June 01, 2010|By Gus G. Sentementes, The Baltimore Sun
Gov. Martin O'Malley proposed a tax credit plan Tuesday intended to spur investment in Maryland's technology and life sciences industries that could be worth up to $100 million.
Under O'Malley's plan, the state would raise investment capital through auctioned tax credits to insurance companies in Maryland, which would purchase the breaks for redemption in 2015 or beyond, state officials said. O'Malley, who recently launched his re-election campaign for governor, unveiled his proposal while speaking before a crowd of business leaders at a technology conference in Rockville.
If O'Malley wins re-election, the tax credit program would need to receive approval in next year's General Assembly session. O'Malley administration officials said they would work with lawmakers to craft the framework for the plan.
Christian S. Johansson, secretary of the Maryland Department of Business and Economic Development, which would run the InvestMaryland program, said several states have used such tax credits to raise money and spur investment in business. He noted that the proposal comes as venture capital investment in the state's life sciences sector has slumped.
"We're giving them a tax credit in the future, and they pay us the money today," Johansson said.
Essentially, the state would target the insurance premium tax for the investment program. Johansson said insurance companies would pay their tax liability for future years up front and receive a credit in later years. The tax credit would not have an impact on the state's budget until 2015, he said.
Larry Letow, chairman of the Maryland Tech Council, a state association of technology companies, said he generally supports O'Malley's plan.
"On the surface, it's good," said Letow, president of Convergence Technology Consulting in Glen Burnie. "Any time the state can create a fund that invests in Maryland companies, it's great. Depending on how it works, that'll determine the true value of it."
Similar tax credit bills introduced during this year's General Assembly session would have cost up to $12.5 million in state revenue each year. Johansson said his department did not introduce its own bill this year because of those proposals, neither of which passed.
Under O'Malley's plan, half the revenue that the Department of Business and Economic Development raises through the program would go into the Maryland Venture Fund, which invests in state-based companies. The fund has invested $25 million and returned $61 million since it started in 1994, Johansson said. The other half of the money would be disseminated to venture capital firms in the region for investment in Maryland companies, he said.
The state would invest in companies where it expects to recoup its investment plus a sizable profit, Johansson said.
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