Tax break for investment to get hearing: Bill would give a 45 percent tax credit for investors in bioscience companies and 35 percent break for tech

BYLINE: Ken Dey, The Idaho Statesman, Boise

Mar. 7--With just a few weeks left in this year's legislative session, supporters of a state tax break to encourage investment in tech and bioscience companies may finally be heard.

The proposed state income tax credit was introduced late last week and is expected to get a hearing this week in the House Revenue and Taxation Committee.

The tax break was recommended by the Governor's Science and Technology Advisory Council, but Gov. Butch Otter didn't mention it in his budget and still hasn't said whether he will support it. Supporters say no legislators have emerged to champion the effort.

The bill would offer a 45 percent tax break for investors in bioscience companies and a 35 percent break for those who invest in tech companies. The credits would be transferable, but would be capped at a maximum of $10 million a year for five years.

Martin Hedley, CEO of Positron Systems in Boise, said the bill is critical to help small companies grow.

Hedley, who is seeking $2 million to grow his company, said he can't compete for funds from so-called "angel investors." They often choose to invest in companies in other states because of the incentives those states offer, he said.

When potential investors look at his company, Hedley said, one of the first questions they ask is whether Idaho has incentives. He says it doesn't.

"I can answer a lot of objections," Hedley said. "But that's one objection I can't come up with an answer for."

Without the investment he needs, Hedley said he can't expand the company and hire more people. Positron's jobs typically pay between $80,000 and $140,000 a year, he said.

Positron spun off from the Idaho National Laboratory, where the company's technology was developed. Positron's device tests utility and airline components at a subatomic level to discover problems long before they become visible or detectable by other means. The early detection can help avoid a catastrophic failure in the component, Hedley said.

Start-up companies like Positron, which have potential but lack resources, were a major reason that the tech advisory council recommended in a 2000 report to then-Gov. Dirk Kempthorne that a tax credit to encourage investment be created. But it's been a struggle to get a bill through the Legislature.

In 2002, the Legislature passed a bill that would have created an Idaho venture capital fund to provide money for companies, but Kempthorne vetoed it. And just last year, plans for a similar tax credit for investors were shelved after Kempthorne said he would not support it.

The latest credit was proposed by the 2006 Bioscience Tax Incentives Task Force, formed by the 2006 Legislature.

Phil Syrdal, president of BioIdaho and co-chairman of the task force, said 2006 data from the National Association of Seed and Venture Funds showed no investments made in Idaho companies and there had only been six investments, totaling $18 million, over the last 10 years.

The tax breaks would help create several thousand new jobs that would easily offset the breaks with new revenues, he said.

George Mulhern, who recently retired as a senior vice president at Hewlett Packard in Boise, is a member of the governor's tech advisory council. In a letter this week, Mulhern said state leaders must focus on developing the new companies because Idaho's mature tech companies like Micron and HP cannot provide the job growth they once did.

"These new companies will hopefully become the Microns and HPs for the next 10 to 20 years," Mulhern said. "Based on my 20 years' experience at Hewlett Packard, I can honestly say that it is rare to see such a significant return on investment, with such low risk in the program."

To offer story ideas or comments, contact reporter Ken Dey at kdey@idahostatesman.com or 672-6757.

Copyright (c) 2007, The Idaho Statesman, Boise Distributed by McClatchy-Tribune Business News. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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Idaho Statesman (Boise)
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