Bill aims at luring investments

Legislators are pushing for a tax incentive to boost venture capital in Indiana as it falls behind other states in investments.

A bill starting a state-level version of the federal New Markets Tax Credit awaits a hearing in the Indiana House Ways and Means Committee after the Senate approved it with a 40-9 vote in February.

Bill author Sen. Randy Head, a Republican from Logansport, said the legislation is in response to weak interest in Indiana investments that use the existing federal incentive.

“The last round of the federal grant, no business in Indiana received the funding,” he said. “Eleven other states have similar [state-level] programs, and it works very well for them.”

Financial firms serving low-income communities—certified as Community Development Entitites by the U.S. Department of the Treasury—compete for federal grants.

Last year, 70 CDEs split $3.6 billion, but none of it went to Indiana.

The financial groups orchestrate the capital investments, and the individual investors receive the tax credits as incentives.

Investors receive the tax breaks over seven years for a total of 39 percent of the money they put in.

To qualify, investments need to be in low-income areas, as defined by the U.S. Census. About 40 percent of the state qualifies, Head said.

Indiana would start small if it launched its own version of the tax credit, capping the program at $10 million a year.

It’s enough money to launch a pilot program, said Frank Hoffman, a partner at Krieg DeVault law firm, who specializes in the New Markets Tax Credit and other economic development incentives.

“It’s not a lot of money,” Hoffman said. “It does show that Indiana and the state legislature are supporting the new markets.”

Ideally, the state-managed incentive would build enough momentum to attract the attention of much larger investors who would use the federal credit to put money in Indiana, he continued.

Venture funding plummeted more than 50 percent last year in Indiana after massive investments the previous year, notably in Indianapolis-based Angie’sList Inc. and ExactTarget Inc.

Representatives for the technology sector have already thrown their support behind a state-level New Market Tax Credit.

Mark Shublak, a lobbyist for TechPoint, said the bill’s focus on low-income areas won’t necessarily translate to direct investments in tech companies—even though it’s a possibility that money has a much better chance of going to a manufacturer.

But there are latent benefits.

“Central Indiana has a lot of economically distressed areas. The city of Indianapolis has a lot of economically distressed areas,” Shublak said. “From TechPoint’s perspective, there is interest in improving the quality of place, so that workers find the area more attractive.”

If the state enacts the bill, it would provide credits to eligible investments until 2016.

Costs will reach $4.27 million that year, $9.15 million the next, according to a fiscal impact report.

But supporters project the incentive will lure $433 million in investments between now and then, and the tax revenue gained from the property developments and new jobs will offset the expenses.