The Washington Post

Commentary: How Maryland can pull a tech trifecta in 2013

Maryland policymakers have taken encouraging steps the past two years to strengthen the state’s technology and life sciences economy.

Two years ago, they expanded access to capital for early-, mid- and late-stage growth companies through the InvestMaryland program.

Last year, they accelerated the transfer of novel technologies from universities into the hands of private companies through the Maryland Innovation Initiative.

This year, Maryland policymakers have the rare opportunity to pull off the “tech trifecta” — three consecutive years of big legislative achievements that bolster knowledge-based economic growth in Maryland.

To complete the trifecta, lawmakers should use their upcoming legislative session to reform and expand one of Maryland’s most important economic development tools: the state’s research and development tax credit.

R&D incentives are a vital driver of economic growth in Maryland. By lowering the cost of research, the tax credit encourages innovative firms to invest locally in highly skilled professionals who are tackling some of the nation’s biggest challenges in health, energy, cybersecurity and other fields.

Despite its successes, Maryland’s R&D tax credit is severely oversubscribed and restricted to certain types of companies. In 2010, for instance, the state received nearly $40 million in tax credit applications, but could only grant $6 million in credits under existing law.

Companies can do their R&D virtually anywhere in the country, so Maryland’s approach to incentives matters. Surrounding states are strengthening their R&D incentives, which jeopardizes Maryland’s competitive edge. Virginia enacted a new R&D tax credit and Pennsylvania boasts a credit that is roughly 10 times the size of Maryland’s.

In the legislative session that begins this month, Maryland lawmakers should increase the R&D tax credit cap from $6 million to $18 million to better meet demand. Further, they should expand eligibility to companies that have not yet turned a profit.

A higher tax cap ensures that innovative companies don’t transfer their research and development operations to other states. Further, expanding eligibility will allow smaller firms to secure tax refunds and funnel the proceeds back into the Maryland economy. We must not forget that small, not-yet-profitable companies often perform groundbreaking R&D, but don’t enjoy the same tax incentives available to more established firms.

To be sure, there is more Maryland can do to strengthen our technology-driven economy beyond R&D. Creating certainty in the corporate tax code and finding long-term funding solutions for both transportation and higher education are important priorities.

But modernizing the R&D tax credit this year would send a powerful message that Maryland intends to remain a global leader in the knowledge-based economy. Combined with their policy achievements from the previous two years, Maryland policymakers could truly take credit for pulling off a tech trifecta in 2013.

Larry Letow is chairman of the Technology Council of Maryland, Maryland’s largest technology trade group. He is also president and chief executive of Convergence Technology Consulting. Doug Doerfler is vice chairman of the Technology Council of Maryland and president and chief executive of Maxcyte.



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