ECONOMIC DEVELOPMENT THROUGH THE USE OF TAX CREDITS

Biotechnology Investment Tax Credit:
The GBC has identified support for life sciences investment as one of its three top priorities.  Tax credits are sound investment tools used to spur economic growth in new and emerging technologies and businesses.  The General Assembly originally passed legislation that created a tax credit for investments made in a biotechnology or venture capital company but without a predictable funding mechanism. However, during the 2007 session the legislature allocated $6 million, which was fully used within a year’s time. 

The GBC strongly supports dedicating $20 million in the budget for this program and reviewing the application of this tax credit to ensure that qualified businesses are able to utilize this important economic development tool.

Research and Development Tax Credit:
The R&D tax credit, capped at $6 million per year, was reinstated during the 2005 session.  Last year, legislation passed to secure the credits even should the federal Research and Development Tax Credit Program be repealed or terminated.  The R&D tax credit is an important tool to attract and retain technology, manufacturing and other businesses in Maryland.  Technological innovation is a major factor that drives economic growth.  Research shows that high-tech jobs often pay 75 percent more than non-high-tech jobs.  States are quick to compete for such businesses.  At least 34 states have their own versions of the R&D credit, with many states offering a “piggy-back” credit on the amount of a firm’s research expenditures that qualify for the federal R&D credit.  In 2005, Pennsylvania raised the cap on its credit to $30 million per year.

Recognizing the challenges in competing with our neighboring states, the GBC urges the Governor and General Assembly to increase the R&D tax credit cap from $6 to $15 million.


LIFE SCIENCES DEVELOPMENT

LIFE SCIENCES FUNDING
For years, the Greater Baltimore Committee has identified life science funding as one of its top priorities with the goal of putting Maryland on the cutting edge of new life science research and practice.  With the support of the legislature, the Baltimore/Washington region is a bioscience powerhouse.  For instance, pharmaceutical manufacturing, the second largest component of the bioscience industry, represents 16.8% of total industry employment in the state.  According to the state’s Department of Business and Economic Development, Maryland has the third or fourth largest state cluster of bioscience companies in the nation and the second largest per capita in the nation.  With more than 60 federal agencies and research labs within thirty miles, the Baltimore region is also home to major research universities such as the Johns Hopkins University and the University of Maryland, Baltimore.  Rich in assets that have attracted bioscience companies to the area, the Baltimore region already boasts one successful biopark in operation, a second partially built, and a third ready to start construction.

The development of life sciences parks on the east and west sides of Baltimore serve also as community revitalization projects and provide the impetus to transform challenged and neglected sections of the city.  It is critical that the Governor and General Assembly continue their efforts to secure much needed federal and state dollars necessary to develop the life sciences industry by increasing funds directed to each of the bioparks.  Of equal importance is the need to translate the invested research dollars into economic development and to propel Maryland as a top location for advances in life sciences. 

The GBC supports the continued State investment in bioscience facilities and urges the legislature to recognize the business opportunities for the Baltimore region and the national recognition provided for the state that this industry represents. 

STATE PENSION FUND INVESTMENT IN PRIVATE EQUITY
Like a majority of states, Maryland allocates a portion of its state pension funds to private equity; however, the most welcoming technology states are investing more.  The use of pension funds is a commonly used practice to raise the amount of investment capital available to bioscience and other technology companies in the state.  This can be done without jeopardizing the stability or fiscal integrity of the pension fund and its beneficiaries.  Massachusetts and New York have a long history of investment in private equity, and Florida has committed to investing up to $1 billion of its employee pension fund in the next three to five years to entice bioscience firms to its state.  Unless the percentage in private equity is increased, Maryland will lose ground in the national competition for economic development. 

The Greater Baltimore Committee supports increasing the percentage of state pension fund dollars invested into private equity including venture capital.

NANOTECH-BIOTECH INITIATIVE
Nanotechnology involves the manufacturing of products made of components the size of atoms and molecules.  Medical applications are expected from nanotech-biotech in areas such as drug delivery and gene therapy.  The State budget includes $6 million for a biotechnology investment tax credit that was established in 2005.  In addition, nano-biotechnology funding receives $2.5 million to be allocated to University System of Maryland institutions.  Nanotechnology will change the way we create and use materials, chemicals, machines, computers, diagnostic and therapeutic products, environmental systems, and even the systems that drive our national security and homeland defense through micro-surveillance and bio-detection systems. 

The GBC strongly supports this next phase of capitalizing on our investment in life sciences through this new initiative.


For the complete GBC 2008 Legislative Agenda, visit www.gbc.org.