More Transparency in Commerce Authority Tax Giveaway Deals Is Needed (video)

UA College of Medicine

Today’s video is about HB2409, small business investment tax credit extension. This is also known as the Angel Investor Tax Credit. In the big scheme of tax giveaways in the state of Arizona, this one is sort of small potatoes dollar wise, but I still have issues. It is an extension if $2.5 million per year tax credit for 10 years. The angel tax credits are for “qualified investors,” people who are licensed, trained, and smart enough to play the stock market and make otherwise risky investments wisely because of their expertise. [My layman’s definition.] 

I have attended several Bioscience Roadmap events where they showcase research and new discoveries from the universities that are … just …about… ready for market. What they need is venture capital to get the new drug discovery or the next medical device from our universities to production to market.

I am very familiar with this topic because ever since I started my own small business in 1986, I have been writing about or working in public health and medical research. In fact, the first Bioscience Roadmap event that I attended featured Dr. Gene Gerner, Dr. Tom Grogan and the story of how their research at the Arizona Cancer Center blossomed into huge NCI research grants, new drugs, and successful UA spinoff businesses. I knew them, wrote about their research, and photographed them when I worked in the communication office at the cancer center.

My point is that I value scientific research and believe that research jobs (and related jobs that come with big grants) are some of the best jobs in our state. One of the reasons that I don’t support the angel investment tax credit is that I found out that only 30% of the funds go to businesses that spinoff from our research universities. Also, there is a $10 million ceiling to qualify as a “small start-up business” (who is eligible to receive funds from angel investors). If your business has $9 million in assets, is it really as “small business start-up”? 

Other issues with this tax credit revolve around lack of transparency with the Arizonza Commerce Authority and basic questions about “picking winners and losers.” How is it determined which “small” businesses get help? How much funding goes to true start-ups? What are the criteria for angel tax credit funding — now that we know that 70% of the funds go to other businesses? I looked up angel investments on their website and found a 44 page spreadsheet listing every business that was eligible to receive an angel investment, because they had been vetted by the Commerce Authority or its predecessor. I couldn’t find any data about how many of these businesses are actually still in business, since the list started in 2006. There was also no information about how many people are currently employed or if the businesses are still in the state of Arizona.

I would prefer that the state of Arizona fund research through seed grants as it did in the early 1990s when Gerner and Grogan were doing their initial research. I also believe that the angel tax credits and all of the other tax giveaways administered by the Commerce Authority need a lot more oversight, better reporting, and better vetting of businesses that get the state’s money. I am sure that even the qualified investors would like more information on this. Just an FYI… Vector Launch, which recently declared bankruptcy, received angel tax credits and other tax incentives.

Lastly, why should we favor university spinoff businesses over other random businesses approved by the Commerce Authority? Because inventions and new drugs developed at the university are owned by the people if Arizona and we get revenue from the research that WE the taxpayers funded. This is the same problem that I have with the R&D tax break, a separate bill that passed the House recently. Why is the state giving R&D tax breaks to major corporations and then allowing them to keep the patents? If the people of Arizona are funding the research, we should get the financial benefits from our investment.