Colorado Gov. Bill Ritter signed into law this week a pair of bills sought by state life science leaders.
Both bills, however, include changes that scale down the tax breaks that were originally proposed through the measures, reflecting the state's need to balance its budget by wiping out a $1.4 billion shortfall blamed on the ongoing economic upheaval.
Ritter on June 1 signed House Bill 09-1035, which expands the categories of business eligible for refunds of up to $50,000 in state sales and use taxes paid on personal property for research and development to include medical-device makers, producers of biofuels, and other "clean" technologies that are headquartered in Colorado and that employ 50 or fewer full-time employees. Biotech businesses are already eligible for the credit.
The governor, a Democrat in his first term, also enacted House Bill 09-1105, which provides tax incentives for angel investors in life-sciences startups, as well as other companies "primarily in research and development or manufacturing of new technologies, products, or processes."
That's a change from the original bill, which specifically included "bioscience" and three other technology categories whose startups could benefit: Aerospace, clean energy, or information technology.
HB 09-1105 sets aside $750,000 for the tax incentives — more than two-thirds below the $3 million originally proposed when the measure was introduced earlier this year by Rep. John Kefalas (D-Fort Collins), and in the state Senate by state Sen. Mark Scheffel (R-Parker).
And while the adopted measure would provides tax incentives of up to 15 percent of the amount invested for each of the two years after the investment is made, as with the original bill, the maximum amount that investors could receive is $20,000, down from the $100,000 originally proposed.
"The original idea of the bill wasn’t actually met this year with all the changes," Leah Kientz, director of public policy and programming for the Colorado BioScience Association, the state's life sciences industry group, told BioRegion News this week..
"The importance of it was noted by the legislature as an important contribution that we need to put toward these high-tech industries, but all the budget issues that did occur this year, I think, made them take a step back, and perhaps that's something we'll reach in the future, expanding upon that legislation. But we have the ground work laid," she added.
Kientz noted that while the bill was originally conceived as an angel investment tax credit program, technically the incentives for angel investors will not be tax credits, but tax subsidies to be awarded by the state Economic Development Commission, a unit of Colorado's Office of Economic Development and International Trade.
Another change, the broadening of technology businesses that could benefit from HB 1105, helped the bill win the votes it needed to clear the state legislature or General Assembly, Kientz said.
The revised bill also raised the limit on total assets startups could have, to $5 million from the original $2 million, not counting investments for which the tax incentives were being sought. However, the revised bill kept the original measure's restrictions on eligible startups as being in business for less than five years, with at least two non-administrative full-time equivalent employees living in the state, having annual revenues of up to $2 million, and having half or more of both its gross assets and its employees within Colorado.
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And in a victory for the life-sci industry, the enacted version of the bill dropped a sunset provision in the original measure that would have ended the angel tax incentive program as of Jan. 1, 2015.
HB 1035, introduced in the House of Representatives by Rep. Jim Riesberg (D-Greeley), and in the state Senate by Sen. Rollie Heath (D-Boulder), was also amended from its original version so that the suspension of sales and use taxes for life-sci companies could be waived in a given year if, by the previous December, the staff of the Colorado Legislative Council — the state legislature's nonpartisan research arm — concludes that "the amount of the total general fund revenues for a particular fiscal year [to run the program] will not be sufficient to maintain the limit on appropriations specified" under the 1991 Arveschoug-Bird Limit, which caps annual state spending hikes to 6 percent over the previous year's general fund, or 5 percent of Colorado personal income, whichever is smaller; the former has prevailed every year.
"We're hopeful, but also we understand the different budget constraints that the state is under. We're waiting to see how it all shakes out," Kientz said.
According to HB 1105, clean technology or medical device taxpayers ineligible to claim refunds in a given year "may claim said refund in the next calendar year in which the revenue estimate allows the refund," according to the enacted bill. And the waiver portion of the new law expires July 1, 2014.
House Bills 1035 and 1105 were two of five measures sought by the industry that were signed into law by Ritter this year after passing both houses of the General Assembly. Other bills that have become law:
• House Bill 09-1001, introduced by Rep. Joe Rice (D-Littleton), would award tax credits to any employers who create 20 or more jobs in Colorado — a figure that drops to 10 or more jobs for employers that locate in one of the state's rural communities.
• Senate Bill 09-67, introduced by Heath, would spend $2.5 million to revive a state guarantee investment pool of up to $50 million in new loans to small businesses, to be overseen by the Colorado Housing and Finance Authority.
• Senate Bill 09-31, introduced by Heath with a companion House bill by Riesberg, would award grants of up to $50,000 to technology-transfer offices at institutions of higher education, and up to $150,000 to early-stage clean-technology companies, for R&D projects involving biofuels and other renewable forms of energy.