15 Mar Wisconsin Assembly passes capital investment bill, revised CAPCO program not presented
MADISON – The Wisconsin Assembly passed a bill Friday designed to promote capital investment and technological entrepreneurship by means of tax credits, grants and loans. The legislation, SB 261, was only one of two venture capital-oriented bills co-authored by Sen. Ted Kanavas, R-Brookfield, to hit the Assembly floor this session. Its companion legislation, SB 249 or the Wisconsin Capital Companies Program, (WISCAP) is a revised version of the Certified Capital Companies program and was not presented to the Assembly floor.
“[SB 261] will provide ample opportunities for companies to link up with investors and take advantage of tax credits so that these companies can get the early financial help needed to grow,” Kanavas said. “We need to give these small, start-up Wisconsin companies the tools they need to be wildly successful and provide high paying jobs for Wisconsinites.”
The vote occurred on the same day Competitive Wisconsin, Inc. released its annual report, which found Wisconsin lacking in venture capital, doctoral degrees and research dollars as compared to other states.
The report reveals that venture capital disbursements per worker in Wisconsin at $18.53 in 2002, down nearly 75 percent from their peak in 2000. This figure is approximately 90 percent lower than the national average.
SB 261 has three parts: create an angle investment tax credit, an early stage seed investment tax credit and a technology commercialization grant and loan program.
The angel investment tax credit would provide a 25-percent tax credit over a two-year period for investments made directly in qualified new businesses. Unused tax credits may be carried forward up to 15 years to offset future tax liabilities, according to the legislation.
The early stage seed investment tax credit portion of the bill would give a 25-percent tax credit to investments made in qualified new business ventures through certified fund managers. Unused credits may again be carried forward.
The third part of the bill, the technology commercialization grant and loan program, would provide early stage planning, matching, bridge, venture capital, entrepreneurial and technology transfer center grants and loans to individuals or companies who have applied for federal government grants.
“The passage of SB 261 is an important step toward creating a more positive investment climate in Wisconsin. The angel and early stage investment tax credits will help Wisconsin do a better job of ‘growing our own’ pool of individual investors, and the technology grant and loan program will help those investors identify promising companies. The Legislature is to be congratulated for acting on SB 261 at a time when it could have been lost in the hustle and bustle of the floor period’s closing days. This proves Wisconsin policymakers, Republican and Democrat, can work together to improve our state’s entrepreneurial business climate,” said Tom Still, president of the Wisconsin Technology Council.
The WISCAP legislation, previously CAPCO, was intended to be enacted alongside SB 261 but was not voted on, according to John Neis, senior partner at Venture Investors. Launched in 1999 with $50 million to support promising technology companies, CAPCO was criticized for being inefficient and unprofitable for Wisconsin and was thusly overhauled into WISCAP. The new programs is designed to allow a wider variety of investors to participate, give the state 20 to 30 percent of the profit and require 50 percent of investments within the first five years to be reserved for “early stage” companies.
“WISCAP has attracted lots of money … we know it works,” Neis said. He stated both bills were heavily negotiated with the Department of Commerce and Gov. Doyle indicated support.
“[Both bills] were both viewed as important components to support venture capital,” Neis added. “Senator Kanavas and Representative Nischke are to be commended for their tenacious efforts to get meaningful venture capital legislation passed during this year’s legislative session. While I am pleased that they got something passed, I was disappointed that entire package, promoted by Republican sponsors in the Senate and endorsed by the administration, did not get acted on. The WISCAP bill wasn’t allowed to reach the Assembly floor for a vote, despite unanimous approval in joint finance and passage by a 25-7 vote in the Senate. In the bill they passed the magnitude of the tax credits got watered down in the last week of the session. Much remains to be defined in the rule making process, which will determine whether this bill will truly provide material assistance in raising capital for Wisconsin’s venture capital community.”
The effect of SB 261 in light of WISCAP’s absence depends on how the legislature intends to implement it.
“[SB 261’s impact] depends on how flexible the legislature is to enable it to provide impact,” Neis said.
Gov. Doyle supports the legislation and is expected to sign the bill into law.