Page 28 - Innovation Delaware 2018

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JAMES DECHENE
JENNIFER HUDSON
MIKE RAMONE
Thus, Hudson says, if a company’s R&D expenses result in a credit that is larger than its tax liability, then the company would get a refund and not have to pay any state income taxes.
This is a significant benefit for startup businesses, she says, since they often have heavy initial R&D expenses and might not begin turning a profit for a couple of years.
Another plus, she says, is that the formula for the R&D credit allows a small business, one with less than $20 million in gross receipts, to claim a credit at double the rate permitted for large businesses.
DeChene and Hudson say the revised formula for the credit should appeal to science and tech businesses that locate at the University of Delaware’s STAR Campus and businesses launched by former DuPont scientists now working
at the Delaware Innovation Space, a business incubator housed at the DuPont Experimental Station.
“If you decide to start a business here, this puts some money in your pocket,” DeChene says.
While the definitions of the Delaware R&D credit generally follow the language of the federal tax code, explanations of the details are best left to accountants and other tax professionals, DeChene and Hudson say.
Another initiative that took effect last year — a law authorizing “equity crowdfunding” to finance small-business startups — enables new businesses in Delaware to raise up to $1 million a year by offering stock to small investors, and permitting individuals with incomes of up to $100,000 to invest up to $5,000 in these new businesses.
The legislation, sponsored by state Rep. Bryon Short and state Sen. Brian Bushweller, “allows Delaware residents to make smallish investments” in promising businesses “that feel they can get off the ground with a small amount of cash,” DeChene says.
A similar piece of legislation, the Angel Investor Job Creation and Innovation Act (House Bill 170), passed the state House last year and is expected to be voted on in the Senate before the end of June, according to its sponsor, state Rep. MIKE RAMONE, a Pike Creek Republican. (Continued on p. 29)
In addition, anticipated modifications to Delaware’s Coastal Zone Act should make more than a dozen unused and underused industrial sites more attractive to developers with innovative ideas, says JAMES DECHENE, the chamber’s senior vice president for government affairs.
The enhanced R&D tax credit was enacted in March 2016 and took effect for the 2017 tax year, says JENNIFER HUDSON, director of the state Division of Revenue. Under the old system, the state had a $5 million cap on the credit, so, if companies entitled to a credit filed claims that exceeded $5 million, the money in the pot would be divided proportionately among them. For example, if claims totaled $10 million, each company would receive one-half of the amount of the credit it claimed.
The new law eliminates the cap, and it also makes the credit refundable.
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26 DelawareBusinessTimes.com