Delaware Governor Jack Markell signed into law new legislation that will double the research and development tax credit the state offers to startups and small businesses.
The Governor signed House Bill 318 at the Delaware BioScience Association’s headquarters in the Delaware Technology Park.
The bill was passed with overwhelming bipartisan support last month by the Delaware Senate and House of Representatives.
As per the new law, businesses with less than $20 million in average annual gross receipts for the most recent four years are eligible for a state R&D tax credit equal to 100 percent of the corresponding federal credit.
Before HB 318 became law, all businesses in the state were entitled to a state R&D tax credit of up to 50 percent of the federal credit. Larger companies will continue to be able to claim up to half of the federal credit.
The amendment is meant to boost Delaware economic development by attracting companies from out of state and by increasing the opportunities for entrepreneurs in the state to innovate and grow.
Gov. Markell said that state R&D tax credits have been proven to encourage research, attract out-of-state companies, and boost the high-tech sector.
Even so, only about two percent of these credits go to startups and small businesses. The Governor said this needs to change, and that’s what this law is about.
“By encouraging research and development at all of our companies, we will incentivize innovation and growth in emerging industries that are vital to our economic future,” said Gov. Markell.
The enhanced amount in tax credits available to each small business won’t reduce state revenues, because the total funding for the R&D tax credit program is still capped at $5 million. The law merely ensures a more equitable distribution, with small businesses and startups getting a larger share of this amount.
State Representative Bryon Short, who sponsored the bill in the House, said the passage and signing of the bill is another step in establishing Delaware as the best state to start and grow a business.
Rep. Short added that Delaware is increasing the opportunity for job growth and enhancing its competitiveness with other states by modernizing the state R&D tax credit to better support the growth of small businesses.