 From Site Selection magazine, November 2002
U.S. LEGISLATIVE UPDATE
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Hawaii
A new law amends the definition of "small business" in the Hawaii Small Business Regulatory Flexibility Act to mean an enterprise with fewer than 100 employees. A bill authorized the issuance of $10 million in special purpose bonds for a macadamia processing and production facility for Hawaii Macadamia Tree, Inc. A new measure authorizes the Board of Land and Natural Resources to lease public lands to renewable energy producers through direct negotiation instead of public auction. Effective April 1, 2002, airport landing fees and system support charges, temporarily suspended in the wake of Sept. 11, were reinstated. A new online service (www.eHawaiiGov.org) allows Hawaii registered business entities to electronically submit their mandatory annual filings with the Hawaii Department of Commerce and Consumer Affairs via the Internet.
Idaho
Effective in 2001, companies engaged in R&D may receive tax credits equal to 5 percent of the excess of qualified research payments over the base amount and 5 percent of the basic research payments according to IRS code, for a period of five years;. Gov. Dirk Kempthorne vetoed a bill that would have provided an additional pool of $30 million that would be available to qualified venture capital companies for investment in start-up companies, citing legal questions surrounding the constitutionality of state guarantees on investments.
Illinois
The State Economic Assistance Accountability Act called for all companies benefiting from incentives granted by the state of $75,000 or more to be held accountable to the numbers present in written agreements. However, the Director of Commerce and Community Affairs reserves the right to waive any of the contractual obligations if the waiver "will promote the viability of the project, will contribute to an increase in employment associated with the project, or will contribute to the retention of jobs in Illinois associated with the project." New Enterprise Zone legislation, enacted in August, exempted businesses in the zones from utility pass-on charges. Also in August, legislation was signed into law setting down ground rules for county-implemented property tax allocation financing (tax increment financing) for economic development projects. While the Illinois Department of Commerce and Community Affairs saw some cuts in its technology marketing and grants programs, it still plans to spend some $78 million in that area this year, says spokesman Brian Reardon. "Governor Ryan believes strongly in economic development, and giving us the tools to continue to generate jobs," he said. "He knew there would be some pain to spread around, but wanted the least impact possible on DCCA." A total of 34 Coal Infrastructure Grants, totaling more than $14 million, will leverage around $130 million in private spending for equipment, facility and transportation upgrades to improve the state's coal production and distribution, all part of an ongoing $1.3-billion coal incentive revitalization package passed in 2001. A new law was signed by Gov. Ryan authorizing the decoupling of state taxes from the new federal depreciation provisions of the federal economic stimulus package. Maintaining the current depreciation allowances for state taxes saves Illinois $240 million and local governments $150 million.
Indiana
On July 1, after a 40-day special legislative session, Gov. Frank O'Bannon signed into law a comprehensive tax reform package that cut business property taxes on average by 23.4 percent. The state's inventory tax will be completely eliminated in five years, and tax exemptions have been granted for "production in process" inventory (for products to be shipped out of state) and for companies that invest venture capital in startups (capped at $10 million annually). In addition, the corporate gross income tax and the supplemental net income tax have been eliminated. To raise the revenue needed to pay for the property tax cuts, the state's remaining businesses taxes are restructured, with an increase in the corporate adjusted gross income tax from 3.4 percent to 8.5 percent. Utilities will pay a supplemental tax to compensate for their 30 percent reduction in property taxes, and the state's sales tax will increase from 5 percent to 6 percent beginning December 1, 2002. The state budget will be helped out by new revenue from increased gaming and cigarette taxes. The state board of education will create a list of vocational courses and a procedure for offering them at high schools throughout the state. Finally, not only has the state appropriated $30 million for the 21st Century Research and Technology Fund for the next two fiscal years as well as establishing certified technology parks, but it has increased the R&D tax credit from 5 percent to 10 percent.
Iowa
Gov. Tom Vilsack signed into law in May a measure that reduced the state's insurance premium tax rate from 2 percent to 1 percent over a 4-year period. Seven insurers with major operations in the state pledged at least $60 million of their consequent savings to investments in Iowa-based venture capital, and an additional $10 million to the state's student achievement/teacher quality program. The "Angel Investor" bill creates a tax credit for investments in qualifying businesses and community-based seed capital funds, allowing for a credit of 20 percent of the amount of an investment made in the form of cash to purchase equity in a qualifying business or community-based seed capital fund. Tax credits may be used against personal and corporate income taxes, financial institutions franchise taxes, insurance premium taxes, or the credit union moneys and credits tax. An individual investor can claim up to $250,000 in a single year. The maximum amount of tax credits authorized under the legislation is $10 million. The "Iowa Fund of Funds" bill creates the Iowa Capital Investment Board, in order to mobilize venture equity capital in Iowa. The Board will determine tax credit eligibility and develop a system for registration and authorization of the tax credits. The bill also creates the Iowa Capital Investment Corporation which will conduct a national solicitation for investment plan proposals from qualified venture capital investment fund allocation managers. Iowa Enterprise Zone legislation was updated to encompass Census 2000 figures, with communities meeting the distress criteria having until July 2005 to designate zones. Among those distress criteria, the per capita income level was amended from $9,600 to $12,648.
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