Pennsylvania to sell $100M in tax credits for tech investment

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If tax credits that helped bring Batman and Jack Reacher to Pennsylvania breathed life into the state's film industry, a similar measure included in the new 2013-14 budget could save the day for early-stage tech investments.

The Innovate in PA Tax Credit, introduced in June by state Sen. John Blake, D-Lackawanna, was officially signed into the tax code Sunday and will be activated once the 2013-14 budget makes it through all the necessary channels.

The credit boosts funding to Ben Franklin Technology Partners, the state-sponsored initiative that funds regional technology accelerators such as South Side-based Innovation Works, the Pennsylvania Venture Capital Investment Program and regional Life Sciences Greenhouses, by selling deferred tax credits to insurance companies.

Under the plan, said Mr. Blake, insurance companies will purchase credits this year to be used against insurance premium tax liabilities in 2017. They buy the credits from the Department of Community and Economic Development.

The department will sell up to $100 million in credits to generate roughly $85 million in investment dollars for the tech investment entities. Ben Franklin Technology Partners will receive half of the proceeds, the PA Venture Capital Investment Program will receive 45 percent, and 5 percent will go toward Life Sciences Greenhouses.

The program is scheduled to continue through 2017, when it will reduce the amount of tax credits sold to $45 million.

What's an obvious boon for technology companies is also a winning bet for the state, said Mr. Blake, who oversaw technology investments as executive deputy secretary for DCED.

He said the investment will put Pennsylvania back into the top three nationally in terms of in terms of early-stage investments. By 2017, private investments made due to the tax credits will bring the state an additional $20 million per year.

"Ideally, the program would collect cash from the insurance industry, promise tax credits for later and use that cash to invest in companies that would then attract additional investment in the Commonwealth," he said.

The credit is a huge boost for Ben Franklin Technology Partners, which has seen its budget cut from $53 million before the 2008 recession to around $14 million in 2011.

Legislators might have been swayed by statistics showing that Ben Franklin Technology Partners provides a more than 3-to-1 return on investment for state dollars.

Tech has been a solid bet for the state, but not sure enough to help pass another tax credit aimed at the sector. The Digital Entertainment Tax Credit, a proposal designed to extend definitions of the existing film tax credit to include digital interactive media creators, was shot down Sunday during budget discussions.

But legislators presiding over the measure were warm to the idea, so it's definitely worth a second try, said Brian Kennedy, vice president of government and external relations for the Pittsburgh Technology Council.

The credit plan was introduced on June 20, and Mr. Kennedy said there wasn't enough time to properly sell its merits before budget votes. However, he said the Pittsburgh Technology Council and the Pittsburgh Film Office were able to generate more than 1,000 letters in five days from Pittsburghers supporting the bill.

With major Silicon Valley companies waiting for better tax incentives in order to set up shop in Pittsburgh, according to Mr. Kennedy, cutting technology companies a break will be dollars well spent.

"If you build this credit, they will come," he said.

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Deborah M. Todd: dtodd@post-gazette.com or 412-263-1652.


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