The Newsletter of TechPAC and NVTC

March 6, 2009

In This Issue
2009 General Assembly Wrap-Up
Veto Session on April 8

To track the legislation NVTC has been monitoring this session, visit NVTC's legislative tracking page.

2009 General Assembly Wrap-Up
The 2009 Virginia General Assembly session was marked by the cloud of a $3.7 billion statewide budget shortfall. Despite this, NVTC was successful in carrying forth several initiatives that retained and even expanded important technology-related programs. What follows are the major developments in this year's General Assembly.

Narrowly Targeting Angel Investor Tax Credit for Technology, Biotechnology, Energy Start-Ups
The General Assembly passed NVTC-backed legislation to encourage investments in Virginia technology start-ups, by retooling the Angel Investor Tax Credit to apply specifically to technology, biotechnology, and energy-related start-ups. NVTC initially led the successful effort to establish the Angel Investor Tax Credit in 1998. However, the broad scope of the law eventually eroded the effectiveness of the program. Investors in all types of businesses utilized the credit, diminishing its effectiveness for the technology industry. This session, NVTC successfully narrowed the credit to investments in small technology, biotechnology and energy companies, a major victory in a session known more for cutbacks, not credits.

Expanding Scope of Technology Research Fund
The General Assembly passed NVTC-backed legislation to revamp Virginia's Technology Research Fund to provide for matching funds to universities to leverage federal and private dollars for the commercialization of qualified research. The fund was also revamped to leverage public-private partnerships to build out wet lab space at universities and for state SBIR/STTR matches to anchor private sector research in Virginia.

NVTC also was successful this session in convincing legislators to restore $2 million in funding for the Technology Research Fund which the Senate had proposed reducing and the House had proposed eliminating. By leveraging the Technology Research Fund in support of private investment and public-private partnerships, it is NVTC's intention to expand wet lab capacity at George Mason University and to support the placement in Virginia of one of five national Nanotechnology Research Institute facilities. The NRI facility would partner with University of Virginia, VA Tech, GMU, VCU, and William & Mary Schools of Engineering to focus on research in nanostructures.

Transportation Funding
NVTC supported and the General Assembly passed legislation amending the Metro governance agreement to ensure eligibility to receive $150 million per year in federal matching funds. The legislation amends the Metro compact relating to board membership, officers, and payments, pursuant to the new federal law which authorizes $150 million in federal funding per year for 10 years for WMATA to purchase Metro rail cars and buses. The federal law first requires, however, that the District of Columbia, Maryland, and Virginia each dedicate $50 million per year to match the federal funding and add certain federal oversight provisions to the Compact.

Unfortunately, but as expected, the General Assembly adjourned without passing any other significant transportation funding bills. Dozens of bills had been introduced this session seeking to tackle Northern Virginia's transportation funding crisis and statewide transportation funding challenges, by raising new revenues or changing funding formulas to redistribute existing funds. The Assembly did reduce the transportation budget to reflect an additional $124.8 million of anticipated transportation money that would not be coming in due to the budget shortfall. Legislators also required the Secretary of Transportation to provide a detailed list of projects that would be funded through the $800 million federal transportation stimulus package.

Funding for Higher Education Partially Restored
While the General Assembly passed a budget that adopted the 5-7 percent cuts to colleges and universities announced back in October, the final budget agreement used $126.7 million of federal stimulus funds to mostly offset an additional round of cuts that would have reduced funding to colleges and universities by 15% in FY2010. Legislators expect the partially restored funding to mitigate the need for tuition and fee increases for in-state students. The budget agreement also restores $4 million to the Eminent Scholars program, which provides matching funds aimed at attracting and retaining nationally renowned teaching and research faculty at state colleges and universities.

New Internet Sales Tax Collection Obligations Rejected
NVTC opposed and the General Assembly rejected a proposal to enlist Virginia in the multi-state streamlined sales and use tax agreement governing taxation of e-commerceľbased transactions. The legislation sought to enroll Virginia in the multi-state Streamlined Sales and Use Tax Agreement (SSUTA) to encourage Congress to place new multi-state sales tax collection obligations on Virginia companies that sell goods, services or content into states that tax those items, even if they don't have a physical presence in those states.

In testifying against the proposal, NVTC shared concerns that businesses, especially small companies, lack the staff and resources to collect and disburse such taxes, and that the costs could be prohibitive to doing business. Also, the Agreement goes beyond tangible goods, into areas of business that Virginia companies have never taxed before, for example, digital downloads and technology services. NVTC noted that the legislation also invites audits by multiple states and potentially every state in which a business has a customer. Finally, NVTC cautioned legislators that the legislation could have an adverse impact on Virginia's competitive advantage in attracting technology businesses by leveling tax competition among the states.

IT Governance Reforms
The Governor and the legislature agreed this year to move forward with IT governance reforms that more strongly align authority, accountability and responsibility within state government. The General Assembly agreed to provide the Governor with greater control over Virginia's Information Technology Investment Board by expanding the Secretary of Technology's influence on the Board by designating him as permanent statutory vice-chair and substituting one of the appointed slots on the Board with the Secretary of Finance. They also established a Division of Enterprise Applications under the Virginia Information Technologies Agency (VITA), headed by a Chief Applications Officer (CAO) reporting to Virginia's CIO. Oversight of agency technology applications budgets and infrastructure expenditures and also enterprise wide technology applications were placed under the purview of the powers and duties of both the Division of Enterprise Applications and Information Technology Investment Board.

Innovation and Entrepreneurship Investment Authority Created
The General Assembly approved legislation merging the Virginia Research Technology Advisory Commission and the Innovative Technology Authority into a new Innovation and Entrepreneurship Investment Authority. The new Authority has heightened oversight over state R&D efforts including the development of a comprehensive R&D strategic roadmap for Virginia and receipt and review of annual reports from state institutions of higher education regarding the progress of projects funded through the Commonwealth Research Initiative or the Commonwealth Technology Research Fund.

Center for Innovative Technology Preserved
The General Assembly maintained the Governor's recommended appropriation of $5 million in annual funding for the Center for Innovative Technology (CIT) which, over the past 25 years, has been instrumental in ensuring that Virginia's education, research and workforce investments remain in the Commonwealth. CIT returns $14 to Virginia's economy for every $1 Virginia invests. CIT's GAP Fund has earned national recognition for its efforts in encouraging Virginia entrepreneurs and innovative technology start-up companies to locate and grow within the Commonwealth by investing in seed-stage firms and university spin-offs with a high potential for successful commercialization, rapid growth and downstream private equity financing.

Telework Responsibility and Oversight Consolidated Under Strengthened Secretary of Technology
The legislature approved a statute consolidating state telework initiatives and responsibilities under the Secretary of Technology. They also authorized the Director of the Office of Telework Promotion and Broadband Assistance to advise and assist private sector employers in planning, developing, and administering programs, projects, plans, policies, and other activities for telecommuting by private sector employees.

Broadband Advisory Council Established
The legislature established a Broadband Advisory Council to advise the Governor on policy and funding priorities to expedite deployment and reduce the cost of broadband access in Virginia.

Single Sales Factor
The General Assembly passed legislation modifying the corporate apportionment formula for Virginia's corporate income tax by allowing multi-state manufacturing companies to elect to use a single sales factor to determine their Virginia taxable income. The legislation will be phased in over the next five years.

Green Energy and Technology
While many green and energy-related bills fell victim to budget realities and politics, the legislature was able to pass a few important bills related to green energy. NVTC worked to ensure that legislation, allowing utilities to recover the costs of creating and managing energy efficiency programs from their customers, treats large data centers and technology companies on par with large manufacturers who are exempted from cost recovery, if they have already spent significant money implementing their own energy efficiency measures.

The legislature also approved bills adding non-feedstock based biofuels to existing biofuels tax credits, awarding these non-feedstock biofuels a greater share of already-existing grants and credits for biofuels. Additional legislation allows localities to award rate or grant incentives to encourage and reward green roof construction. Legislation was also passed that instructs the State Corporation Commission to determine achievable and cost effective energy conservation goals for the Commonwealth, that asks for the establishment of electric energy efficiency standards, and that sets goals for reducing peak electricity demand by 2015.

Expanding Wet Lab Capacity
The legislature added a Bioscience Wet Laboratory Facility under the Virginia Economic Development Partnership (VEDP) to Virginia's six-year capital outlay plan, for projects to be funded entirely or partially from general fund-supported resources. The six-year capital outlay plan now provides for the construction and renovation of biotechnology shell buildings designed to accommodate wet-lab space or other needed laboratory, research, office, or production space, to attract biosciences and other related technology companies to the state, and it also accommodates the growth of companies already located in Virginia.

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Veto Session on April 8
The General Assembly is scheduled to reconvene for the Veto Session on Wednesday, April 8, 2009 at 12 noon. Between now and then, Governor Kaine and his Administration will be reviewing almost 1500 bills that were passed by the General Assembly. During the Veto Session legislators will have an opportunity to act on bills that may be vetoed or amended by Governor Kaine.

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