Wisconsin Economic Development Programs Special Committee on Strategic Job Creation

1. Wisconsin Economic Development Programs Special Committee on Strategic Job Creation Presented by: Zach Brandon Deputy Secretary Wisconsin Department of Commerce

2. Wisconsin Department of Commerce Financial Assistance Objectives • Job Creation/ Job Retention • Entrepreneurial Development • Capital Financing • Technology Development • Employee Training • Targeted sectors, including supply chains

3. Tools Used to Achieve Objectives • Loans & Grants to Businesses, Communities and Nonprofits • Tax Credits (Refundable and non-refundable) • Bonding

4. Wisconsin has assembled some of the most powerful economic development tools in the country. The following initiatives, termed, “Accelerate Wisconsin”, are designed to grow Wisconsin’s economy, to create jobs and spur new investment in Wisconsin companies.

5. Enterprise Zone Tax Credits • Provides a large employer with a refundable income and franchise tax credit for a portion of the company’s payroll paid to new full-time employees (EZ-E). • Allows for up to a 100-percent training costs credit.

6. Enterprise Zone Tax Credits • Allows for a new job retention credit for payroll if the company is an original equipment manufacturer (OEM) with a significant supply chain in the state or employs more than 500 full-time employees, and the company makes a significant capital investment in property in the enterprise zone. (EZ-R). • Allows for a new 10-percent refundable credit for companies making significant capital expenditures in an enterprise zone.

7. Enterprise Zone Tax Credits • Allows for a credit if the business purchases tangible personal property items, property, goods, or services from Wisconsin vendors. • Authorizes 12 enterprise zones.

8. JOBS Tax Credit • Provides a new refundable payroll tax credits to small and medium-sized business relocating to or expanding in Wisconsin. • Provides income tax credits to businesses that • create manufacturing jobs; • train current employees.

9. New Super R&D Tax Credit • Provides a dollar-for-dollar credit for qualified research expenses paid or incurred by a business in a tax year that exceeded 1.25 times the average annual amount of qualified expenses paid or incurred in the previous three tax years. • Offsets future tax liabilities.

10. Investment in Wisconsin Businesses • Provides a 100-percent credit to those who invest their capital gains in Wisconsin start-up businesses designated by the Department as Qualified New Business Ventures. • Allows deferral of taxes on up to $10 million of gain realized from sales of capital assets held for more than one year if reinvested in a Qualified New Business Venture.

11. Research & Development Tax Exemption • Provides a new sales and use tax exemption for machinery used exclusively for research and development in Biotechnology and Manufacturing.

12. Green to Gold Fund • A one-stop shop— single point of entry for manufacturers that aligns federal dollars, existing and future state resources to ensure that industrial manufacturers create or retain jobs as they achieve energy efficiency, use renewable energy, and make products that support a green economy.

13. Early-Stage Investment Tax Credits • The access to capital barrier for business start-ups is particularly difficult for companies attempting to commercialize the leading-edge technology being developed by Wisconsin’s high-tech companies and research institutions. • Wisconsin’s nation-leading program assists Wisconsin companies by attracting new investments with tax credits for individuals and groups investing in a Qualified New Business Venture (QNBV).

14. Overview Early-stage businesses conducting pre-commercialization activity related to proprietary technology may be designated as QNBV.  This designation is designed to assist businesses in their efforts to attract investors by making state tax credits available to individuals and groups investing in these businesses. 14

15. QNBV Investors: Angel Investors Angel investors and angel investor networks, which are one set of accredited investors that invest in a QNBV, may be eligible to claim an income tax credit on that investment, up to 25% of the investment amount. 15

16. QNBV Investors: Venture Capital • Venture Capital Funds, which are certified by the Department and that invest in QNBVs, may be eligible to claim up to a 25% income tax credit on that investment.

17. Individual Business Tax Credits Updates to individual QNBV tax credit limits: The aggregate amount of investment in a QNBV that may qualify for tax credits is limited to: $4,000,000 in qualified investments for taxable years before January 1, 2011. $8,000,000 in qualified investments for taxable years after December 31, 2010. Note: Individual angel investment and fund investment limits have been eliminated. 17

18. Tax Credit Program Limits Updates to the program’s Angel tax credit limits: $6,500,000 for calendar year 2010. $20,000,000 per calendar year for years after December 31, 2010. Additional $250,000 in investment tax credits for nanotechnology businesses, for taxable years after December 31, 2010. Transferable 18

19. Tax Credit Program Limits Updates to the program’s Venture tax credit limits: $8,000,000 for calendar year 2010. $20,500,000 per calendar year for years after December 31, 2010 Additional $250,000 in investment tax credits for nanotechnology businesses, for taxable years after December 31, 2010 Transferable 19

20. Tax Credit Program Limits Updates to the program’s credit carry-forwards: Commerce, in consultation with Department of Revenue, may carry forward unclaimed tax credits to subsequent taxable years Annually no later than July 1, Commerce shall submit its recommendations for carry forward of credit amounts to the Department of Revenue 20

21. Program Updates (cont) Modifies the angel investment credit to allow investors to claim the credit for investments made up to two months before a company moves to Wisconsin if that company is qualified as a new business venture within six months of its relocation to Wisconsin. Permits unused tax credits in the Accelerate Wisconsin Program to be allocated to the Jobs Tax Credit Program. 21

22. Success So far, more than 145 companies have been certified for investment under the program. Significant gains in expanding the Wisconsin Angel Network have taken place since 2005. Total dollars and number of investments by networks and funds increased from $1.7 million in 11 deals, to $15 million in 53 deals. 22

23. Examples of Success Sold to Microsoft in October 2007.  Founders started QNBV Alice.com which has raised significant capital. Sold to Thermo-Fisher Scientific in August 2008.  Jobs remained in Wisconsin . Raised $70 million from investors, including Honda and Cargill. Has a collaborative partnership deal with oil giant Shell . Recently raised $40.6 million after closing a $18 million funding round in October 2008. 23

24. Other Tax Credits: Consolidation • Deletes the existing enterprise development zones, community development zones, agricultural development zones, technology development zones, and airport development zones programs . . . and created a new consolidated tax credit program. • Allocates tax credits (about $103 million) to businesses for job creation, capital investment, employee training, and job retention (if connected to location or retention of a corp. headquarters in Wis.) • Commerce allocates a portion of the tax credits to rural areas and to small businesses.

25. Targeted Industry Specific Credits: • Commerce administers several specific tax credits for the dairy, food processing, meat processing, woody biomass and electronic medical records industries.

26. Grants & Loans: Wisconsin Development Fund (WDF) • The WDF is funded at $13,264,400 in FY 11 (includes state funds and repayments). • Provides grants and loans for capital financing, worker training, entrepreneurial development, promoting urban or regional economic development, establishing revolving loan funds, providing working capital, promoting employee ownership, and providing assistance to technology-based businesses or to businesses at a foreign trade show or event.

27. WDF: CORE Jobs (Act 265) Changes Grants for Manufacturing Facilities • In FY 11, requires Commerce to award grants from the WDF not to exceed $2 million to businesses for converting existing manufacturing facilities to the production of renewable energy or the manufacturing of equipment used in the production of renewable energy. • If the $2 million is not spent on the grants permitted in this Act, the remaining funds may be used to provide funding for loans to manufacturing businesses for implementing the Green to Gold Program.

28. Grants & Loans: Forward Innovation • The Forward Innovation Fund (FIF) consolidated the Minority Business Development Fund and the Community-Based Economic Development program. • FIF is funded at $884,600 GPR annually. • Provides grants and loans to businesses, municipalities, community-based organizations, cooperatives, local development corporations, and non-profit organizations. • Provides grants and loans to assist minority businesses; businesses in economically distressed areas; and innovative proposals to strengthen inner cities, entrepreneurship, and industry clusters.

29. Grants & Loans: Energy Independence • The Wisconsin Energy Independence Fund (WEIF) has a base level of funding in FY 2011 in the amount of $14,850,000. • Funds up to 50% of eligible project costs, including capital investment and working capital. • Eligible project activities include R&D or commercial application related to renewable energy sources or technologies, or construction of a cellulosic ethanol production plant. • Eligible recipients include businesses or researchers in Wisconsin.

30. Grant & Loans: Rural Economic Development • The Rural Economic Development (RED) Program is funded at $683,200 in FY 11 (includes state funds and repayments). • Funds up to 75%, or $100,000, of eligible costs, which include working capital, fixed asset financing, or employee relocation costs. Cash match of 25% required. • Eligible recipients include small (<50 employees) for-profit businesses or cooperatives, engaged in startup or expansion and located in a rural municipality.

31. Grants & Loans: Gaming • The Gaming Economic Diversification Program is funded at $1,407,900 in FY 11 (includes state funds and repayments). • Funds up to 75% of fixed asset financing or technical assistance costs related to a project having a community economic diversification, brownfields remediation, or profitability improvement component. • Eligible recipients include existing or start-up businesses, including Native American businesses, that are located in or expanding in the state.

32. Communities: Econ Development Aids • The Brownfields Grant Program is funded at $6,570,500 annually. • Eligible recipients include a city, village, town, county, individual, partnership, corporation or limited liability company. • A grant may only be awarded if the recipient uses the grant proceeds for brownfields redevelopment or associated environmental remediation activities. • The recipient may not use grant proceeds to pay lien claims, delinquent taxes, interest, or penalties.

33. Communities: Economic Development Aids • Commerce administers the Small Cities Community Development Block (CDBG) Program. • $10 million/yr. is targeted for economic development grants to local governments, which use the funds to help finance business start-ups or expansions, investments and job creation/retention. • Localities have established revolving loan funds with repayments . • CDBG funds are also used for local infrastructure improvements directly tied to bus. investment and job creation/retention projects.

34. Communities: Economic Development Aids • Industrial Revenue Bonds (IRBs). Commerce administers the IRB program, which authorizes municipal issuance of revenue (non-general obligation, or “Private Activity”) bonds. • The proceeds are loaned to manufacturing businesses for the purpose of financing the construction, expansion, or equipping of manufacturing plants. • $250 million in bonding authority is allocated for the IRB Program annually. • Recovery Zone Facility Bonds and Midwest Disaster Assistance Bonds

35. Targeted Programs: Economic Development • Women’s Business Initiative: $99,000 • Wisconsin Technology Council: $534,700 • Wis. Mfg. Extension Partnership: $1,126,400 • Wisconsin Entrepreneur’s Network (WEN): $600,000 • Capital Access Program: $350,000