A position statement on the proposed R&D tax credit reduction and limitations on net operating losses.
The tech industry in Connecticut is creating jobs, receiving investment and working to pull Connecticut out of its economic doldrums. CyberStates, a report released by industry group CompTia in early February, gives us a great snapshot of where we are as an industry. A few facts pulled from the Cyberstates Report:
On the investment side, Connecticut enjoyed its best year yet when, in 2014, we were ranked 10th in venture investment on a per capita basis. To put in perspective, we were ranked 28th just a few years ago after being consistently in the top five at the turn of the century.
Great news, right? These numbers are the result of a sustained effort in both the private sector and the public sector to grow our technology based economic development (TBED). But all of this is at risk. The Governor has proposed reducing the value of the R&D tax credit by half and limiting the amount of net operating losses that companies can carry forward. These tools are critical to the growth of tech companies and R&D is the lifeblood of the tech sector. Many projects, whether in advanced manufacturing or biosciences, take a decade or more to fully mature. How long did Pratt and Whitney work on the PurePower technology before it could be rolled out? The expenses involved are significant and having the R&D tax credit helps ameliorate costs, a vital tool in attracting companies to Connecticut, or keeping them here.
More than anything else, our companies need to count on State Government to be a dependable partner. Changes in tax credit rules or net operating losses AFTER the company has made an investment makes companies skittish about making future investments in Connecticut.
We can’t solve Connecticut’s current budget dilemma without taking into account competitive neighboring states. Especially when neighboring states are enacting, or making permanent tax laws, that are extremely attractive to the companies for which we are proposing to do harm. Will a tech company make its next R&D investment in Connecticut when there is a 100% R&D tax credit available in Massachusetts? With Connecticut’s current R&D credit at 70% it may not be worth the hassle for a company to create new labs or research facilities elsewhere. If the credit gets reduced that to 35% thus introducing uncertainty, it is another nail in the coffin.
As President of the Connecticut Technology Council and representative of those 6,000 tech companies mentioned above, I urge the General Assembly to support industry growth rather than force our companies to look for greener pastures.
– Bruce Carlson, Presdient & CEO, The Connecticut Technology Council
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