U’s MnDRIVE Thrives, Angel Tax Credit Gets Wings Clipped
Two medtech- and biotech-related issues before the state Legislature had opposite endings to their stories as the 2017 session drew to a close: A signature University of Minnesota research effort got a funding bump, while the state’s angel investor tax credit program got its wings clipped, perhaps permanently.
Thanks to strong backing from Gov. Mark Dayton, the U of M received significant extra funding for its Minnesota Discovery, Research, and InnoVation Economy (MnDRIVE) program, to the tune of $8 million. It certainly wasn’t the amount the school originally requested ($23.5 million), but it was four times the amount originally approved by the Republican-controlled Legislature.
MnDRIVE is a partnership between the U and the state aimed at advancing Minnesota’s economy by backing U research that aligns with the state’s areas of strength and competitive advantages. It was established in 2014 and has been funded by approximately $18 million per year.
Since then, the U has been funneling the money into research in four such areas: advancing discoveries and treatments for brain conditions such as Parkinson’s disease; securing the global food supply; supporting robotics, sensors, and advanced manufacturing; and advancing industry and conserving the environment.
Backers claim the return on MnDRIVE’s investment has been considerable: 507 full-time jobs created, the attraction of $167 million in outside funding and 184 invention disclosures. As a result, U officials proposed to up the ante by adding four more areas of research and bumping its two-year funding by $23.5 million over the ongoing base amount.
Dayton’s approach was more modest. His budget included $8 million over two years to back just one of the proposed new areas: the creation of the Minnesota Cancer Trials Network. Under the plan, the U’s Masonic Cancer Center will bring its own cutting-edge cancer prevention and treatment trials—as well as those from the Hormel Institute and the Mayo Clinic Cancer Center—to local medical centers and providers across Minnesota.
The idea is to “create more equitable access to care, and improve cancer outcomes throughout the state” by helping those who can’t travel to the Twin Cities or Rochester to receive the benefits of the latest cancer-fighting trials.
In the first version of higher education finance bill, however, the Legislature included just $2 million for the MnDRIVE expansion. Dayton singled that out as one of the prime reasons for his May 15 veto of the bill. The next version contained what he had been looking for — $4 million in each of the next two fiscal years for a total of $8 million. He signed it into law May 30.
Angel investor tax credit falls to earth
The news, however, wasn’t nearly as good for the state’s angel investor tax credit, hailed by medtech and biotech entrepreneurs as a vital piece of the puzzle in efforts to translate Minnesota’s leadership in medical research into startup businesses.
Despite what appeared to be bipartisan support, including that of Dayton and Rep. Sarah Anderson (R-Plymouth), chair of the House state government finance committee, a measure to extend and fund the program beyond this year’s sunset clause was not included in the tax bill signed by the governor on May 31.
The Minnesota High Tech Association asserts $377 million in business investment has been tied to the credits since their inception in 2010. They provided qualified investors in certified small businesses with a refundable income tax credit equal to 25 percent of their investments up to a maximum of $125,000 ($250,000 for married joint filers).
Annual allocations of $15 million were provided from 2014 to 2016 and $10 million for 2017. Dayton proposed another $10 million for FY2018 only, while a House version backed by Anderson called for not only keeping the tax credit alive, but making it permanent at a funding level of $20 million per year.
After initially being left out of the omnibus tax bill, the MHTA responded with what it described as an intense lobbying effort from “dozens of companies and organizations.” They successfully persuaded lawmakers to re-insert the original $20 million in annual funding and extending the sunset date.
But “at the last minute, as bills were being negotiated behind closed doors,” the MHTA reported in its blog, “the funding for the Angel Tax Credit was removed from the final bill.”
The group vowed it and its allies “will push to restore funding for this vital program in the next session.”