Supports business R&D and innovation, and helps attract Dow-DuPont spinoff headquarters
Dover, DE – Building on progress that has led to the best job creation of any state in the region, Governor Markell today signed the Commitment to Innovation Act, which includes provisions to expand the state research and development tax credit and incentivize companies to establish headquarters in Delaware. The legislation (SB 200) passed the House today by a 34-3 margin following a unanimous vote by the Senate last week.
“We should celebrate the significant progress of the state’s economy in recent years, but this legislation reflects our belief that our work is never done,” said Governor Markell. “We must always seek out ways to foster more innovation and the creation of well-paying jobs for our workforce. Passage of this legislation continues the tremendous cooperation that helped convince the leaders of Dow and DuPont to locate new headquarters in Delaware, while it also paves the way for more companies to innovate, increase research and development, and create jobs in our state.”
Provisions of the Commitment to Innovation Act
First, the Act ensures all companies receive the full research and development tax credit for which they qualify by removing the annual expenditure cap of $5 million and making the credit refundable. The new law makes Delaware one of only three states in the country, and the only state east of the Mississippi, with an R&D credit containing both of these attractive features.
By making the existing research and development credit refundable, it will become more useful to many businesses, particularly to early stage research companies that may not yet be profitable, as well as to established companies interested in expanding their research footprint in Delaware. Removal of the $5 million cap ensures that all eligible applicants receive a credit equal to the full amount of their award, which is calculated at a value equal to half the amount of their federal R&D credit. Currently, all applicants have their awards scaled down if the credits are oversubscribed so that the cap is not exceeded.
Second, SB 200 makes modifications to the New Economy Jobs tax credit, which provides an incentive for companies to establish global corporate headquarters in Delaware. Companies that choose to do this are eligible to receive a tax credit calculated based on the value of their total income tax withholding payments to the state.
The New Economy Jobs tax credit was designed to incentivize companies who were considering such a move to come to Delaware. With today’s bill signing, the modified credit also reflects the need to attract the headquarters of the new spin-offs that are planned as a result of the proposed Dow-DuPont merger. The Commitment to Innovation Act represents an important part of the state’s proposal to DuPont to locate the headquarters of both the agricultural company spin-off and its specialty products spin-off following its expected merger with Dow.
Comments on the Commitment to Innovation Act
“Delaware families will be the end beneficiaries of these changes,” said Senate President Pro Tempore Patricia Blevins, D-Elsmere, the lead sponsor of the bill and State Senator for a district that includes DuPont’s Chestnut Run facility. “When we create more jobs, strengthen our economy and reward innovation, we all win. This law checks all those boxes, and is another example of the positive impact we can have when legislators work together to improve our State.”
“While the situation with DuPont created an urgency to make these changes, modernizing our R&D credit has a much bigger benefit than just preserving DuPont in Delaware,” said House Speaker Pete Schwartzkopf, D-Rehoboth. “This law will encourage businesses that are in the early stages of development to invest and locate here. By becoming one of only a few states in the country with this system, and given our location along the East Coast, we can become a major hub for research and development. Delawareans ask all the time what we are going to do to help create more jobs here, and the passage of this bill helps to answer that question.”
“I was happy to support this important legislation and see it signed into law,” said Senate Minority Leader Gary Simpson, R-Milford. “Not only will it help keep a strong DuPont presence in Delaware, but perhaps more importantly, it will preserve the jobs of hundreds of highly trained employees in the state.”
“As the pending merger and reorganization of DuPont has shown, times are changing,” said House Minority Leader Danny Short, R-Seaford. “We need to start carving a new economic niche for our state. The passage of this legislation, which will encourage research and development on the macro and micro levels, is a step in the right direction.”
“Research and development continues to be a large investment and job creator for companies, and is important for Delaware’s economic growth moving forward. By passing this bill, the legislature has taken an important step to help create jobs here, and the Delaware State Chamber of Commerce applauds the members who supported it,” said Rich Heffron, President of the State Chamber of Commerce. “If I am a business owner in this state or outside of it, I am standing up and taking note of the fact that there are some really positive things happening in Delaware.”
“These changes are an investment in our economy and set Delaware on a more positive pathway to robust economic growth and job creation,” said Bob Perkins, Executive Director of the Delaware Business Roundtable. “The Roundtable applauds the legislators who supported these changes, and we are happy to see this bill signed into law.”
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