The Newsletter of TechPAC and NVTC

March 22, 2010


2010 Legislative Update: General Assembly Wrap-up


In This Issue

General Assembly Adjourned, Veto Session to Begin April 21

Job Creation and Economic Development

State IT Governance

Education

Internet-related Taxes

Transportation

Technology-related Crimes

Public-Private Partnerships

Telemedicine

Note on the Northern Virginia Delegation to the General Assembly

Note on Budget Conferees


General Assembly Adjourned, Veto Session to Begin April 21

On Sunday, March 14, the Virginia General Assembly adjourned sine die concluding its 2010 legislative session. The General Assembly tackled more than 2,900 bills and resolutions during the session related to a broad array of important issues, including job creation and economic development, education, energy, transportation and health care. (See status of top NVTC issues below.) However, the need to tackle Virginia's $4.2 billion revenue shortfall was clearly the dominant issue this session. Although the legislative session ran over by one day, legislators were able to reach consensus on a new, two-year $31 billion General Fund budget which has been sent to Governor Bob McDonnell for his review and action.

The General Assembly is scheduled to reconvene for the one-day Veto Session on Wednesday, April 21, 2010 at noon. In the interim, Governor McDonnell and his administration will be reviewing more than 1,500 bills that were passed by the General Assembly, including the budget bill. When the Veto Session convenes, legislators will have an opportunity to act on bills that may be vetoed or amended by the Governor.

NVTC maintained a full time presence in Richmond throughout the legislative session to actively advocate on behalf of Northern Virginia's technology community. NVTC's Public Policy Advocacy Team included NVTC Vice President for Policy Josh Levi, NVTC Public Policy Manager Allison Glatfelter, NVTC Special Projects Manager David Baker and Myles Louria, Director of Government Affairs of Hunton & Williams LLP.

Under the leadership of NVTC's Chair Donna Morea of CGI, our public policy advocacy was supplemented throughout the legislative session with frequent visits to Richmond by NVTC technology leaders including NVTC President & CEO Bobbie Kilberg, NVTC Chairman Emeritus John Backus of New Atlantic Ventures, NVTC Chairman Emeritus Sudhakar Shenoy of IMC, NVTC TechPAC Chairman Dendy Young of McLean Capital, LLC, and members of the NVTC Board of Directors and of the NVTC TechPAC Board of Trustees, including: Will Castleberry of AOL, Tim Cook of Alion Science & Technology, Michelle Frank of Orbital Sciences Corporation, Dan Gonzalez of Appian Realty Advisors, Todd House of Micron Technology, Dr. Alan Merten of George Mason University, Rob Quartel of NTELX, and Dr. Bob Templin of Northern Virginia Community College.

While NVTC's Four Year Vision drives our overall advocacy efforts, NVTC's specific legislative priorities for the 2010 Legislative Session were outlined in a letter to legislators before this session began.

NVTC is pleased to report the following important technology business accomplishments that resulted from action taken during the 2010 Legislative Session:
  • The passage of legislation establishing a 100 percent capital gains tax exclusion for founders and investors in qualifying technology, energy and biotechnology startups in Virginia for investments made over the next three years.
  • An additional $1.5 million state investment in the Center for Innovative Technology's (CIT) early stage GAP Fund to underwrite critical and immediate first financing for 20 new early-stage technology companies by leveraging an additional $16 million+ in private sector investment.
  • Legislation establishing governance reform and restructuring of Virginia Information Technologies Agency (VITA).
  • Rejection of Internet tax legislation that would have established a sales tax collection requirement for large out-of-state online retailers who advertise on Virginia-based websites on a click through/commission basis.
  • An additional $1 million investment to continue Virginia's Business One Stop program to streamline Virginia's business permitting process and enable entrepreneurs to more quickly launch new businesses in the Commonwealth.
  • Increased funding to support Virginia's technology-focused Angel Investor Tax Credit this year to more aggressively leverage early-stage investments in technology, energy and biotechnology companies across the state.
  • $3 million in the budget to establish a Virginia Biotechnology Wet Laboratory Program with half of the funding targeted to benefit George Mason University's Prince William County campus.
  • Passage of a new "Green Jobs" tax credit.
  • An additional $837,000 per year to support the Mid-Atlantic Regional Spaceport.
  • Rejection of the proposed freeze of the Local Composite Index (LCI) which determines state and local education funding responsibility and would have cost Northern Virginia localities an additional $118 million in state K-12 funds.
  • Legislation establishing voluntary state guidelines that local school boards may use in establishing virtual school programs around the state.
  • Funding to launch The Governor's School @ Innovation Park which will provide an advanced and intensive program in science, technology, engineering, and mathematics for high school juniors and seniors.
  • Legislation narrowing Virginia's anti-spam laws to ensure constitutionality.
  • Legislation that provides that health insurers cannot exclude a service for coverage solely because the service is provided through telemedicine rather than through face-to-face consultation.
The articles below provide more details on the important technology business issues and accomplishments of the 2010 General Assembly.

Back to top


Job Creation and Economic Development

The strong emphasis by the McDonnell Administration and the General Assembly on job creation this year has enabled NVTC to continue to aggressively promote the technology community's dual-pronged jobs creation strategy.

Emphasis 1: Attracting Companies to Locate to Virginia
NVTC has been a strong advocate for enhancing Virginia's ability to attract mature companies that are seeking to expand, relocate, move corporate headquarters, and establish research operations. This will bring much needed job growth and tax revenue to the Commonwealth.

Among the actions taken by policymakers this year:
  • Doubling the Governor's Opportunity Fund by appropriating an additional $12 million in FY11.
  • Committing $5 million to a state industrial mega-site fund to attract new employers.
  • Lowering the threshold for companies to qualify for Virginia's Major Business Facility Jobs Tax Credit from 100 new jobs created to 50 new jobs created.
  • Providing $6 million for expanding international economic development offices and enhancing international advertising and marketing campaigns.
Emphasis 2: "Grow Your Own"/ New Company Formation Strategy
Over the past several years, NVTC has actively promoted a comprehensive "Grow Your Own" strategy for new company formation to position Virginia as a leader in next generation tech company formation and innovation, as well as a top destination for entrepreneurs, early-stage investors, researchers and innovators.

Among the actions taken by policymakers this year:
  • Establishing a 100 percent capital gains tax exclusion for founders and investors in qualifying technology, energy and biotechnology startups in Virginia for investments made over the next three years. NVTC is currently working to move up the July 1, 2010 start date.
  • Allocating an additional $1.5 million to the Center for Innovative Technology's (CIT) early-stage GAP Fund to underwrite critical and immediate first financing for 20 new early-stage technology companies by leveraging an additional $16 million+ in private sector investment.
  • Providing $1 million to continue Virginia's Business One Stop program to streamline Virginia's business permitting process and enable entrepreneurs to more quickly launch new businesses in the Commonwealth.
  • Increasing the cap on Virginia's technology-focused Angel Investor Tax Credit this year to more aggressively leverage early-stage investments in technology, energy and biotechnology companies across the state.
  • Providing $3 million for a Virginia Biotechnology Wet Laboratory Program to provide loans, loan guarantees, or grants to construct, improve, furnish, equip, maintain, acquire and renovate biotechnology laboratories designed to accommodate and provide wet lab space or other needed laboratory, research, or production space. Half of this funding is targeted to George Mason University's Prince William County campus.
Virginia's Angel Investor Tax Credit- Cap Increased to $5 Million
NVTC 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. In 2007, for example, the credit resulted in more than $10 million worth of claims across all industries but was only funded at $3 million resulting in a pro-rated credit for all investors that did not meet their expectations. During the 2009 session, NVTC successfully advocated to narrow eligibility for the credit to investments in small technology, energy and biotech companies, a major victory in a session known more for cutbacks, than credits. This year, the legislature approved a McDonnell Administration initiative to increase funding of Virginia's technology-focused Angel Investor Tax Credit to $5 million for calendar year 2010.

CIT's Gap Fund- An Additional $1.5 Million in Funding
Notwithstanding the budget crunch, the General Assembly, Secretary of Technology Jim Duffey and Secretary of Commerce and Trade Jim Cheng supported an NVTC-led effort to leverage a small public investment in the CIT GAP Fund to generate seed capital for technology startups. The budget invests an additional $1.5 million over the next two years to support the CIT's early stage GAP Fund. This additional funding will be used by CIT to:
  • Underwrite critical and immediate first financing for 20 new early-stage technology companies.
  • Drive private sector capital infusion into these new companies at a rate of 11 times the Commonwealth's investment.
  • Create a self-perpetuating funding capacity for out-year investment.
  • Position Virginia as a leader in next-generation company formation in technology, biosciences, and energy.
  • Exemplify the power of public-private partnerships in smart, long-term job creation on the national stage.
Virginia Capital Gains Exemption for Investments in Technology Startups
NVTC and VaBIO took the lead this year in promoting legislation to encourage and stimulate high-potential startup companies by providing a three-year 100 percent state capital gains tax exclusion for founders of and investors (individual, corporate, or institutional) in qualified technology, energy, and biotechnology startups.

This bipartisan legislation, sponsored by Senator Mark Herring (D-Loudoun) and Delegate Sam Nixon (R-Chesterfield), was supported by the McDonnell Administration and passed by the General Assembly.

NVTC believes this legislation will:
  • Promote immediate investment in new company formation and job creation in Virginia.
  • Help move Virginia from a top ten region for new venture-backed companies to a top five region within four years.
  • Provide Virginia with a tax favorability competitive advantage compared to other states, so that entrepreneurs who are "on the fence" about where to locate their startups will consider Virginia a more willing investment community.
  • Encourage follow-on investments in high-potential companies that start in Virginia, allowing for rapid growth and headcount expansion.
  • Encourage experienced investors who have previously built successful startup companies to locate their new companies in Virginia.
NVTC is asking the McDonnell Administration and legislators to amend the legislation during the April 21 Veto Session so that the law will go into effect sooner than the current date of July 1, 2010. Stay tuned!

Green Jobs Tax Credit
Senator Emmett Hanger (R-Augusta) and Delegate Charles Poindexter (R-Glade Hill) successfully sponsored legislation this session creating a Green Jobs Tax Credit. Companies that create up to 350 "green" jobs in the state will receive an income tax credit of $500 per new employee with a salary of more than $50,000 annually.

Mid-Atlantic Regional Spaceport
NVTC supported efforts this session to provide funding to ensure the Mid-Atlantic Regional Spaceport at Wallops Island becomes the top commercial space flight facility in the country. In addition to the statewide economic development potential presented by the Spaceport, it also is an important driver of aerospace related jobs in Northern Virginia. Governor Tim Kaine and Governor Bob McDonnell proposed an additional $1.39 million per year in funding for the Spaceport in order to hire highly technical permanent and specialized contract staff and to support infrastructure growth that will allow for cargo resupply to the International Space Station.

Spaceport advocates including Senator Mark Herring (D-Loudoun), Senator Ralph Northam (D-Norfolk), Delegate John Cosgrove (R-Chesapeake) and Delegate Lynwood Lewis (D-Accomack) won legislative support for an additional $837,000 per year, but not the full $1.39 million. NVTC will urge Governor McDonnell and legislators to amend the budget during the April 21 Veto Session to provide an additional $550,000 per year in funding to the Spaceport.

Back to top


State IT Governance

Governance Reform and Restructuring of Virginia Information Technologies Agency (VITA)
Governor Bob McDonnell signed legislation into law last week that provides for the Chief Information Officer (CIO) of the Commonwealth to report to the Governor through the Secretary of Technology. This legislation restructures the governance of the Virginia Information Technologies Agency (VITA) by creating a direct reporting structure between Virginia's CIO and Virginia's Secretary of Technology. Under the new law, which contained an emergency enactment provision putting it into effect immediately upon the Governor's signature, VITA and the CIO will no longer fall under the oversight of the Information Technology Investment Board (ITIB), an independent Board consisting of gubernatorial and legislative appointees. The new legislation dissolves the ITIB and provides for the Governor to appoint the CIO, who serves as the head of VITA, and who reports to the Governor through Virginia's Secretary of Technology.

Passage of this legislation was a top NVTC priority. Northern Virginia's technology community has been a strong advocate for these governance reforms which increase accountability and authority between the CIO and the Executive Branch. The private sector has long recognized that it is very difficult for a CEO to be successful if the company's CIO reports outside the chain of command and is not accountable and responsible to the CEO. With the passage of this legislation, the Commonwealth of Virginia has strongly delineated lines of authority, accountability and responsibility within the state's information technology governance structure.

The bill's Chief Sponsors Senators Janet Howell (D-Reston), Ryan McDougle (R-Hanover), Walter Stosch (R-Henrico) and Delegate Kathy Byron (R-Campbell) demonstrated strong leadership in achieving this major reform. Other legislative champions included Senator Mamie Locke (D-Hampton), Senator William Wampler (R-Bristol), and Delegate Clay Athey (R-Front Royal). Governor Bob McDonnell and Secretary of Technology Jim Duffey made this issue a top Administration priority.

Click here to read more on NVTC's support of this law in the Washington Business Journal, Government Technology, and dcTechSource.

Back to top


Education

K-12 Funding Formula
NVTC was a strong advocate of the action Governor McDonnell and members of the General Assembly took in undoing the proposed freeze of the Local Composite Index (LCI) which determines state and local education funding responsibility. The LCI has historically been adjusted every two years to account for changing local economic conditions. The proposal to freeze the LCI would have cost Fairfax County public schools approximately $61 million, Loudon County public schools $34.4 million, and Prince William County schools $22.6 million in state education funding, especially difficult cuts as these three systems add 8,897 new students.

As part of our advocacy efforts on this issue during the session, NVTC drafted a letter to the Governor and members of the Northern Virginia General Assembly Delegation that was signed by eleven regional business organizations asking the Governor to undo the proposed freeze of the LCI. NVTC is especially pleased that the Northern Virginia Delegation took a strong and unified position opposing the changes to the LCI.

Virtual Schools Program
NVTC successfully supported legislation this session which promotes technology as a tool that can enable children to learn no matter where they are or what their circumstances may be.

The bills, sponsored by Senator Steve Newman (R-Lynchburg) and Delegate Dickie Bell (R-Staunton), establish voluntary state guidelines that local school boards may use in establishing virtual school programs around the state. The legislation, which was supported by the McDonnell Administration, stimulates the growth of these innovative education programs among local school boards to help students who struggle in a traditional classroom environment and to provide parents with an option within Virginia's public school system.

Higher Education
NVTC has been a strong supporter of public institutions of higher education in Northern Virginia as well as increasing the number of STEM graduates statewide. During the 2010 legislative session, NVTC urged legislators to preserve funding for Virginia colleges and universities and to ensure that these institutions are given maximum flexibility to deal with budget cuts, including the ability to set tuition and fees. The budget adopted by the legislature this year cut an additional $40 million from higher education including $10 million in funding for Virginia's Tuition Assistance Grant program (TAG). In total, higher education funding in Virginia will have been reduced by almost 25 percent over a five year period.

Governor's School in Prince William County
Through the efforts of Senator Chuck Colgan (D-Prince William), the budget includes $487,000 to provide the state's share of funding to launch The Governor's School @ Innovation Park which offers selected juniors and seniors from Manassas City, Manassas Park, and Prince William County an advanced and intensive program in STEM - science, technology, engineering, and mathematics. The two-year half-day program will be based at George Mason University's Prince William Campus.

Back to top


Internet-related Taxes

Internet Sales Tax/Amazon Bill
NVTC spearheaded the effort along with AOL, NetChoice and the Performance Marketing Association in opposing SB 660, sponsored by Senator Emmett Hanger (R-Augusta), which sought to establish a sales tax collection requirement for large out-of-state online retailers who advertise on Virginia-based websites on a click through/commission basis. Under current law, any seller who has a physical presence or "nexus" in Virginia is obligated to collect and remit Virginia sales tax. In an effort to address what they consider to be an "unlevel playing field", traditional retail businesses and other supporters of this new legislation sought to create a tax collection presence in Virginia for Amazon, Overstock and other large Internet retailers if they advertise on Virginia-based websites.

The U.S. Supreme Court has ruled, however, that states cannot force out-of-state retailers without a physical presence or other nexus in a state to collect and remit sales tax on Internet-based purchases because thousands of tax jurisdictions with differing tax rates and rules present an unconstitutional burden on interstate commerce. When legislation similar to SB 660 was passed in New York recently, Amazon and Overstock filed lawsuits challenging the law's constitutionality and litigation on the issue is ongoing. When North Carolina and Rhode Island, however, passed similar legislation, many large Internet retailers responded by severing all advertising relationships with their affiliates and partners in those states. The same large online retailers indicated that if Virginia's bill passed, they would sever their advertising relationships with more than 5,200 Internet-based Virginia businesses that rely on advertising revenue provided by large e-retailers to support their business model. Colorado recently enacted a substantially different version of this legislation which also resulted in Amazon severing advertising relationships in that state.

While the Virginia bill passed the Senate 28-12, notwithstanding the bipartisan opposition of leading senators including Senators Mark Herring (D-Loudoun) and William Wampler (R-Bristol), the legislation was tabled in the House Finance Committee in response to opposition led by tech champion Delegate Tim Hugo (R-Centreville). Others opposing the legislation in Committee included, from Northern Virginia, Delegates Rich Anderson (R-Woodbridge), Mark Keam (D-Vienna), and Vivian Watts (D-Annandale), as well as Delegates Kathy Byron (R-Campbell), Lynwood Lewis (D-Accomack), Chris Peace (R-Hanover), and Lee Ware (R-Powhatan).

Back to top


Transportation

NVTC was disappointed that the issue of transportation funding received minimal attention during the 2010 session. Governor McDonnell has indicated, however, that he might call the General Assembly to Richmond for two Special Sessions this year, one to tackle government reform and the other to tackle transportation funding. NVTC will continue its efforts to urge Governor McDonnell and members of the Assembly to address Northern Virginia's transportation crisis in a significant and meaningful way, as transportation infrastructure is critical to the growth of Northern Virginia's technology economy and, by extension, to the long-term economic health of the state.

Back to top


Technology-related Crimes

Anti-Spam Legislation
The legislature adopted a bill sponsored by Delegate Manoli Loupassi (R-Richmond) which narrows Virginia's anti-spam laws to outlaw deceptive commercial e-mails containing falsified header and routing information, ensuring that Virginia's anti-spam laws pass constitutional muster.

Outlawing Malicious Use of Screen Shot Hardware/Software
Delegate Dave Albo (R-Fairfax) sponsored legislation on behalf of the Fairfax County Police seeking to expand the crime of computer trespass to prohibit the malicious use of video and image capture software or hardware in Virginia. NVTC successfully worked to include safeguards to protect technology businesses engaged in legitimate commercial activities. In sponsoring the legislation, Delegate Albo remained committed to doing no harm to the technology community and legitimate business practice. While the bill passed the House of Delegates, it was carried over until next year in the Senate due to the budget situation and the possibility its passage would increase incarceration-related costs to the state.

Back to top


Public-Private Partnerships

NVTC has long encouraged legislators to leverage private sector experience and expertise, boost efficiencies and recognize cost savings by harnessing the power of public-private partnerships as a mechanism to address core priorities including health care, transportation, education, broadband and technology. This year, NVTC joined other business organizations in supporting legislation sponsored by Senator Walter Stosch (R-Henrico) and Delegate Jimmie Massie (R-Henrico) which would have allowed state agencies and localities to enter into public-private partnerships where private entities may be paid grants, as a return on investment, from a portion of the growth in state tax revenues attributable to the development of a particular project. The complexity of the legislation and concerns about how it would work led to its defeat this year.

Back to top


Telemedicine

NVTC successfully supported legislation sponsored by Senator William Wampler (R-Bristol) that provides that health insurers cannot exclude a service for coverage solely because the service is provided through telemedicine rather than a through face-to-face consultation.

Back to top


Note on the Northern Virginia Delegation to the General Assembly

One of NVTC's long-standing priorities has been to increase cohesion within the Northern Virginia Delegation to the General Assembly so that legislators from our region could speak with a strong, unified, and bipartisan voice on issues of critical importance to the region. In addition to emphasizing the importance of a strong Northern Virginia Delegation with all of our regional candidates and legislators, NVTC also has facilitated a meeting of the Delegation to identify and highlight issues where the delegation should act as one. Upon learning of the school funding freeze, NVTC drafted a letter signed by ten additional regional business groups urging the entire Northern Virginia Delegation to jointly sign a letter to Governor McDonnell asking for his support on the issue - and Northern Virginia's Delegation delivered! While the proposed freeze of the school funding formula ignited a divisive battle across the state, the issue unified the Northern Virginia Delegation more strongly than any other issue in recent memory.

Northern Virginia's Delegation to the House of Delegates includes 10 of the House's 21 freshmen. These ten freshmen legislators each distinguished themselves in their first year through their strong bipartisan and proactive advocacy in support of various NVTC's legislative initiatives, including the school funding formula issue, the passage of the technology capital gains exemption law, support for the CIT GAP Fund, and opposition to the Amazon Internet tax legislation.

2010 Northern Virginia House Freshmen
Rich Anderson (R-Woodbridge)
Barbara Comstock (R-McLean)
Eileen Filler-Corn (D-Springfield)
Tag Greason (R-Potomac Falls)
Patrick Hope (D-Arlington)
Mark Keam (D-Vienna)
Kaye Kory (D-Falls Church)
Jim LeMunyon (R-Oak Hill)
Scott Surovell (D-Fairfax)
Luke Torian (D-Woodbridge)

Back to top


Note on Budget Conferees

In a very difficult budget climate, Northern Virginia and our technology community fared relatively well, a fact that is especially attributable to our region's Senate Budget Conferees: Senators Chuck Colgan (D-Prince William), Janet Howell (D-Reston) and Dick Saslaw (D-Fairfax). All three leaders were strong advocates for Northern Virginia's technology community.

We also had strong allies on the budget conference elsewhere in the state who supported NVTC budget priorities and technology investments, including Senators Edd Houck (D-Spottsylvania), Walter Stosch (R-Henrico), and William Wampler (R-Bristol) and Delegates Lacey E. Putney (I-Bedford), Kirk Cox (R-Colonial Heights), Bev Sherwood (R-Frederick), Johnny Joannou (D-Portsmouth), and Chris Jones (R-Suffolk). Long-time technology champion Delegate Steve Landes (R-Augusta) also was named as a House budget conferee this year where he quickly took a leadership role in promoting technology investments.

Back to top



This newsletter is brought to you by the Northern Virginia Technology Council.
If you no longer wish to receive this newsletter, please click here to unsubscribe, or send an e-mail to nvtc@nvtc.org.