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Vermont Passes Tax Credits, Examines High Tech Impact

July 26, 2002

Vermont’s high-tech businesses now can take advantage of new tax credits with Governor Howard Dean, M.D.’s signature on H. 239. The bill creates a set of five incentives for high-tech businesses in industries including computer hardware or software, information and communications, microelectronics, semiconductors, digital communications, medical devices, energy technologies and electric vehicles.

The high tech credits are applied to investments in machinery and equipment, renovations to provide cable, fiber or telecommunications access, workforce development, and a sales and use tax exemption for personal computers and software. Applying to investments made on or after July 1, 2002, the High Tech Tax Credit effects taxable years beginning on or after January 1, 2002.

All of the incentives will be administered by the Vermont Economic Progress Council (VEPC) and are subject to the same approval process, cost/benefit model and guidelines as current law provides for tax credits.

High Tech Important for State

The Vermont Department of Economic Development also recently completed an in-depth profile of the state's high-tech industry, revealing rather vividly the importance of high-tech on Vermont's economy. Using the AEA's definition of "high tech," the Department found high tech firms employ almost 15,000 people in the state, have a combined payroll of $722 million, and pay workers an average of $21,000 more per year than other private sector employees.

Additional highlights of the report include:

  • Vermont has the 2nd highest concentration of technology exports in the nation.
  • Technology exports account for $3.4 billion of Vermont’s $4.1 billion in annual exports.
  • High-tech jobs grew 30 percent in Vermont between 1994 and 2000 with more than 3,400 new jobs.

The report also examined new business start-ups, research, patent activity and venture capital investment, educational attainment and overall use of computers and the Internet, finding:

  • >From 1997 to 2001 over 12,000 new firms were created.
  • In the same period, new corporate registrations outstripped bankruptcy filings 26 to 1.
  • Between 1996 and 2000, patents issued annually grew by 49 percent.
  • Vermont is 2nd in the nation for patents issued per million inhabitants.
  • 792 of the 1571 patents issued from 1996 to 2000 were semi-conductor related.

Of particular note, agency staff had been skeptical of the state's poor performances in large quarterly venture capital surveys, such as Moneytree™, since the national findings did not mesh with their own empirical notes. As a result, the project included primary data collection directly from the funded businesses, firms handling the investment transaction, angel investors, and venture fund managers. The Department found over $100 million of private equity capital was invested in Vermont from venture capital, angel investment, and equity investment from friends and family from 1996 to 2001. Half of the total, or $50 million, was in the form of venture capital. (Moneytree™ reported a total venture capital of only $1.3 million for the period.)

In 2001, the Department reported Vermont businesses received $15.5 million in venture capital.

More information on the report is available at: http://www.thinkvermont.com/technology/technews.cfm

Vermont