We welcome Pennsylvania Rep. Wendi Thomas (178th District) to discuss her proposed Investor Startup Tax Credit.
Thomas' legislation is designed to help create more capital for technology startup companies by giving so-called angel investors a tax break on investments in early stage Pennsylvania companies. The idea is that reducing the tax burden on investors would give them an incentive to back these companies.
Join us for more information on the proposed legislation and other priorities Thomas has for the next legislative session.
Transcription:
So good afternoon, everyone. This is Audrey Russo, President and CEO of the Pittsburgh Technology Council and a subsidiary called 40 by 80. That's our nonprofit charitable arm of the tech Council. That's the longitude and latitude of Pittsburgh. And that's where we work on all things that are related to education and entrepreneurship. So I'm thrilled to be here. This is another topic that I'm absolutely passionate about some of my colleagues as well as most of our membership. So we're really thrilled to have Pennsylvania representative when Dave's with Wendy Thomas with us, we're going to talk about startup investor tax credit. So hold on, hold on, put, you know, have your lunch, put your seatbelt on, because we're going to dive into all that she is leading. And I'm pretty excited about that. So I'll also want to give a shout out to Huntington bank, for them believing in our work and taking chances on us in terms of the experiments that we run each and every day. And I think that this is probably like our 280, something that we've done since the start of COVID. And hopefully, we're gonna see some sunshine and some breakthrough of some positive, returning to the world soon. So stay tuned to our next pivot in terms of what we're going to be working on to make sure that the community is tethered together. So we've muted your microphones just want everyone to know that your microphones are muted on purpose, because we want to make sure that we hear our guests. And Wendy representative has already told us that in her she is sitting in an old school house and the acoustics might be a little louder might be a little off. But we tested it. And I think it's fine. We have Jonathan Kersting here with us each and every day. He's vice president of all things, media, and marketing tells a lot of stories, interviews, people shines the light on almost everything that's happening across Southwestern Pennsylvania in terms of innovation, technology, and people building companies. So we have an opportunity for questions in our chat, Jonathan will keep his eyes on that, make sure that we have time. And as it makes sense to ask the questions that affect each and every one of us. So I'm pretty excited about this. I'm very thrilled to bring up representative Deke Thomas, why do I keep saying Davis, that's, that's terrible. That's terrible. So please forgive me, please forgive me. I am really, really thrilled to have you here. So let's before we start, I also want to give a shout out to at&t at&t has been incredible partners with us on all things public policy. And if you don't know about some of the other things that they've done since the onset of COVID, they have made sure that people have access to wireless they've been for Wi Fi, they've made sure that we get access into the schools, they've even helped with the food banks, it's been non stop. So they have really been tremendous in terms of our partnership in terms of public policy. And so they today are also supporting this conversation. So representative, before we talk about startup investor tax credit, can we just take a few minutes just talk about you talk about you and your background, and even the area that you cover? So sure,
tell us about Absolutely. And I am equally as passionate. So the two of us ought to be a very lively conversation today. My background is I spent almost 30 years in business, but the first 20 were in health care, health insurance, Employee Benefit area. So that is a background of mine. But in the mid 2005 ish, I went to a company called health advocate, which is an employee benefit that advocates for people as they try to navigate through health care, we could have a long conversation about that. I'm super passionate about it. But it was an idea that somebody have and they went out look and Pennsylvania company, they went out looking for investment, they got investment, and we built that company. And ultimately it was it was sold for a great deal of money. But it's a it's a tremendous benefit. It's a tremendous concept. But it was a startup. It was a start up and and I learned a lot from that. In addition to that, I also sat on a school board for 10 years, and that's kind of how I ended up as a state rep. My, one of my previous state reps came to me and said, Would you run and I was like, No, are you crazy? And then here I am. So it's been a great journey. I'm in the beginning of my second term, or beginning of year three, really? So that's a little bit of my background.
So we're right, yeah. Marissa,
what do you come out I'm in Bucks County. So Washington Crossing for history. Any history above or new hope it's another famous place. I cover Five little towns in the center of Bucks County.
That's nice. It's beautiful out there. So I'm so glad that you're joining us today. And we can talk a little bit about that side of the state. But you know, we want to brag a little bit about Southwest, Pennsylvania and just in all fairness, so we're thrilled to have you here. Are you are you a native of Bucks County?
No McGorry County. So actually, I've lived mostly on the east. But two weekends ago, I happen to be in Pittsburgh, I have my husband's from the center of the state Danville, but he had the rest of his family went to Pittsburgh, and he and I fill it out yet outside of the state. So I love Pittsburgh, beautiful area had a great time
when I was there. So next time, you're here, please call us so that we can meet and continue to dive into this, as well as all the health advocacy work that you just articulated, because that's also near and dear to our heart. So really appreciate it glad yourself. You're, you know, safe and sound and appreciate hearing about your background. So how has your district been impacted though, by the pandemic? Can you just do like a little retro in terms of the last 1516 months? Yeah, my
my particular district is mostly suburban. But I do have a couple downtown's. And we sadly lost some of our small businesses. You know, it's taken a toll on everyone. But I do feel the resurgence. You know, I feel the district. And I know you guys feel it out there. As I drove to Pittsburgh, and the amount of traffic that I had to get to where I was going in Pittsburgh.
I was like, Whoa,
Pittsburgh is back. Everybody's out in their cars. But which was good to see. But my districts also we're, you know, we're starting, you know, things are starting to come back. The weather is nice getting outside. So we get some of those small businesses
back.
You know, they were the most impacted that. That's really great.
That's great. So you also, you know, I've talked a lot about the importance of Pennsylvania's, you know, health care workers. But recently, you convened a hearing about mental health. Right, and of those frontline heroes. So can you talk a little bit about what you discovered what you heard?
Yeah, as I would say, early this year, I was had this mind thought of, you know, we're going to be post pandemic vaccines are coming out. But I've heard and a passion of mine is also mental health, and advocating for mental health and, and recognizing mental health. I, a lot of my time on school board, we, you know, we worked with that dealt with that the student whole wellness idea, as we were coming out of pandemic, there were three groups of people that I think have been tremendously impacted. And one is all of our first responders, our healthcare workers, that kind of whole group that stood with us. And the second was our seniors. And the third is our kids, not necessarily in that order. But those are the three groups. So we had our hearing, as we started this on health care workers, and we heard from doctors, from nurses about the evolution of their mental health through the pandemic, I was actually, you know, hearing from some local physicians that I friendly with in December in January, they were concerned about the mental health, and the description, I think we kind of all know this, but the description of those health co workers saying, you know, typically, I'm a nurse in a hospital, and I'm there to help you medically and I do provide some support. But in COVID, with no family members, I not only had to be that nurse, I had to be your family, I had to stand with you. And sadly, they the people they stood with who passed and it really has taken a toll on them. So So we've introduced our first bill, we hope is going to run before the end of the month to support an awareness campaign, because there is mental health support for first responders and our health care workers. We need them to know that it's there, and it's okay to go and get some help. We need to break down some of those barriers.
The stigma remains, but I can't even imagine based on people who are alone. And that's how they're spending their last days. And they and our frontline workers seeing that all day long day in and day out. So I applaud you, I applaud you for that we all need to raise that awareness and that eradicate that stigma.
It was tremendously moving. Actually, we were very fortunate. We had 20 over 20 legislators attend bipartisan and hear their stories and listen to them and really be concerned about it. And so we hope to we hope to help.
Thank you, thanks for your leadership on that. So get listened to now we're here we want to talk about legislation that you're advocating for that would help address one of the biggest challenges that impact early stage companies and many businesses, which is really startup capital. So you've announced a proposal, right, that would help specifically enhance the availability of angel investment resources in Pennsylvania. So talk about the bill Talk, talk about the why. And obviously, if you can keep, you can hear your passion around business as well, you know, the beginning of this conversation, but just tell us about it, give us give us the scoop.
So I was fortunate to be appointed to a group that was, you know, around economic recovery that leadership put together. And my passion, even pre COVID, has been biotech in the part of the state that I sit in, we go right over the water to Jersey, and they have all these biotech firms and stuff. And I want them to come on this side of the river into Pennsylvania. And we all know, tech merging across the whole state, we have great educational institutions. So I think because I was vocal about that, in my first two years, when they put this group together, they said, We want you to be part of the group, we want you to look at, you know, Targeted Investment, where can we grow? What should we focus on? So in spending a great deal of time on that I actually met a man who's my constituent, and he has a biotech firm, I met him. And, you know, I talked to him, what was his experience, he had worked in a pharma company for a long time. And in 2002, we started a biotech. And he talked to me about all the challenges he went through, he ended up selling that near 2010. And he has now a new idea. And he's starting again. And he just shared with me the frustration of finding investors, and having to go out of state to find them. And then he said, and if, if my company is successful, my investors want me to be closer to them. So, you know, the trajectory here was not very good. Even if you could convince them to give you money, you came here, you started, if that company grew, they're gonna want you to, you know, and again, in my, your side of the state, maybe is Ohio and bad direction. My side is New York, you know? Right, right, New Jersey, New York. And, um, you know, we just had a long conversation about his frustration, and then he actually took me to a biotech center. That's a group of biotechs, I met some other companies, and they also expressed this concern for investment. So worked with some people back at the house, did some research learned that an angel investment tax credit had been proposed, but never got passed. So we just mulled it over and said, you know, in an ideal world, the world of tax credits, you know, is this big world, and it doesn't always have a lot of support, because they're, it's, they're all over the map, we don't know what we get for them. But unless we're going to revise the entire tax credit, and we're going to soup to nuts do it, which is a big task, and many years long, we have to keep with this. So for that reason, I think making a statement that Pennsylvania is open for business, we want you to invest here, we want angel investment, we have great ideas here, we want you to come, this state has to back that up with tax policy. Because I can go out all day long and say, Come to Bucks County, come to Pittsburgh, you know, come here, open your business. But if my, if my policies don't backup that message, nobody hears me. And I know that you guys do a great job advocating for tech in Pittsburgh. But to get these investors to come and I think you've built a great community, but stay why we should we should really have that message out there. Come here, we want you here, we understand your value. And because of that, we're willing to give you something for it.
What so what is the what are you proposing? So can you talk about what's being proposed? I
can it's and I'm just gonna pull my co sponsor meme off. So for those who might not know, when you have an idea, you put out something called a co sponsor to the other legislators. And basically, it's somebody who has a new idea, or new product, fewer than 100 employees, and they would registered as a qualified startup business and be eligible for a 25% tax credit.
Okay, and so what exists today? Nothing, right. Nothing Oh,
just just my invitation to come bring your business to Pennsylvania. That's it. That hasn't generated a ton of people coming but I'm still asking Please come. Yeah, I mean, there's many, many things that it you know, he's really spent hours looking at this the January, February, March, really a lot of hours, trying to look at different ideas and there are a plethora of them in other states, and some To do it really well. But this idea, the reason I really focused on this is because it's quick, it can happen easy. And it sends that message. Come here invest. One other interesting thing. The gentleman I met with, he said the people who typically invest in the biotech, none of those investors are located in Pennsylvania,
right? Zero.
He said, they don't even have a nobody called shingle. They don't even have a shingle no shingle. I'm like, How can that be?
And it's harder for you over there because of New Jersey, you're right there in New Jersey in New York, where they're just saying it's only an hour or so away. Right?
That's correct. And we do, we're already this side on biotech, we're usually rated five or seven in the country. So we have all the big universities. So if we just did a little bit more, maybe we could be number one or number two.
It's amazing what actually exists there. So there's a couple of questions I want Jonathan to grab. And to ask, you see the one from Christine.
Absolutely. Good questions here. Welcome to the show. Glad to have you here and talking about we're talking about. So Christine wants to know, how does a tax credit help companies that are not yet profitable in the credits be sold to profitable companies in exchange for cash?
That is traditionally how they've been done. We're still working on the details of legislation, and we're still taking input by now. But traditionally, that's how it's done. So they generate, they generate money for the for the company, as they're sold.
It does the tax credit accrue to the angel investor at 25% of their investment? Is that
general proposal?
Excellent. And so the general proposal, are you starting from scratch? Are you copying any of these other states that have done a good job?
So we started with the bill from 2015, actually, because that was already written for Pennsylvania tax code. And then we have gathered information from the other states. And we're trying to see what compiles and what makes sense here. And then we have to kind of fit it into Pennsylvania law.
So we're talking about angel investors. So can we shift a little bit and talk about venture venture capital? Yeah, we talked about that, because that's an incredibly important piece of, you know, our ecosystem as well. It is.
Yeah, I had some experience, when we were building the company, I was really a worker, not one of the key people going out, but I watched the the owners go fly around the country to get VC money to come to Pennsylvania for their for their idea. And, um, you know, it can be very challenging. Now, I know you guys have some, some experience with VC as well.
Oh, yeah, we definitely do. I mean, you heard before the show, Brian Kennedy was talking about in the last couple of years, over 70 venture firms that are from outside the region invested into our region. And that I think that represents 70 companies, because I really want to say it's almost like 80% 80% of that money comes in from outside the region. And thankfully, at the state level, we have the the Ben Franklin's the bfdia is that are actually helping to spawn some of this innovation at the sort of like the nascent level, but they're, you know, they're first in and they're taking risks on many, many things across the ecosystem.
The bends are actually how I met the constituent from my district who started his business. So they, they had to put out an announcement of some of the companies they had invested in, and I saw his name and where he was from, and I actually connected through them. I think the beds have done, done a really good job. And we need to continue to encourage that. And in fact, what I heard on a call is back when we first started investing with the bands, we were Pennsylvania was kind of a leader in that area. But unfortunately, I think since that time, people have surpassed us. And Pennsylvania really needs to look, take a hard look at what we are doing to attract business, what results we're getting for what we're doing, you know, I always say is about Sacre mess. If you are running this as a business or you business people on here, you know, you take your investment, you look at your results, and you do an A value ation and ROI, if you will, you know, big government does not exactly work that way.
Really,
those of us who have a business background are always like, Where's the chart, you know, the investment, the result? So the results, you know, get published and report here or there, but it's not It's not a consolidated, you know, it's a little hard to put your arms around, I think there are over 47 economic development programs sponsored by the state, but they're all over. And so we really have to, I believe, focus on ones where we know we're going to attract business to Pennsylvania. Another interesting fact you guys might like it. And I don't have the latest one, but there's pre COVID the information I had the only growing population in the state of Pennsylvania
85 plus, that's what's growing at five plus in the whole state five year old, 85 year old son Oh, but you know, there's a lot of great, you know, bio research on on lifespan. So it could be that those people who are 85 plus live at least another 20 years now,
I think it's to our week, we did do a plus, because live here, their whole lives, they stay here, they live here, you know, but what we're not doing is attracting the young people and these startup companies, that's who they can attract these technology companies. This is where the younger generation is really interested. And the marriage between those ideas, our universities and our business community, you know, with the state saying, Yes, we want this and we'll back it up, and we'll help you is really where I think we need to go. Okay, so
we have, we have a couple of questions out there that I want Jonathan to grab. And then I want to ask one of the questions on some other things that you're working on as well.
Absolutely. That's good. And Natalie Nunez here, it's good to see her again, haven't seen her in a while. This is a good question here. So some professors at CMU, NYU, and UCLA did some research on the economic impact of these kinds of tax incentives. And their conclusion was, quote, we find that while they increase angel investment, they have no significant effect on entrepreneurial activity. And that's he has the source, they're listed below there. People want to go click the link and read more about it. Um, so he thought that Pittsburgh would would be different in this regard from the study?
I don't know that's hard. I mean, probably without Do you want to? Do you want to attack that represent? Yeah,
I don't know, the study well enough to say probably fully, rapidly respond. I do think it probably is a little hard to draw the, the lines, I was just saying that would be nice to have on ROI you about, you know, it probably is hard to do that on this tax credit, as well. But I have heard it from people who are trying to start businesses here that this is a point of frustrations. And you know, my worry would be that people will go other places, maybe we can't track the growth, but we can at least keep what we have here. And you know, if people go to Ohio, on your side of the state, or go to New Jersey, on my side of the state or Maryland, wherever you are New York and get advantages. We're not going to even know we lost them, we're you know, we're just going to have them. So I think this is about right now, it's about us just trying to stay competitive with it's not about an advantage. It's more about staying competitive.
Well, I've actually I just tagged that article, so I can read it. There's lots of variables that are tied to it. It is one study. And you know, we've been involved with the Calvin Institute on you know, we brought them in and have them talk to us over the years, benchmarking. We've had lots of studies in our city, but the point is, is feeding the current, the current yield, that's really what the issue is, it's feeding the current yield. And when people know that there's opportunities for them to proliferate, that's when the growth does occur. So I have to read that that report. Is there another question in there,
so the one and only john Denny so glad to see him here, he would like to learn a little bit more about House Bill 1200 the Family Care Act, switching gears a little bit.
So when I was in Pittsburgh two weeks ago, I actually went to one of your wonderful employers, JV manufacturing. And we talked about paid family leave so I am the prime sponsor on paid family leave and the bill would basically say everybody in the state puts a teeny bit in to the fund and at the time at which you were family members that you'd get a little bit money out just to sustain you and very frankly um you know, business traditionally goes oh no another prop you know, something else for a business to paid for or etc. But this is about us all putting in an all getting out. And the other thing is, after we've been through COVID Is there anybody who doesn't think that at some point in your life, you're going to be sick or you're going to need to take care of a family member. And I had a business owner tell me you know, not to discount having children I have three but you you know, for the most part people plan and even do that. But when your parents suddenly get sick, and you're suddenly off work as she was, in the sit last six weeks of her mother's life, she was afraid she couldn't keep the lights on and keep her to employees. And, you know, that's where it convinced me like, if we could all put a little away, then we can all get just a little bit back to sustain us through a difficult time that paid families leaves time really has come. And here in Pennsylvania, you know, I've said before the young, the young people aren't going, we want to be what families to come first, we want people to come here and work. We're family friendly. We have good ideas, and we want angel investors, we can do it all.
Well, so what do you how do you think, um, you know, with the budget, we're set to pass a budget, can I put you on the spot for that? What do you think? And, you know, that's like the coming weeks? If we do it on time, how is the Commonwealth doing in from a budget perspective?
Well, you know, the federal government is giving the state money. And, and, frankly, if they weren't, we would be in, in serious trouble. I think that, you know, we're gonna have to see how it goes the given takes, it takes three of us the House, the Senate, the governor to, to agree. So that's always challenging. But, you know, from my perspective, you got to be cautious when you get one time money, you just got to, you have to be careful how you spend it, and what you do, you don't want to set yourself up for failure. You know, when I got to the legislature, I believe this statistic was we had two or three hours of worth of money, two or three hours worth of money in the rainy day fund. It was, yeah, I see your faces. And then in in June of 19, we had a little surplus, we put half of it in the rainy day fund. So I think we're at six or eight hours. And we spent the rest of it. So you know, it's, it's definitely going to be a challenge to make sure that we can get through it, balance it but not go overboard.
Right, because it's not gonna be there. Right. Right. And we've seen that so right, it's a good point to reiterate. So how do we stay connected to your work on this angel tax credit initiative? What whatever you know, this bill, how do we stay connected? How do you get our prices so
you know, we've we have a study to look at and things and people want to share information they can do that. With me through me. I my Harrisburg office, email works great. And I don't know Brian or somebody wants to put it up but it's w Thomas at pa House GOP calm. Or, you know, you call my Harrisburg office, my website's rep Thomas, calm, super easy. You can get to me through that as well. If you have ideas, thoughts, concerns, experience, I am not an angel investor, personally. So you know, for me, this is always listening and learning and making sure that we make this the best legislation we can because the goal is to help and help the state help bring business here and help us all grow.
Well, I my hat's off to you to bringing this backup, honestly. And I do want to remind john Denny put a note out there. And if you go out to YouTube, you'll see a video that we made a few years ago, called the Pittsburgh pivot. And you can see that we had an interview with former governor Thornburg who talked about how he actually started the bf t va ssti, the founding of the Pittsburgh tech Council, you know, everything that happened at that point in time. So this has been a long time running, Governor Thornburg definitely had an amazing vision that is still being used today at DC Bay. And, you know, we still have work to do, you know, almost 40 years later, we still have work to do. And it's never gonna stop. But I just so appreciate your leadership on this. We'll stay connected to you. Really appreciate you, you being open. And, you know, we'll get feedback for you as well. So, thank you for your time. I think your acoustics were perfect. So Oh, good. Being in there, really appreciate it. And everyone stay safe. Is there anything Jonathan about Friday is tomorrow's Friday, more or less Friday, and
we're taking the day off to enjoy this nice weather. And we'll be back on the 25th with Senator Bob mehg. Talk about the clean infrastructure act so great.
Okay. Well, thank you. Thank you.
Thank you,
Thomas. Thank you. Bye.
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