Location:
ECONOMIC DEVELOPMENT; MEDICAL RESEARCH; SCIENCE AND TECHNOLOGY;
Scope:
Connecticut laws/regulations; Other States laws/regulations;

OLR Research Report


December 21, 2011

 

2011-R-0424

CONNECTICUT AND MASSACHUSETTS BIOSCIENCE ASSISTANCE PROGRAMS

By: John Rappa, Chief Analyst

You asked us to summarize Massachusetts' bioscience business assistance programs and compare them with Connecticut's. You also asked us to identify any major bioscience projects Massachusetts recently attracted or retained.

SUMMARY

In 2008, the Massachusetts legislature launched a 10-year, $1 billion strategy to develop and sustain the state's bioscience industry and support the academic institutions that conduct bioscience research. To implement the strategy, the legislature created many new programs and assigned them to the Massachusetts Life Science Center (MLSC), a quasi-public agency it created in 2006.

The bioscience programs provide funds and tax credits for developing infrastructure and facilities, acquiring machines and equipment, starting or expanding new businesses, and hiring college interns. They run parallel to older programs serving a wider range of businesses, including bioscience ones. Both program tracks offer the same types of assistance (e.g., loans and tax credits), but the older track is mostly for mid-stage and mature businesses while the bioscience track offers assistance for bioscience businesses at all developmental stages.

MLSC uses the bioscience programs to recruit and retain businesses. MLSC staff actively recruits bioscience businesses by attending conferences and tradeshows. The recruited businesses include branches or divisions of Biocell Center (from Italy), Integragen (from France), and Pfizer (from Groton, Connecticut), although MLSC's annual reports do not include them among the businesses that received assistance. The reports do not identify those businesses MLSC kept from leaving the state or closing.

Connecticut provides the same types of assistance to bioscience businesses as Massachusetts, but mostly through programs opened to many different types of businesses, such as manufacturers and financial service firms. The exception is the Bioscience Facilities Fund, which provides financing for constructing laboratories designed for handling chemicals, drugs, and other substances (i.e., wet laboratories). Recently, the legislature sought to stimulate and sustain the bioscience industry by funding large-scale bioscience projects at John Dempsey Hospital and the University of Connecticut Health Center.

MASSACHUSETTS BIOSCIENCE ASSISTANCE PROGRAMS

Massachusetts 2008 Life Science Initiative

In 2008, Massachusetts enacted a 10-year, $1 billion strategy to develop and sustain the state's bioscience industry, which includes biotechnology, pharmaceutical, medical devices, diagnostic, and bioinformatic businesses (2008 Mass. Chapter 130). The strategy addresses the industry's physical, human, and technological development needs and consists of many economic development programs targeting only bioscience businesses.

The $1 billion price tag includes up to $500 million in bonds for specified projects; $250 million in appropriations for research grants, fellowships, and sector-wide workforce training initiatives; and $250 million in personal and corporate business tax credits and sales tax exemptions. The tax credits are capped at $25 million per year. As Table 1 shows, the programs address the bioscience industry's long- and short-term infrastructure, workforce development, and financial needs.

Table 1: Massachusetts Life Sciences Initiatives

Physical Development

Long-Term Needs

Short-Term Needs

$500 million in bonds for specified life science infrastructure and facilities, including water purification plants and incubator buildings

Tax Incentives

10%, refundable personal income and corporate tax credit against the cost of acquiring, constructing, reconstructing, or erecting real and tangible personal property used exclusively in Massachusetts

Sales tax exemption for purchasing tangible personal property to be used for developing R&D or manufacturing facilities or utility support systems

Human Development

Long-Term Needs

Short-Term Needs

Matching grants for:

Supporting new personnel conducting innovative research at colleges and universities

Attracting and retaining nationally prominent faculty

Encouraging business-university collaborative research

Purchasing life science demonstration and training equipment and supplies for educational laboratories and training spaces

Internship Challenge Program places students and recent graduates in life science-related internship programs and reimburses businesses for up to $7,200 of the cost

$5,000 -$15,000 grants covering living expenses for life sciences doctoral students and post-doctoral fellows

Grants to vocational and technical schools for purchasing or leasing equipment for training in life sciences technology and research

100% life science job incentive tax credit (90% refundable) for companies adding at least 50 new full-time jobs

Technological Development

Long-Term Needs

Short-Term Needs

Regional Technology and Innovation Centers for:

Promoting collaborative research

Building life sciences industry data bases

Developing life sciences workforce

Disseminating best life sciences business practices

Facilitating public and private investments

Reviewing proposals for Life Sciences Center funding

Identifying life sciences regional clusters

Tax Incentives

100% personal income and corporate tax credit against Federal Food and Drug Administration user fee applications for human drugs manufactured in Massachusetts

Nonrefundable credit applicable to R&D expenses not covered under the generic R&D credit

Deduction for clinical expenses of testing drugs for rare diseases or conditions

Sales tax exemption for items used in R&D

15-year net operating loss carried forward (normally, five-year carry forward)

“Throwbacks” excluded from sales factor for apportioning corporate income*

Financial Assistance

Life Science Investment Fund: grants, loans, investments, and other funding to businesses, universities, institutes, and other entities for commercializing life science R&D

Small Business Equity Investment Fund: up to $250,000 investments in early stage life sciences firms

Small Business Matching Grant Fund: Up to $500,000 to match federal grants for commercializing production-ready new technologies

Life Science Accelerator Program: working capital loans for early stage life science companies with less than $7.5 million in equity financing

* Throwback” requires companies to add sales in states where there are no corporate taxes to Massachusetts sales.

The programs are implemented by MLSC and are available to any business meeting statutory criteria that require, among other things, the business to estimate the revenue it expects to generate and the number of permanent full-time jobs it expects to create or retain. MLSC can revoke funding if the actual revenue is less than 70% of the projected revenue.

Generic Economic Development Programs

The life science programs are in addition to the Massachusetts' generic economic development programs, many of which are still available to life science businesses and predate the bioscience programs. Table 2 identifies the programs and the implementing agencies.

Table 2: Massachusetts Generic Economic Development Programs

Type of Assistance

Massachusetts Finance and Development Authority (MassDevelopment)

Executive Office of Housing and Economic Development

Massachusetts Technology Development Corporation (MTDC)

Financing

Financing for developing property, acquiring machinery and equipment, new and expanding technology companies, and assessing and remediating contaminated property

No programs

No programs

Venture Capital

No programs

No programs

Venture capital investments for start-up and expanding early-stage technology companies

Expedited Permitting

Helping municipalities identify appropriate priority development sites

Funds for municipalities to identify sites for expedited permitting

No programs

Technical Assistance

Helping municipalities identify and assess development feasibility of specific sites

Helping businesses access economic development programs

Helping businesses obtain permits, licenses, and other regulatory approvals

No programs

Tax Credits

 

10% to 40% tax credits for business projects creating jobs and generating substantial sales outside the state

3% investment tax credit for developing property

No programs

As the table shows, Massachusetts' generic programs include several that help businesses obtain necessary state and local approvals. The Massachusetts Permitting Regulatory Office helps businesses, including bioscience ones, obtain necessary licenses, permits, and approvals. It also provides grants to municipalities to identify sites where they can expeditiously approve permits for a proposed development. The office also tracks pending regulatory approvals for state funded-housing and economic development projects.

Massachusetts' generic economic development and new bioscience programs can be combined to help bioscience businesses in different developmental stages. As Table 3 shows, the generic programs focus on mid-stage or mature businesses while bioscience programs cover these and start-up and early stage businesses.

Table 3: Massachusetts Life Science Incentives Matrix

 

= Life Science Initiative Program

 

= Generic Economic Development Program

Assistance Type

Individuals and Universities

Business Development Stages

Infrastructure

Start-ups

Early Stage

Mid-Stage

Mature

Grants

New Investigator Grant

Cooperative Research Grant

Hiring Incentive Grant

Infrastructure Grants

New Faculty Start-up

 

Internship Challenge Grants

Infrastructure Grants

   

Small Business Matching Grant

 

Financing

 

Life Sciences Accelerator

Emerging Technology Fund

District Improvement Financing

     

Export Financing

 
       

Tax-Exempt Industrial Bonds

 

Tax Incentives

 

Refundable 10% Life Science Investment Tax Credit

 
     

Economic Development Incentive Program

 
     

3% Investment Tax Credit

 
       

Single Sales Tax Factor for Manufacturers

 
     

Sales and Use Tax Exemption

 
 

Refundable Life Science R&D Tax Credit

 
     

10% R&D Tax Credit

 
   

Refundable FDA User Fee Credit

 
     

15-year Net Operating Loss Carry Forward

 
     

Construction Sales Tax Exemption

 

Source: Massachusetts Biotechnology Council

Attracted or Retained Projects

MLSC and MassDevelopment report on the businesses they financed in their annual plans. MLSC identifies those it attracted to Massachusetts, but does not specifically identify those it retained there. (We assume that a retention project provides assistance to a company that might close or leave the state.) MassDevelopment does not divide projects into attraction and retention categories.

Table 4 lists the bioscience businesses that received financial assistance from MLSC and MassDevelopment and investment capital from MTDC. It also identifies projects MLSC identified as attractions projects, some of which were not listed among those that received financing or tax credits. We limited the businesses receiving tax credits to those that received over $1 million in credits. The table does not include the early-stage businesses that received MLSC assistance. Nor does it include businesses awarded tax credits by the Executive Office of Housing and Economic Development, which oversees the Massachusetts Office of Business Development, the Massachusetts Permit Regulatory Office, and several other executive branch entities.

Table 4: Bioscience Businesses Receiving MLSC and MassDevelopment Financing, 2006-2011

Company

Amount

Year

Agency

Attraction Project

Bidex, Inc

$2.5 million in Emerging Technology Fund loan

2006

MassDevelopment

Not indicated

Biocell Center

No assistance reported

2009

MLSC

Yes—from Italy

Biogen Idec MA, Inc.

$1.5 million in tax credits

2010

MLSC

No

Blue Sky Biotech, Inc.

$175,000 Emerging Technology Fund loan

2008

MassDevelopment

Not indicated

$150,000 Emerging Technology Fund loan

2006

MassDevelopment

Not indicated

$150,000 equipment loan

2007

MassDevelopment

Not indicated

Bristol-Myer Squibb

$112 million mortgage guarantee

2009

MassDevelopment

Not indicated

Cubist Pharmaceuticals, Inc

$1.7 million in tax credits

2010

MLSC

No

CYTOO

No assistance reported

2009

MLSC

Yes—from France

Early Sense

No assistance reported

2011

MLSC

Yes—from Israel

ECI Biotech

$400,000 in Emerging Technology Fund loan

2008

MassDevelopment

Not indicated

Evaluate Pharma

No assistance reported

2011

MLSC

No

Genzyme Corporation

$6.0 million in tax credits

2010

MLSC

No

Hyaluron Corporation

$1 million Emerging Technology Fund loan

2006

MassDevelopment

Not indicated

$500,000 export loan guarantee

2006

MassDevelopment

Not indicated

Image Diagnostic

$1.5 million in tax-exempt bond financing

2009

MassDevelopment

Not indicated

Integragen

No assistance reported

2011

MLSC

Yes—France

Marine Biological Laboratories

$3.4 million in tax-exempt bond financing

2006

MassDevelopment

Not indicated

Massachusetts Biomedical Initiative

$1 million in Emerging Technology Fund loan

2006

MassDevelopment

Not indicated

$1 million real estate loan

2006

Mass Development

Not indicated

Masy System, Inc.

$490,000 export loan

$700,000 equipment loan

2011

MassDevelopment

Not indicated

Merrimack Pharmaceuticals

$1.5 million in tax credits

2010

MLSC

No

$1.3 million in tax credits

2011

MLSC

No

Millstone Medical Outsourcing

$4.5 million in tax-exempt bond financing

2009

MassDevelopment

Not indicated

Neostem, Inc.

No assistance reported

2010

MLSC

Yes—International, multiple locations

NX Stage Medical, Inc.

$1.3 million in tax credits

2011

MLSC

No

Pfizer Center for Therapeutic Innovation

No assistance reported

2011

MLSC

Yes—Groton, Connecticut

Pharmalucence, Inc.

$20 million in Recovery Zone Bond financing

2010

MassDevelopment

Not indicated

Qteros

$2 million Emerging Technology Fund loan

2010

MassDevelopment

Not indicated

Sagentia

No assistance reported

2011

MLSC

Yes—United Kingdom

Shire Human Genetic Therapies, Inc.

$6.3 million in tax credits

2010

MLSC

No

$5.8 million in tax credits

2011

MLSC

No

Sanofi-Aventis, U.S., Inc.

$2.5 million in tax credits

2011

MLSC

Yes—from France

Systagenix

No assistance reported

2009

MLSC

Yes—from United Kingdom

Thomophase Corporation

Venture capital investment, amount unspecified

2011

MTDC

Not indicated

Vertex Pharmaceuticals

$2.2 million in tax credits

2011

MLSC

No

Sources: MLSC FY 2010 and 2011 annual reports and MassDevelopment annual reports 2006-2010, and MTDC website.

CONNECTICUT'S ECONOMIC ASSISTANCE FOR BIOSCIENCE BUSINESSES

Connecticut provides the same kind of economic assistance to bioscience businesses as Massachusetts, but does so through agencies and programs serving several different industry sectors.

● The Department of Economic and Community Development, like Massachusetts' Executive Office of Housing and Economic Development, finances business and municipal development projects and helps expedite state approvals of large-scale economic development projects.

● The Connecticut Development Authority, like MassDevelopment, provides loans, loan guarantees, and tax-exempt bond financing for business development projects. It also provides sales and use tax exemptions for these projects.

Connecticut Innovations, Inc.(CII), like MTDC, mostly invests in technology businesses, but also finances the construction of wet laboratories and related facilities (Bioscience Facilities Fund) and provides tax credits to individuals investing in small businesses developing new technologies (Angel Investor Tax Credit Program).

The legislature recently shifted gears, authorizing bonds for large-scale bioscience projects as a way to stimulate and develop the bioscience industry. PA 10-104 provided over $360 million in bonds and other funds for constructing a new bed tower; renovating academic, clinical, and research space at John Dempsey Hospital; and developing regional health network initiatives. It also extended enterprise zone property tax exemptions and corporation business tax credits to bioscience businesses in Hartford and designated sections of Farmington, New Britain, and Bristol. (PA 11-140 extended these benefits to designated sections of Plainville.)

PA 11-2, October Special Session, authorized CII to develop a bioscience industry cluster centered on a new Jackson Labs research facility to be constructed at the University of Connecticut Health Center. It authorized up to $290 million in bonds over 10 years for the laboratory's construction, operation, and research activities.

LINKS

2008 Mass. Chapter 130, http://www.malegislature.gov/Laws/SessionLaws/Acts/2008/Chapter130

Massachusetts Life Science Center, http://www.masslifesciences.com/mission.html

Massachusetts Biotechnology Council, “Massachusetts Life Science Incentive Matrix,” http://www.massbio.org/writable/editor_files/2010_incentives.pdf

MassDevelopment, http://www.massdevelopment.com/

Massachusetts Executive Office of Housing and Economic Development, http://www.mass.gov/hed/

Massachusetts Economic Development Incentive Program, http://www.mass.gov/hed/business/incentives/edip/edip-program-information.html

Massachusetts Investment Tax Credit, http://www.mass.gov/hed/business/incentives/investment-tax-credit.html

Massachusetts Technology Development Corporation, http://www.mtdc.com/

Massachusetts Permit Regulatory Office, http://www.mass.gov/hed/economic/eohed/pro/about/mission-of-the-office.html

Connecticut Department of Economic and Community Development, http://www.ct.gov/ecd/site/default.asp

Connecticut Development Authority, http://www.ctcda.com/

Connecticut Innovations, Inc., http://www.ctinnovations.com/FundingOpportunities.aspx

Connecticut Innovations, Inc., Bioscience Facilities Fund, http://www.ctinnovations.com/FundingOpportunities/BioScienceFacilitiesFund.aspx

Connecticut Innovations, Inc., Angel Investor Tax Credit, http://www.ctangeltaxcredit.com/

JR:ro