Tax Incentive Updates Impacting U.S. Tech Development

Larry Gigerich

By: Larry Gigerich - Managing Director, Ginovus

Categories: Economic Development, Economy

During this challenging economic period, states are continuing to look at different ways to support economic development projects and initiatives. One area receiving a lot of attention is the area of tax incentives programs.

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In some cases, this means the renewal and/or tweaking of existing incentives programs, while in other cases it may mean the creation of a new program.

Efforts to provide access to capital, encourage research & development activity, and to create new jobs are areas of focus by many locations in the United States. Please find below a summary of actions taken by some states.

1. Florida: Governor Rick Scott and Florida lawmakers approved $10 Million in tax credits for space related business and $7.1 Million in research & development tax credits. The state has done a good job of building technology businesses over the years, particularly in the optics, gaming, life sciences and aerospace related sectors. These efforts should further position the state to continue to grow this important sector of its economy.
2. New Jersey: Governor Chris Christie and New Jersey legislators approved an increase in available funds for the Technology Business Tax Certification Transfer program from $30 Million to $60 Million. In addition, the state increased its research & development tax credit to 100%. Governor Christie has taken dramatic steps to improve the state’s positioning for economic development projects.
3. Colorado: Governor John Hickenlooper and Colorado lawmakers approved the creation of a new seed funding program for biosciences and clean technology industries in the state. The program collects 50% of the future income tax withholdings from these companies and puts them in a fund to make investments in start-up companies. The state has had a significant amount of success in the life sciences and clean technology sectors.
4. Maryland: Governor Martin O’Malley and Maryland legislators created the InvestMaryland initiative. The program is to fill the financing gap for new start-up technology companies. The program will invest at least $70 Million in start-up and early stage companies. The funding of the program comes from the auctioning of premium tax credits to insurance companies and will be invested in private venture capital firms. The state hopes to be a recognized leader in the development of new technology companies.
5. Ohio: Governor Kasich and Ohio lawmakers enacted the InvestOhio program to provide tax credits to angel investors who invest in Ohio small businesses. The state will provide a 10% tax credit to individuals who invest up to $10 Million in a company. The program defines a small business as a company with less than $50 Million in assets or $10 Million in sales. The tax credit is applied if the investment in a small business is held for at least two years. Ohio hopes to grow its economy by supporting the development of small business and technology companies.
6. Louisiana: Governor Jindal and Louisiana legislators took important steps to extend programs critical to the development of technology companies. The state extended the research & development tax credit and the Technology Commercialization Credit and Jobs program for an additional six years. The program allows for a refundable tax credit of up to 40% qualified research & development expenditures and investment in the commercialization of technology. Governor Jindal hopes to leverage the state’s university system and young technology industry in the state, to create good paying jobs.
7. Pennsylvania: Governor Corbett and Pennsylvania lawmakers approved an increase in the state’s research and development tax credit cap. Companies in the state can now take advantage of an allocation of $55 Million in research and development tax credits, as compared to the former $40 Million cap. The state has always been a leader in the life sciences and advanced manufacturing technology sectors.
8. Vermont: Governor Shumlin and Vermont legislators enacted a new research and development tax credit in their state. The program allows for companies to receive a 30% research and development tax credit (calculated based upon what they are eligible for under the federal research & development tax credit). The state is making a concerted effort to build a strong technology company foundation as their neighbors in Massachusetts and New Hampshire already have in place.
9. Virginia: Governor McDonnell and Virginia lawmakers approved an appropriation of $5 Million to seed a new research and development tax credit. Under the program, companies can claim a 15% tax credit for qualifying research activities. The amount can be increased to 20% if the research and development is done in conjunction with a Virginia university. Virginia has some pockets of technology industry sector strength, but recognized a need to encourage more activity in the state, in part, by leveraging the state’s outstanding higher educational institutions.
10. Connecticut: Governor Malloy and Connecticut legislators approved a major investment in the University of Connecticut Health Center. The goal was to double the amount of federal research grants that come to the state. The program includes space and funding for a small business incubator, loan forgiveness for students graduating in certain fields and also includes $254 Million in additional bonding. Connecticut hopes to leverage higher education and life sciences businesses to create more technology based jobs in the state.

These examples only scratch the surface of what is going on across the United States to develop technology based companies and jobs. These states have recognized a need to participate, but not control, the development of young technology companies in their states. With many new governors taking office after the 2010 election, there is a tremendous amount of new thinking and momentum for the development of technology businesses. It is a very positive sign for our country for states to have leaders that understand the need to grow knowledge based industry sectors. Let’s hope this leadership helps our country move out of the economic malaise that we have been suffered during the past three years.

Larry Gigerich serves as Managing Director of Ginovus. Ginovus is a leading provider of national site selection, community comparative analysis and economic development incentive procurement & management services to private sector, educational, governmental and not-for-profit organizations throughout North America. Ginovus is headquartered in Indianapolis, Indiana.

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