ANNAPOLIS – In the wake of the loss of two major biotechnology facilities, Montgomery County officials plugged a tax benefit program designed to attract and keep such companies within Maryland
Montgomery County Executive Douglas M. Duncan and Delegate Kumar Barve, D-Montgomery, testified before the House Ways and Means Committee that the program could lure more biotechnology companies to Maryland, which has the country’s third-largest concentration of biotech firms.
“We in the state of Maryland have been very fortunate to have a lot of programs that were very effective in bringing and maintaining biotechnology companies . . . to our state,” Barve said.
“Our goal should be to be the leading center,” Duncan said.
Biotech companies tend to locate near one another, business experts say, so the loss of one could make the area less desirable for others.
Montgomery County has a vested interest in the health of the state’s biotech industry. About 200 of Maryland’s 337 biotechnology firms are located there, but it lost one of its oldest and largest biotech companies in December when Life Technologies’ new owners announced it was moving to Frederick.
In addition, Howard Hughes Medical Research Institute, headquartered in Chevy Chase, chose to build a $500 million biomedical research center in Loudoun County, Va., where it purchased 281 acres in December.
The new bill could provide a boost for biotechnology companies, which rarely are profitable early on and could use the infusion of cash from the sale of tax credits, said Dyan Brasington, president of the Tech Council of Maryland.
The bill would give new biotech companies the opportunity to support their research by selling, on a dollar-for-dollar basis, their tax credits from operating at a loss. The buying companies would get a tax write-off, which would be a percentage of what the credits are worth. The measure also would allow biotech companies to surrender unused research and development tax credits to other companies.
Tax credit sales would be capped at $4 million over the company’s lifetime. And the Maryland Department of Business and Economic Development could approve no more than $20 million in such credit swaps in a single year.
“It is imperative for us to continue the nurturing process,” Brasington said, calling biotechnology a “delicate, volatile industry that has a very, very, long time frame for coming to fruition.”
John Holaday, co-founder of EntreMed, a biopharmaceutical company in Rockville, said his company is developing disease-fighting pharmaceuticals, but because it hasn’t put its products on the market yet, it could use the extra money.
“This is a really great opportunity to do well by doing good,” he said. “You do well by fostering the growth of biotech companies . . . and you make a difference in people’s lives.”
However, some view this type of tax-benefit program as “corporate welfare.”
Although the Maryland Taxpayers Association has yet to take a position on this bill, it opposes corporate welfare policies, said Kenneth Timmerman, association president.
“This is a taxpayer bailout of failure,” said Timmerman, who personally opposes the bill’s premise. “I think that’s a terrible idea.”
Maryland is lucky, Timmerman said, to have a thriving biotech industry, but the state should let firms fail or succeed on their own.
“This puts up a sign at the borders of Maryland that says, `Bring me all your failed start-ups and we will give you a bucket of cash to fail here in Maryland,” said Timmerman.
Barve and Duncan, however, both said Maryland must work to keep up with competitor states like Massachusetts, New Jersey and California.
As the industry becomes increasingly competitive, the state can’t afford to lose its edge, said Duncan.
“I am concerned about where we’re going to be 20 years from now,” said Duncan. “I’m concerned not just for Montgomery, but for the whole state” which needs to stay competitive in an increasingly competitive industry.