Bio-Industry Leaders Meet with Governor’s Office on Early Stage Investment Legislation
Monday, November 28, 2016
Posted by: Stephen Rapundalo
A meeting between bio-industry leaders and the Governor’s Office this week helped further efforts to reestablish a so-called “Angel Investor Tax Credit” (AITC) that could spur early-stage company investment.
Roger Newton, PhD, Co-Founder, Executive Chairman and CSO at Esperion Therapeutics, and Mark Gurney, PhD, Co-Founder, President and CEO at Tetra Discovery Solutions, joined Stephen Rapundalo, PhD, President and CEO, MichBio in a meeting with Dick Posthumus, Senior Advisor to Governor Snyder (and former Lt. Governor), and Michelle Lange, Deputy Director of Legislative Affairs, to discuss AITC legislation (HB 5786 and HB 5787) currently pending House consideration.
Support for early stage company investment is critical, particularly given that 28 other states offer such an AITC incentive. Both Drs. Newton and Gurney described their respective efforts to fundraise in the early days of their company formation, and the challenges that persist today in seeking angel funding. They noted that Michigan lags other Midwest states in the availability of such funding, and ranks 22nd in early stage investment nationally.
MichBio’s Rapundalo provided evidence to counter the argument that only high-tax states provide such tax incentives to offset a harsher business climate. In fact, of the 21 states with a corporate tax rate equal to (i.e., 6%) or less than that of Michigan’s, 13 Republican-led states and 4 Democrat-led states, offer an AITC. Evidence suggests that an AITC results in not only new investor participation, but also greater investment/deal.
Michigan offered an AITC credit briefly for tax year 2011, but the incentive was vacated upon the creation of the simplified and low-rate, Michigan Corporate Tax, as was the state R&D tax credit. Twenty-four companies benefited from the Michigan AITC, 8 of which were bioscience ventures. The State invested $6 million to support the AITC, and in turn the companies leveraged over a $100 million in follow-on funding…a great ROI. Reestablishment of both the AITC and R&D credit are priorities identified in the Michigan Bio-Industry Roadmap for Success, a plan released earlier this year by MichBio, that identified actions needed to spur the statewide biosciences industry.
Indeed, Mr. Posthumus, as the co-architect of the Michigan Life Sciences Corridor Fund back in 1999, expressed great interest in strengthening the state’s bio-industry through a holistic policy approach. MichBio plans follow up discussions with the Governor’s Office on how best to accomplish that commitment.
HB 5786 and HB 5787 are likely to “die” with the conclusion of the 2016 legislative session. However, there is a great likelihood that such bills will be re-introduced early in 2017. MichBio, working alongside partners like the Michigan Venture Capital Association (MVCA), will continue advocacy efforts in support of early-stage investment legislation. Please let us know if you would like engage with us in those activities.