Development Bill is More Than a Tax Holiday

August 3, 2010 : The Boston Globe, by Todd Wallack

The economic development bill approved by the Legislature last week and expected to be signed by Governor Deval Patrick in the next few days goes far beyond authorizing a new sales tax holiday and tax breaks for companies, its best-known provisions.

The legislation also alters a wide variety of regulations — everything from lawsuit limits to building permits.

For instance, the bill will allow developers of projects that stalled because they could not get financing during the financial crisis to extend building permits for another two years. And it will create a new program to offer expedited permitting in growth districts.

The bill will allow residents to file court claims of up to $7,000 in small claims session, up from $2,000.

And it calls for one commission to study creating a state-owned bank, and another to study ways to reduce Massachusetts' energy costs, which are among the highest in the country.

The legislation will also try to combine several agencies with similar functions. The Health and Educational Facilities Authority would be folded into the Massachusetts Development Finance Agency, for example. Also, the Community Development Finance Corporation and the Economic Stabilization Trust would be incorporated into the Massachusetts Growth Capital Corporation.

It would also create a Massachusetts Marketing Partnership board to oversee the state's marketing efforts for activities that range from tourism to film production to international trade.

The bill would also require the state to issue an economic development plan every four years and give the governor greater oversight over quasi-public agencies that work on economic development.

But business groups have been particularly enthusiastic about the sales tax holiday, which will be observed Aug. 14-15, and about several corporate tax breaks that could be worth tens of millions of dollars a year.

One change would allow firms to carry losses on their state tax returns for 20 years, up from five years. In addition, the bill would allow international companies operating in Massachusetts to avoid state taxes on some income if that revenue would normally be exempt under US treaties with other countries, something many other states allow.

And for investments in Massachusetts start-ups, it would reduce the tax rate on capital gains from 5.3 percent to 3 percent, as long as the investments are held for at least three years, a provision that is more unusual.

The measure also contains several smaller tax changes, such as extending the brownfields tax credit, which gives companies an incentive to clean up and build on polluted development sites, and extending manufacturing and research tax credits to limited liability corporations.

Jim Klocke, executive vice president at the Greater Boston Chamber of Commerce, said the Department of Revenue estimated the tax incentives would cost the state $92 million a year by 2031, though the Revenue Department says it is still working on a final cost estimate.

But by attracting additional investment from companies expanding in Massachusetts, the chamber estimated the changes would produce an increase of at least $94 million a year in state tax revenue.

“We feel strongly it will be a net revenue producer,” Klocke said. “It will make a big difference in our ability to grow jobs in the innovation sector.”

In a statement last week, Patrick predicted the bill “will result in new job opportunities, promote small business growth, and help Massachusetts continue to lead the nation out of recession.”

Several consumer groups expressed concern yesterday about an amendment that would exempt warehouse club retailers like BJ's and Costco from state consumer pricing laws.

If passed, the clubs would no longer be required to put prices on grocery items.

The Massachusetts Public Interest Research Group, the Massachusetts Consumer Coalition, and Consumer World, a website for consumers, oppose the amendment, calling it a loophole for specific companies.

“No one class of retailer should be allowed to flout consumer pricing laws while every other retailer in the state must comply,” the groups wrote recently to state lawmakers.