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Brewer vetoes Tobin’s R&D tax credit bill

House Speaker Andy Tobin

Gov. Jan Brewer acted on the last three remaining bills of the 2013 legislative session, including a veto of one of House Speaker Andy Tobin’s top priorities.

HB2342 would have expanded the annual cap on a refundable tax credit program for research and development activities. Tobin touted the bill, which was supported by the Arizona Technology Council, as legislation that would boost economic development in the state.

The current cap is set at $5 million in refundable tax credits per year. HB2342 would have raised the cap to $10 million in 2014 and $15 million starting in 2015.

In her veto letter, Brewer said the state had an interest in providing assistance to small businesses and start-up companies engaged in research and development. But she expressed concern over the bill’s cost to the state’s general fund.

“Such expenditures of state taxpayer dollars deserve the highest level of scrutiny to determine their benefits to the overall state economy as well as their relative importance against other general fund obligations,” Brewer wrote. “My decision on this bill must be in the context of other tax changes and spending items that have come up after the enacted budget. Therefore, I believe it is best to re-examine this proposal in the light of next year’s spending priorities.”

Tobin, R-Paulden, said he was disappointed and surprised by the veto. He said the Ninth Floor never gave any indication that Brewer has issues with the bill, and noted that Brewer signed other legislation with larger fiscal impacts.

“We’ve already seen the benefits of the R&D. This is something she helped create,” Tobin said, referring to legislation Brewer signed in 2010 that created the most recent incarnation of the program. “In the scheme of things, it wasn’t that much money.”

Tobin said the bill would have been most important to small businesses and rural communities. He said the fact that the $5 million cap so early each year shows that the program is popular.

“The tax credit usually gets eaten up early in the year. So obviously it’s being used and its working,” he said.

Brewer spokesman Matthew Benson said the R&D tax credit program was only created in 2010, and that she wants more information on its costs and benefits before she signs a bill significantly expanding it. He also noted that the legislation had a fiscal impact but was passed separately from the budget, saying that was a contributing factor in Brewer’s Wednesday veto of both HB2342 and HB2439, a bill that would have adjusted income tax brackets for inflation each year.

But Benson said Brewer is open to revisiting the proposal next year.

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