Wednesday, 16 February 2011 17:32

Jindal Announces Louisiana Legislation For Critical Business Incentives, Programs

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Despite the projected $1.6 billion budget crunch Louisiana is facing this year, Governor Jindal has come out to promote the protection and expansion of certain programs and tax incentives to keep Louisiana growing. 

Here is a press release from the Jindal press office, issued Wednesday:

Today, Governor Jindal announced that he will work in the upcoming legislative session to extend the Quality Jobs Program, the Research and Development Tax Credit and the Technology Commercialization Credit/Jobs Program, in addition to making enhancements to the Digital Interactive Media Production Tax Credit to keep the state competitive in attracting business investment and spurring job creation.

Governor Jindal said, “Of course, we are not going to raise taxes, and we are announcing today that in the upcoming legislative session, we will propose the extension of three existing tax incentives set to expire, and improvements to a fourth tax incentive to keep businesses growing and creating jobs in Louisiana.

“These tax incentives provide critical tools to ensure that we not only have the ability to remain economically competitive, but we continue to move our state forward by making Louisiana the best place in the world to pursue a rewarding career and raise a family. In order to build on our current record of job growth we absolutely mustcontinue these three incentives set to expire. In many ways they are similar to best practices other states use to attract businesses, which makes them vital to helping Louisiana compete for businesses all across the country and the world.”

Executive Vice President of the Gulf Coast Region for Baton Rouge Coca-Cola Bottling Company Darian Chustz said, “When we were considering our options to build a new production and distribution facility, we evaluated several locations and ultimately chose Baton Rouge because of the local and state incentives. The Quality Jobs Program coupled with the other incentives was the determining factor in our decision. It is a great program for our state, our community and for Baton Rouge Coca-Cola.”

CEO of Globalstar Peter Dalton said, “Last year, when we were considering relocating our company from Silicon Valley to Louisiana, the digital-media incentive program, Louisiana’s competitive business climate and lower taxes were simply too compelling to ignore.  Today, I am thrilled that the state is proposing updates that will make the digital-media incentive program even stronger and more flexible for technology companies. These pro-business, pro-growth policies, along with the state’s efforts to improve them, reinforce our decision to call Louisiana home.”


Hector Alila with Esperance said, “We are delighted to be recipients of tax credits from the State of Louisiana through the support of LED. The funds have helped Esperance Pharmaceuticals since its inception to hire staff and recruit world-class management and a scientific advisory board that is experienced in drug development. As a result, the company has grown rapidly and attracted local and out of state investors including Louisiana Fund I, Themelios Venture Partners and Research Corporation Technologies, Louisiana Technology Fund and private investors. The company has raised $14 million to date.  Esperance Pharmaceuticals is developing unique, targeted, anticancer drugs that selectively kill cancer cells without harming normal cells. The company was founded based on the technology discovered by researchers at the Pennington Biomedical Research Center, LSU AgCenter and Louisiana State University main campus. The drugs being developed by Esperance have real prospects to dramatically improve the treatment of cancer. The company’s lead drug, EP-100, is currently in human clinical trials.”

Extend the Quality Jobs Program


The Quality Jobs program encourages businesses to locate or expand operations in Louisiana by providing tax incentives for job creation and capital investment.


Governor Jindal said, “The Louisiana Quality Jobs program is one of the most competitive job-creation incentives in the country and one of our state’s most powerful tools for business development. Other Southern competitor states, including Mississippi, Arkansas, and Oklahoma, also offer similar incentives for the creation of high-paying jobs. We must renew this program to maintain our state’s competitive position. We will work to extend the Quality Jobs program, currently due to sunset at the end of calendar year 2011, for another six years.”


Currently, a business qualifying for Quality Jobs incentives may receive rebates equal to five to six percent of payroll for net new jobs meeting specific wage and health care benefit levels. A qualifying business may receive annual payroll rebates over five years, or over ten years total with renewal, and may also receive a four percent sales and use tax rebate or a 1.5 percent investment tax credit on capital investments if it meets the hiring requirements under the Enterprise Zone program.


The Governor highlighted Baton Rouge Coca Cola Bottling Company as an example of the impact of the Quality Jobs program on the creation of Louisiana jobs. In May of 2008, the Baton Rouge Coca-Cola Bottling Company announced that the company would expand its Baton Rouge production and distribution facility by at least 270,000 additional square feet. This $93 million expansion brings the company's local investment to $178 million.


In 2008, the Baton Rouge Coca-Cola Bottling Company expected this expansion to add up to 113 new jobs by 2012 with an average annual wage of $45,000. To date, the company already added about 80 of the pledged 113 new direct jobs. The Louisiana Quality Jobs program helped secure the expanded production agreement and create these jobs.


The Quality Jobs program also supported 32 business location or expansion projects in 2009, which could generate over 3,000 new direct jobs and over $700 million in capital investment in Louisiana. In 2010, the Quality Jobs program helped secure several key business development wins, including:

·       Blade Dynamics opening, which will manufacture advanced wind turbine blades and components at the Michoud Assembly Facility in New Orleans. This will bring 600 new direct jobs with an average annual salary of $48,000, in addition to 970 new indirect jobs and $13 million in capital expenditures.

·       TraceSecurity Inc. is relocating two of the company's key operating divisions - software development and national sales - from Dallas and San Diego to Baton Rouge. This will bring 15 new direct jobs with a $50,000 average annual salary and will retain 35 jobs.

·       Sasol Ltd. will construct the world's first commercial, ethylene tetramerization unit at its production site in Lake Charles. This project will create 36 new direct jobs with $62,000 average annual salary and will retain 350 jobs. The anticipated capital expenditures are $175 million.

·       Myriant Technologies will build a new 392,000-square-foot plant at the Port of Lake Providence that will be the world's largest bio-based succinic acid plant. The company expects to generate 49 new direct jobs, 127 new indirect jobs, and $80 million in anticipated capital expenditures. Annual average salaries are expected to be $40,000.

·       Affiliated Mortgage Co. of West Monroe committed to retain and expand its operations in Northeast Louisiana. This will create 137 new direct jobs, 80 new indirect jobs, 41 retained jobs, and $2 million in anticipated capital expenditures.


Extend and Enhance Innovation Tax Incentives


Governor Jindal said the administration is also working to extend and enhance two innovation-related tax incentives – the Research and Development Tax Credit (R&D Tax Credit) and the Technology Commercialization Credit/Jobs Program.


Governor Jindal said, “The R&D Tax Credit is set to sunset at the end of calendar year 2013, and our legislation will work to extend it by six years to the end of calendar year 2019. Louisiana cannot afford to let this R&D Tax Credit expire. Most Southern states - including Texas, Arkansas, and Mississippi - offer some form of R&D incentive, and we must compete for economic investment.”


The R&D tax credit program provides up to a 40 percent refundable tax credit for Louisiana businesses - based on employment levels - that conduct research and development activities in Louisiana. The program offers refundable credits for a company’s qualified in-state research expenditures at a rate of eight percent for companies with 100 or more employees, 20 percent for companies with 50-99 employees, and 40 percent for firms with fewer than 50 employees. The tax credit also enables recipients of the U.S. Small Business Administration’s Small Business Innovation Research or Small Business Technology Transfer grants to receive a refundable tax credit worth 40 percent of their award.


The top six industries applying for R&D tax credits in Louisiana are information technologies; oil, gas, and energy technologies; advanced materials; chemicals and petrochemicals; environmental technologies; and healthcare. Companies ranging in size from less than five employees to thousands of employees, across a variety of sectors, have taken advantage of the program - including John Deere and Albemarle, as well as early-stage entrepreneurial businesses like the nano-technology company, Aquaculture.


Indeed, since the inception of the current R&D Tax Credit program, demand for credits and the number of participating companies have increased dramatically. In 2010, the program approved 144 applications, resulting in a total of $204.5 million in estimated certified R&D spending in Louisiana.


The Governor also said the credit has become more attractive to Louisiana’s small businesses. Since a 2009 change in law, which grants small businesses – those with less than 50 employees - a tax credit equal to 40 percent of their R&D expenditures, small businesses have represented more than 60 percent of incentive recipients.


Governor Jindal said, “Our legislation in this session will also work to enhance the R&D tax credit program’s value to businesses by changing the structure of the credit from a refundable tax credit to a rebate. This will also improve the state’s return on investment by clarifying statutory language to ensure the credit is based only on Louisiana-based R&D expenditures.”

Extend and Enhance the Technology Commercialization Credit/Jobs Program

The Governor said he is also working to extend the Technology Commercialization Credit and Jobs Program by extending the program, which is set to sunset at the end of calendar year 2011, by six years, to the end of 2017.

The Technology Commercialization Tax Credit provides incentives to Louisiana companies that invest in the commercialization of technology resulting from research performed by a Louisiana university. The program currently provides a 40 percent refundable tax credit on business investments related to commercialization activity as well as a six percent refundable tax credit on annual payroll for new jobs created. Qualifying research centers that develop Louisiana technology may be granted a refundable tax credit based on new jobs created from the development.

The Technology Commercialization Credit and Jobs Program had eight new projects in 2009, resulting in approximately $1 million in approved commercial costs. The majority of the claimed costs are associated with patents and licensing fees. Notable projects that used this program include:

·       Embera NeuroTherapeutics, Inc., a pharmaceutical company started by a researcher at the Louisiana State University Health Science Center in Shreveport, that develops drug therapies to treat addiction and obesity. This tax incentive helped the company to license psychiatric pharmaceutical technology from the Louisiana State University Health Science Center in Shreveport.

·       PhilipCare, LLC, based in Shreveport, used the incentive to license two technologies related to cancer treatments from the Louisiana State University Health Science Center in Shreveport.

·       International Mezzo Technology, Inc., a Baton Rouge company that designs and manufactures thermal products, used the credit to license heat exchange technology from Louisiana State University A&M.

·       Esperance Pharmaceuticals, Inc., a pharmaceutical company that develops cancer therapeutics, licensed pharmaceutical technology from Louisiana State University A&M to develop new cancer treatments.


The Governor added that the legislation to extend the Technology and Commercialization Program would also shift the program structure from a refundable tax credit program to a rebate program, which will enable businesses to benefit from the credit sooner.


Enhance the Digital Interactive Media Tax Credit


Lastly, the Governor said he will work with legislators to introduce legislation to improve the Digital Media Tax Credit - a program for video game development, software development, and digital media projects.


Governor Jindal said, “The Louisiana Digital Media Tax Credit is one of the most competitive incentives in the U..S. for digital media and software development activities among roughly twenty such programs - including several southern states like Alabama, Arkansas, Florida, Georgia, Kentucky, and North Carolina. As part of this package to improve these vital tax incentives, we are proposing targeted refinements to this program to ensure our state remains competitive for digital media investments.The Digital Media Tax Credit is a key component of our state’s efforts to develop a high-wage, knowledge-based industry around digital interactive media and software development in Louisiana.


“Digital media is a key emerging industry in Louisiana because of its growth potential and because the jobs it creates are stable and high-paying. This sector has the potential to generate 11,000 to 23,000 direct jobs and 25,000 to 55,000 total jobs in Louisiana over the next 20 years. However, we will only produce these incredible results if we aggressively cultivate this industry.


“For example, Electronic Arts established its first quality assurance center in Baton Rouge in 2008 and indicated that it will be the only U.S. facility that would not be scaled back given the current economic climate.  This unique partnership includes collaboration with Louisiana State University A&M, which will add to the industry’s future workforce development efforts. We know from EA that the digital media tax credits were a key consideration in their decision to locate in Louisiana.


“Additionally, Globalstar, a leading provider of commercial and consumer mobile satellite voice and data services, relocated its corporate headquarters to Covington, LA.  Globalstar’s product development center, international customer care operations, call center and other global business functions - including finance, accounting, sales, marketing and corporate communications will all move to Louisiana as part of this relocation.  Globalstar expects to create close to 150 high-value jobs in Covington by the end of 2011, increasing to 200 jobs by 2013 and a total of more than 490 jobs by 2018.”


The Digital Media Tax Credit program provides a 25 percent tax credit on qualified production expenditures for state-certified digital interactive productions in Louisiana, and a 35 percent tax credit on payroll expenditures for Louisiana residents. Since its inception in 2005, the tax credit has evolved from focusing solely on interactive media to include a broader focus on software development.


Enhancements the Governor proposed to the Digital Media Tax Credit Program include:

·       Changing the program to a refundable tax credit structure, from the current transferable tax credit structure in order to deliver more financial benefit to eligible companies.

·       Modifying the name of the program to better communicate its applicability to software development by calling it the “Digital Media and Software Development” tax credit.

·       Updating the statutory language to clearly state eligibility for projects with expenditures relating to federal government entities like projects for cyber security or healthcare. The current statutory language creates some ambiguity about whether the intended exclusion for receiving credits for state government contracts actually includes federal government dollars as well. Legislation will clarify that revenue from non-state funds, in the form of federal government dollars, is indeed applicable as part of this program.

·       Adding a provision to require “advance notification” of intent to apply for the credit in order to ensure credit is incentivizing qualifying projects, and not simply providing credit for activity that is already occurring.


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