MADISON – The biennial state budget signed into law Monday by Gov. Jim Doyle builds on recent efforts to enhance Wisconsin’s tech-based economy through targeted tax credits, investments in core research projects and other incentives for companies and entrepreneurs.
A number of the ideas were rooted in recommendations by the non-partisan Wisconsin Technology Council in its “white paper” reports to the governor and the Legislature. The most recent report was issued in late 2008.
Major provisions signed into law include:
— 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, effective Jan. 1, 2012. “Qualified research expenses” would be qualified research expenses as defined under the Internal Revenue Code incurred by the claimant for research conducted in Wisconsin for the tax year. This is the same definition used for the research credit under current law.
— Research and development tax credits for businesses that increase R&D by more than 125 percent of the company’s three-year R&D average. The credit would be an income and franchise tax credit worth $1 for each $1 of investment above 125 percent. This provision would take effect Jan. 1, 2011, using the same “qualified research expenses” definition as the sales tax exemption.
— Spending $2 million on the Wisconsin Genomics Initiative, a collaborative effort between the Marshfield Clinic, Medical College of Wisconsin, UW-Madison School of Medicine and Public Health and UW-Milwaukee. This investment will promote Wisconsin leadership in personalized health care research.
— Spending $8.2 million on biotechnology, nanotechnology and information technologies research at the Wisconsin Institutes for Discovery, a groundbreaking research institute at the UW-Madison charged with enhancing human health through interdisciplinary research. This budget item will leverage $150 million in private and public investment in construction of the Institute and its private counterpart, the Morgridge Institute for Research.
— A provision that will modify Wisconsin’s so-called “self-dealing” law to lower barriers to university professors launching start-up companies, which can create high-wage jobs.
— Spending $240-million over six years on UW-Milwaukee’s building plans, which include expanding its research and economic development activities.
— Spending $4.05 million in each budget on research and development projects at the Great Lakes Bioenergy Research Center at the UW-Madison and related bio-energy projects at UW-Milwaukee, UW-Stevens Point, UW-River Falls and UW-Green Bay.
The provisions in the budget build upon ideas passed in other recent budget bills and the state’s economic stimulus bill, which enhanced Wisconsin’s nationally known investor tax credits law.
“The governor and members of the Legislature deserve credit for continuing to invest in Wisconsin’s knowledge- based economy, even during a budget year that required many tough decisions,” said Tom Still, president of the Tech Council.
The Tech Council is the independent, non-profit and non-partisan science and technology adviser to the governor and the Legislature. Through its Wisconsin Innovation Network, Wisconsin Angel Network and Wisconsin Security Research Consortium, the Tech Council provides outreach and services statewide.
Here is a detailed statement issued by Doyle’s office:
The Governor’s budget and the economic recovery bill he signed earlier this spring, contain a number of initiatives to move toward an economy that is stronger than ever and built around the things we value: education, entrepreneurship, manufacturing, agriculture and science and technology.
These provisions will lower business taxes by $130 million over the next four years.
The goal of this initiative is to accelerate new business development in Wisconsin. This initiative was adopted as part of Wisconsin Act 2.
Act 255 Enhancements
• Raise the cap on Act 255 tax credits for angel investments from $1 million to $4 million beginning retroactively for the 2008 tax year.
• Raise the aggregate creditable investment to $8 million per year from any combination of angel or venture sources, beginning January 1, 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 January 1, 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 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.
• Expand program eligibility
• 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.
Capital Gains Reinvestment
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 (QNBV certified by Commerce under Act 255), beginning January 1, 2011.
The purpose of this initiative is to increase R&D activities and biotechnology research in Wisconsin.
Sales and Use Tax Exemptions for Manufacturing and Biotechnology
The Governor 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, effective January 1, 2012.
Income Tax Credit for Increasing Research and Development
The Governor will provide businesses that increase R&D by 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 125%. For example, if a Wisconsin business spends an average of $3 million on R&D over a three year period, and then in the following year increases its expenditures to $5 million, it would receive a credit worth $1.25 million, equal to the value of the research above $3.75 million. This provision would take effect on January 1, 2011.
“Qualified research expenses” would be qualified research expenses as defined under the Internal Revenue Code incurred by the claimant for research conducted in Wisconsin for the tax year. (This is the same definition used for the research credit under current law.)
Research and development at our universities is an important part of the state’s economy. Advances in science, engineering and health care made there all support job creation and business development across the state.
• Strengthens Wisconsin’s leadership role in medical research by providing $2 for the Wisconsin Genomics Initiative, a collaborative effort between the Marshfield Clinic, Medical College of Wisconsin, UW-Madison School of Medicine and Public Health and UW-Milwaukee that will keep us at the forefront of personalized health care research.
• Places Wisconsin at the leading edge of renewable energy science by investing $4.05 million annually in research and development projects at the Great Lakes Bioenergy Research Center at the University of Wisconsin-Madison and related bio-energy projects UW-Milwaukee, UW-Stevens Point, UW-River Falls, UW-Green Bay. The projects are developing the next generation of bio-based fuels and energy.
• Provides $8.2 to support biotechnology, nanotechnology, and information technologies research at the Wisconsin Institutes for Discovery (WID), a visionary research institute at the University of Wisconsin-Madison charged with enhancing human health and welfare through interdisciplinary research.
Clean Energy Wisconsin and Job Training
Through Wisconsin Act 2, the Governor provided $2,630,000 in grants from the Wisconsin Development Fund to specific organizations (unions) in the building trades to provide job training and retraining programs, including training in green building and the installation of alternative energy systems.
a. $1 million to the Wisconsin Regional Training Partnership/Building Industry Group Skilled Trades Employment Program (BIG STEP)
b. $150,000 to the Painters and Allied Trades, District Council 7 to train workers on the construction industry on the LEED certification process
c. $175,000 to the Painters and Allied Trades, District Council 7 to train to certify individuals to provide instruction to workers in the construction industry on standards established by the National Association of Corrosion Engineers International, and by the Society for Protective Coatings
d. $175,000 to the Wisconsin State Council of Carpenters to train carpenters in the installation of windmills and other alternative energy systems.
e. $72,000 to the Wisconsin State Council of Carpenters to train carpenters in sustainable green building practices.
f. $248,000 to the Wisconsin Pipe Trades Association, Local 75 to build, using green building practices, a mobile training facility to be used in connection with training programs for workers in the pipe trades.
g. $265,000 to the Wisconsin Laborers’ District Council
h. $275,000 to the Wisconsin Operating Engineers to train workers in the construction of geothermal energy and wind energy systems.
i. $210,000 to the International Brotherhood of Electrical Workers to purchase equipment for three laboratories to be established in the state for training workers in the installation of solar electricity systems
j. $60,000 to the International Brotherhood of Electrical Workers for instructor training and start−up costs in connection with the laboratories that will be established by this group
The budget also provides nearly $2 million to the Wisconsin Technical College System to support efforts to re-train individuals and prepare them for available jobs in industries across the state.
Next Generation Manufacturing
Next Generation Manufacturing Tax Credits
This initiative 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 in companies with corporate headquarters in Wisconsin. It will also further support economic growth in rural areas and for small manufacturers and businesses. This initiative was adopted as part of Wisconsin Act 2.
The Department of Commerce has five existing tax credit programs (development zones, enterprise development zones, agricultural development zones, technology zones and airport development zones).
In the past, some tax credit programs have proved more popular than others. However, because each program serves a distinct purpose, Commerce cannot easily transfer tax credits from one program to another. Consolidating the programs will prevent a situation where one program is exhausted of funds, while another program sits under-used.
Enterprise Zones (EZ 10) Improvements
Through a recent piece of legislation (Wisconsin Act 11) and through the 2009-11 budget, the Governor is making two changes to the EZ 10 program to benefit Wisconsin businesses. The first change allows companies to receive enterprise zone tax credits for jobs retained as well as jobs created.
The second change (2009-11 budget), the Enterprise Zones Capital Investment Tax Credit, allows a 10% refundable capital investment tax credit to be awarded by Commerce to a company that makes significant capital expenditures in an enterprise zone.
JOBS Tax Credit
The Governor is increasing the state’s ability to retain and attract manufacturers and businesses that create jobs, invest capital, provide training and retraining to new and incumbent workers, and retain jobs in companies with corporate headquarters in Wisconsin.
This new refundable tax credit program allows Commerce to certify up to a 10% full-time payroll credit for up to 10 years for a business creating jobs in Wisconsin. Training costs would also be eligible to earn credits. Commerce could certify a business that begins operations in Wisconsin or expands operations in Wisconsin as long as net Wisconsin employment increases.
Commerce may certify firms to begin claiming credits in tax year 2010.
Next Generation Agriculture
Dairy Co-operative Modernization
Through Wisconsin Act 2, the Governor provided the ability for a dairy cooperative to claim an income and franchise tax credit for 10 percent of the amount paid by the cooperative in the taxable year for dairy manufacturing modernization and expansion of a dairy manufacturing operation. The dairy cooperative determines the amount of the credit that each member may claim based on the amount of milk each member delivers to the cooperative. The total credits available for dairy modernization and expansion are $1.3 million over the biennium.
The budget also creates a new grant program to support large cheese processors.
Meat Processing Facility Modernization
Through Act 2, the Governor also provided a Meat Processing Facility Credit, which will allow meat processors to claim an income tax credit for ten percent of the amount paid for meat processing modernization or expansion costs. There are $1 million in credits available over the biennium.