CED today joined the North Carolina Entrepreneurial Association, North Carolina Technology Association and other partners to express strong support for proposals by Governor Mike Easley to increase funding for North Carolina’s new SBIR/STTR Matching Grants Program and to reduce sales taxes on R&D equipment purchases by research companies.
Easley’s budget would increase funding for the SBIR/STTR grant program to $5 million annually, a substantial increase from the $1 million allocated in FY 2005-06. The Governor also proposed reducing the state’s sales tax rate on R&D equipment purchases by research companies not currently engaged in manufacturing.
“Building and preserving capital may be the biggest challenge faced by innovation-based start-up companies in North Carolina today,� said Sam Taylor, President of the North Carolina Entrepreneurial Association. “The Governor’s budget proposals are going to help us attack that problem head-on. NCEA is very excited about the Easley Administration’s proposals and we urge the General Assembly to adopt them as part of the State’s 2006-07 budget.�
"Investing in the early stage of the innovation curve is critical and the SBIR match will help fuel entrepreneurial, high-growth companies in North Carolina,� said Joan Myers, President and CEO of NCTA. “Any investment in R&D pays off in the short and long-term for creating new jobs in the state,� she added.
“Governor Easley has taken two more very important steps in strengthening North Carolina’s innovation-based entrepreneurial economy,� said CED President Monica Doss. “North Carolina’s universities and other research institutions have enormous innovative capacity, but many of our good ideas are never commercialized because of lack of capital and other barriers to innovation at the entrepreneurial level. These changes will help North Carolina’s small, innovation based companies attract more start-up capital and deploy it more efficiently.�
The SBIR/STTR grant program, which was launched by Easley last year, provides matching grants of up to $100,000 for North Carolina businesses receiving Phase I SBIR or STTR grants from federal agencies. The program also provides small stipends to companies to help cover the cost of grant applications. The SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) Programs are operated by the federal government and earmark a portion of all federal R&D spending for grants to small companies. North Carolina has historically lagged the national average in per capita SBIR grant awards. The grant monies typically provide capital for companies’ initial commercialization of new technologies – activities that are essential to attracting larger rounds of funding from venture capital companies and other investors.
“Non-dilutive funding like that provided in the SBIR Grant Program helps companies through one of the toughest parts of the their growth cycle,� said Jon Obermeyer, Interim CEO, Piedmont Triad Entrepreneurial Network. “We hope the General Assembly will adopt this recommendation.�
The R&D equipment sales tax reduction proposed by Easley would eliminate a significant tax disadvantage suffered by start-up innovation-based companies that are not yet manufacturing products. Under current law, such companies must pay 7% sales tax on research and development equipment. R&D companies with manufacturing operations typically pay only 1% sales tax or $80 per item for R&D equipment, whichever is less. Innovation-based start-up companies can pay hundreds of thousands of dollars for start-up equipment, resulting in tax bills that eat in to precious start-up capital.
“Our innovation-base entrepreneurial companies need to hold on to every penny of cash that they can in order to survive the pre-revenue phase of their development,� said Taylor. “This change addresses a significant and unfair drain on the resources of these companies.�
"Encouraging innovation is a critical component for Jim Roberts and our Blue Ridge Entrepreneurial Council to help grow the economy in western North Carolina,� said Dale Carroll, CEO of AdvantageWest - North Carolina, a regional economic development organization. "We believe that starting successful small businesses here in the mountains will help us secure a bright economic future for our children. We applaud Governor Easley for making North Carolina an even better state for small business by proposing to strengthen the SBIR/STTR matching grants program and to reduce sales tax on R&D equipment purchases by research companies.�
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