SSTI Digest

Presently, the IRS provides private foundations a tax break if they show a trend of exceeding qualifying distribution requirements (grants). The legislative intent is for the tax reduction to serve as an incentive or reward for those foundations that are more generous with their grants over a five-year period than the 5 percent minimum distribution required by law.  The Council of Foundations wants all philanthropists to get the tax break regardless of the trends in their generosity and disbursements.  Four senators apparently agree with the council as they have included the provision in S. 1343, the recently introduced bill addressing several tax provisions dealing with charitable giving. The bill was introduced by Sens. John Thune (R-S.D.) and Bob Casey (D-Pa.), both members of the tax-writing Senate Finance Committee, with Sens. Pat Roberts (R-Kan.) and Ron Wyden (D-Ore) as co-sponsors.

Restoring America’s competitive edge requires a new approach to managing suppliers, one where all the players are connected, collaborative, and focused on maximizing shared value – a “smart supply chain” – says a new report from MForesight. SSTI spoke with Tom Mahoney, one of the report’s authors and associate director at MForesight, who said that if steps are not taken to move the supply chain in the right direction, or if funding for the Manufacturing Extension Partnership is eliminated as has been proposed in the White House’s budget, the outlook for manufacturing will be poor. Ensuring American Manufacturing Leadership Through Next-Generation Supply Chains, by Mahoney and Susan Helper, provides insight into the current challenges and opportunities facing supply chain management in U.S. manufacturing and provides recommendations for regaining a competitive edge. To be successful, all sectors must take a role – from business to government and educational institutions – the authors contend.

An SSTI analysis of exits occurring during the second quarter by a number of venture development organizations reveals equity investment in innovation companies undertaken as strategic public-private partnerships for regional growth can yield more for their communities than just hitting the return on investment expectations of seed and traditional venture capital. The recent exits highlighted below reveal a variety of economic development impacts resulting from effective innovation investment strategies, including:

• Increased competitiveness and growth of local firms through mergers and acquisition;
• New market entry and new product lines for existing manufacturers;
• Opportunities to broaden wealth generation among wider population;
• Foreign direct investment and company relocation; and of course,
• Wealth generation, tax revenues and job growth within the local community.

Note: this is SSTI’s second look at recent VDO exits; selected first quarter 2017 exits for VDOs are available here.  Second quarter highlights include:

Many states took another hit to their budgets in April, with income tax revenue falling 4 percent compared to last year according to a new report from the Rockefeller Institute of Government. By the Numbers takes a look at the declining revenue, which it says was worse for April and May this year than had been forecast, but not as large as some states have experienced in recent years. Several explanations are explored, including a “Trump Effect” where taxpayers shifted taxable income out of 2016 and into 2017 in the hope of benefiting from a promised federal tax cut. The report also says that a weaker-than-estimated economy could play a role. Or, it could be that both forces were at work, the authors state.

In a recent paper from the National Bureau of Economic Research (NBER), the authors contend the U.S. Patent Office (USPTO) has created a lottery-type system that creates great economic benefit for startups and other patent-seekers that drew lenient patent examiners. In What Is A Patent Worth? Evidence from The U.S. Patent “Lottery,” the authors found that patent applications by startups that were reviewed by lenient USPTO examiners had, on average, 55 percent higher employment growth and 80 percent higher sales growth five years later. Those startups also pursue more and higher quality, follow-on innovation. These results are, in large part, due to increased access of funding from VCs, banks, and public investors.

U.S. institutions of higher education awarded 55,006 research doctorate degrees in 2015 according to the National Science Foundation’s Survey of Earned Doctorates (SED). This figure represents the highest number ever reported. The report also highlights several other multi-year trends.

When SSTI learned that the House commerce appropriations subcommittee’s draft FY 2018 bill did not specifically fund the Regional Innovation Strategies (RIS) program, we called on members to contact the full committee and ask that the bill designate funding for RIS. Thanks to the quick action of SSTI members, the House Appropriations Committee passed the bill last week with level RIS funding of $17 million for FY 2018. Congressional staff specifically said this change resulted from members of Congress who expressed concerns to the committee at the request of their constituents. This is an important win for the program that will allow it to continue funding regional initiatives to spur the transformation of research and innovations into successful products and businesses, but is just one step in the FY 2018 appropriations process. Next, the bill will go to the floor of the House, and the Senate will draft and consider its own bill soon. Eventually, the chambers will need to come to agreement on FY 2018 funding.

The White House Office of Management and Budget sent a letter directing all agency heads to prepare FY 2019 budget requests with the figures provided in the administration’s FY 2018 request. Because the long-term budget provided few year-over-year changes for science or innovation, the administration will therefore again propose to eliminate Regional Innovation Strategies, the Manufacturing Extension Partnership, much of the SBA’s entrepreneurial development funding and other innovation programs, while also making deep cuts to many R&D initiatives. Read SSTI’s full coverage of the administration’s FY 2018 budget request for more information.