New Jersey’s Business Tax Credit Certificate Transfer Program—commonly known as the Net Operating Loss (NOL) Program—is a unique tax incentive designed to help small and early-stage technology and biotechnology companies stay afloat and grow. Unlike many tax credit programs that enable the sale of excess R&D or investment credits, New Jersey’s NOL program goes a step further by allowing eligible businesses to sell their net operating losses for current capital. This feature makes the program particularly valuable for firms that are not yet profitable but need liquidity to continue innovating.

Early-stage companies, especially in high-growth sectors like biotech and advanced tech, often face significant capital constraints in their formative years. These businesses may be rich in intellectual property and promise—but cash poor. The NOL program acts as a financial bridge, giving these firms a way to monetize tax attributes they can’t yet use due to lack of profitability. NJEDA commissioned ESI and Smart Incentives to study the program’s impacts over the last twenty-five years. As the report explains:

“The NOL program aims to serve as a financial buffer, helping to address capital constraints that could otherwise hinder their progress and threaten their viability.” (p. 22)

How We Measured Impact

To evaluate the effectiveness of the NOL program, the research team used a combination of firm-level research and economic modeling. We compiled and analyzed data on individual NOL awardees and compared program participants to a national benchmark using Business Employment Dynamics data from the Bureau of Labor Statistics. This allowed us to assess business survival rates and employment trends over time, using a consistent set of peer firms matched by industry sector and age.

To understand the broader economic contribution of these companies, we used input-output modeling to estimate the direct, indirect, and induced effects of their activity on the New Jersey economy. This included the jobs they support, the wages they pay, and the ripple effects across suppliers and local communities. Taken together, these methods provided a detailed view of how the program supports firm growth and contributes to the state’s overall economic health.

Study Findings

The analysis surfaced several noteworthy patterns that illustrate how the NOL program has supported participating firms:

• Improved Survival Rates: Companies that received NOL awards had a survival rate more than double that of industry benchmarks for technology firms, underscoring the program’s role in strengthening business resilience.
• Positive Fiscal Impact: Participating companies have generated more in tax revenue through their growth and sustainability than the state has foregone through the credit.
• Retention and Growth: Participating companies were more likely to stay, expand, and hire in New Jersey. The program was explicitly cited as a reason for remaining in the state by several firms.
• Credibility and Leverage: Beyond the cash infusion, many participants viewed the program as a trusted endorsement that helped unlock other sources of capital, including private investment and follow-on support from NJEDA.

Lessons for Incentive Design

The NOL program illustrates that well-structured incentives can be powerful tools for economic development—when aligned with an ecosystem approach. Incentives for entrepreneurial and early-stage technology companies work best when they are part of a support ecosystem. Program participants explained how the NOL program did more than provide access to funds to keep the business going and enable investments to continue growing. They provided a “stamp of credibility” with other investors and were often accessed as part of a wider set of services and incentives that NJEDA offers to help startups, including an Angel Investors Tax Credit Program. As one co-founder explained, “It wasn’t just one program—it was the whole support system that brought us here and keeps us here.”

In a sector where early capital can determine long-term survival, New Jersey’s NOL program is making a difference—helping innovative firms gain traction, secure funding, and grow roots in the Garden State.

Rebecca Garvin DeJoseph, Senior Vice President for Talent Development & Principal | Dejoseph@econsultsolutions.com

Rebecca Garvin DeJoseph is a Senior Vice President for Talent Development and Principal at ESI and an Assistant Professor of Economics and Statistics at the Community College of Philadelphia. Rebecca is well trained in economics and applies critical economic thinking and analysis to complex projects in economic development, workforce development, and public policy.

Ellen Harpel, Smart Incentives Founder & BDA President

Ellen Harpel is the founder of Smart Incentives, which helps communities make sound decisions throughout the economic development incentives process. She is also president of Business Development Advisors LLC (BDA), an economic development and market intelligence consulting firm in Arlington, VA. Smart Incentives serves governments and economic development organizations.