LANSING – The stalemate in the Michigan legislature over whether or not to phase out the Single Business Tax has left the fate of the Venture Michigan Fund in limbo as well.
The Venture Michigan would pump nearly $150 million into Venture Capital companies that would in turn invest that money in promising Michigan technology start ups and life sciences companies, to help diversify the Michigan economy away from such heavy dependence on the auto industry and manufacturing.
But the tax credit that backs the fund is tied to the Single Business Tax, Kelly Williams, a Managing Director at First Boston Credit Suisse told the Michigan Venture Capital Association annual meeting Nov. 10. She said the amendment to sunset the Single Business Tax by 2010 – an amendment inserted last week by Legislative Republicans into a bill that would also create a $1.4 billion technology job investment fund – would undermine the state’s ability to provide tax credits to back the Venture Fund. The Fund would operate for 12 years, eight years beyond the proposed SBT sunset.
Granholm has threatened to veto the entire $3 million job creation, tax cut package unless the Republicans remove the SBT sunset provision.
Michigan Treasurer Jay Rising confirmed Williams conclusion.
“What we stated is we’d have a tax credit backing up the investment against the SBT,’’ he said. “The Venture Michigan Fund would provide a voucher to pay your tax. If there is no tax to pay, the voucher is worth nothing and the backstop is worth nothing.”
Rising said the Venture Michigan Fund would allow investors that lose money on their SBT vouchers could instead trade them for income tax vouchers if no SBT tax existed.
“We don’t even know who we can sell the income tax credits to,” Rising said. “It will be a much harder credit to analyze. It would be much easier if we had just the SBT credit.”