09 Jan Wisconsin Technology Council endorses Doyle investment plan
Milwaukee, Wis. – A new investment strategy unveiled this week by Gov. Jim Doyle received the tacit endorsement of the Wisconsin Technology Council Board, and received across-the-board praise from the gathering of business leaders.
Doyle was scheduled to address the board Tuesday, but Monday’s tornadoes prompted him to survey the storm damage in Kenosha. In his absence, the Technology Council Board passed a resolution endorsing the plan in concept.
The plan, known as Accelerate Wisconsin, was followed up with a research and development tax credit proposal designed to stimulate innovation in the state’s manufacturing base, but it was Accelerate Wisconsin’s combination of grants and tax credits that drew praise from members so the Technology Council Board.
Accelerate Wisconsin would establish a capital-gains exclusion to promote re-investment in start-up companies. It allows individuals a 100 percent capital gains exclusion of up to $10 million for long-term capital gains reinvested in qualifying Wisconsin businesses.
Madison banker Terry Grosenheider, who has been outspoken about the need to improve the state’s investment climate, applauded the initiative, especially the capital gains exclusion. “It’s a great principle and something we desperately need – more private-sector investment in early-stage companies,” he said.
The Governor also wants to increase the total amount of angel investor and venture capital tax credits available to businesses. Under the plan, the total amount of tax credits would reach $100 million and leverage a minimum of $400 million in private investment by 2015.
“There needs to be more of them [tax credits],” Grosenheider said. “New jobs come from new businesses and Wisconsin, by all measures, is under-investing in early-stage businesses.”
Lorrie Keating Heinemann, secretary of the Wisconsin Department of Financial Institutions, said the capital gains proposal is a good strategy to ensure that entrepreneurs have access to capital. She said if someone invests in a Wisconsin company and “cashes out of it,” they could take those capital gains and plow them back into another Wisconsin company certified by the Wisconsin Department of Commerce.
“It keeps money recirculating back into Wisconsin,” she said.
Heinemann said the provision to raise the current per-business cap of $1 million in tax-creditable angel investment to $4 million, regardless of whether the source is angel or venture capital, would give entrepreneurs the flexibility to raise capital with a combination of mechanisms.
Many entrepreneurs have told Heinemann and other state officials that the $1 million cap is too low. She said raising the cap allows angel networks to “get a little bigger,” closing the “clear gap that exists between angel and venture.”
In addition to providing the matching funds required for federal research grant applications, the proposal also doubles funding for current technology grants and loans, and allocates $5 million annually for seed money to start-up companies and small businesses.
Tom Still, president of the Wisconsin Technology Council, noted that state support of angel networks initially began with a grant, and he characterized Accelerate Wisconsin as a grant that is a new part of Doyle’s “Grow Wisconsin” initiative.
“It looks like it’s going to be a remarkable way to unleash capital,” Still said.
In a move that could help Wisconsin manufacturers better compete in the global market, Doyle also unveiled a research and development tax credit plan called “Innovate Wisconsin.”
The plan seeks to intensify the state’s focus on R&D by providing new tax credits for companies that increase R&D spending by 25 percent over their three-year average. Those companies will receive a $1 tax credit for every $1 spent above this threshold, and the tax credit a company can claim is capped at 50 percent of its tax liability.
The plan also includes a sales-tax exemption for equipment used in R&D. The exemption that now applies to machines and equipment used in manufacturing would be extended to cover equipment used in research and development.
In addition, Doyle proposes that equipment used in research and development be exempt from property taxes.
According to Doyle, R&D spending in Wisconsin totaled $2.7 billion in 2005, or 1.23 percent of the state’s gross domestic economy. That figure is below the national average of 1.65 and less than half of what neighboring Minnesota spends on R&D, the Governor noted.
Both Accelerate Wisconsin and Innovate Wisconsin are subject to legislative approval. Joe Kremer, director of the Wisconsin Angel Network, said the proposals are consistent with Doyle’s approach to stimulate investments through market incentives. “When you think about it, it’s not just a one-shot deal,” Kremer said. “This continues the policy he laid out five years ago.”
In a related matter, Wisconsin Angel Network, which helps entrepreneurs make connections with investors, is implementing Angelsoft, an angel group management software product designed to help angel networks manage their deal flow and collaborate on investments. The product is used by a variety of angel networks in the United States and worldwide.
Kremer believes the product will help connect angel networks along the “IQ Corridor,” which stretches from Chicago, and through Milwaukee, Madison, and Northwestern Wisconsin to the Twin Cities.
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