01 Jun Kanavas says Wisconsin has no more excuses
Milwaukee, Wis. – One of the most active legislative periods from the standpoint of technology has come to a close, and a key legislator says the state has no more excuses when it comes to building a technology-based economy.
State Senator Ted Kanavas, R-Brookfield, stopped short of saying all the legislature’s technology work is done, but with the signing of broadband, shareholder liability, and IT tax credit bills, he said the major hurdles have been cleared.
“At the point we’re at, we’ve repealed of shareholder liability and we’ve been aggressive in creating an angel [investment] network and tax credits,” he noted. “There are no more excuses from a government standpoint, except for the tax burden, and that’s not something that can be addressed in just a two-year cycle.”
Bills, bills, bills
In Kanavas’ view, the most significant piece of legislation from this session is the repeal of shareholder liability. Many viewed shareholder liability as an impediment to capital formation because when a public company failed, shareholders were held personally liable for wages owed to employees.
Kanavas said the law’s repeal fundamentally improves the ability of Wisconsin businesses to raise capital. “What we did was remove a barrier that had been hanging around for 20 years,” he stated.
Mark Heesen, president of the National Venture Capital Association, also applauded repeal. Heesen, a keynote speaker at the forthcoming Wisconsin Entrepreneur’s Conference in Milwaukee, said it’s a positive step for Wisconsin’s investment climate. He noted that most venture-backed companies are smaller and haven’t gone public, but as more companies are incubated to the point where they can go public, repealing shareholder liability should stimulate investment. Venture capitalists realize a return on their investment only when their portfolio companies issue an Initial Public Offering, merge with another business, or are acquired by another company.
“Today, there are reasons to take a company from one state to another,” Heesen said, citing factors like taxes, workforce quality, and legal climate. “States that are friendly to capital formation should reap the benefits.”
According to Kanavas, the sleeper in this series of legislative initiatives may be Senate Bill 563. When Gov. Jim Doyle signed the legislation, it was touted as a measure that will attract the film industry to Wisconsin by providing tax incentives for films produced here. But those tax credits also will be available to companies involved in the production of television, electronic games, and broadcast advertisements.
Doyle noted that because of the high cost of film production in California and New York, filmmakers and investors are looking for new areas to produce films. He said Toronto and Vancouver already have capitalized on this, but Kanavas views SB 563 as more as an IT stimulant. Companies certified by the Department of Commerce will be able to claim a credit of 25 percent of wages paid to company employees for services rendered in Wisconsin.
Kanavas, who was among the key legislative sponsors, said technology manufacturers building intellectual property-based products and content probably would derive more benefits than the makers of feature films. “I think it will have an underestimated impact,” he said. “It’s not necessarily for the entertainment industry; it’s really for IT.”
He said a bill designed to extend broadband deployment to underserved areas also is important, but its impact will not be immediately felt. The act provides $7.5 million in a combination of tax credits and exemptions for companies that expand in areas of the state where there are one or fewer broadband service providers. Companies that want to take advantage of the tax incentives will apply to the Wisconsin Department of Commerce and show that they are going to expand broadband services to the targeted areas.
The Doyle Administration, lawmakers, and telecommunications firms have championed broadband expansion, but Kanavas preached patience. “Broadband will help on the margins,” he said, “but it will need time to germinate and grow.”
With the legislative session now completed, the next opportunity for lawmakers to impact information technology will be the 2007-09 budget process. Kanavas and others would like to allocate more for Act 255 angel investment tax credits, and provide more state support for the Milwaukee-based Biomedical Technology Alliance.
Under Act 255, the state made available $65 million in tax credits over 10 years to encourage angel investors to invest more in early-stage companies. All of the angel tax credits available in the current biennial budget were used in the first year, and Commerce Secretary Mary Burke would like to double the current $3 million annual allocation.
Heesen said the importance of angel networks couldn’t be overstated, particularly in states that lack large numbers of venture capital firms. He said there is a growing sense of professionalism among angel investor networks, which stands in contrast to the days where they served as more of a social function.
“An educated angel network understands how to fund a company, and how to make it attractive to venture capitalists as it matures,” Heesen said. “The [tax credit] program is absolutely a step in the right direction.”
The Biomedical Technology Alliance, a collaboration of TechStar and the Medical College of Wisconsin, did not receive the additional grant funding in this legislative session. The BTA is caught up in the stem cell debate, but Kanavas said 90% of what the alliance attempts to accomplish for southeastern Wisconsin has nothing to do with stem cells.
“We’ve got to expand Milwaukee’s ability to create IT companies,” he said. “Transforming Milwaukee is `job one’ as we move forward.”
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