R&D Tax credit expansion, SFAz funding passes with state budget

[Source, Ty Young, East Valley Living] - Albeit by a slim margin, the Arizona House of Representatives approved the fiscal 2009 state budget sent by the Senate. Included in that measure was the technology communitiy’s long-sought-after research and development tax credit increase and continued funding of Science Foundation Arizona and other technology programs.

To put it lightly, the technology community is overjoyed, said Steve Zylstra, president and chief executive of the Arizona Technology Council.

“R&D is the key to future high-tech competitiveness,” he said. “By focusing renewed attention and resources on research, this bill will ensure that Arizona remains a leader in cutting-edge technology.”

Originally a legislative bill approved by the House that stalled in the Senate, the R&D tax credit extension is being hailed as Arizona’s latest attempt to keep itself in the discussion for future technology-based economic development.

In 2009, companies spending less that $2.5 million will receive a 22 percent credit, up from 20 percent. Companies spending more than $2.5 million will receive a $600,000base credit, up from the $500,000 from the first R&D credit. Also, for those companies, they will receive and additional 13 percent for R&D expenditures above $2.5 million. That is an increase from the 11 percent on the books.

Initially, the tax credit for companies spending less than $2.5 million in research-based activities would increase to 24 percent, while companies spending more would receive a $750,000 credit plus an additional 15 percent. Through various amendments, the figures were drawn down.

Regardless, local technology sector representatives said in increase is necessary to keep pace with other states, especially California, New Mexico, New York and Texas. All of those states are still far ahead of Arizona in terms of R&D tax credits and way ahead in terms of companies currently headquartered and doing work in their borders.

“Innovation doesn’t just happen. It requires leadership and an environment that fosters creativity,” said Jason Bagley, Government Affairs manager, Intel Corp.. “Arizona’s policy leaders are demonstrating their commitment to investing in innovation by supporting the enhanced Research and Development Tax Credit.

Choosing to compete encourages growth of high-wage, knowledge-economy jobs and leads to greater prosperity for Arizona’s future.”

The House passed the $9.9 billion budget budget June 26 evening by a 31-29 vote. The Senate passed its budget to the House at 5:30 a.m. after an all-night session. Gov. Janet Napolitano is expected to sign the budget, thus opening the door to fiscal 2009.

Science Foundation Arizona was targeted by some lawmakers as a potential budget cut. The non-profit organization receives $25 million each year to fund science and technology-based research ventures in the state. The allotment must be matched by private industry in order for the funds to be given to SFAz.

The new budget also preserved funding for the Arizona Job Training Fund and the Greater e-Learning Association (GAZeL), considered necessities for the technology community to prosper.

With the R&D credit now on the books, many technology companies are hoping it will bring new growth to its continuously growing sector. In a time where money is tight for both businesses and residents, keeping an eye on the future is very important, said Steve Turcotte, president of Advanced Ceramics Manufacturing in Tucson.

“With rising fuel prices and a tightening economy, there is no better time to have R&D tax credits available,” he said. “Innovation leads to both job creation and long-term revenue growth for both small and large companies. If we stop innovating, we’ll lose our competitive edge.”