{"id":613097,"date":"2026-09-11T23:04:39","date_gmt":"2026-09-11T23:04:39","guid":{"rendered":"https:\/\/www.olympiajournal.com\/news\/story\/613097\/biotech-startups-qualify-for-rd-tax-credits-more-often-than-they-realize-k38-consulting-reports.html"},"modified":"2026-09-11T23:04:39","modified_gmt":"2026-09-11T23:04:39","slug":"biotech-startups-qualify-for-rd-tax-credits-more-often-than-they-realize-k38-consulting-reports","status":"publish","type":"post","link":"https:\/\/www.pennsylvania-magazine.com\/news\/story\/613097\/biotech-startups-qualify-for-rd-tax-credits-more-often-than-they-realize-k38-consulting-reports.html","title":{"rendered":"Biotech Startups Qualify for R&D Tax Credits More Often Than They Realize, K-38 Consulting Reports"},"content":{"rendered":"
\"Biotech<\/a><\/div>\n
K-38 Consulting reports that many biotech startups may be overlooking valuable R&D tax credits despite conducting extensive qualifying research. Pre-revenue companies, clinical-stage startups, and firms working on assays, formulations, manufacturing processes, and analytical methods may qualify. The firm recommends reviewing eligibility throughout development, documenting failed research, using payroll tax offsets when applicable, and checking state-level credits.<\/div>\n

RALEIGH, N.C. — September 11th, 2026 <\/strong>— Biotech companies are, almost by definition, engaged in research and development — yet fewer than 30% of eligible small businesses claim the federal R&D tax credit, according to Armanino’s analysis of small business tax credit utilization. K-38 Consulting, which provides R&D tax credit services to biotech clients, says the gap is a striking one for an industry whose entire operating model centers on scientific and technical research.<\/p>\n

“You’d think biotech would be the industry with the highest R&D credit claim rate in the country, given what these companies actually do all day,” said Dallas Alford IV, CPA, Founder of K-38 Consulting. “Instead, we consistently find biotech founders who assume their work is too early-stage, too experimental, or too focused on regulatory milestones to qualify — when in reality, that’s often exactly the kind of work the credit was built for.”<\/p>\n

Why Biotech Founders Miss This Credit<\/p>\n

K-38 Consulting says the gap in biotech specifically tends to stem from a handful of recurring misconceptions:<\/p>\n

Assuming pre-revenue means the credit doesn’t apply.<\/strong> Many biotech founders don’t realize the R&D tax credit can be applied directly against payroll tax liability for qualifying startups — a critical distinction for pre-revenue companies with no income tax owed. Since the 2015 PATH Act, this payroll tax offset has made the credit accessible to exactly the kind of early-stage, cash-constrained biotech company that might otherwise assume tax credits aren’t relevant to their situation. The Inflation Reduction Act later doubled that payroll tax offset cap from $250,000 to $500,000, further increasing the potential cash benefit.<\/p>\n

Focusing only on formal clinical trials.<\/strong> While clinical trial work often clearly qualifies, a significant amount of credit-eligible activity happens earlier and later in the development process — assay development, formulation work, manufacturing process optimization, and analytical method development can all involve the kind of technical uncertainty resolution the credit is designed to reward.<\/p>\n

Treating failed experiments as disqualifying.<\/strong> Because the credit is tied to the research process rather than a successful outcome, failed experiments, discontinued drug candidates, and abandoned formulations can still generate qualifying expenses — an important distinction in an industry where the large majority of research programs don’t reach commercialization.<\/p>\n

Not revisiting eligibility as the science program evolves.<\/strong> A biotech company’s qualifying activity typically shifts significantly as it moves from discovery through preclinical work and into clinical development, and founders who assessed eligibility once, early on, may be missing credits tied to more recent stages of their program.<\/p>\n

“The credit doesn’t require success — it requires genuine technical uncertainty and a systematic process for resolving it,” Alford said. “That describes most of what a biotech company does at every stage, whether the outcome ends up being a successful compound or one that gets shelved.”<\/p>\n

What Commonly Qualifies in Biotech Development<\/p>\n

K-38 Consulting identifies several categories of biotech work that frequently qualify for the credit, often without founders realizing it:<\/p>\n

Preclinical research and assay development.<\/strong> Work aimed at developing or validating new assays, screening methods, or preclinical models typically involves the kind of technical uncertainty the credit is designed to capture.<\/p>\n

Formulation and manufacturing process development.<\/strong> Efforts to develop, scale, or improve a manufacturing process for a drug or biologic candidate — including work that doesn’t ultimately succeed — often qualifies.<\/p>\n

Clinical trial design and protocol development.<\/strong> Beyond the trials themselves, the scientific and technical work involved in designing trial protocols and analytical methods can also qualify.<\/p>\n

Regulatory and analytical method development.<\/strong> Developing new analytical or testing methods required to support regulatory submissions frequently involves qualifying technical work, even though it’s adjacent to rather than part of the core therapeutic research.<\/p>\n

What K-38 Consulting Recommends<\/p>\n

Based on the patterns it sees most often among biotech clients, K-38 Consulting recommends founders:<\/p>\n