Bill fails in General Assembly
While running for governor, Terry McAuliffe called for boosting a tax incentive designed to encourage private investment in the state's biotech industry.
"Terry McAuliffe proposes … increasing the current limit on investment tax credits for commercialization," the campaign stated in August 2013 in its platform.
"The current limit of $5 million … should be increased by an amount between $1 million to $2.5 million depending on budget conditions, with the increase specifically targeted to biotechnology and biomedical companies."
The so-called "angel investor" tax credit is given for investments in companies that have gross revenues of no more than $3 million a year. It's geared to help get backing for businesses seeking to commercialize research that they developed with colleges and universities.
The credit, which started in 1999, provides a state tax break of either: $50,000; the amount of an investor's annual state income tax bill; or the amount of the tax credit that state tax officials approve - whichever is the lowest of those three amounts.
Has McAuliffe succeeded in increasing the tax break fund for investors in small biotechs and biomedical companies?
The answer is no but not for lack of trying.
McAuliffe in December 2015 proposed increasing the tax credit pool from $5 million a year to $9 million, with $2 million of the pot earmarked for investors in bioscience projects. But the effort was killed in the General Assembly.
Brian Coy, McAuliffe's director of communications, declined to say whether the governor will take another shot at increasing the credit before leaving office in January 2018.
So for now, we rate that progress is "Stalled."
Terry McAuliffe's gubernatorial campaign platform, "Terry's platform for Virginia First: Biotech," Aug. 13, 2013.
Email from Brian Coy, spokesman for Gov. Terry McAuliffe, Dec. 8, 2016.
Gov. Terry McAuliffe, "Governor announces key tax cut and credit proposals," Dec. 3, 2016.
Introduced 2016-2018 budget proposal for the angel investor tax credit, accessed Dec. 8, 2016.
PolitiFact Virginia, "Review underway," Sept. 8, 2015.
PolitiFact Virginia, "Keeps promise by increasing grants," Dec. 6, 2017.
Virginia state code, "Qualified equity and subordinated debt investments tax credit," accessed Dec. 8, 2016.
Legislative Information System, SB 200, Jan. 4, 2016.
Virginia state budget for the 2016-2018 biennium, May 20, 2016.
Virginia Department of Taxation, "Tax credits," accessed Dec. 8, 2016.
VirginiaBusiness.com, "A busy body," May 28, 2016.
Virginia Bio, "Bioscience incentives," accessed Dec. 9, 2016.
Terry McAuliffe said while campaigning for governor that he'd be a booster of biotechnology.
McAuliffe unveiled a platform aimed at helping Virginia biotech companies move from the stage of simply having an idea to making a viable business out of it.
"Terry McAuliffe proposes … increasing the current limit on investment tax credits for commercialization," McAuliffe said in the written platform that he released Aug. 1, 2013. "The current limit of $5 million … should be increased by an amount between $1 million and $2.5 million depending on budget conditions, with the increase specifically targeted to biotechnology and biomedical companies."
McAuliffe, in his platform, focused on increasing the overall amount of credits the state makes available each year for investors who provide cash or take out debt to help launch Virginia-based high-tech companies -- including those in the biotechnology field.
That credit is given for investments in biotech companies that don't have gross revenues exceeding $3 million per year and is geared toward businesses that commercialize research that was developed in partnership with colleges and universities.
The tax break, known as the "angel investor" tax credit, started in 1999. It provides a state tax break of either: $50,000; the amount of an investor's annual state income tax bill; or the amount of the tax credit that state tax officials approve -- whichever is the lowest of those three amounts.
The $5 million limit that was in place when McAuliffe made his vow remains in effect today.
Jennifer Lee, Virginia's deputy secretary of health and human resources, said McAuliffe still is considering boosting the maximum amount the state provides each year for that tax credit.
But Lee said McAuliffe hasn't done so yet because his administration is in the midst of a broader review of the state's biotech grants and incentives.
Lee said the governor wants to see which incentives are most effective in growing Virginia's biotech industry before deciding whether to boost the annual limit of the angel investor tax credit. She added that his administration "wants to make sure we use every single dollar in the most effective way."
"We do believe the angel investor tax credit is helpful, but we want to evaluate that in the context of all the other incentives," Lee said. "The governor is really committed to growing bioscience."
Christina Nuckols, a McAuliffe spokeswoman, noted the governor hosted an April conference in Chantilly that brought together academics, researchers and others to discuss ways to boost the Virginia bioscience industry. The governor recently traveled to a Georgia conference to seek ways that the state can attract bioscience investment to Virginia, Nuckols said.
Last year, McAuliffe signed a measure that increased the annual amount the state provides for a different tax credit -- a tax break that reimburses companies for research-and-development costs.
That measure increased the overall amount the state can pay out from $5 million a year to $6 million a year. Lee said there was a greater urgency to address the fate of that research-and-development tax credit, because it was a temporary tax break that was set to expire.
It had been set to sunset this year, but the law McAuliffe signed renewed the research-and-development credit through 2018 and boosted the amount of R&D expenses a company can claim.
It's geared not only to biotech companies, but it is available to businesses in that field. It can be useful for biotech companies that spend the majority of their costs in their early years on research and development, said Jeff Gallagher, CEO of Virginia Bio, an association representing biotechnology companies in the state.
So McAuliffe still is weighing his options for how to grow the biotech industry before deciding whether to boost the annual limit for the angel investor tax credit. For now, we'll rate this a promise that's In The Works.
Terry McAuliffe, "Virginia biotech commercialization program improvements," Aug. 13, 2013.
Email from Christina Nuckols, spokeswoman for Gov. Terry McAuliffe, Sept. 3, 2015.
Email from Paige Tucker, communications specialist with the Virginia Department of Taxation, Sept. 3, 2015.
Interview with Jennifer Lee, Virginia's Deputy Secretary of Health and Human Resources, Sept. 3, 2015.
Interview with Jeff Gallagher, CEO of Virginia Bio, Sept. 3, 2015.
Virginia Bio, "Incentives for Bioscience research, commercialization and investement in the commonwealth," accessed Sept. 3, 2015.
Virginia Bio, "2014 General Assembly" accessed Sept. 2, 2015.
Code of Virginia "Qualified equity and subordinated debt investments tax credit," accessed Sept. 2, 2015.
Legislative Information System, HB 1220, March 7, 2014.
Virginia Department of Taxation, "Research and Development expenses tax credit guidelines," Jan. 6, 2015.
Daily Press, "Gov. McAuliffe: Let's juice Virginia biotech," June 2, 2014.
Virginia Business, "From mapping brains to modeling diseases," Aug. 28, 2015.