Long-Term Benefits of State Investment in Life Sciences Sector Summarized
SACRAMENTO – At a virtual press event, the Milken Institute released a summary of initial findings on California’s Life Sciences industry. The report, “Sustaining California's Leadership in Life Sciences R&D,” outlines the vital role of life sciences in California and the positive impact that state Research and Development Tax Credits have on sustaining growth in the industry. The full report will be released in early June to help lawmakers make state budget decisions.
“California has long been the home to biotech startups and budding innovation,” said Assemblywoman Cottie Petrie-Norris (D-Laguna Beach). “As we look to move past this pandemic crisis and steer our economy in the right direction, we must secure California’s role as the nation’s innovation leader and invest in a sector that holds vast opportunity for job growth and workforce development.”
As a result of the COVID-19 pandemic, the Governor signed AB 85 into law which capped the R&D tax credit to $5 million and suspended the use of the net operating loss deductions for businesses with revenues in excess of $1 million for the years 2020, 2021 and 2022. Although the effects of this reduction are not yet clear, according to the Milken Institute, several surveys suggest that many life sciences firms are looking into alternative options to reduce their operating costs, specifically moving operations outside of California to states that provide more compelling tax incentives.
“Reinstating California’s Life Sciences research and development tax credit is a critical and much needed step in bolstering biomedical innovation throughout California, which is known worldwide as the Birthplace of Biotechnology,” said Assemblymember Kevin Mullin (D-South San Francisco). "As we continue to adjust and recover from a worldwide pandemic, now more than ever, Life Sciences research is needed. Whether it is COVID-19 or any other serious health condition, the Life Sciences industry provides life-saving opportunities to survive life threatening conditions. Consequently, since we are experiencing a significant budget surplus I believe it is critical that we move to accelerate the restoration of R & D tax credits so California may maintain its competitive edge in this innovative space."
The life science industry is a cornerstone of California’s economy. According to this report, California boasts one of the highest employment rates of the life sciences industry in the nation. Over the last decade, California’s employment in the research and development industry grew nearly 34% and even higher in the biotech industry at 146%. This growth suggests that concentrated support in the life sciences industry has had a broad impact on both job creation and subsequently, wage increases.