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State Legislative Best Practices in Support of Bioscience Industry Development
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Venture Capital and Discovery Funds
A significant number of state governments passed measures to actively promote the formation of venture capital and discovery funds that benefit targeted technology sectors, especially at early stages underserved by existing capital markets. Additionally, states have also modified their supportive investment structures to more accurately reflect the changing nature of the bioscience industry and competitive funding techniques.
Policymakers are establishing a variety of mechanisms to provide vital "deal flow" funding for companies at various stages of research and development. From encouraging pension fund investments and quasi-public investments administered by privately managed venture funds to tax credits to angel investors.
Michigan: 21st Century Jobs Fund
PDF of Legislative Language (60 KB)
Michigan's 21st Century Jobs Fund Public Act 225 is a $2 billion, ten-year initiative to accelerate the diversification of the state's economy and devotes approximately $800 million for technologies in the targeted sectors of life sciences, alternative energy, advanced automotive materials and manufacturing, and homeland security/defense. The annual awards are administered by the Michigan Economic Development Corporation (MEDC) with contracts that establish conditions and mileposts for receipt of funds. The Jobs Fund's Competitive-Edge Technologies Program invests in funds or alongside qualified private equity funds, qualified mezzanine funds, and qualified venture capital funds and a commercial enhancement program to assist small companies
Maryland: Biotechnology Investment Tax Credit Program
PDF of Legislative Language (22 KB)
Maryland's 2005 Biotechnology Investment Tax Credit program HB 664 provides income tax credits for individuals, corporations and qualified Maryland venture capital firms that invest in qualified Maryland biotechnology companies. The value of the credit is equal to 50% of an eligible investment made to a qualified Maryland company during the taxable year. The maximum amount of the credit cannot exceed $50,000 for individual investors and $250,000 for corporations and qualified Maryland venture capital funds.
A qualified Maryland biotechnology company has its headquarters and base of operations in the state, has fewer than 50 employees and has been in active business no longer than 10 years. A qualified venture capital firm has at least two principals who each have at least 5 years of venture capital experience and has its principal place of operation in Maryland.
Missouri: New Enterprise Creation Venture Fund Tax Credit
PDF of Legislative Language (18 KB)
Missouri's New Enterprise Creation Tax Credit, HB 664, offers a $20 million pool of 100 percent tax credits to individual and corporate investors in venture funds that are approved by the Missouri Seed Capital Investment Board. The board in turn has selected Prolog Ventures, to manage the fund based on Prolog's commitment to invest in Missouri-based seed- and early-stage companies, primarily in the life sciences.
Kentucky: Investment Fund Act
PDF of Legislative Language (18 KB)
The Kentucky Investment Fund Act provides a 40 percent tax credit, capped at $3 million a year, available to angel and corporate investors in approved venture funds. After credits are allocated to a fund, they are proportionately granted to the fund's investors upon completion of the fund's investment program. However, they must invest in qualifying companies which are Kentucky-based small businesses. These businesses are defined as having half of whose assets are in state, with net worth less than $5 million or net income less than $3 million, and fewer than 100 employees.
Oklahoma: Capital Investment Board
PDF of Legislative Language (13 KB)
Oklahoma's CAPCO (A pool of certified capital investment companies chartered to invest in small, high-growth companies) Tax Credits Act uses tax credits as levers to increase the level of indigenous capital that is invested instate in various kinds of targeted enterprises. The Oklahoma Capital Investment Board has set up as a state-beneficiary public trust, uses contingent tax credits to guarantee $30 million generated from public utility corporations operating in-state by the Oklahoma Capital Formation Corporation.
DISCLAIMER: The examples cited in this document are only a small fraction of policies state governments have put in place to grow the bioscience industry. It is not intended to be exclusive of other policies to develop technology-based industries.
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