Research and development are the keys to innovation, job creation and making the Commonwealth a top state to do business. Earlier this month, Gov. McAuliffe signed my bill to extend and expand Virginia’s Research and Development tax credit, HB 1220, praising it as legislation that “enhances Virginia’s business climate and builds on the strong presence of thriving, innovative companies in the Commonwealth.” (Governor McAuliffe Letter to the General Assembly, March 8, 2014)
This legislation, which was passed with broad bipartisan support, ensures continuity and security for innovation and works to expand our state’s previously existing research and development (R&D) tax credit. By expanding the tax credit, Virginia will continue to create an environment and incentives that will promote research and development in our technology communities, which play a vital part in our economy.
In 2011, Virginia joined 37 other states to provide a (R&D) tax credit to businesses and research centers throughout the Commonwealth. I was proud to be part of the coalition to push the initial legislation for the tax credit, which has helped to promote innovation and job creation, diversify the economy, boost industry sponsored research associated with colleges and universities – all right here in the Commonwealth. Since the adoption, the R&D tax credit has been an important tool in enhancing Virginia’s competitiveness as a preferred location for research investment and activity.
As awareness of the credit grew, more and more businesses applied for the credits. A total of 135 businesses applied for credits totaling $4.55 million in 2012, just one year after the original legislation went into effect. As utilization of the credit approached the $5 million statutory cap and the demand continued – there was a critical need to raise the cap. Once applications for the credit exceed the statutory cap, the credit is prorated and the credit becomes less valuable which results in less of an incentive for businesses to conduct research. It took common sense legislation to expand the already existing credit that made it possible for more businesses to be included.
HB 1220, boosts the competitiveness of Virginia’s R&D Tax Credit by increasing the statutory cap of the credit and increasing the eligible research expenses per company. Partnerships and LLCs will also now be able to elect to receive the credit directly instead of providing it pro-rata to individual partners and shareholders. And finally, legislators will be provided with additional information about how the credit is used so they can better evaluate and determine the efficacy of the credit.
I was proud to work with the Virginia Technology Council and other business stakeholders who developed this bill. They recognize the importance of this incentive in helping grow our economy and create jobs at a time when our nation’s economy is at a standstill. In connection with this legislation I was awarded the Virginia Chamber of Commerce “Competitiveness Award” this year. I was proud to receive this award and to have the Chamber’s support for championing policies that foster job growth, increase competition, and provide more jobs for the citizens of the Commonwealth.
Businesses rely on predictability and certainty when making long-term investment decisions. It is important that they have confidence that incentives that are offered will maintain their value once they are earned. The National Association of Manufacturers has advocated for a permanent federal R&D tax credit and I couldn’t agree more. The House of Representatives passed a permanent, stronger R&D tax credit in May, but current Senate Majority Leader Harry Reid continues to refuse to bring this common sense bipartisan legislation to the floor even though it had 62 Democrat votes in the House.
I will continue to work with my fellow elected officials, business leaders and higher education stakeholders to ensure that we enhance Virginia’s competitiveness as a preferred location for research investment and activity. Congress could learn from the bipartisan lead that we have taken in Virginia on this important issue.
Del. Barbara Comstock (R-Dist. 34)