West Virginia Passes Two TBED Tax Credits

The jury's still out on the appropriate role or effectiveness of most tax credits to encourage tech-based economic development (TBED), but most politicians and economic development practitioners believe their state is at a competitive disadvantage without at least a few breaks.

With Gov. Bob Wise's recent signature on two bills, West Virginia becomes the latest state to add two tax credits of potential value for the state's growing tech community. Both the High Growth Business Investment Tax Credit and the Strategic Research and Development Tax Credit offer incentives for investment in growth-oriented research and development (R&D) businesses and assisting R&D companies in the early stages of operation.

Guidelines for the High Growth Business Investment Tax Credit include:

• Individuals or businesses investing in other businesses eligible for the Strategic R&D Tax Credit may receive a credit of up to 50 percent of their angel or seed investment. Unused credit may be carried forward for up to four years after the initial investment.
• Investors or investor groups may obtain up to $50,000 of credit. To be eligible, investors must invest in businesses with gross revenues of no more than $20 million and a payroll of no more than $2.5 million while maintaining their corporate headquarters in West Virginia.

The Strategic R&D Tax Credit may be used to offset up to 100 percent of business franchise, corporation net income or personal income taxes. The credit will equal the higher of 3 percent of all qualified R&D expenses and investments for the tax year, or 10 percent of their excess for the tax year over the average of the expenses for a base period. The base period is said to be the three years prior to the tax year when the R&D expenses and investments occur.

House Bill 4047 and Senate Bill 204, which detail the tax credits, are available in their entirety through the West Virginia legislature at: http://www.legis.state.wv.us/legishp.html