On Monday June 13, the Joint Finance Committee (JFC) approved the Wisconsin Economic Development Corporation’s (WEDC) request to reallocate tax credits between two tax credit programs. WEDC proposed reallocating $8 million in unused Early Stage Business Investment Tax Credits to the Business Development Tax Credit program.
The Early Stage Business Investment Tax Credit program includes two types of nonrefundable tax credits: the angel investment tax credit and the early stage seed investment tax credit. Nonrefundable tax credits provide a refund only up to the amount owed in taxes, while refundable tax credits provide a payment back if the tax liability is exceeded.
Under the 2015-17 budget, the angel and early stage seed investment tax credits were capped at $30 million per calendar year. The budget also restricted any of these credits from being carried over into subsequent years. However, under the budget and with a JFC passive 14-day review, unused angel and early stage seed tax credits could be reallocated as refundable business tax credits. Reallocating the angel and early stage seed investment tax credits to the refundable Business Development Tax Credit program will increase the amount of business development tax credits available in 2016 from $17 million to $25 million. The Business Development Tax Credit program was created under the 2015-17 budget from the consolidation of the nonrefundable economic development tax credit and the refundable jobs tax credit.
The Legislative Fiscal Bureau memo outlining WEDC’s request, states that the fiscal effect of this reallocation will increase general purpose revenue (GPR) by $8 million in future years. The business development tax credits can be carried over year after year, therefore LFB estimates that GPR will increase $2 million in 2016-17 and $6 million in 2017-18. The fiscal year for 2016-17 begins on July 1, 2016.