Biotech bill on public agenda

Assembly shifts attention from Net to high-tech sector

January 10, 2001|By Michael Dresser | Michael Dresser,SUN STAFF

One company's loss could become another's gain under legislation at the top of the high-technology agenda for the 2001 General Assembly session beginning today.

The bill, which is being promoted heavily by the Maryland High Technology Council and Montgomery County Executive Douglas M. Duncan, would let start-up biotech companies sell their net operating losses to other businesses in need of a break on state corporate income taxes.

The net-operating-loss legislation is one of several measures being proposed to nurture high-technology companies in Maryland.

Last year the General Assembly passed a series of important measures designed to encourage Internet-related business. This year, the emphasis appears to have shifted to biotechnology.

Duncan's activism reflects the high concentration of biotech businesses in his county. But the industry, which employs an estimated 15,000-20,000 people in Maryland, has assumed a growing role statewide as well.

"We're the third-biggest biotech center in the country right now, and we should be the biggest and best in the world," Duncan said.

Other technology-related measures the General Assembly will consider:

An exemption from the state sales tax for material used to build Internet infrastructure or biotech manufacturing facilities.

The establishment of a Maryland Technology Incubator Program, with $10 million in financing beginning with the fiscal 2003 budget.

Easier eligibility for existing scholarships to college students in high-technology fields. The measure would allow students to qualify for a scholarship within five years of high school graduation rather than the current two.

Biotech companies are particularly interested in the net-operating-loss bill, modeled after a similar program in New Jersey.

John W. Holaday, chairman and chief executive of EntreMed Inc., said the vast majority of biotech companies have few sales and heavy losses because they are in the process of developing new drugs to bring to market.

"It takes something like eight to 10 years for a biotech company from the time of its founding to turn the corner," said Holaday, who is also chairman of the Maryland Bioscience Alliance.

He said his Rockville company and most of the 300-plus biotech firms in Maryland would benefit if they could sell those losses to profitable companies that could use them to reduce their tax bills.

Holaday said biotech has enjoyed strong growth in Maryland even without much investment by the state, because of its strong base of universities and government labs. But he said that growth has been slowing.

"We want the state to be more committed to our industry," Holaday explained.

In an unusual move for a county executive, Duncan has put forward his own legislative agenda for high-technology issues. Besides the net-operating-loss bill, Duncan's proposals also include the sales tax exemption and business incubator measures.

Duncan said the net-operating-loss bill is especially important because New Jersey offers such an incentive to biotech companies.

"I think that would be heard loud and clear across the country about how serious Maryland is about biotech," he said.

Duncan said he has discussed the concept with Gov. Parris N. Glendening but has not received a response.

The legislation will be sponsored by Del. Kumar P. Barve, a Montgomery Democrat who heads a subcommittee on high technology.

The bill has the support of the state's independent Economic Development Commission, said executive director Sally Scott Marietta.

The Glendening administration is taking a wait-and-see approach. David S. Iannucci, secretary of the state's Business and Economic Development Department, said the governor would have to weigh the fiscal implications of the program against the potential benefits.

Under the proposed legislation, the benefits would be limited to $20 million for all companies next year. Each company would be limited to $4 million in benefits over the life of the program.

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