SB525: Bill Text

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2017 - 2018 LEGISLATURE

2017 Senate BILL 525

November 8, 2017 - Introduced by Senators Darling, Wanggaard, Feyen, Johnson and Olsen, cosponsored by Representatives Neylon, Rohrkaste, Crowley, Fields, Genrich, Horlacher, Krug, Mursau, Ohnstad, Tusler, Zepnick and Goyke. Referred to Committee on Economic Development, Commerce and Local Government.

SB525,1,7 An Act to amend 20.536 (1) (k) and 25.14 (1) (a) (intro.); and to create 19.42 (10) (t), 19.42 (13) (q), 20.192 (1) (t), 20.192 (1) (y), 25.17 (73), 25.90, 73.17 and subchapter III of chapter 238 [precedes 238.40] of the statutes; relating to: creating the innovation fund and economic development programs funded by that fund, establishing the Innovation Fund Council, authorizing the State of Wisconsin Investment Board to provide certain advice and services to state agencies and others, and making appropriations.

Analysis by the Legislative Reference Bureau

Innovation fund

This bill creates a nonlapsible fund to be known as the “innovation fund" (fund). From the interest earnings of the fund, the Wisconsin Economic Development Corporation may make grants, and payments under certain contracts, as set forth below. For short-term management, the fund is included in the state investment fund managed by the State of Wisconsin Investment Board.

In addition to any donations, gifts, or bequests made to the fund, any moneys transferred to the fund, any moneys deposited in the fund by WEDC, and any income or interest earned by the fund, the fund consists of moneys generated from tax revenue collected from a specific class of companies, referred to in the bill as “qualifying companies." Under the bill, a qualifying company is identified by the company's principal business activity code under the North American Industry Classification System (NAICS).

The bill directs the Department of Revenue to determine before May 1, 2019, the total amount of withholding taxes due and payable from qualifying companies for calendar year 2017. Then, on July 1, 2019, and on each July 1 thereafter, ending on July 1, 2033, DOR must deposit in the fund an amount equal to 95 percent of the withholding taxes due and payable from qualifying companies that exceeds the total amount calculated for calendar year 2017. DOR may not deposit more than $50,000,000 into the fund in any fiscal year and may not deposit more than $500,000,000 in total into the fund.

Innovation Fund Council

The bill requires WEDC to establish an Innovation Fund Council to advise WEDC with respect to the use of fund moneys to make grants and to make payments under certain contracts, as set forth below. The advisory council consists of the following 11 members:

1. One member appointed by the executive director of the Investment Board.

2. One member appointed by the managing director of the Wisconsin Alumni Research Foundation.

3. One member appointed by the governor who serves in a senior management position at a manufacturing company headquartered in Wisconsin that employs at least 250 employees and engages in research and development.

4. One member appointed by the governor who serves in a senior management position at a manufacturing company headquartered in Wisconsin that employs fewer than 50 employees and who has responsibilities related to the financing of the company or of its product development activities.

5. One member appointed by the governor who serves in a senior management position at a technology company headquartered in Wisconsin that employs at least 250 employees and engages in corporate research and development.

6. One member appointed by the governor who serves in a senior management position at a technology company headquartered in Wisconsin that employs fewer than 50 employees and who has responsibilities related to the financing of the company or of its product development activities.

7. One member appointed by the president of the University of Wisconsin System who has experience in collaborations among universities and industries to conduct innovative, fundamental research in science, engineering, technology, and other areas of interest to industry.

8. One member appointed by the president of the Wisconsin Association of Independent Colleges and Universities who has experience in collaborations among universities and industries to conduct innovative, fundamental research in science, engineering, technology, and other areas of interest to industry.

9. Two members appointed by the governor who have experience working for industry cluster partnerships. Under the bill, an industry cluster partnership is defined as a nonprofit organization whose primary purpose is to assist in developing and supporting a regional concentration of industry-specific private sector businesses that share a common interest in fostering research and development, worker skills training, and market development.

10. One member appointed by the governor who has at least five years of experience in the investment activities, merger, and acquisition of technology or manufacturing companies.

Economic development programs supported by the fund

Under the bill, subject to certain additional limitations and requirements set forth in the bill, WEDC administers the following economic development programs using interest earnings from the fund:

1. WEDC may award grants to businesses and other entities headquartered in Wisconsin for the development or deployment of new technologies, components, systems, or processes to solve or significantly improve upon local problems identified by WEDC with the advisory council's concurrence.

2. WEDC may award a grant to businesses and other entities headquartered in Wisconsin for the development or deployment of a new technology, component, system, or process to solve or significantly improve upon a problem affecting a significant portion of Wisconsin or the nation identified by WEDC.

3. WEDC may award grants to early stage businesses for the purpose of facilitating rapid prototype development and pilot testing of potentially marketable new technologies, components, or products.

4. WEDC may make payments under contracts with industry cluster partnerships. WEDC may award a contract to an industry cluster partnership only if it meets certain conditions and may award only one contract per year.

The bill further authorizes WEDC to expend interest earnings from the fund to partially fund any grant that WEDC provides under a program WEDC administers to support business accelerators in Wisconsin. The bill also authorizes WEDC to use interest earnings from the fund to partially fund any grant that WEDC provides to match or partially match grants made by the federal small business administration or under the federal Small Business Technology Transfer Program.

Additional contracting authority for the Investment Board

The bill authorizes the Investment Board to provide advice and services to any state agency or authority or a business entity owned by an agency or authority. Under the bill, the Investment Board may provide advice or services related to the management or administration, for any purpose, including economic development, of money or property that an agency, authority, or eligible business entity controls. The agency, authority, or eligible business entity must contract with the Investment Board and pay the Investment Board for any advice or services the Investment Board provides.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB525,1 Section 1. 19.42 (10) (t) of the statutes is created to read:

SB525,4,3 19.42 (10) (t) The members of the innovation fund council established under s. 238.41.

SB525,2 Section 2. 19.42 (13) (q) of the statutes is created to read:

SB525,4,6 19.42 (13) (q) The members of the innovation fund council established under s. 238.41.

SB525,3 Section 3. 20.192 (1) (t) of the statutes is created to read:

SB525,4,14 20.192 (1) (t) Innovation fund and programs; general program operations; grants. From interest earnings of the innovation fund, a sum sufficient to provide the grants and other payments under ss. 238.42, 238.43, 238.44, and 238.45 and for general program operations and administrative expenses related to the innovation fund council and the programs administered under subch. III of ch. 238. Not more than the following amounts may be expended under this paragraph for general program operations and administrative expenses under subch. III of ch. 238:

SB525,4,15 1. In fiscal year 2019-20, 5 percent of the moneys in the innovation fund.

SB525,4,16 2. In fiscal year 2020-21, 5 percent of the moneys in the innovation fund.

SB525,4,17 3. In fiscal year 2021-22, 2 percent of the moneys in the innovation fund.

SB525,4,19 4. In fiscal year 2022-23 and in each fiscal year thereafter, 0.5 percent of the moneys in the innovation fund.

SB525,4 Section 4. 20.192 (1) (y) of the statutes is created to read:

SB525,4,24 20.192 (1) (y) Innovation fund and programs; additional operational or administrative expenses. From interest earnings of the innovation fund, a sum sufficient equal to any amount authorized under s. 238.48 (2) for general program operations and administrative expenses.

SB525,5 Section 5. 20.536 (1) (k) of the statutes is amended to read:

SB525,5,4 20.536 (1) (k) General program operations. All moneys received from assessments made under s. 25.187 (2) and from charges made under s. 25.17 (9), and from assessments or charges made under s. 25.17 (73), for the purpose of conducting general program operations.

SB525,6 Section 6. 25.14 (1) (a) (intro.) of the statutes is amended to read:

SB525,5,10 25.14 (1) (a) (intro.) There is created a state investment fund under the jurisdiction and management of the board to be operated as an investment trust for the purpose of managing the securities of all funds that are required by law to be invested in the state investment fund, the innovation fund, and all of the state's funds specified in s. 25.17 (1), except all of the following:

SB525,7 Section 7. 25.17 (73) of the statutes is created to read:

SB525,5,25 25.17 (73) Have authority to provide advice and services requested by a state agency, as defined in s. 20.001 (1), or authority, as defined in s. 16.417 (1) (b), or business entity owned or controlled by a state agency or authority, relating to managing or administering money and property controlled by the agency, authority, or business entity for any purpose, including economic development in this state. The scope of any advice or services provided to a state agency, authority, or business entity under this subsection shall be defined by agreement between the board and the agency, authority, or business entity. This agreement shall require the cost of any advice or services provided by the board to be paid by the agency, authority, or business entity and the agreement may authorize the board to make assessments against the money and property controlled by the agency, authority, or business entity or to charge the agency, authority, or business entity for the cost of any advice or services provided. All moneys received by the board under this subsection shall be credited to the appropriation account under s. 20.536 (1) (k).

SB525,8 Section 8. 25.90 of the statutes is created to read:

SB525,6,6 25.90 Innovation fund. There is established a separate nonlapsible trust fund designated as the innovation fund. The fund shall consist of all moneys deposited in the fund under s. 73.17, together with all donations, gifts, or bequests made to the fund, all moneys transferred to the fund from other funds, and all income or interest earned by the fund.

SB525,9 Section 9. 73.17 of the statutes is created to read:

SB525,6,23 73.17 Innovation fund. (1) In this section, “qualifying company" means a person whose principal business activity code in the North American Industry Classification System, 2017 edition, published by the federal office of management and budget, is one of the following: 111, 112, 311, 424, 445, 481, 3121, 3364, 4244, 4245, 4881, 221111, 221112, 221113, 221114, 221115, 221116, 221117, 221121, 221122, 221210, 221310, 221330, 237990, 238210, 311221, 311224, 324110, 324191, 325193, 325199, 325220, 325311, 325312, 325314, 325320, 325411, 325412, 325413, 325414, 325998, 326122, 326199, 327331, 332410, 332420, 332911, 332913, 322999, 333111, 333249, 333241, 333242, 333318, 333413, 333414, 333415, 333611, 333612, 333613, 333618, 333991, 333993, 333994, 333995, 333996, 333999, 334111, 334290, 334412, 334413, 334416, 334418, 334419, 334510, 334511, 334512, 334513, 334514, 334515, 334516, 334517, 334519, 335110, 335121, 335122, 335129, 335210, 335220, 335311, 335312, 335313, 335314, 335911, 335912, 335921, 335929, 335931, 335999, 339112, 339113, 339114, 339115, 339116, 511210, 517410, 541320, 541330, 541370, 541380, 541511, 541512, 541519, 541620, 541713, 541714, 541715, 611512, 621491, 621493, 621511, 621512, 622110, or 811219.

SB525,7,3 (2) (a) Before May 1, 2019, the department of revenue shall determine the total amount of withholding taxes due and payable under subch. X of ch. 71 from qualifying companies for calendar year 2017.

SB525,7,8 (b) Subject to par. (d), on July 1, 2019, and on each July 1 thereafter, ending on July 1, 2033, the department of revenue shall deposit into the innovation fund an amount equal to 95 percent of the amount of withholding taxes due and payable under subch. X of ch. 71 from qualifying companies in the previous calendar year that exceeds the amount determined under par. (a).

SB525,7,11 (c) A person who is subject to withholding taxes under subch. X of ch. 71 shall indicate to the department of revenue whether it is a qualifying company for purposes of this section in the manner determined by the department.

SB525,7,14 (d) The department of revenue may not deposit into the innovation fund more than $50,000,000 in any fiscal year, and the total amount deposited may not exceed $500,000,000.

SB525,10 Section 10. Subchapter III of chapter 238 [precedes 238.40] of the statutes is created to read:

SB525,7,17 Chapter 238

SB525,7,19 Subchapter III innovation

SB525,7,20 238.40 Definitions. In this subchapter:

SB525,7,21 (1) “Council” means the innovation fund council established under s. 238.41.

SB525,7,22 (1m) “Eligible regulatory applicant” means any of the following:

SB525,7,23 (a) An entity that has received a grant under s. 238.42 or 238.43.

SB525,7,25 (b) Any business, institution of higher education, technical college, or public utility that is a member of an industry cluster partnership.

SB525,8,3 (c) Any business, institution of higher education, technical college, or public utility that participates in a business accelerator, business incubator, or technology pilot program facilitated by an industry cluster partnership.

SB525,8,4 (2) “Fund” means the innovation fund.

SB525,8,12 (3) “Industry cluster partnership" means a nonprofit organization, including its subsidiaries and affiliates, whose primary purpose, or whose subsidiary's or affiliate's primary purpose, is to assist in developing and supporting a regional concentration of industry-specific private sector businesses in this state and to foster industry-specific research and development, worker skills training, and market development at institutions of higher education in this state, including technical colleges, for the purpose of transferring to the private sector, and commercializing, technology developed at those institutions that is related to relevant industries.

SB525,8,18 238.41 Innovation fund council. (1) Establishment. The corporation shall establish an advisory council to be called the “innovation fund council.” Except as otherwise provided under this section or in policies and procedures adopted by the corporation to govern the council's business, the council shall be subject to s. 15.09. The council shall advise the corporation concerning the use of fund moneys and the economic development programs administered under this subchapter.

SB525,8,20 (2) Membership. The council shall consist of the following members, to serve staggered 3-year terms:

SB525,8,21 (a) One member appointed by the executive director of the investment board.

SB525,8,23 (b) One member appointed by the managing director of the Wisconsin Alumni Research Foundation, Inc.

SB525,9,2 (c) One member appointed by the governor who currently serves in a senior management position at a manufacturing company headquartered in this state that employs at least 250 employees in this state, including any affiliate, and that engages in research and development.