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Amendment Seeks to Broaden R&D Tax Credit

Posted by Brad MacDougall on Jun 30, 2014 6:49:03 AM

An amendment filed Saturday to a proposed Senate economic development bill would broaden existing tax incentives for companies to conduct research and development in the Bay State.

StateHouse-resized-600The amendment, filed by Senator Michael Rodrigues, D-Westport, would allow employers a credit equal to 10 of any research expenses that exceed a base amount calculated over a period of three years.

Associated Industries of Massachusetts supports the expansion and believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011.

“The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, defense and biopharma companies salted throughout the commonwealth. Expanding the R&D credit helps all of these companies produce the kind of innovation that drives the Massachusetts economy,” said John Regan, Executive Vice President of AIM.

“And we know that R&D credits work. Massachusetts enacted a set of research and development tax incentives in 1991 that were among the most advantageous in the nation. Over the next five years, R&D spending in the commonwealth increased by more than 50 percent.”

The Senate legislation, due to be debated on Tuesday, would also make investments in workforce training, entrepreneur mentorship programs, the redevelopment of polluted sites and marketing efforts designed to lure business and travelers to Massachusetts. It includes roughly $63 million in initiatives, including $10 million for the redevelopment of brownfields and $10 million for a new grant fund to support development and the creation of collaborative workspaces in so-called “Gateway Cities” outside of Boston.

AIM is still reviewing additional amendments filed over the week-end. The final Senate bill will go to a conference committee, where legislators will resolve differences with an earlier measure passed by the House of Representatives.

AIM members with significant research activity have pressed for changes to the existing R&D credit because it measures incremental R&D expenditures against a single benchmark year that is often artificially high. A company that invests a significant amount of money in R&D one year could therefore be penalized if it does not boost spending over that already high level.

A recent report from The Pioneer Institute found that overall R&D spending in Massachusetts fell 10.3 percent in the four years ending in 2011. Massachusetts fell further behind chief R&D rival California, which significantly increased its R&D market share on the strength of one of the strongest R&D credits in the nation – 15 percent.

Topics: Economic Development, Taxes

AIM: Enhance R and D Tax Credit; Preserve Non-Compete Agreements

Posted by Christopher Geehern on May 29, 2014 3:49:00 PM

John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts asked Beacon Hill lawmakers this afternoon to enhance the commonwealth's research and development tax credit and to preserve the current system of enforcing non-compete agreements. Regan testified as lawmakers considered Governor Deval Patrick's jobs bill.

Topics: Associated Industries of Massachusetts, Economic Development, Non-Compete Agreements

Legislature, Governor Approve Flood of Business-Related Bills

Posted by Brad MacDougall on Aug 6, 2012 6:13:00 AM

Massachusetts lawmakers sent a flurry of mostly positive business-related legislation to Governor Deval Patrick last week to go with the initiative to control health insurance costs.

PatrickSignsEnergyBill.SmallThe House and Senate passed an energy bill, an economic development bill and a compromise “right to repair” bill in the final hours of formal legislative sessions Tuesday night. Legislators also advanced two measures opposed by AIM – one moving private child care providers into a union and an ambulance payment bill that would add $80 million in health care costs to businesses and consumers.

The governor signed the energy, economic development and child care measures last week. He is expected to approve the health care bill this morning.

Also significant were the bills that the Legislature elected not to approve, including a measure that would have mandated that employers provide seven sick days to workers. Lawmakers also declined to repeal or restrict non-compete agreements that protect the intellectual property of employers.

“The Legislature and Governor Patrick placed a premium on maintaining a business climate that encourages employers to create jobs,” said John Regan, Executive Vice President of Government Affairs for AIM.

“We do not agree on everything, but acknowledge that the governor and Legislature have balanced the budget without increasing taxes and wisely concentrated on issues that will help our unemployed fellow citizens get back to work.”

The flow of bills from the Legislature to the governor did not stop when formal sessions ended at midnight Tuesday. Lawmakers working during informal sessions on Thursday approved two expensive insurance mandates – one requiring insurance companies to cover hearing aids for all children and adults under age 21 and a second requiring coverage of treatment for cleft palates.

The bills of interest to employers include:

  • Energy - The legislation includes a provision supported by AIM that would resolve inequalities under which commercial and industrial ratepayers have paid an increased percentage of total electricity costs despite using a declining share of power. The bill would also require utilities to procure competitively by 2016 an additional 4 percent, or 7 percent total, of their peak-load power needs from renewable sources through long-term contracts of 10 to 20 years. The annual payment for utilities entering into those long-term contracts for renewable energy would drop from 4 percent to 2.75 percent.
  • Economic Development – The measure would improve the schedule for companies making estimated tax payments, authorize investments in research and development, provide tax-credits to start-up enterprises, and suspend the sales tax on the weekend of August 11-12. The measure also creates a $50 million fund to help local universities and nonprofit institutions compete for federal research and development money. Lawmakers removed a provision that would have expanded the bottle bill to non-carbonated beverage containers.
  • Right to Repair - The final legislation protects trade secrets and intellectual property (IP). AIM’s objection to the initial bill was driven by language that would have threatened existing legal protections for IP and trade secrets. Because the legislation passed after the July 3 deadline, Massachusetts residents will still see the Right to Repair questions on the ballot in the November elections. To educate the public about this compromise, all parties that signed the agreement letter have agreed to run ads indicating that the measure is unnecessary.
  • Child Care – The bill would move private-sector child care providers into a union collective bargaining unit.  AIM considers the bill a clear and unprecedented intrusion by government into the private sector.
  • Ambulance Payment - Overall added costs from this provision would be at least $80 million. The bill would codify this inequity with the practical effect of 300 percent of Medicare becoming the floor for all payments, while providing a disincentive for providers to contract with insurers at more reasonable rates. This is clearly contrary to the intent of cost-control efforts.

AIM opposed the cleft palate and hearing aid bills because they represent the latest in a steady stream of health insurance mandates that will exacerbate the health cost crisis for small employers. State-mandated benefits account for $1.3 billion or 12 cents of every dollar paid for health insurance.

“At a time when employers and the state are struggling with rising health care costs and the Legislature has passed payment reform legislation to contain the cost of health care, adopting new mandated benefits runs counter to those efforts,” Regan said.

Topics: Health Care Costs, Issues, Economic Development, Energy

State Seeks Input on Manufacturing Challenges

Posted by Brian Gilmore on Apr 13, 2012 9:35:00 AM

What are the barriers that hinder Massachusetts manufacturers?

RobotState officials want to find out. They plan to survey of Bay State manufacturing companies during the next several days about the issues that affect their ability to compete in the global market. It’s all part of the Patrick administration’s recently announced Advanced Manufacturing Collaborative (AMC) initiative.

Northeastern University will conduct the survey as a follow-up to a similar study the school did in 2007. The earlier survey emphasized the continuing importance to the Massachusetts economy of a manufacturing base dominated by innovative small and medium-sized companies.

The new survey comes at a time when manufacturing has emerged as one of the unlikely superstars of the post-crash economic recovery. The renaissance of high-value manufacturing in Massachusetts is being driven by factors ranging from technology, exports and efficiency to innovative design and a startling reversal of the off-shoring trend that dominated the 1980s and 1990s.

Massachusetts manufacturers have added a net total of 1,800 jobs during the past year. Manufacturing productivity grew 1.7 percent during the past four quarters.

The manufacturing survey includes questions about the structure, employee count and market dynamics of each responding company. It also gives employers the opportunity to weigh in on issues such as access to capital, training and recruitment, use of technology and their reasons for operating in Massachusetts.

All responses will be protected and no individual data or information will be publicly disclosed at any time.

Click me

AIM and several of its member employers participate in the Advanced Manufacturing Collaborative. AMC was launched last fall by the governor with the release of a report calling for the creation of a competitive and innovative cluster of companies with advanced manufacturing capabilities.

Topics: Economic Development, Manufacturing

Massachusetts Republican Lawmakers Unveil Jobs Plan

Posted by Brad MacDougall on Feb 15, 2012 1:02:00 PM

Republican state lawmakers today unveiled a comprehensive jobs proposal they say will put the commonwealth on track to getting 240,000 unemployed residents back to work.

Republican Jobs PlanThe plan, developed from a series of public meetings conducted last year, seeks to stimulate economic growth by making improvements in five key areas - business regulations, education, energy, health care, and taxes.

“While we maintain that government cannot create jobs, we believe government can provide the right environment for the private sector to grow and thrive. Our goal is to alleviate the burdensome regulations and policies that drive entrepreneurs and business away from our commonwealth,” the Republican Caucus wrote in the report, entitled “Putting Massachusetts on the Road to Opportunity.”

The Republican blueprint contains several recommendations long supported by AIM and the business community, most notably reforming the unemployment insurance system, requiring competitive bidding for long-term renewable energy contracts and changing the onerous treble damages law.

“AIM appreciates the continued focus by Beacon Hill on jobs and the economy,” said John Regan, Executive Vice President of Government Affairs.

Specific recommendations of the Republican plan include:

Business Regulations

  • Reform Regulatory Processes for Efficiency
  • Redefine Independent Contractor
  • Create Certainty by Restructuring the Massachusetts Endangered Species Act
  • Streamline and Consolidate Local Permitting Process
  • Reform Unemployment Insurance System
  • Reform Treble Damages for Wage Violations

Education

  • Incentivize Students to Complete Their College Degree by Creating a Finish-Line Grant Program
  • Empower Vocational Schools and Strengthen Collaboration with Community Colleges to Meet Demand for Targeted Skills
  • Establish a Student-Operated Early Investment Fund to Provide Funding for Potential Start-Up Companies to Grow and Create Jobs
  • Qualify Veterans for Licenses and/or Academic Credit at Public Institutions of Higher Learning

Energy

  • Require Competitive Bidding for Long-Term Renewable Energy Contracts
  • Incorporate Small Renewable Hydroelectric Generation into the Renewable Portfolio Standards (RPS)
  • Incorporate Large Renewable Hydroelectric Generation into the Renewable Portfolio Standards (RPS)
  • Establish Energy Policy and Electricity Cost Reduction Commission and Review Renewable Energy Portfolio Standards
  • Require Economic Evaluation of All Proposed Legislative Changes to Energy and Electricity Policies

Health Care 

  • Reform Fair Share Contribution Requirements
  • Increase the Full Time Equivalent (FTE) Threshold
  • Reduce Healthcare Mandates
  • Suspend the Prescription Drug Requirement from Minimum Creditable Coverage Guidelines
  • Reform Massachusetts’ Medical Malpractice Laws

Taxes

  • Reduce Commercial Vehicle Registration Fee
  • Establish a Job Creation Tax Credit
  • Simplify and Eliminate Corporate Fees and Taxes
  • Incentivize First-Time Homebuyer Savings Accounts
  • Establish Angel Investment Tax Credit

The Republican jobs plan is the latest signal that policymakers intend to emphasize economic issues during 2012.

House Speaker Robert A. DeLeo last week outlined a 2012 agenda that includes improving the business climate, reforming health care and producing a state budget without new taxes and fees.  In December, the Patrick administration unveiled an economic development plan it says will help Massachusetts compete in the global economy by making strategic investments in education, innovation and infrastructure.

Topics: Massachusetts Legislature, Economic Development

Mestek, Orion Find New Business Close to Home in Massachusetts

Posted by Christopher Geehern on Jan 31, 2012 2:19:00 PM

Richard Kessler of Mestek Inc. in Westfield and Peter Smith of Orion Industries in Ayer both admit to being a bit surprised that the two companies would end up doing business as a result of a BuyMass Matchmaking event at Mestek in November.

BuyMassMestek, after all, is a $400 million heating, ventilating and air conditioning systems maker that until recently bought thermal insulation materials from a national supplier located in the southern United States.

Orion is a 35-person company that typically sells fabricated parts to electronics and medical-device companies. Orion sold thermal insulation years ago to a Massachusetts HVAC manufacturer, but that company eventually moved production overseas.

Two weeks after the BuyMass event, however, Mestek placed an initial order for thermal insulation materials with Orion. The Ayer company is now bidding on a second project to supply Mestek with gasket pieces.

“Orion showed an interest in our business and demonstrated the strong technical ability that we need. Their lead time was also better than the incumbent and speed wins,” said Mr. Kessler, the Vice President of Supply Management at Mestek and the executive in charge of the BuyMass event.

He reported that two or three other companies that attended the matchmaking session may also become Mestek partners.

Mr. Smith, the Orion Industries sales manager, came to the November 17 BuyMass event with a case of the flu and some serious doubts about whether his company could provide products that Mestek needed. He walked curiously around a display of Mestek boilers before his meeting, looking inside each one to determine whether it might use Orion products.

“We were very pleasantly surprised to get the business,” Mr. Smith said.

“Mestek is not a typical customer for us – we’re usually doing fabricated parts for specialized electronic equipment. But to gain this business over a company in the south with lower overhead is exciting.”

Orion, founded in 1973, designs and manufactures custom parts, specializing in electrical insulation, gaskets and seals, thermal transfer materials, and EMI/RFI shield laminates.

Mestek met with 19 potential suppliers overall at the November event,  the latest in a series of supplier-matchmaking sessions organized by AIM’s BuyMass initiative as part of an effort to encourage the development of commercial relationships among Massachusetts companies. BuyMass created a matchmaking event for Raytheon Company in the spring of 2011 at which the defense engineering company met with 15 potential suppliers.

Additional BuyMass Matchmaking events will be scheduled this year. The meetings have produced a number of successful supply relationships among Massachusetts companies, including one between Raytheon and office products manufacturer Roxbury Technology Corporation of Hyde Park.

Mr. Kessler said the BuyMass event offered Mestek an efficient way to find interesting and price-competitive companies that will help it win worldwide market share. He noted that Orion not only offered a lower unit price than its competitors, but also a lower total acquired cost, a broader category that includes selling, transportation, minimum order quantities, lead time, stocking programs and technical resources.

“Orion was the clear choice,” he said.

The November BuyMass event was co-sponsored by the Massachusetts Executive Office of Housing and Economic Development and the Economic Development Council of Western Massachusetts.

 

Topics: Economic Development, BuyMass

Administration Economic Plan Highlights Growth Industries

Posted by John Regan on Dec 29, 2011 1:15:00 PM

The Patrick administration yesterday unveiled an economic development plan it says will help Massachusetts compete in the global economy by making strategic investments in education, innovation and infrastructure.

Chooosing to CompeteThe 34-page blueprint, Choosing to Compete in the 21st Century, is the first to be developed under a 2010 law requiring the governor of Massachusetts to submit to the legislature an economic plan at the beginning of his or her administration. The plan includes five primary initiatives:

  • advancing education and workforce development for middle-skill jobs through coordination of education;
  • economic development and workforce development programs;
  • supporting innovation and entrepreneurship;
  • supporting regional development through infrastructure investments and local empowerment; and
  • increasing the ease of doing business; and addressing our cost competiveness

An Economic Development Planning Council made up of 34 state officials and business executives developed the plan over eight months. Michael Hogan, President and Chief Executive Officer of the A.D. Makepeace Company in Wareham and a member of the Associated Industries of Massachusetts Board of Directors, represented AIM on the council.

"The Economic Development Planning Council plan will help continue to support the economic growth we have seen, while identifying ways to make Massachusetts more competitive in the world economy and allow the administration to work with our partners in the business and academic communities to make the commonwealth stronger in the long term," Secretary of Housing and Economic Development Gregory Bialecki said in a statement.

The plan contains 55 specific recommendations that strongly reflect the administration’s emphasis on supporting innovation industries and emerging technologies.

Key recommendations, taken directly from the plan, include:

  • Design and develop a cohesive, coordinated workforce development system with clear leadership - The commonwealth requires a more cohesive and coordinated “workforce development system” and employers, education and workforce training providers, and others should be engaged in designing this system.
  • Protect and maintain full funding of currently well-performing programs such as the Workforce Training Program.
  • Strengthen and support the innovation community - Increasingly, the commonwealth will succeed in sectors where its public and private universities, research institutions and companies collaborate to drive discovery and address barriers to development and commercialization that no one institution can do by itself.
  • Engage in on-going state regulatory review - In order to enhance the long-term health and prosperity of the state, it is important to maintain a transparent and consistent regulatory process that considers the economic impact of government regulation.
  • Contain the increasing cost of health care while protecting access and quality - The commonwealth needs to maintain an appropriate balance between providing both top quality and unimpeded access to health care for its citizens while at the same time carefully watching the increasing cost impact on businesses and jobs.
  • Reduce energy costs while creating a diversified energy portfolio that balances competitive pricing with sustainability - While containing the growth of energy costs is a paramount concern in the short-term, it is equally important to focus on longer-term, sustainable energy sources that will fuel our growing economy.
  • Make the tax structure more simple, competitive, and predictable by addressing the use of tax-based business incentives - Businesses make location and expansion decisions based not only on the overall business tax burden, but also on the simplicity, fairness and predictability of the tax system. A competitive tax system for Massachusetts should address both aspects. An appropriate area of focus is the use, effectiveness and accountability of tax-based business incentives in the state.

The legislature will conduct a hearing on the administration plan early in 2012.

What do you think? Please share your opinions in the comment space below or contact me directly at jregan@aimnet.org.

Topics: Issues, Massachusetts economy, Economic Development, Deval Patrick, Jobs

Governor, AIM Announce Expanded BuyMass Initiative

Posted by Christopher Geehern on May 16, 2011 8:32:00 AM

Associated Industries of Massachusetts (AIM) and the Commonwealth of Massachusetts on Friday announced a major expansion of their public/private collaboration to stimulate the economy by encouraging Massachusetts companies to do business with one another.

BuyMassGovernor Deval Patrick announced the expanded BuyMass initiative during a keynote address today to more than 600 business leaders at the AIM Annual Meeting in Waltham. The improvements include new search capabilities for the BuyMass.org statewide online directory and the introduction of BuyMass Matchmaking, a series of focused business-to-business meetings throughout Massachusetts between global companies and best-in-class suppliers.

BuyMass is supported by major private employers such as Raytheon Company, Procter & Gamble|Gillette, GE Aviation, the DePuy Companies of Johnson & Johnson, New Balance, Salem Five, NYPRO, Mestek and Solutia. The objective is for manufacturing and other companies to develop regional supply networks and commercial relationships that create jobs and economic opportunity for the citizens of the Commonwealth.

“The public and private sectors are working side-by-side to strengthen our economic recovery and help Massachusetts employers find exciting new business opportunities right here in their own backyard,” said Governor Patrick.

“Global companies identify innovative providers of new technologies and products, while young, entrepreneurial companies find important new customers. These partnerships deliver lasting economic benefits for individual businesses, regional economies and our entire Commonwealth."

AIM and the Patrick-Murray Administration’s Executive Office of Housing and Economic Development have been working on the BuyMass initiative for more than a year. The formal announcement came less than a week after the inaugural BuyMass Matchmaking event in Springfield brought defense and technology giant Raytheon together with 15 potential business partners offering everything from radar and sonar technology to computer software.

“We are very appreciative for the opportunity to meet with Raytheon and look forward to meeting with other Massachusetts companies to create business growth in the manufacturing sector. We can do business with global companies like Raytheon, but we just need someone to open the door and help us find the right people,” said Robert Klinger, President of Klinger Engineering in Whately.

Richard C. Lord, President of Associated Industries of Massachusetts and Chief Executive of the BuyMass initiative, said the idea of regional matchmaking events comes directly from the companies such as Raytheon that support and advise BuyMass.

“These companies want efficient opportunities to establish relationships that will create revenue, growth and jobs throughout the Massachusetts economy. The fact that Raytheon stepped forward to participate in the Springfield event underscores the company’s longtime dedication to improving the Massachusetts manufacturing economy,” Lord said.

The BuyMass.org online directory includes more than 6,000 Massachusetts companies ranging from global high technology enterprises to physician practices to bed-and-breakfasts. New upgrades to the site will allow potential customers to search for Bay State companies by product, industry, location or designations such as minority owned enterprise or ISO 9000 certified.

Secretary of Housing and Economic Development Gregory Bialecki, who participated in last week’s matchmaking event with Raytheon in Springfield, said the Commonwealth is using BuyMass to help companies looking to locate or expand in Massachusetts find potential suppliers. The idea, according to Secretary Bialecki, is for Massachusetts companies to find opportunities that make business sense for the parties involved and end up growing the economy.

“The Patrick-Murray Administration has worked with the many world-class manufacturers across the Commonwealth and is pleased to partner with AIM to strengthen our efforts to help companies expand their sales in-state,” said Secretary Bialecki.

Founding Supporters of BuyMass include:

Raytheon Company
GE Aviation
Procter & Gamble | Gillette
New Balance
DePuy Companies of Johnson & Johnson
NYPRO, Inc.
Mestek, Inc.
Solutia, Inc.
Commonwealth of Massachusetts
Salem Five
Chase Corporation
Sturtevant, Inc.
Roxbury Technology Corporation
Humboldt Storage and Moving
Universal Plastics
Artaic LLC
Mylec, Inc.

Topics: Associated Industries of Massachusetts, Economic Development, Deval Patrick, BuyMass

Raytheon Meets Potential Suppliers at BuyMass Event in Springfield

Posted by Christopher Geehern on May 6, 2011 8:26:00 AM

What do you get when you combine global defense and technology leader Raytheon with 15 Massachusetts companies offering world-class technology and processes in everything from materials to computer software?

Raytheon“A really great opportunity to do more business and to grow,” said one participant in the inaugural BuyMass supplier matchmaking event yesterday in Springfield.

Raytheon met throughout the day at the Springfield Technology Park with companies it had selected for their ability to address the company’s interest in sonar technologies, command and control systems, renewable energy storage and other areas. The strict pre-qualification process meant that Raytheon will follow up with virtually all of the companies with which it spoke.

Raytheon representative also attended a luncheon at which Secretary of Housing and Economic Development Gregory Bialecki, Springfield Mayor Domenic Sarno and regional development executives discussed the economic assets of the Pioneer Valley.

BuyMass is a joint business-development initiative of Associated Industries of Massachusetts and Executive Office of Housing and Economic Development. The collaboration is intended to encourage Massachusetts companies to develop regional supply networks and commercial relationships with other employers in the commonwealth.  

 Yesterday’s matchmaking event was conducted in partnership with the Economic Development Council of Western Massachusetts (EDC).

“The matchmaking event gives Raytheon the opportunity to find innovative and world-class suppliers in western Massachusetts while allowing companies here in the Valley to speak directly about their technologies and products to one of the world’s foremost companies,” said Allan Blair, President of the EDC.

Raytheon has 1,700 subcontractors in the state doing about $600 million a year in business, said Dennis G. Austin, director of state government relations for Raytheon.

Richard C. Lord, President of Associated Industries of Massachusetts and Chief Executive of the BuyMass initiative, said the idea of regional matchmaking events comes directly from the companies such as Raytheon, Procter & Gamble|Gillette, General Electric and Solutia that support and advise BuyMass.

“These companies want efficient opportunities to establish relationships that will create revenue, growth and jobs throughout the Massachusetts economy. The fact that Raytheon stepped forward to participate in the Springfield event underscores the company’s longtime dedication to improving the Massachusetts manufacturing economy,” Lord said.

Bialecki told the group that the matchmaking events are intended to help both larger companies and smaller potential suppliers from Massachusetts discover legitimate opportunities for doing business. The Patrick administration, according to Bialecki, will not pressure companies like Raytheon to buy goods or services that are not in the best interests of their companies, but rather invite them to participate because there is measurable benefit.

Read The Springfield Republican article.

Topics: Associated Industries of Massachusetts, Economic Development, BuyMass

Tax Law Used by Fidelity Resolved Longstanding Inequities

Posted by Rick Lord on Mar 29, 2011 4:22:00 PM

The recent announcement by Fidelity Investments that it plans to move about 1,100 jobs from its Marlborough location here in Massachusetts to company sites in New Hampshire and Rhode Island has ignited a firestorm of commentary related to a 1996 state economic-development law. Much of that commentary – which has suggested that the legislation was a cash incentive enacted primarily for Fidelity's benefit – has misrepresented the provisions, scope and spirit of the law.

Economic DevelopmentThe 1996 Jobs Growth Act created an equitable tax structure for the mutual fund industry in Massachusetts. Prior to the law’s enactment, Massachusetts’ corporate income tax structure penalized mutual fund firms that grew in the state, taxing them for every job they created and any real estate they built or acquired to run their operations. The Jobs Growth Act leveled the playing field between in-state and out-of-state companies by basing the tax on a company’s sales in the Commonwealth, in proportion to the company’s total sales.

The old tax structure had existed since the early 20th century and was the remnant of a time when the vast majority of companies were local entities, operating largely in one state. Massachusetts had already addressed this tax apportionment imbalance on behalf of the manufacturing and defense industries in 1995. The 1996 Jobs Growth Act extended this new, more equitable tax structure to the mutual fund industry, but added one significant stipulation: The mutual fund companies were required to grow their in-state employee count by at least 5 percent per year for the next five years in order to qualify. No benefit could be obtained unless the job growth requirements were met.

Among economic planners and tax professionals, the thinking behind the 1996 law is hardly controversial. Because of the inherent disadvantages for in-state companies, most states have been moving away from the historical approach and toward the apportionment method more heavily based on sales.

While Massachusetts was an early adopter, today the majority of states, including major markets such as California, New York, New Jersey and Texas, have similar apportionment rules for mutual fund and other financial service businesses.  Any retreat from this law in Massachusetts would place the Commonwealth at a distinct competitive disadvantage.

Fidelity's announcement regarding its Marlborough campus employees is disappointing, especially to the many local businesses in and around Marlborough. But the rhetoric of some policymakers, implying that the application of a widely accepted approach to taxing mutual fund companies is somehow a “corporate giveaway,” is troubling. Criticizing the decision of a major employer that has clearly and indisputably complied with the law is short-sighted and likely will prove to be counter-productive.

Competitive tax policies enable a state to “compete” for jobs—they are essential but not sufficient to attracting and maintaining jobs. Many factors affect decisions to locate and grow employment. But the rush to politicize this particular business decision by Fidelity should not obscure the fact that the Jobs Growth Act has done exactly what it was enacted to do – create and preserve thousands of high-quality jobs, thereby enriching the state, its residents and its communities.

Topics: Massachusetts economy, Economic Development, Taxes, Jobs

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