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2004 legislature focuses on bioscience

BT Catalyst, Sept-Oct, 2004 by Sam Taylor

BIOTECHNOLOGY REMAINED near the top of legislators' priorities in 2004. By adjournment day of the 2004 short session, legislators had approved additional funding for the North Carolina Biotechnology Center, expanded tax credits aimed at promoting the creation and growth of bioscience and other innovation-based industries, and expanded industrial recruitment and related training programs that may be used to attract new or expanding life science manufacturing facilities. Legislators also rejected opportunities to reduce university research funding or impose artificial price limits on brand name pharmaceuticals purchased by the state's Medicaid program.

North Carolina Biotechnology Center

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Legislators expanded funding for the North Carolina Biotechnology Center by $5 million, bringing total funding for the Center's operations in the 2004-05 fiscal year to $10.88 million.

Although the 2004 appropriation represents an increase of more than 85 percent over the Center's 2003-04 operating budget, much of the increase merely restores budget cuts imposed in 2002 and 2003. Viewed historically, this year's appropriation basically restores the Center's real-dollar spending power to peak funding levels achieved in the 1990s.

The 2004 appropriation will be used to fund expansion of several Center programs, including restoration of university research grants and start-up company loans, strengthening of the K-12 education and work force training programs, and support of the Center's expanding satellite office network. Of the $5 million in new funding, $3.2 million was earmarked for the Center's permanent operating budget. The remaining $1.8 million in expansion funding was appropriated from non-recurring budget funds.

Tax Incentives for Innovation

Companies paying North Carolina corporate income or franchise taxes will receive significant new breaks for research and development activity, thanks to 2004 legislation revamping the state's R&D tax credit. Under the new law, companies will be eligible for income or franchise tax credits of up to 3 percent of their total North Carolina R&D spending. Previously, companies could claim credits only for increased R&D spending in the state. The amount of the new credit will vary according to companies' size and location. Companies that have annual revenues of less than $1 million or are located in economically distressed counties will be eligible for the full 3 percent credit. For other companies, the amount of the credit will depend on the business' total North Carolina R&D expenditures--ranging from a 1 percent credit for R&D spending of $50,000 or less, up to a 3 percent credit for R&D spending in excess of $200 million.

Start-up biotechnology companies will benefit from an expansion of North Carolina's unique Qualified Business Venture (QBV) Tax Credit. The credit allows investors in small innovation-based companies to reduce their tax liability by 25 percent of the amount of their investment in qualifying companies. However, total credits taken by all investors under the program have historically been capped at $6 million per year--often resulting in across-the-board reductions in credits received by taxpayers. The 2004 Budget Act, adopted by legislators in July, increases the aggregate credit cap to $7 million per year. The legislation also extended the duration of the QBV credit program by one year, from 2006 to 2007.

Industrial Recruitment

The 2004 General Assembly also dramatically expanded cash set-asides and other industry recruitment programs that may be used to attract new and expanding bioscience companies to the state. Even before deliberations on a final budget were complete, legislators added $20 million to the One North Carolina Fund, which is used by the governor for industrial recruitment. The Assembly also expanded the new North Carolina Job Development and Infrastructure Grants (JDIG) Program that provides companies long-term cash assistance in return for locating new or expanded industrial facilities in the state. Maximum outlays for the JDIG Program were increased by a total of $15 million per year and the Program's expiration date was extended by one year from January 1, 2005 to January 1, 2006. North Carolina Commerce Department officials have said that the JDIG Program was instrumental in attracting Merck & Company's planned $300 million vaccine manufacturing plant to Durham County, and could play a similar role in bringing other pharmaceutical and biomanufacturing facilities to the state.

Legislators also made an emergency cash infusion of $4.1 million to North Carolina's Focused Industrial Training Program, which allows community colleges across the state to offer customized training for new and expanding manufacturing facilities. Recurring funding for the program was increased by $2 million. In addition, legislators added a badly needed recurring allocation of $6 million to fund community college equipment purchases. Community college officials have targeted biomanufacturing and pharmaceutical training needs as a special focus for future training programs.

Technology Industry

2004 legislature focuses on bioscience

BT Catalyst, Sept-Oct, 2004 by Sam Taylor

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