WILLIAMS’ BILL TO INCREASE BUSINESS INCENTIVES FOR RESEARCH AND DEVELOPMENT IN PENNSYLVANIA PASSED OUT OF COMMITTEE

HARRISBURG, June 20, 2003 - - The Senate Finance Committee Tuesday unanimously approved Senate Bill 550 sponsored by Senator Connie Williams (D-Montgomery and Delaware). The measure will encourage businesses to invest in the research and development of new products by increasing the tax credits that they are permitted to apply against their tax liabilities. The bill now goes before the full Senate for consideration.

SB 550 increases the maximum amount of tax liability credit a company is permitted to claim from 50% to 75%. For example, if a company owes $1000 in business taxes, and spends $800 in research and development activities, it can now apply a tax credit of $750 rather than a tax credit of $500.

In addition, the total tax credit budget would be increased from $15 million to $60 million per year. Companies that have taken advantage of this credit in the past and received $.25 for each dollar they spent on research and development would now receive $1. Finally, the bill also reserves more of the tax credits for small business, and for the first time gives companies the option of selling their unused tax credits to other businesses.

Williams said companies could use the tax credit to reduce their Corporate Net Income Tax, Capital Stock and Franchise Tax and Personal Income Tax liability.

“I have been working on this issue for several years and am delighted that Governor Rendell believes, as I do, that this is an important tool to encourage investment in Pennsylvania by Pennsylvania companies.”

“My bill allows companies to reduce their tax liabilities while investing in research and development activities.”

Under this new provision, with the approval of the Department of Community and Economic Development (DCED), a start up company without income could sell all or part of its unused tax credits.

“This provision focuses the stimulus tool on companies that would most effectively use the credit to grow and expand,” Williams said.

The bill would increase, to $12 million of the $60 million total, the amount of tax credits available to a small business.. Currently only is $3 million of the total $15 million credit is allocated to small business.

“More Pennsylvania small businesses would be able to grow by limiting their tax liabilities and enabling them to invest more in developing new products, processes and technologies,” Williams said.

“Nearly half of the tax credits set aside for small business have gone unused, mainly because these companies have little or no tax liability,” Williams added. “My bill would encourage these small and emerging companies to invest more in research and development so more new products are brought to market in Pennsylvania.”

The bill, part of Governor Rendell’s Plan for a New Pennsylvania, is expected to stimulate over $180 million in new research and development activity in Pennsylvania.

“The Commonwealth should be an active agent in encouraging both academic and private research as well as moving the fruits of that research into the marketplace,” Williams said.

“I hope to have the support of my colleagues to give the business community the opportunity to significantly reduce their tax liability by investing in research and development and grow Pennsylvania business.”