By Matthew Bragg, Director of Data & Policy, ISTC
Earlier this month, the end of a busy session in Springfield saw new legislation with far-reaching implications for Illinois’ innovation economy, including a $40 billion budget and $45 billion capital bill. Thanks to the hard work of many in the community—including iBIO, the Illinois Chamber of Commerce, IMA, and many others—a number of new policy items will help boost innovation in the state, growing the economy and creating strong new jobs.
R&D Tax Credit Extension
Illinois’ R&D Tax Credit was extended by five years, through 2027 (Senate Bill 1591). The incentive provides a 6.5 percent credit on increases in R&D spending in the state. Though Illinois is a top-10 state for business R&D, growth in this activity has lagged the national average over the past five years (1.4 percent annually growth in Illinois from 2012 to 2016, compared with 5.5 percent growth nationally). Extending the credit provides in-state business with more certainty when planning long-term R&D projects, and will help business R&D activity grow in the state. The extension is a win for R&D focused companies in Illinois, but the legislature stopped short of making the credit permanent, a step advocated for by ISTC and its partners.
Illinois’ new budget increases state support for both K-12 and higher education (Senate Bill 262). K-12 public schools will see a funding increase of $375 million in fiscal year 2020, with state universities and community colleges receiving a 5% increase in base funding, totaling around $67 million. The budget also calls for a $50 million increase to the Monetary Award Program (MAP grants) for low-income students. The new capital bill (House Bill 62) also includes funds for infrastructure improvements and new facilities at campuses across the state.
This investment in Illinois’ public higher education system provides much-needed financial relief, especially for the state’s regional public universities, which were hit hardest by the two year budget impasse of FY 2016 – FY 2017. Despite the uptick in support, state funding for public education has room to grow, with the FY 2020 funding level still $1.6 billion below its peak level from 2002. ISTC applauds Governor Pritzker’s goal to restore our public education institutions, and echo his view that they are “the best economic investments you can make.”
The capital bill includes several significant innovation-focused funding appropriations to the Department of Commerce and Economic Opportunity (DCEO):
- $300 million to DCEO for broadband deployment and strengthening existing broadband networks
- $75 million for the creation of new innovation spaces that will encourage new investment and the creation or retention of jobs in economically depressed areas of the state.
- $50 million to support emerging technology enterprises to support and encourage: commercialization of new technologies, technology transfer projects, and R&D with the potential to foster economic development.
- $15 million for grants awarded in conjunction with the Office of Minority Economic Empowerment.
- The state new budget also carves out $3 million in grants from DCEO to Intersect Illinois for economic development.
Apprenticeship Tax Credit
Along with the extension of the R&D Tax Credit, Senate Bill 1591 established a new apprenticeship tax credit. The new program provides up to $3,500 to employers to cover expenses for those enrolled in qualifying apprenticeship programs, with an additional $1,500 available for those living in underserved areas of the state. The program has a statewide cap of $5 million per year. ISTC supports apprenticeships that widen the pipeline for Illinoisans seeking employment in STEM fields, and will advocate for the expansion of this and similar programs.
Data Center Tax Incentives
A new incentive passed as part of the capital bill exempts qualifying data centers in Illinois from state and local sales tax on new equipment. To qualify, data centers must invest at least $250 million in the facility and hire 20 workers over five years. The program also includes a 20 percent income tax break for developers building new facilities in underserved areas of the state. The new tax incentives improve Illinois’ competitiveness in the attraction and retention of data centers, which will help grow jobs in more rural parts of the state.
Next Up: SBIR Matching Programs
Despite the many successes of this legislative term for the innovation community, a bill that would have created an SBIR matching program in Illinois did not pass. The bill (Senate Bill 1608) proposed state grants of up to 50% of the amount of a federal Phase I award, and encouraged grantees to pursue Phase II awards. SB 1608 passed unanimously in the Senate, but was held up in the House Revenue and Finance Committee.
The federal SBIR programs provides more than $2.5 billion annually in grants from 11 federal agencies designed to help small businesses create and commercialize new technologies. Illinois pulls below its weight in SBIR and STTR funding, ranking 13th among states after receiving $52.9M in 2017. ISTC research shows that SBIR/STTR awards increase the viability and retention of the state’s university-supported startups. To encourage Illinois companies to access this vital federal funding, ISTC will work with iBIO and other partners to establish an SBIR matching program in the state.
Get in Touch: Are there policy items we missed during this busy session? Is your organization interested in pursuing a policy item for the benefit of the innovation community? Please get in touch.