Pressure BioSciences, Inc. (NASDAQ: PBIO) is expected to receive approximately $623,000 in the form of a tax refund from the government this year for the 2004 calendar year. The five-year carry back of 2008 net operating losses are eligible for small businesses under the American Recovery and Reinvestment Act of 2009, passed by Congress and signed into law by President Obama in February 2009.

The new tax provision could help many companies posting losses last year to get refunds for taxes paid as far back as five years earlier. The businesses could then re-file their old tax returns, using the losses suffered last year to offset profits made when times were good. The two year net operating loss carry-back provisions in 2002 provided much-needed relief to manufactures and Obama expanded it.

Pharmaceutical companies are likely to be the largest beneficiaries of this new law given their rather unstable operating histories. A company with a profitable drug for two of the last five years that sold it to fund a new drug in development may now reach out and get tax refunds for those two years of profitability. This could prove extremely valuable in today’s tough financing environment.

Another unintended consequence of this lengthening of the carry-forward may be in mergers and acquisitions. Often times, larger profitable companies buy non-profitable companies with promising assets to not only gain the assets, but also use the carry-forwards to help offset their profits. Now, these carry-forwards are valid for the past five years.

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