CONCORD - A top priority for Senate Republicans and Democrats easily cleared its first hurdle Tuesday when the Senate Finance Committee voted 5-0 to double the state’s research and development tax credit.
The pool of money available for tax credits earned for research and development work would double from $1 million yearly to $2 million and would be permanent under Senate Bill 1.
Tuesday, speakers from different industries said they support the increase, although several suggested the tax credit be more proportional to the amount of money a company spends on research and development.
After the committee’s vote, Gov. Maggie Hassan applauded the recommendation, saying many businesses she has visited use the credit and support increasing it.
“The doubling of the research-and-development tax credit, and its permanent extension, will send a strong signal to existing New Hampshire businesses and prospective businesses that the State of New Hampshire will continue to work with them to encourage innovation and invest in our economic future,” Hassan wrote in a letter to the committee supporting SB 1.
The Senate approved a similar bill last year but the increase fell victim to what Sen. David Pierce, D-Etna, called “a radical social agenda,” when a provision was attached in the House restricting abortion rights.
The credit is capped at $50,000 and may be applied to a company tax liability for either the business profits tax or business enterprise tax. However, because more companies apply for the credit than is available, most companies receive only about a quarter of their request.
That is all right with Val Zanchuk of Graphicast of Jaffrey, a company that employs about 30.
“Thirty-thousand dollars in cash is a considerable amount of money for us. We spent it on three Dartmouth graduate students who worked with us all year to improve our manufacturing processes,” Zanchuk said. “This is the most effective piece of industry policy the state can do.”
The only opposition came from Rep. Dan McGuire, R-Epsom, who said “I dislike the idea that us as a legislature can impose on society a preference for one particular type of business over another. I don’t think that is appropriate.”
He said the credit does not do what lawmakers expect it do, noting it does not help small startups that will not make money for years and he objected to how the credit is calculated, saying it is based on a company’s research and development spending in 1983.
“The bulk of the credit is not for creating new jobs,” McGuire said, “but for doing normal research work.”
Others praised the idea from lawmakers to representatives of business organizations and business leaders, saying it sends the signal the state is open to helping those companies that do research and development and, ultimately, create jobs here.
“Senate Bill 1 is an extremely important benchmark for job creation here in New Hampshire. By doubling our R&D tax credit from one million to two million dollars, we are sending a strong signal to our business community, encouraging them to create high paying jobs in sectors that leverage those jobs for a stronger economy,” said the bill’s chief sponsor, Sen. Bob Odell, R-Lempster. “This bill is the top priority for the Business and Industry Association as well as the High Tech Council. It also has the support of Gov. Hassan. I look forward to its swift passage and implementation.”
Fred Kocher, president of the state High Technology Council, supported the bill, but noted New Hampshire lags behind its New England neighbors in what it offers for a research and development credit, noting 40 states offer some kind of credit.
“Another reason to pass this bill is manufacturing has moved out of this country, largely to Asia, and with it research and development,” Kocher said. “We are losing out not having this tool in the toolbox.”
The tax credit which was reinstated in 2007, has proved popular with businesses large and small, but the $1 million in credit was not sufficient to cover the requests its first year, when 71 companies applied for $2.4 million in credits, said John Lighthall of the Department of Revenue Administration.
Last year companies applied for more than $4 million in credit and received about 24 percent of what they requested, said Lighthall.
The full Senate is expected to act on the bill when it holds its next session. The bill is sponsored by 21 of the 24 senators.