Legislation introduced by Pennsylvania Senator Rob Wonderling (R-24) to expand Pennsylvania’s research and development tax credit program was unanimously approved by the Senate Finance Committee.

“This bill will encourage businesses to invest in the development of new goods and services and help to create and retain high-quality jobs for hard-working Pennsylvanians,” Wonderling said. “Lowering the cost of research and development expenses will provide a great incentive for businesses to invest more of its capital in new products and technologies.”

Wonderling said Senate Bill 670 would increase the current cap on research and development tax credits from $30 million to $120 million a year and change the sunset date from December 31, 2006 to 2008. The amount of tax credits set aside for small companies—those with assets valued under $5 million—would also be increased from $6 million to $40 million.

“The current level of research and development tax credits is insufficient to support employers that are making significant investments in innovations to compete in the global economy,” Wonderling said. “The program should be expanded to help more companies remain successful and grow in Pennsylvania, especially the high-tech and bio-tech industries that are emerging in our state.”

The R&D tax credit may be claimed against the Corporate Net Income tax, the Capital Stock and Franchise Tax or the Personal Income Tax. The bill also would maintain the existing statute that allows taxpayers to carry over and apply any unused tax credit for up to fifteen years.

Source: Pennsylvania Senate Republican Communications

The House Democrats in Pennsylvania have introduced 13 bills, which, if passed, could have a significant impact on the industry in Pennsylvania.

At the press conference introducing these bills, House Minority Leader DeWeese stated, “It is unconscionable that Pennsylvania is not getting the lowest prices possible when we buy medicine for our insurance programs, our Medicaid, our prisons. Every year, the Keystone State fattens the wallets of the drug manufacturers by $2.6 billion. It is time that these manufacturers treat us with the respect we deserve as a customer of the prodigious magnitude.”

Representative DeWeese fails to recognize that the pharmaceutical manufacturers have worked with the Pennsylvania legislature and administration to lower the cost of prescription drugs for Pennsylvanians. Last fall, the legislature passed a substantial increase in the PACE/PACENET program that revised the rebate that pharmaceutical manufacturers pay to the program to “Medicaid Best Price” (approximately 22%) for brand name drugs. The rebate for generic drugs is now 14%. The pharmaceutical industry supported this bill, and it was the only industry that accepted a retroactive provision that extended the rebate back to January 2003. This provision is estimated to have cost the industry $60 million for 2003.

While Pennsylvania Bio will review all 13 bills in depth, of the most immediate concern is the introduction of re-importation.

“While re-importation may make for good politics, it is bad public policy,” said Fritz Bittenbender, president of Pennsylvania Bio. “Re-importing drugs from other countries is tantamount to importing foreign price controls, and we have very tangible evidence in Pennsylvania of the disastrous effect importing price controls can have on an industry. Ultimately we will trade away the innovation that is helping to reshape Pennsylvania’s economy. The life sciences industry is Pennsylvania’s leading growth industry, and it is bringing high quality jobs that are helping to attract and retain great talent in the Commonwealth.”

Pennsylvania Bio will review the 13 bills and will work with the association’s public policy committee to determine a position on each bill. Additionally, Pennsylvania Bio welcomes the opportunity to work with the state legislature to pass a series of bills that are in the best interest of consumers and the Commonwealth’s growing life sciences industry

To build even greater support for the life sciences, the Pennsylvania Senate will form a life sciences caucus, which will be chaired by Senator Robert Thompson (R-19). The caucus will help the legislature better understand the unique needs of the life sciences industry and create policy that will foster continued growth in the Commonwealth.

“We are excited that our idea for a life sciences caucus is not only coming to fruition, but that it is being so well received by members of the legislature,” said Fritz Bittenbender, president of Pennsylvania Bio. “Senator Thompson has been a longtime supporter of the life sciences and will be a dynamic and knowledgeable leader for the caucus. We couldn’t be more pleased that, in Pennsylvania, the life sciences are receiving this kind of serious support from our policy makers.”

One of the key messages to attendees of the Biotechnology Industry Organization’s 2004 international conference, to be held June 6-9 in San Francisco, is that Pennsylvania is an ideal location for life sciences companies. In addition to world-class research and a strong community of companies, Pennsylvania has supportive public officials that are creating innovative programs to continue company growth in the Commonwealth.

Pennsylvania’s comprehensive Economic Stimulus Program, passed with bi-partisan support, will invest more than $2 billion as a magnet to attract at least $5 billion in private investment in the following target areas:

• Community Revitalization
• Site Preparation, Infrastructure Improvement and Construction
• Business Investment

The Economic Stimulus will fuel the Commonwealth’s community and business growth. It focuses investment in new high-growth companies, and it channels new resources to aging communities in need of new and improved infrastructure. It provides the resources which will allow traditional industries, especially manufacturing, to access new technology to enhance their productivity. Most of all, it brings a new vision for creating jobs, retaining talent, growing the economy and positioning Pennsylvania for success in the 21st century. 
 
Included in the legislation, is the creation of a new Commonwealth Financing Authority with powers to issue bonds that will fund the various programs as well as provide program oversight.
 
Summary of the programs that included in the economic stimulus program:

Keystone Innovation Zones -$10m for grants -$25m in tax credits
Keystone Innovation Zones (KIZs) are designated zones that may be established in communities that host institutions of higher education. These zones are designed to foster innovation and create entrepreneurial opportunities.  By bringing together education, community and economic development initiatives, local municipalities and businesses can focus on creating an environment to support company growth and formation. 
 
Expanded Research and Development Tax Credit -$30m
Research and new product development are cornerstones to broader economic growth. From manufacturing to drug discovery, the Commonwealth can be an active agent in stimulating both academic and private research as well as moving the fruits of that research into the marketplace. The increase of the R&D tax credit to $30 million from $15 million and allowing credits to be traded will help.
 
Business in Our Sites -$300m
Business in Our Sites will offer flexible loans and grants for local municipalities and their economic development partners to create future business growth and attract opportunities through the acquisition and preparation of key sites for development.
 
New Pennsylvania Venture Guarantee Program -$250m
This program will allow the Commonwealth to more actively partner with the investment community by structuring a program that provides guarantees to venture capital companies interested in investing in Pennsylvania businesses.  These guarantees will provide increased capital for Pennsylvania businesses to grow and create jobs.
 
New PA Venture Capital Investment Program -$60m
The New PA Venture Capital Investment Program will provide capital to Pennsylvania-focused venture capital companies that agree to match those funds and make investments in Pennsylvania businesses.  At least 50% of the money must be invested in underserved areas of Pennsylvania.

Building PA -$150m
Building PA will provide funding for the development of real estate assets within the Commonwealth.  Funds will be loaned to experienced private sector real estate funds that will raise matching funds and invest in projects throughout the Commonwealth.
 
First Industries Fund -$150m
Agriculture and tourism are two of Pennsylvania’s largest industry segments.  Historically, the Commonwealth has provided little in the way of financial incentives to owners of tourism-related businesses or assisted farmers with their capitalization or working capital needs.  First Industries will provide grants and low-interest loans for these important industry sectors.    
 
Second Stage Loan Program -$50m
Second Stage will provide guarantees for bank loans to second stage manufacturers and technology companies for working capital and other financing needs.  Targeted toward manufacturing, advanced technology and biotechnology, these funds will support growth in these vital sectors.
 
Tax Increment Financing (TIF) Guarantee Program -$100m
TIF has been a significant financing tool for the Commonwealth for many years.  Through TIF financing, communities can borrow funds for projects that will develop blighted areas and then repay those borrowed monies through the incremental tax revenues that will be generated as a result of the development.  While this method of financing has been used extensively by the state's largest cities, smaller communities have not tapped into the potential of TIF financing.  In order to solve this disparity, a combination of technical assistance and loan guarantee assistance is proposed to encourage small and mid-sized communities to utilize this method of financing projects.

Infrastructure & Facilities Improvement Program
This is a multi-year grant program that will provide grants to certain issuers of debt in order to assist with the payment of debt service.  The grants will be based upon incremental state tax revenue that will result from the development of new infrastructure.  The funds are targeted to manufacturing, hospital, large retail and convention center projects.  
 
These programs join components that were part of the 2003-2004 budget or that were signed into law by Governor Rendell in February 2004.

Elm Street -$5m
The Elm Street program builds on the success of the Main Street program in transforming the core areas of a community.  By providing $5 million in funding, the Elm Street program will encourage improvements to residential communities that are located in proximity to commercial corridors.  This funding can be used to upgrade the physical infrastructure such as streetscapes, sidewalks, and lighting as well as improving housing facades and exterior repairs.
 
Main Street -$5m
The Main Street program has been a successful model to assist small towns and cities to revitalize their central business district.  The stimulus effort includes a doubling of this program to $5 million for FY 2003-04.  The program supports creation of a local organization and some physical improvements to the downtown structures that make Main Streets more attractive business locations.
 
Core Industries -$75m
The Core Industries program will enhance the successful Machinery and Equipment Loan Fund (MELF) by adding an additional $75 million in revolving loan funds and by increasing the maximum loan amount from half a million to five million dollars.  Twenty-five million dollars will be targeted to aid hospitals with the purchase and installation of FDA required pharmaceutical management technology.

Base Retention and Conversion -$1.25m
The Base Retention and Conversion program includes $1.25 million provided for BRAC-related activities to be used for the development of a statewide strategy and grants for economic impact and other studies, as well as development activities, associated with individual military bases in Pennsylvania.  This initiative is designed to assist local defense organizations in protecting the 60,330 active, reserve and National Guard positions within the Commonwealth that are at risk because of the BRAC process in 2005.

Section 108 (HUD) Loan Pool -$288m
The Section (HUD) 108 Loan Pool enables small and mid-size communities to access loan funds for economic development, community facilities, participating in the Community Development Block Grant (CDBG) program to obtain federally guaranteed loans to fund large economic development projects and undertake revitalization activities. Under Pennsylvania’s initiative to use HUD 108 the loans are guaranteed by the Commonwealth, committing the use of future CDBG funds to pay off the loan in case of default.
 
Homeownership Choice Program -$15m
The Homeownership Choice Program (HCP) is an incentive program of the Pennsylvania Housing Finance Agency (PHFA).  This program finances new, single-family home construction in blighted urban areas of the Commonwealth.  It creates more opportunities for families to own their own home, ultimately transforming neglected neighborhoods into better places to live and work.  For FY 2003, the Pennsylvania Housing Finance Agency has committed $15 million in agency reserves for the Homeownership Choice Program.
 
Housing & Redevelopment Assistance -$25m
DCED provides assistance for housing and redevelopment through this funding source.  The program provides the most flexible funding available to cities and smaller urban areas in order to revitalize downtowns, older industrial areas and commercial sites.  This funding source also provides affordable housing.  The program has been significantly increased from $15 million to $25 million in 2003-04. 
 
Source: PA Department of Community and Economic Development