18 Feb Governor Doyle's budget initiatives to promote innovation and growth
Although this budget demands hard decisions, I have included multiple provisions intended to help Wisconsin businesses continue to flourish and innovate, despite the challenging economy. These provisions are listed below.
To accelerate new business development in Wisconsin, I am launching an Accelerate Wisconsin initiative that will enhance the existing angel investment and venture capital investment tax credit program (Act 255) and offer a capital gains re-investment incentive. These initiatives will support start-up technology companies, increase flexibility for entrepreneurs seeking tax creditable investment, increase ease of program administration and provide parity between investor groups, and spur investment in Wisconsin start-up companies by insurers.
To enhance the program known as Act 255, I will:
- Raise the cap on Act 255 tax credits for angel investments from $1 million to $4 million.
- Raise the aggregate creditable investment to from $4 to $8 million per year from any combination of angel or venture sources beginning in 2011.
- Triple the annual pool of credits available from $5.5 million to $18.25 million per year for angel credits and from $6 million a year to $18.75 million for venture credits beginning in 2011.
- Allow angel investors to claim the entire 25% credit on their investment in the first taxable year.
- Permit insurance companies to claim the venture capital investment tax credit against their gross premium tax liability.
- Permit the Department of Commerce to require that businesses seeking to raise funds specify the investment amount they wish to raise. Commerce will then be permitted to certify the business and determine the amount that qualifies under the Act 255 tax credit for that round of fundraising.
- Expand program eligibility, to include companies that are engaged in innovation in any of the categories below.
- Manufacturing; biotechnology; nanotechnology; communications; agriculture; clean energy creation or storage technology;
- Processing or assembling products, including medical devices, pharmaceuticals, computer software, computer hardware, semiconductors, any other innovative technology products, or other products that are produced using manufacturing methods that are enabled by applying proprietary technology.
- Services that are enabled by applying proprietary technology.
- Pre-commercialization activity related to proprietary technology that includes conducting research, developing a new product or business process, or developing a service that is principally reliant on applying proprietary technology.
- Allow investors to transfer/sell their credits to one other person, with only one transfer allowed per 12 month period. The Department of Commerce will charge a fee to the seller equal to 1 percent of the credit amount sold or transferred.
In addition, beginning in 2011, I will allow individuals a limited 100 percent capital gains exclusion of up to $10 million for long-term capital gains reinvested in a Qualified New Business Venture (certified by the Department of Commerce under Act 255).
Wisconsin Venture Fund
To increase the amount of early stage venture capital and corporate strategic investments made into innovative Wisconsin companies, I am creating a Wisconsin Venture Fund at the Department of Commerce. This fund will contain two programs—a Capital Connections program, and a Venture Seed Fund Match program. Â The Capital connections program will: provide education, networking, capital raising assistance, and investment opportunities to Wisconsin and regional venture capital firms; and help connect entrepreneurial companies to sources of venture capital. The program will fund existing access-to-capital networks, fund proposed networks, and sponsor events which connect capital to companies.Â The Venture Seed Fund Match program will provide a dollar-for-dollar match for funds raised and invested by research institutions and non profits which invest into companies in their formation stages.Â Commerce will create a “Qualified Venture Seed Fund” status that will allow funds to apply for matching grants when the investments are made.
Next Generation Manufacturing
In these difficult economic times it is imperative that our Economic Development programs remain agile and flexible to respond to the changing needs of the business community.Â To help the state remain responsive to business needs, I am launching a Next Generation Manufacturing initiative, which will consolidate five existing tax credit zones (development zones, enterprise development zones, agricultural development zones, technology zones and airport development zones), create a Forward Innovation Fund, and create a new JOBs tax credit. These initiatives will increase the state’s ability to target tax credits to manufacturers and businesses that create jobs, invest capital, provide training and retraining to new and incumbent workers, and retain jobs.
First, I will consolidate five existing tax credit zones at the Department of Commerce (development zones, enterprise development zones, agricultural development zones, technology zones and airport development zones) to increase flexibility of funds and make the most efficient use of our economic development dollars.
I will also creating a new $10 million-per-year refundable tax credit program for business expansion and attraction. The program will allow Commerce to certify up to a 10% full-time payroll credit for up to 10 years for a business creating jobs in Wisconsin, either through expansion or through relocation to the state. The wage threshold to add jobs would be high in general, but in distressed areas, jobs created at a lower wage could qualify. Training costs would also be eligible to earn credits.
Forward Innovation Fund
To continue streamlining Wisconsin’s economic development programs, I am also creating the Forward Innovation Fund that will consolidate the Community Based Economic Development Program, the Rural Economic Development Program and the Minority Business Grant and Loan Program into one program focused on innovation and strategic activities designed to grow Wisconsin’s economy. These activities include:
1. The start-up, expansion, or retention of minority businesses.
2. The start-up, expansion, or retention of businesses in economically distressed areas.
3. Innovative proposals to strengthen inner cities, rural communities, industry clusters and entrepreneurship.
To increase research and development activities in Wisconsin, I am launching an Innovate Wisconsin initiative that will provide a sales and use tax exemption for biotechnology, a property tax exemption for R&D, and an income tax credit for increases in R&D expenditures.
I will provide biotechnology companies an exemption to the sales and use tax for machinery and other tangible personal property used for qualified manufacturing or biotechnology research in the state
I will also create a property tax exemption for machinery and equipment sold to or used by persons who are primarily engaged in manufacturing or biotechnology, if the machinery and equipment is used exclusively and directly in qualified research.
Finally, I will provide businesses that increase R&D to more than 125% of their 3-year R&D average with an income and franchise tax credit worth $1 for each $1 of investment above the 125%.
Next Generation Agriculture
To provide the dairy and agriculture industries with more resources to modernize and innovate, capture new markets, and seize new green opportunities, I am launching a Next Generation Agriculture initiative that includes a dairy cooperative investment tax credit as well as a meat processing facility tax credit.
First, I will allow the members of a dairy cooperative to claim a tax credit for the dairy manufacturing modernization or expansion expenses paid by the cooperative. The dairy cooperative may then distribute the credit to their members based on the amount of milk each member delivers to the cooperative.
I will also allow meat processors to claim an income tax credit for ten percent of the amount paid for meat processing modernization or expansion costs.
Minority Business Certification
I am expanding the Minority Business Certification guidelines to stimulate growth, improve access to capital and create entrepreneurial opportunity for minority-business owners. In order for minority-controlled companies to compete globally, they must expand their capacity to provide an array of products and services. Like most companies, the biggest hurdle minority businesses face is a lack of access to capital. With a change in certification requirements, minority-owned firms will be able to offer equity positions to investors in return for infusions of capital. Minority-owned businesses can then access venture and angel investment without losing their competitive status with the state.
The Department of Commerce will certify a business that is at least 30 percent owned by an eligible minority group member or members, provided the minority group member or members control the day-to-day operations of the business, control at least 51 percent of the voting rights of the equity shares of the business, and appoint no less than 51 percent of the members of the board of directors of the business.
Economic Policy Board
To continue streamlining the state’s economic development programs, I am consolidating four fragmented review boards into one Economic Policy Board to ensure that the state’s Economic Development programs operate in an effective and strategic manner.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.