Pennsylvania legislators are poised to approve a plan to sell $100 million in tax credits for early stage investments in biotechnology companies and other other technology companies through an innovative tax credit program. The move hopes to restore allocations to its economic development programs including Ben Franklin Technology Partners that have been scaled back since the recession from $53 million in 2008 to $14 million in 2011.
The program entails offering deferred premium tax credits to qualified insurance companies that pay the state’s insurance premium tax. For each $1 of tax credit offered, insurance providers will receive an up-front discount.the difference between the tax credits offered and the potential investment capital raised would be the discount offered to insurance companies that purchase the tax credits.
The Pittsburgh Post Gazette reported that the tax credit introduced in June by state Sen. John Blake was officially signed into the tax code and will be activated as part of the 2013-14 state budget. But some of the details of the proposal are still being worked out.
A few versions of the bill have been proposed in the past year. Although it has bipartisan support, the amount of insurance tax credits proposed for sale has been a point of contention.
Although other states have passed similar legislation, such as Maryland, Pennsylvania is unique in that it has a network of agencies and investment partners that invest in startups across the state: Ben Franklin Technology Partners which has four regional divisions across the state, the Pennsylvania Venture Capital Investment Program — which is managed by the Ben Franklin Technology Development Authority — and the Life Sciences Greenhouses. Ben Franklin will get half of the proceeds from the tax credit program, the venture capital investment program will get 45 percent and the remaining 5 percent will go to the Life Science Greenhouses of which there are three across the state– one in Pittsburgh, one in Harrisburg and Bioadvance in Wayne, Pennsylvania.
The move comes as states develop tax credit programs to fund new and growing companies to spur job growth and increase their tax bases. Ben Franklin Technology Partners produced 20,200 jobs in the state between 2007 through 2011, according to a report by the Pennsylvania Economy League.
