Earlier this week, the Maine Legislature's Taxation Committee held a public hearing on LD 498, a bill to restore the Super Credit for Research and Development expenses that was eliminated in 2014. Maine's R&D tax credits are not used very much, being focused only on increases in R&D year over year, rather than overall levels of R&D. In addition, as credits on taxes owed, they are not particularly useful for early-stage companies that are conducting a great deal of R&D, but do not have profits that are taxable. To read more about this bill, and other ideas for using tax policy to help startups, click HERE.

Cathy

FCC Decision on Net Neutrality

In mid-February, the Federal Communications Commission (FCC) voted to approve its Net Neutrality policy, effectively deciding to regulate the Internet as a utility. This decision blocks broadband providers from offering different access speeds to different users at different prices. Supporters of this decision, including entrepreneurs, did not want large corporations such as Google, Yahoo or Netflix, to have so-called "fast lanes" that only they could afford. Detractors of the policy argued that regulating the Internet will end up quashing innovation by taking away the incentives for large Internet Service Providers (ISPs) to invest in their networks. In an interesting twist, the Wall Street Journal editorialized about the evils of this decision, calling it worse than Obamacare, while simultaneously reporting that the stock prices of the major ISPs went up after the decision, reflecting the market view that this policy will not actually harm them very much. Read the Scientific American view HERE. 

Start-up Capital Spreading to Flyover States

Although a handful of well-known cities continue to dominate early-stage venture capital investing, other cities are making significant strides. This is the conclusion of a new study by Ian Hathaway recently reported in the Harvard Business Review. Hathaway found that the number of first fundings (initial rounds of professional venture investment) increased 150 percent between 2009 and 2012. He also found that seven of every ten early-stage deals go to companies located in the top 5 percent of cities. The important point is that the bottom of the pyramid is broadening. Some of the new cities in the top twenty include Provo, UT, Charlottesville, VA, Lincoln, NE and Wilmington, DE. To view the data, click HERE.

Who Qualifies as an Accredited Investor?

With the rise of crowdfunding, an important question is coming up: Who qualifies as an Accredited Investor? The current definition was set by the Securities and Exchange Commission (SEC) back in the 1930s in order to protect investors after the excesses of the 1920s. The idea was that accredited investors would be sophisticated enough to make their own investment decisions. The level of financial independence now required by the SEC has remained unchanged for 30 years, allowing inflation to devalue the income and net worth thresholds. 

So, the SEC has been considering moving the thresholds up substantially. Angels and entrepreneurs have been against the change, arguing that the pool of potential investors would be significantly diminished. Instead, many are arguing for a change that would allow the substitution of education or experience for income and net worth as the appropriate threshold. The SEC Advisory Committee appears to concur that simply raising the threshold is too simplistic, and is continuing its work. Click HERE to read the SEC recommendations. 

The Real Results of Federal R&D

My esteemed colleagues at Battelle have recently published an analysis of patents based on federal R&D investments. They found that the R&D programs at the National Institutes of Health, the National Science Foundation, the Department of Energy and the National Institute for Standards and Technology are very productive when it comes to patents. But, the Department of Defense R&D programs were substantially less productive, generating ½ to 1/5 as many patents as the other agencies.