By Donald C. Fry
Last spring Greater Baltimore Committee, in surveying members of Maryland’s bioscience community, asked a straightforward question: what is the single most important thing the state can do to ensure a robust bioscience industry?
The survey, conducted with MdBio, a division of the Tech Council of Maryland, yielded an overwhelmingly straightforward answer. Nurture more private investment in bioscience companies, said 70 percent of respondents, most of whom favored expanding the state’s biotech investment tax credit.
The other two most often-cited responses were to encourage collaboration in the bioscience sector and to support education and training in science-oriented disciplines.
The survey appears to confirm what members of the bioscience and economic development communities have been telling us anecdotally for several years – that the biotech tax credit is a highly popular and productive development tool. It leverages a strategic public commitment into private-sector investment that drives the growth of an industry looked upon by many, both locally and nationally, as an important driver of our state’s 21st century economy.
Maryland’s biotech investment tax credit first became available in 2007, when $6 million was budgeted annually for the incentive that enables investors to claim a 50 percent credit – up to $250,000 – against their state income taxes for eligible investments in qualified Maryland bioscience companies.
The new incentive prompted investors to begin lining up as early as 24 hours in advance of July 1, when the tax credits became officially available, in order to qualify for the limited amount of credits. The line of bioscience investors became a July 1 ritual for the next three years.
In 2008, Governor Martin O’Malley proposed to increase available biotech investment tax credits to $12 million in 2009 and to $24 million by 2013 as part of a plan to invest $1 billion in bioscience industry growth over 10 years. The state’s Life Sciences Advisory Board also recommended strengthening the biotech investment tax credit.
But the recession intervened and in 2009 lawmakers kept funding for the tax credits at the $6 million level. In a last-minute budget item in the waning days of the 2010 General Assembly, lawmakers added $2 million, bringing available tax credits to $8 million for FY 2011, which began July 1.
Fortunately, hearing bioscience advocates’ pleas to find a better way to process and approve investors for the credits, the state launched an online applications process this year, which eliminated the annual “rock-concert” line of anxious investors. No doubt, it tested the July 1 capacity of network servers at the Maryland Department of Business and Economic Development, which administers the biotech tax credit.
The popularity of this tax credit serves as an example of what many consider to be the highest and best use of a state resource to generate private-sector business growth.
That’s not to say that the bioscience community doesn’t have some issues with the biotech investment tax credit. For instance drawbacks cited by survey respondents included that the tax credits are not available for investments to start-up companies and cannot currently be used by owners who invest in their own businesses.
Nevertheless, there is an overwhelming consensus among those on the ground in our state’s bioscience industry that the biotech investment tax credit is a highly effective development tool that has made a quantifiable difference in Maryland’s bioscience growth.
In a time when many state lawmakers are seeking ways to cut state business incentives, this is one incentive that is delivering measurable growth and for which availability should be expanded as soon as possible to the funding levels originally envisioned by the governor and his life science advisors.