First Rhode Island Startups Closing in on Tax Credit Under New Stimulus Program
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the first half-dozen preliminary approvals were issued in November. The next phase of the process is set to begin on January 28. That’s when the RIEDC board of directors meets to start determining whether any of the firms approved in November have received investments in their businesses that qualify for the tax break. Firms have six months from the time of pre-approval to come before the board for this review, which involves submitting bank statements, cancelled checks, and so on to prove that a bona fide investment was actually made in the firm. Presuming all is well, says Withers, RIEDC will issue a certificate verifying that the investor or company is due the tax credit.
At least four, and possibly more, of the six companies pre-approved in November will be going before the board this month to try and win the certification. One might be Bionica, a four-person life sciences startup that launched last year to develop a state-of-the-art hearing aid. Co-founder Ralph Beckman said the funds raised under the auspices of the credit incentive should help cover the cost of developing various prototypes of the device, which is known as the Clio. He actively sought out the incentive when it was first publicized last summer, and said the state was smart to pass the program. “It raises the profile of young startups like ours,” Beckman said. “It’s good to know that the state is behind you and helps sell your project.”
Beyond Bionica, the other firms pre-approved in November for the tax credit are: Lighthouse Security Group of Lincoln, an IT security-consulting company; Ocean State Solutions, a North Kingstown tech company developing a system that lets customers use cell phones to pay bills or wire money; Providence Health Solutions, a Providence company developing software to promote wellness programs; Public Display, another Providence software firm that’s developing web applications to help organize data; and Tizra, a Providence-based company trying to help publishers price, package, market, and sell content on the web.
Withers says additional applications will be taken on a rolling basis and considered about four times each year. She adds that Rhode Island hopes to see companies from all of the qualifying industries apply for the credit in the coming months, and that “time will tell” if it helps grow emerging sectors such as biotechnology, which has become a highly coveted industry in other states and around the world.
Indeed, Rhode Island has become increasingly active in growing—and luring—firms in biotechnology and other tech fields, most significantly through tax incentives. For example, tax incentives helped encourage biotechnology giant Amgen to continue to expand in Rhode Island after purchasing a drug manufacturing facility in West Greenwich in 2002. Employment has grown since then to beyond 1,700 people.
But does the newest tax credit program do much to tilt the balance much toward Rhode Island, especially as Massachusetts legislators consider a mammoth, $1 billion biotechnology economic stimulus bill that would include tax credits, development grants, and other incentives? (Some legislators are balking at focusing the bill only on life sciences, so a final version could be geared at helping a variety of industries in order to get the measure passed.) And that’s on top of other Bay State legislative advances in recent years that include streamlined permitting, which allows cities and towns to designate zones for quick industrial development and more efficient permitting processes—a major issue for many high technology and life sciences companies.
“It’s a great start,” is the early take from Kathie Shields, director of the Tech Collective in Providence, an industry association whose membership includes 180 companies in the high technology and biotechnology spaces. Shields cautions, though, that more enticements are needed soon to enable Rhode Island to more rapidly grow its own reputation as an innovation leader. “We need incentives in place not only through tax incentives, but also through areas of training dollars and support programming and workforce development,” she says.
Withers seems to be in agreement. “Many of our incentive programs are outdated and reflect old assumptions about the kind of economy we need to create greater prosperity for our citizens,” she says. “The Innovation Tax Credit directs resources toward innovative companies that are poised to create new, higher wage jobs. This program is a strategic investment for Rhode Island and one that is in line with our economic development strategy.”