Letter to the Legislature: Reinstate the R&D Tax Incentive Program

Dear Governor/Legislator:

Washington faces significant fiscal challenges over the next few years. As employer representatives, we understand the issues and also want to enhance a competitive business climate that creates additional job opportunities for the citizens of our state – and generates needed resources to build a better state. We believe that the public and private sectors working together can successfully tackle these issues.

Over the last two decades, the combined technology industries have become the primary driver of job growth in Washington. Today, more than one in four Washington jobs is directly or indirectly attributable to these industries, making them a key foundation to our state’s economic health. These companies provide high wage jobs in growing fields such as information technology, aerospace, biotechnology, health care, and clean energy. 

The innovative climate they create spills over to other local employers in more traditional fields like retail and manufacturing, helping make them more competitive and spurring additional economic growth. The economic activity they create in turn has a significant multiplier effect throughout the entire economy.
 
The important role played by the innovation sector is why we are writing: to urge the 2015 legislature to reinstate the research and development (R&D) tax incentive programs that have served our state so well over the last two decades. These incentives, which are expiring on January 1st, have encouraged high-value R&D activities and helped spawn new industries, generating significant resources for state and local governments throughout Washington. The combined tech industries generate nearly $3 billion in sales and business and occupation taxes each year – which means for every one dollar invested by the state during the past twenty years, our industries give back almost three dollars every single year. 
The benefits of the incentives are clear; Washington is a premier destination for fast growing science and technology companies. Let’s keep it that way.
We are highlighting the following examples of companies that have used the R&D tax preferences to build their business. Keep in mind this represents a very small sample of the many hundreds of companies that have used the incentives to grow their business and hire Washington citizens.

 

Impinj  Impinj is the global leader in RFID technology and is a leading innovator in the emerging field known as Internet of Things. They have invested 14 years and more than $130M in capital to research, design and test the technology that now makes them a leader.  The R&D incentives were instrumental in allowing them to invest precious capital into hiring top talent. It also helps soften the blow of a regressive tax policy that harms early stage companies.  It is essential that Washington State encourage investment into R&D. 

 
Micronics – The R&D tax credit of approximately $35,000, helped allow the company to retain two key employees and keep their doors open for business at a critical stage in the company’s development. The company has since obtained FDA clearance of one product and has received global recognition for its technologies. The company now employees 50 people and is expected to grow to 90 by the end of 2015.
 
Seattle Genetics – The Company currently employs more than 600 people, approximately 65 percent of whom are in research and development, where to date the company has invested more than $1 billion. The sales and use tax deferral was critical in doubling their laboratory space, allowing them to hire additional research staff. In August of 2011 the company’s drug ADCETRIS was approved by the FDA, the first drug approved in 30 years for Hodgkin’s Lymphoma.

 F5 NetworksF5 Networks is the global leader in Application Delivery Networking. The company’s hardware, software, and virtual solutions help organizations address the relentless growth of voice, data, and video traffic to better support mobile workers and applications—in the data center, the network, and the cloud.   F5 was founded in 1996 and now is an S&P500 company that employs more than 3300 employees worldwide.   The R&D tax incentive programs helped the company over the past 15 years to hire critical employees. An R&D tax preference is essential to building a future IT industry in the state.

 

EMC/Isilon  Isilon Systems was founded in 2001 to provide data storage solutions for large scale content like pictures, videos and DNA sequences. It took an enormous amount of capital and nearly a decade of development before they had their first profitable year.  The R&D tax preferences were instrumental in allowing them to build the business and accelerate hiring so that they could bring solutions to market more rapidly.  In 2010 EMC, the global leader in data storage, acquired Isilon Systems.  They are still based in Seattle and continue to grow employing nearly 1,000 people in the State.    

 

Zillow – Zillow conducts “advanced computing” under Washington State law, which results in significant savings through the research and development tax incentive programs. This allows them to hire more people and focus on other ways to grow the business, which in turn helps the local economy. Zillow, like many companies, have been approached by other jurisdictions, from Nebraska to New York to Louisiana, with tax incentives to hire high-tech employees in their states. To stay competitive with other jurisdictions and for future company growth in Washington, the state needs to extend this tax incentive.

 

ZymoGenetics — Founded in 1981, ZymoGenetics is focused on the discovery, development, manufacturing and commercialization of therapeutic proteins. The R&D tax credit incentives enabled continued and future BMS investment locally in ZymoGenetics R&D personnel, capital projects, and importantly, the discovery, development and delivery of innovative medicines to help patients prevail over their serious diseases. In addition to their scientific contributions, the R&D tax credit was a key strategic business driver in the acquisition by Bristol-Myers Squibb in 2010 and decision to keep ZymoGenetics doors open & continue operations and expansion in Washington State.

 

These are just a few of the stories where the R&D incentives made a key difference in the economic prospects of important local employers, created new employment opportunities in our state, accelerated research investments and further advanced our global reputation as a destination for innovation.

 

In addition to these direct economic benefits, communities across Washington have been improved by the charitable contributions and volunteer efforts of the companies and employees of the innovation sector. There has been generous support of K-12 and higher education, scholarships, social services, environmental causes and the arts, which have made a significant difference in the lives of citizens across our state.

Other states and countries continue to view Washington’s strong technology sector with envy and aggressively recruit our firms to relocate or expand elsewhere. These governments often provide a wide variety of incentives that are unavailable in this state.  Reauthorization of the R&D incentives sends the right signal at the right time to one of the most vibrant sectors of our economy, securing their intent to grow and expand here in Washington State.

While budget pressures will surely be intense during the 2015 session, extension of these incentives is a prudent investment in the continued economic growth of our state. The best way to generate funding for public education and other critical government services is to grow the state economy. Reinstating these incentives will help retain and expand a critically important industry at this most crucial time.

 

We strongly encourage you to extend the R&D incentives for Washington state companies.

Sincerely,

 

Kris Johnson,

President

Association of Washington Business

 

Robert Bernardi

Chair

Clark County HTC

 

Tom Ranken,

President & CEO

CleanTech Alliance

 

Ernie Simas

Chair

East King County Chambers of Commerce

 

Suzanne Dale-Estey

President & CEO

EDC of Seattle & King County

 

Susannah Malarkey

Executive

Director Technology Alliance

 

Maud Daudon

President & CEO

Seattle Chamber of Commerce

 

Meg Weber

Executive Director

Technology Alliance Group NW

 

Chris Rivera

President & CEO

WBBA

 

Mayor John Marchione,

Washingon Tech Cities Coalition

 

Michael Schutzler

CEO

WTIA

 

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