the $350 million for the new technology hub,
the government plans to release at least $150 million in tax
credits associated with green energy. This is consistent
with the similar NY SUN initiative which creates $1 billion
dollars in incentives for ratepayers to incorporate solar
capabilities into their electrical systems. For more on
this topic see “NY
Offers Billions in Energy Incentives Commencing 2014”.
Another critical component of fostering
health and life sciences innovation is knowledge exchange and
collaboration among organizations and people in the life
sciences field. Many regions are experimenting with
co-location of facilities, creating formal and informal
opportunities for interaction, and interdisciplinary exchange.
The Buffalo Niagara region is beginning to facilitate this
interaction through efforts such as the co-location of
clinical and R&D functions at the Buffalo Niagara Medical
Campus (BNMC). This type of collaboration is an emerging
trend in all U.S. competitive economies. For more on
this topic see “The
R&D Tax Credit Aspects of Innovation in New Jersey”.
Research and development is crucial to the
growth of modern economies. With the new
economic development plan and the state incentives for
investment in R&D, Buffalo’s economy is positioned for
economic growth. Advanced manufacturers and energy producers
should be aware of the state and federal tax credits available
to stimulate their efforts.