A total of $100 million in tax credits can be auctioned off in a deal aimed at boosting state-backed early stage capital in Pennsylvania thanks to the trimmed down passage of the ‘Innovate in PA‘ program that was signed by Governor Corbett Tuesday.
The money, earmarked for life sciences and other technology firms, is going state-wide but by virtue of Philadelphia’s size and its relative share of technology business, this region should see a sizable benefit.
- The auction is aimed at insurance companies and the credits are expected to sell for at least 75 percent of face value to bring in $75 million or more.
- Both the sale and the money would be managed by the state’s Department of Community and Economic Development and the Ben Franklin Technology Development Authority, which includes the Ben Franklin Technology Partners of Southeastern Pennsylvania.
- The auction could happen as quickly as this year and flow money through BFTDA soon after in 2014, said Dean Miller, the CEO of PACT and an active proponent of the legislation.
- This style of focused tax credit sales for investment is modeled after similar Maryland legislation.
Tax credits purchased can’t be redeemed until 2017 and then over five years — $20 million max per year. That delay is meant to give the investment a chance to help new businesses grow fast enough to bring in economic benefit to the state, said Miller. This premise is based on the economic impact reports that BFTP has promoted in Harrisburg for years — in June, the latest argued that for every $1 BFTP spends, another $3.60 is returned to the state.
The state Senate had approved $175 million but that total was lowered to $100 million by the state House in its final form. That came with passage of House Bill 465, an amendment to the tax code that came in final state budget negotiations at the end of fiscal year 2012 late last month.
State Sen. John Gordner (R-Montour) — whom Miller called “instrumental in inserting Innovate PA in the budget negotiations” — merged House Bill 898 and Senate Bill 456 into what became law. State Sen. John Blake (D-Lackawanna) championed the idea out of the Senate Finance Committee. Miller was eager to also thank state House members Rep. Warren Kampf (R-Chester/Montgomery) and Rep. Joe Hackett (R-Delaware).
Why did Innovate PA take such a big cut in negotiations? Miller points to last year’s passage of sizable tax credits for an ethane facility in western Pennsylvania that took a political toll.
“State revenues this year were [again] very tight with no desire to raise taxes. This made asking for more credits difficult,” said Miller, who helped lead a lobbying effort including investor and entrepreneurs and professional lobbyist support that PACT funds.